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I’m going to begin the day today on the US Dollar versus the Japanese Yen [USDJPY]. Here, on the Daily Chart, we could see that this currency pair has been in an uptrend for quite some time. We go all the way back down here into October of 2013. We began down here into the 96.80-level and began the climb, as it pushed with higher highs and higher lows, all the way up here into the 105.40s, 105.50s at the top of the chart.
We could see the green-shaded area at the very top of the chart holding as our current resistance. I want to take a quick trip out here to the Weekly Chart and zoom out a couple of times so we could see some interesting information about this green-shaded area that we just looked at on the Daily Chart. And I’m going to scroll back in time just a little bit. Taking a Fibonacci measurement from the highest high that you see here on the left-hand side of the chart, and of course that’s way back in time, all the way back into 2007, into the 124.0-level at the top left-hand side of the chart. We take Fibonacci measurement from there all the way down within that downtrend to the bottom right-hand side of the chart, back down close to the 75.38-level – the bottom of the chart. That’s in 2011.
So, we measure Fibonacci of this entire long downtrend between 2007 and 2011. And in doing that we find the .618 Fibonacci retracement level at 105.56. That’s right there in the middle of the chart. A little difficult to see. If you look to the right-hand side of the chart, you could see underneath my crosshair, where it says .618, 105.56. That’s that Fibonacci of that previous downtrend. Now that we see where that comes from, let’s take that information back to the Daily Chart, zoom it back in, and now we could see that .618 at the top right-hand side of the chart – 105.56. That is our current resistance for the USDJPY.
It’s my expectation that as long as it stays underneath there, and let me squeeze the chart in just a little bit. As long as it stays underneath there, we’ll look for resistance. If it breaks above there, we’ll look for a continuation of the current uptrend that we’ve been in for this currency pair. Now, on the other side of that, we could see some support for this currency pair, down here into this orange-shaded area. And I have two red horizontal lines outlining that orange-shaded area, showing the significance of that support. And as long as it stays above that support, we’re within the parameters of an uptrend.
Again, an uptrend has higher highs and higher lows. And as you could see, I’ve even taken a blue trend line and connected the last two lows. As you could see, the lows, even within that orange-shaded area, have continued to rise. So, if that continues to be the case, we could be looking for a breakout, over time, above the green-shaded area and a continuation of the uptrend. So let’s go ahead and put some arrows here. This gives us an idea that we’re looking for support into the orange zone. As long as it stays above there, we look for a continuation of the uptrend. The other side of that of course would be a break underneath there, a break of those supports, we look for a change of the trending pattern and a turn back lower for the USDJPY.
Let’s go ahead and take that information down to the 4-Hour Chart. And of course there’s that same orange-shaded area down there, and we’ve already seen, over the past several days, support found there into that orange-shaded area and the bounce back higher again. It never broke underneath it and never continued that downtrend that we’ve been looking for over the past few days. Now pushing back above this purple-shaded area. As you could see here in this purple-shaded area, we’ve stalled out over the past couple of days. It hasn’t been a very big move at all over the past day or so.
We could see the bottom of this purple-shaded area right around the 104.70, 104.75-level, and the top or current market price right around 105.0. So we only see about a 20 to 30-point spread between the highs and lows over the past several 4-hour candles that we see right here, just above the purple-shaded area.
Now, during the Trade Room yesterday, I described a potential scenario here for you. If you were not willing to wait or not patient enough to wait for the market to reach back to the orange or the green-shaded area, which we described as our major areas of support and resistance, and you were looking for an intraday trade yesterday, it could be that you’d look for a buy scenario into the purple-shaded area with your stops just underneath it. That was my suggestion during the Trade Room. If you decided to take into a buy, into the purple-shaded area, 104.75, 104.80, you’re seeing a little bit of profit. Nothing extraordinary. Only about 10 to 15 pips, as it pushes now into 105.0. If it’s going to continue to pressure higher, of course you’ll look for the break of 105.0 and a continuation back to the 105.30-level.
The only thing that will change that intraday perspective is a breakdown of this purple-shaded area. We’re back into the orange zone at the bottom of the chart. And I think that still remains in effect – the same similar scenario today. Staying above the purple zone, you look for very low risk buying opportunities to target back to the green zone. And of course a break above the green zone, we look for a continuation of the uptrend. The other side of this, if it breaks underneath the purple zone, may provide intraday opportunities to sell the USDJPY, targeting back down to the orange zone. And of course a break under the orange zone, look for the continuation lower. All the while, knowing that the orange zone and green zone are our major areas of support and resistance, and will also be an indication of a breakout in the direction of a new trend or a continuation of the uptrend for the USDJPY today.
