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I’m going to begin the day today on the US Dollar versus the Japanese Yen [USDJPY]. Starting here on the Daily Chart, we can clearly see, on the left-hand side of the chart, that this currency pair was in an up trend, as it made a rise from down here into the 79.00s all the way up into the 103.00s. Now, in May, we saw a change of that trending pattern. On the left-hand side, we saw higher highs and higher lows. On the right hand side, we can see falling highs along the red trend line and rising lows along the blue trend line, making what we can see here as a triangle pattern with those falling highs and rising lows.
The blue trend line representing those rising lows within the pattern, but not only that. If we follow this purple-shaded area back in time, we can see clearly in history that this currency pair has found support along that purple-shaded area multiple times. We go all the way back here into August; we can see support in this area. We go back further into July and even all the way back here into June; we could see some support on top of that purple-shaded area. And even going back to the left-hand side into April and May of this year, we can see some support on top of that purple-shaded area.
So, two indicators pointing to support today: the purple-shaded area along the bottom of that price level and the blue trend line representing the rising lows. So, as long as the market holds above that blue trend line and purple-shaded area, we can expect some support and the potential to stay within that consolidating triangle pattern that we could see here on the Daily Chart, and another challenge as it goes back up in the opposite direction, staying within that pattern. If the market does a breakout and breaks underneath this purple-shaded area and blue trend line and changes the trend pattern, then we likely look for a continuation lower for the USDJPY.
Let’s take that information down to the 4-Hour Chart. And clearly here, on the 4-Hour Chart, we can see that the market has continued to challenge that purple-shaded area. The top of that purple zone is 97.65. As long as it holds above 97.65, the top of that purple-shaded area, and above this blue trend line, we can expect some support, as we have seen so far this week. Yesterday, as market opened and we saw the gapping from the weekend, as it opened up, it opened up closer towards this purple-shaded area and the 97.65-level.
Yesterday we found continued support above that purple-shaded area and the blue trend line and it made a rise all the way back here into the mid-98.00s. Now, since then, we’ve seen a new fall and it’s not challenging once again back here into the mid-97.00s and back into that blue trend line and purple-shaded area. So, for the day today, as long as it holds above the 97.60s, we’ll support and the possibility of rallying back to the yellow zone, possibly even higher towards the blue zone into the 99.00s. If it breaks out of this pattern and breaks underneath the 97.60s, we’re likely looking for a push back down towards the 97.00-level – the bottom of the purple-shaded area.
And of course, underneath that purple-shaded area, we’ll look for a complete change of the trending pattern and the possibility of the down trend continuing. And when I talk about a down trend continuing, even within the triangle pattern – the larger triangle pattern from the Daily Chart -, we could see lower highs and lower lows along this downward trend from the last time it challenged the red trend line all the way down to where it challenged the blue trend line. And I can put a trend line here to represent this down trend, where we could see lower highs and lower lows within the triangle pattern.
As long as it stays underneath that red trend line, there’s potential for it to continue to find resistance and challenge the support lows into the blue trend line and the purple-shaded area. If it breaks above that shorter red trend line and the yellow-shaded area, we’ll likely look for a continuation higher, so that becomes our intraday resistance. Right here into that red trend line and that yellow-shaded area. Staying underneath it, we look for potential like yesterday, for the bounce back down. Breaking above it, we look for a continuation back towards this blue-shaded area into the 99.00s.
So, the closest elements today or closest opportunities today for the USDJPY are here into the 0.9760s. Staying above here, as we are right now, we find support and challenge back in towards the mid- 98.00s – the yellow-shaded area. If it breaks above there, we look for a continuation higher. If it finds resistance into the yellow-shaded area, we look for a fall back down. Now, underneath the 97.60s – the top of the purple-shaded area – we likely look for the continuation down towards 97.00. And a breakout underneath that purple-shaded area changes the entire trending pattern and we look for a continuation lower for the USDJPY.
Now, interesting today is that over the past several days we have seen the trend bar green for the Forex Black Book, but today it’s the dark green color. So, what we’d like to see, if we’re going to see a turnaround and a continuation higher, we’d like to see this trend bar turn bright green, showing that the shorter and longer-term trends are in agreement together. While it’s dark green, that shows us that the trends are in disagreement and it doesn’t give us as high of confidence in any buy signals.
Now, we have seen a green arrow with a green trend bar, which could be our first clue that we’re looking for a turnaround for this currency pair to go back up again. But be cautious. Since it is darker green, it could be showing us that there is a trend change. What we want to see is the brighter trend color. The brighter green gives us confidence that it’s going up. If it turns to red after breaking out underneath this purple-shaded area, it could be telling us that the trend pattern – the triangle pattern from the Daily Chart – is changing and we could look for a breakout of that triangle over the long-term for the USDJPY.
