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I’m going to get started today on the US Dollar versus the Japanese Yen [USDJPY]. I’m going to start all the way out here on the Monthly Chart, the largest time compression that we have here, because I think it’s important for us to take a look at this every now and then. Get a longer-term perspective for the currency pair. The only real thing I want you to see from the Monthly Chart is this blue trend line.
Now, it’s going to be difficult to see the current market price with all of the indicators on the smaller compressions, but the biggest thing you need to see is where this blue trend line comes from. It connects all the way back here into 2002, beginning of 2002, and then connects here into 2007. So, about a five-year period, where it made a high, made a dip, made another high and made the continuation of the downtrend, because that’s going to be important because that’s where the current market price is, and we’ll see that on the smaller compressions. I just wanted you to see where it came from here on the Monthly Chart.
Let’s go ahead and take it down to the Weekly Chart. And as we get down to the Weekly Chart, we’re starting to get a glimpse of where that longer-term blue trend line comes into play at the very top right-hand side of the chart. Coming in diagonally, there’s that blue trend line, and of course you can start to see where the current market price sits up here, close to that blue trend line. Of course over the past couple of years we have been in an uptrend and really that has not changed here for the USDJPY. The uptrend is still in place for this currency pair.
Now, let’s take it on down to the Daily Chart and we can begin to get an idea of how important that blue trend line from the Monthly Chart has been over the past several weeks. Take a look. There it is coming down from the top left-hand side of the chart. The blue trend line coming in diagonally. The market challenged it several days. This is the Daily Chart. Several days challenged it, tried to push above it, squeaked all the way up to 110.0, couldn’t sustain that breakout, and now has made a substantial pullback from 110, back down to the 105-level, where it found support into the blue-shaded area here in the middle of the chart.
In most recent days, we made a little bit of a pullback and another attempt to turn into the direction of the previous uptrend. Clearly this was in an uptrend. We saw retracement back down to the blue-shaded area and now we’re starting to go back up again. The question is: are we looking for this to turn back in the direction of the long-term uptrend that we’ve seen for the past couple years, or are we going to once again look for resistance? Well, I think we have a long way before we would reach resistance.
Resistance comes as it reaches back here, where this red box is. And I have the three different colored boxes here. We’ve been talking about them all week. Yesterday I changed the colors of them, so I could talk about. The blue box of course is our support at the blue-shaded area. The yellow box is the current area of congestion, where the orange-shaded area is, and the red box at the very top of the chart is where that blue trend line from the Monthly Chart comes into play and where our most recent historical resistance levels are reached there into the 108s, 109s, towards the 110-level.
Over the past three days, we’ve been stuck inside this orange box, waiting for a breakout. We see the potential of a breakout here, but of course it broke to the bottom side here and then now has turned back higher. So, we need to be cautious about a false breakout, but we also want to watch for opportunities if this is turning back in the direction of the longer-term trend.
Let’s go ahead and take all of that information on down to the 4-Hour Chart. Here we could see today the market pressuring through that orange-shaded area. And during the Trade Room yesterday, we talked about two opportunities. One was the breakout above the orange zone. The other was a breakout under the orange zone. And as we can see, today we are pushing through the top of the orange-shaded area. We’ll call it 107.30. As long as we stay above there, here on the 4-Hour, specifically on the Daily, I would be concentrating on looking for buying opportunities in the direction of this current momentum in the direction of the previous long-term trend as we look for a return of the longer-term uptrend. And again, a potential challenge all the way up towards the higher highs and that blue trend line coming from the Monthly Chart at the very top of the chart.
So, watching for those buying opportunities above 107, 107.30, above the orange zone, taking it back to the green-shaded area, where we see historical congestion back here on the left or even higher towards the red box. The other side of the story of course is if the market reverses once again, we see it back under the orange zone with an open and close underneath 106.70. Then we’re going to look for a turn back down here towards the blue-shaded area and into the 105s once again for the USDJPY.
Now, the Forex Black Book turned red over the past several days because of the bearish movement we saw. The bounce off the monthly trend line. The fall that we see. It turned red. The question is: is it going to stay red or, over time, as we start to see a return of the uptrend, will it turn back to green as we see over here on the left-hand side of the chart? And I think that’s a possibility as we see it breaking through the orange zone, potentially even challenging back up here towards the red trend line.
If I was going to sell it, of course the higher it gets, the better the selling opportunities become. So, my preference to selling would be all the way back up there towards the red box and towards the blue trend line. If I was looking to sell it, that would be a better opportunity, or simply a break underneath the current support zone, which is the orange-shaded area. More likely on an intraday basis, I’m looking for buys on top of that orange zone. So, let’s take it back down here. You could see the resistance high here. You could see the resistance here. You could see resistance. So, as long as we’re above resistance, 107.30, I think we’re looking for intraday buying opportunities, at least targeting back to the green-shaded area, where we see historical congestion.
So, let’s put this arrow here and let’s put one more arrow all the way down here in the blue zone because I think that’s our next support if we break through the orange-shaded area. If we get through the green-shaded area that we see there, and let me pull this over a little bit further. This is the bottom of our red box here. That blue-shaded area at the top of the chart. That becomes our next resistance target. So, buyers, you’re interested in this. 107, 107.30, the top of the orange zone, the top of the yellow box. That becomes your buying opportunity.
If you’re a seller in the market, you’re potentially looking into the green zone. That’s 107.70 to 108.00, or up into the 108.40s, 108.50s, and 108.60s, the blue-shaded area. Right now we’re right around 107.55 or so. So, either way you look at it, whether you’re buying or selling, I think we need to see some momentum out of this, dipping back to the orange zone or rallying back to the green zone before we take a new trading opportunity today for the USDJPY.
