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Getting started today on the US Dollar versus the Japanese Yen [USDJPY]. Starting here on the Daily Chart, we could see for quite some time, this blue-shaded area at the very bottom of the chart has continued to hold as support, going all the way back, multi-month, into January of this year. We’re going back to the left-hand side of the chart, bottom left-hand side. We could see support down here into the blue-shaded area. Made a little bit of a rally higher, support here again in March. Then we saw support here again mid-March. We see it here back into April. We see support here once age into May of this year, right here into the blue-shaded area. And then, over the past several weeks, we’ve seen support here again, starting at the beginning of July. We see it here about ten days later, and now of course we’re seeing support here once again.
So, this blue-shaded area critically has been a major area of support. And as long as it holds there, I believe there’s still the possibility of reversal and for this to turn back higher again. If, at some point in time, we start to see a breakdown of that blue-shaded area and it gets through the 101.0-level, which is the bottom of that blue zone, then we’ll likely look for a change of this overall pattern and a continuation lower.
If I zoom out a little bit here, and I’m just going to move it over a little bit and zoom out here on the Daily Chart, you could see that red box that’s on the chart, the blue-shaded area, and how long it’s been sitting in there. We previously came from a downtrend. We could see that over here on the left-hand side. First off, it was in an uptrend, climbing from back in September/October of 2013, climbing. Hit the recent highest high back into the 105s. Then we fell back down here into this range and been stuck in this range, again, pretty much most of the year since January of 2014. A breakdown of the blue zone, a breakdown underneath that 101.0-level, we look for it to go lower.
Here’s something interesting that we have pointed out in the Trade Room over the past few days, and I’m going to get it back to our original view here. Something I pointed out here in the Trade Room over the past few days is that every time this currency pair came down and tested down into this blue-shaded area as support, the Forex Black Book trend bar at the bottom was red. So, you can’t take that for granted sometimes when the market is in a downtrend and comes to a complete stop. You could see it here where the blue line is on the left-hand side of the chart. You could see it was red at the bottom.
You can see it here. It was red at the bottom. You could see it here. It was red at the bottom. We could see it here and here. There’s only been one time in the recent days here, where the blue line is, that the Forex Black Book trend bar was green. So, just because it’s red doesn’t mean it has to continue down. What it means is that the momentum at that moment was going down. Then it hurt support. So, what you want to take from all of that is if you’re going to sell the USDJPY based on the red trend bar, you’d actually prefer it to go up first, find resistance, sell into resistance, which I say all the time, selling into resistance, and then you look for it to go down in the direction of the red trend bar.
You don’t actually want to sell a currency pair with the red trend bar when it’s sitting into support, and that makes sense logically. If you go back to the trading motto, buy low, sell high, you don’t really want to sell it out of support. You want to sell it into resistance when the trend bar is red. So, taking that information, it tells me that right now, as long as we sit down here on top of or just above this blue-shaded area, I’m not really interested in selling this at the current moment. It’s more likely that as long as it sits on top of that blue-shaded area, on top of the 101.30, down to 101-level, the blue zone, then it’s more likely that I’m considering a new buy scenario here for the USDJPY. And then, of course, we’d target back to the pink zone, which is our current resistance, which of course would be the spot in which we might consider a sell back into resistance.
We also have the red trend line coming down from the top there. That would also give us some clue of resistance and a potential sell. I have a few different Fibonacci ranges measured here. We could see where the shorter-term fibs are. We’re finding some resistance into the 101.40s and 101.50s. We can see further resistance into the 1010.70s as it tests back up there to the pink zone, into the red trend line, but all in all, buying into support or selling into resistance is likely your most main objective here for the USDJPY.
So, let’s take all of that information. Let’s just zoom it down here to the 4-Hour Chart. I haven’t looked at this 4-Hour Chart with you here in the videos much at all over the past few weeks because I don’t think it really changes the outlook. I think it just gives you a little bit of a closer viewpoint, but it doesn’t change the outlook. The pink zone is still the resistance. The red trend line is still the resistance. The blue zone is still your support. That doesn’t change any of that. So, you’re still looking for buys into support or sells into resistance. So, that being said, today’s outlook would be sitting here between 101.30, even dips down into the 101.20s or maybe the teens still provide opportunities to buy into our current support.
If you’re looking to sell it, I know we have a red arrow right here, but again, buy low, sell high. You’d actually like it to go up into resistance first. That red arrow sits right on top of our historical multi-month support and it’s not my recommendation to sell it right now because we are finding support here into 101.30. If I was going to sell it with the red arrow, I’d actually like to do it back up here towards the pink-shaded area.
Now, that doesn’t mean it can’t go down. Obviously it could go down. The market could change its mind, finally breakdown through this blue-shaded area and start going back down, but I think you’re carrying higher risk at this point if you decide to sell it. There’s no guarantees or there’s never a guarantee, but there’s no high confidence that it’s going to go down right now as long as it sits on top of this support.
So, for me, selling this pair is back to the pink zone or underneath the blue-shaded area. Otherwise, sitting on top or within this blue-shaded area, then I expect that we’re looking for buys, targeting back to the 101.50-level, which is our current resistance right here, where the Fibonacci sits. Then of course back above there, we’re going all the way back to 101.75, towards 102.00, the pink-shaded area for the USDJPY today.
