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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 go all the way back to the left-hand side of this red box that you see here in the middle of the chart. We’re going back to the end of January, beginning of February, where the market first began finding support into this blue-shaded area at the bottom of the red box.
We could see support back here at the beginning of February, and multiple times through the life of this range or trend, we can see the market finding support into the blue-shaded area. And even most recently, we’ve seen, once again, support into this blue-shaded area over the past few weeks, going through the end of May and now the beginning of June.
Throughout the life of that same support, we’ve found consistent resistance at a couple of different places. First was the yellow-shaded area. We could see lots of congestion, resistance, and even support on top of this yellow-shaded area. And then, just above that, the green-shaded area. We could see consistent resistance here and going back to the left-hand side of the chart. And then, once again, above that, we go all the way back to the top of the red box, into the pink and the purple-shaded area, but most importantly today will be the yellow zone as resistance. The blue zone as our support.
Let’s go ahead and put a couple arrows here, and let me show you what my expectations are today. If, at any point today, we see the market breaking above the yellow-shaded area, that price point would be right around 102.25. Getting above 102.25, which represents this last resistance high that you see over here on the left-hand side. Getting above that last resistance high, yellow-shaded area, 102.25, we’re likely, at least, continuing towards the green-shaded area, which sits into the 102.50s, 102.60s, and 102.70s. That also would be another retest underneath this blue trend line. We’ll talk a little bit more about that blue trend line later today in the Trade Room.
If it can’t break through there, if it can’t sustain a push through that yellow-shaded area, and we continue to see it holding underneath there, which sits between 102.0 – that’s the bottom of the yellow-shaded area – and 102.25. That’s the top of the yellow-shaded area. If it continues to find resistance here, a fall back down towards the blue-shaded area, which, of course, has been our consistent support since the beginning of February of this year, we’ll look for support there and, once again, into the blue zone. If we can’t break through the yellow zone, this becomes our support.
All of this changes, the entire pattern changes, if someday we see the breakdown underneath 101.20. An open and close underneath the red box, the blue-shaded area, of course we’ll look for this to continue to pressure higher. Now, if you’ve been in the Trade Room any amount of time over the past several weeks, you’ll know that I’ve been concentrating on buys into the blue-shaded area. Have not been selling, but I suppose if you’re looking for a sell opportunity today, there’s really two opportunities to sell it. It could be here in the yellow zone. It does have low risk and potential reward if it does go back down to the blue-shaded area.
Your risk, of course, is just above the yellow zone, likely right around 102.30, 102.35. That way, if it does break above there, of course you’re out of those sells and watch for it to go back to the green zone. So, your first opportunity to sell it would be here in the yellow zone. If you’re not holding buys from the blue-shaded area, that might be an opportunity, and you’re cheering on the buyers to break through 102.25, if you’re in a buy, to go higher. If you’re selling, you want it to stay within or under the yellow zone and target back down to the blue zone.
Another opportunity to sell it would of course be into the green-shaded area, into the 102.50, 102.60, 102.70-level. Then you look for new opportunities to sell in that next resistance that we see over here on the left-hand side. So, those are two opportunities to sell it. Into the yellow zone or into the green zone, or I guess a third opportunity would be a break underneath the blue zone. The buyers that have been holding from the blue-shaded area or if you’re looking for an opportunity to buy this, would be back down to the blue-shaded area, into the 101.40s, 101.50s, maybe even as deep as the 101.20-level, as we saw the market challenge back down here.
The other reason to buy this, if it doesn’t dip back down into support, of course would be the breakout above 102.25. The problem I have with that is that the next resistance, the green-shaded area isn’t very far away. You’re only looking at 20 or so pips higher, into the green-shaded area. So, be very cautious on buying above the yellow zone. Better to buy it on a dip to the blue zone or holding buys that you might be in from over the past couple weeks for the blue-shaded area.
The Forex Black Book is red. The trend bar is red. So that means what we’re going to do is look for new red arrows, signaling bearish momentum building back in. Let’s go ahead and take it down to the 4-Hour Chart. And as you could see, we’ve seen that rally higher, into the yellow-shaded area here on the 4-Hour Chart.
Well, take a look at the last time. What happened the last two times we saw the market challenge into the yellow-shaded area? Well, we see a rally, red arrow, fall. Rally, red arrows here into the yellow-shaded area, and a new fall back down to the blue zone. So, again, today, very similar to that, if you see a new red arrow show up inside this yellow-shaded area, it could give you a clue that it’s going to fall back to the blue-shaded area. If you don’t see a red arrow, it could signal the fact that we’re looking for the breakout above 102.25 finally and a continuation towards the green-shaded area.
So, sellers, again, using the Forex Black Book, here in the yellow zone becomes an opportunity, especially if you see a new red arrow like you’ve seen the past two times into this yellow zone. Preferably, I’m in a buy from the blue zone, so I’m looking for the breakout above the yellow zone and the continuation higher for the USDJPY this week.
