Want FULL ACCESS To
ROSS’ DAILY TRADE ROOM?
Simply Click The Get Started Button Right Now!
Transcript of Video
Click Here to receive an email alert when Ross posts a new daily video
I’m going to begin the day today on the US Dollar versus the Japanese Yen [USDJPY]. Starting here on the Weekly Chart, we could see that this currency pair has been in an uptrend for quite some time. We started all the way back down here at the left-hand side of the chart, back into 2011, into the mid-75.000s. We could see that it’s been climbing ever since and made a resistance high here into this pink-shaded area and into the 83.0-level. Fell back down, broke above it. We could see the open and close above that pink-shaded area and the continuation of the uptrend.
Recently, we saw a high here into May of this year, where it settled out into the low-103s. Fell back down into 94s. Then, once again, we’ve challenged back here for a few weeks. We settled out underneath that 103-level and now we’ve pushed through there and broken through and made a new high. Let’s go ahead and zoom in one time here on the Weekly Chart. We could see that recent resistance high back in May. We can see, currently, we have pushed above it.
And the question of course will be: is this going to be a longer-term continuation of the uptrend that’s been in place since 2011 or is this going to be a false breakout and we’re going to see some reversal and retracement back down? Well, as long as it stays above the trend lines and we continue to see the pattern of the trend – higher highs and higher lows -, we have to make some assumption that the trend is going to continue. And if that’s the case, if the trend is going to continue, we would be looking for low risk, high reward opportunities to trade in that direction.
Zooming out one more time, further back out here on the Weekly Chart, I want to take a look at one last thing. Let’s scroll back a little bit here on the Weekly Chart so we could see the previous downtrend. I’m going from the highest high, back here into 2007. Top left-hand side of the chart. Highest high down to the lowest low that you see here on this weekly view, measuring that with Fibonacci. Highest high to lowest low on this weekly view puts the .618 Fibonacci retracement level at 105.56. That’s the most important level I want you to see right now by looking at this previous downtrend and the longer-term Fibonacci, because if you take that back to current time, you could see that the market is now approaching that .618 fib. Top horizontal line. Black line at the very top of the chart – 105.56.
That’s an important level because it’s likely to find some resistance there into the 105.50s as it challenges that weekly Fibonacci level. Now, take that information down to the Daily Chart and let’s get back to our current timeframe. And here we are challenging and breaking above, of course, our previous resistance high. We see the opens and closes. The preference of course would be a dip into support before buying because buying at the top of resistance becomes riskier that we’ll look for some reversal, but so far we have not seen that dip back down yet. And of course there is that .618 Fibonacci – 105.56 – sitting at the top of the chart into that black horizontal line at the very top of the chart.
Let’s go ahead and zoom it in here on the Daily Chart to get a little bit closer view of that daily trend that we’ve been in. Higher highs and higher lows continues to make higher highs and higher lows. The question is: is this a real breakout or is this a false breakout? Well, there’s a couple of things that we have going on here. Of course five days sat inside this orange-shaded area, between 104.0 and 104.50. Sat inside there and then finally, over the past two days, we’ve seen a breakout.
Interesting, with the Christmas holiday, we saw a gapping a little bit higher on the open of the market yesterday. We saw a gap a little bit higher, but it has not come back down to fill in that gap that gap. That’s very interesting for those traders that have been trying to see if it will fall back down into the orange zone and fill in that gap, which it has not done yet. Still a possibility. I suppose we could see it still fall back down into the orange-shaded area. Again, looking at risk-reward, your best lowest risk, highest potential reward opportunities, I believe, will be on dips into support.
We’ve seen it all along this uptrend, where it will dip, go into a period of congestion, and then break out. So, what I would like to actually see on this pair is a fall back down into the trend line. Maybe even back down into 104. We’re talking about 90 pips down from current market, but I would definitely like to see it fall back down towards the 104-level, back to the bottom of this orange zone, back into the black trend line. That would give us a better lower risk opportunity to buy this currency pair in the direction of the trend.
If you were to buy it right now, of course is that potential we come back down to fill the gap. We dip into support, challenge the trend line once again before going back up. So, buying right now has a higher amount of risk. I think, if you were to buy it right now, you might even consider putting a stop underneath 104. So, a very high risk potential scenario and fairly low reward comparably speaking because your potential target is here at that .618 fib at 105.56 from the Weekly Chart. So, if you take a look at that, where your last support low is and the current potential profit target here into the 56-level, you don’t have a long way to go before it actually rallies into that Fibonacci level and it’s a larger stop.
So, again, a dip back down. If we’re going to use that as a profit target, a dip back down to the orange-shaded area gives us a lower risk, higher potential reward opportunity. Now, it of course doesn’t have to go down. It could simply continue to rally higher towards 105.56 without going down. If it does that, of course that becomes our next area of resistance. So let’s go ahead and put an arrow there. That’s our next area of resistance. Would expect some resistance there, some hesitation, maybe even an opportunity to watch for clues to reversal and a selling opportunity for the USDJPY. Otherwise, it’s going to take a challenge back down here and a break underneath the black trend line and the orange-shaded area before I’m comfortable for this as a reversal for the USDJPY.
Let’s go ahead and take this down to the 4-Hour Chart. And as we get down here to the 4-Hour Chart, there’s our same orange-shaded area. We could see the market has been holding just above it. There’s our longer-term black trend line. Let me make sure it’s connected exactly to that low there. And we could see that that comes in play as our next support level. We can see these supports over here. If it stays on top of 104.50 that may provide some short term opportunities to buy it. 104.50 is our last resistance high. But again, I would expect it needs to come down there before it gives us a lower risk, higher potential reward opportunity to buy this currency pair.
So, dips into support become opportunities to buy it. A break underneath the black trend line, orange-shaded area becomes an opportunity to sell it as reversal and lower highs and lower lows. Our next profit target is 105.50 for the upside on the USDJPY. Zoom it one time here on the 4-Hour Chart. We have seen, over the past several hours – couple of days. Now we’ve seen a range of about 20 to 25 pips. I’m just looking at this small, little area right here, and let’s go ahead and highlight it like this. I’m looking at this smaller area here. I’m going to change the color to a different color here. Let’s make it this green color here.
That green little box is where we’ve been struggling inside over the past several days. If we break underneath that little green box, of course we’ll go challenge back down here into the orange-shaded area and the black trend line. If we break above it, we could see a turn back towards the 105.50-level. So, if you’re looking for an opportunity today, maybe a breakout of this area of congestion, you could even take that down to the 1-Hour Chart. You could see the market holding in here. You could bring this in a little bit tighter. And that would be your zone of breakout.
If it breaks out above this, which it’s attempting to now, but it hasn’t cleanly broken above it. We’re just seeing attempt to break above 105. If it does, we already know that there’s potential for it go back towards the 105.56-level, all the way up here into the top of the chart. That’s that .618 Fibonacci level. If it breaks underneath here, we’re back down into the orange-shaded area for the USDJPY today.
