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I’m going to get started today on the US Dollar versus the Japanese Yen [USDJPY]. I want to start all the way out here on the Weekly Chart, just so we can get a grasp of what’s been happening over the past few years here for this currency pair. We found some support all the way down here at the bottom of the chart, and this is down into the mid to upper-76.00s. 76.70, down into the 76.0-level.
We’ve found support down here at the bottom. We had a little bit of a rally, a dip back down towards the lows, and then a massive uptrend as the market moved from down here into the 77s, all the way up here into the 102s. 102.70, 103.0, as it made a new high. Then it went into a period of consolidation or contraction, where it went into this triangle pattern. You could see it highlighted in yellow here on the chart, and once again broke out in the direction of the trend as it started moving all the way back and made a new high into the mid-105s.
And then, for much of this year, we saw it come down and go into a flat pattern. You could see that range that developed up here. It’s kind of hard to see with all the lines on the chart. We’ll see it better on the Daily, but you could see this red box up here, and it’s been stuck in that red box since this vertical, red line that sits there all the way since January of this year, and we’ve been kind of stuck in that red box.
Now let’s begin to zoom it in a little bit. We’re down here to the Daily Chart now, and you could see that red box and how the market has been, for the most part, stuck inside there with one exception where it made a run to get out of there and couldn’t sustain that run, and then came right back down within the red box. Well, once again, we’ve made an attempt to break out of that range and an attempt to break out of that box. And for the most part, it’s been a little bit more sustained than the previous run.
So, we’re looking for a continuation of what was the previous uptrend. Again, going back for the past couple of years, it was an uptrend. We’ve gone into this ranging period and now the potential continuation of the trend, as we see the breakout of the range that’s been there since January. So, how do you handle that? I think what you’re looking for, if you’re looking for the return of the buyers and the return of the uptrend, we’re looking for buys on dips into support. That becomes your main focus when you’re trading in an uptrend. Buys on dips into support give you lower risk and higher potential reward opportunities.
You don’t want to buy into resistance. Once it hits a resistance, there’s potential for a little bit of a pullback. So, even within an uptrend, buying into a resistance just doesn’t make logical sense, even if you’re going to buy it in an uptrend, you want to wait for a dip to support. Now, obviously that provides lower risk, but not a no-risk scenario. We could always go down to the next support. So, that at least provides us a lower risk opportunity than it would be for buying all the way into resistance.
Now, we can continue to watch for clues to resistance and reversal also, but for the time being, I don’t think we have sufficient evidence of that here on the USDJPY. I think we still see clues to the uptrend here for the USDJPY. And continuing above the purple-shaded area that you see here into the 104.20, 104.40-level, we would see it back to the highest highs, into the 105-level. And then of course a break above that blue zone, we’re into multi-year highs, back into the upper-105s, towards the 106-level as we look for a breakout of that last resistance.
Now, if we get back underneath supports and we start to see lower highs and lower lows, then of course we’ll look for reversal once again for this pair. But until then, I’m going to start focusing my efforts on buying on dips into support, or I should say continuing my efforts for buying on dips into support as I have been from down here into the blue zone and the pink-shaded area at the bottom of the range.
Now that we see that, let’s zoom it in a little bit, still staying on the Daily Chart. I’ve taken a couple of different fib ranges. The high here in the middle, in the green-shaded area, down to the low. The highest high, down to the low. This low right here, where the blue trend line is, to the highest high. And taking Fibonacci of all of those ranges, we see some overlap here where the Fibonacci levels come into congestion right around the 103.65-level. That’s the bottom of our orange-shaded area. And obviously on the left-hand side, that orange-shaded area showed resistance on the left-hand side of the chart.
If I scroll it back in time just a little bit further, you could see resistance here. You could even go back and see some support and resistance on the left-hand side of the chart. So, that entire orange-shaded area has been clearly resistance and support back in the past. So, we take it back into current time. We could see that along with those Fibonacci levels. So, our first opportunity I think today for new buying opportunities is here into the 103.65-level. As close as possible to that reduces your risk. What’s the risk? The risk is that it breaks underneath that orange-shaded area and continues to go back down to the next support.
The next support of course is the green-shaded area, which was our resistance within our longer-term range since January of this year. That’s back down into the 103.25-level. So, for the day today, I’m concentrating right there into the 103.60s as a support, new buying opportunities, and for the potential rally back towards the higher highs. If it breaks there, the next potential support that we’ll look at will be the green zone. And of course if it breaks there, we could be looking for a return of the sellers in the downtrend.
Forex Black Book trend bar is green. That also provides us some uptrend bias here for this currency pair. We know that that helps us identify the trend and momentum of the currency pair, and we could see it’s green for an uptrend bias.
Let’s take all that information down to the 4-Hour Chart. Get it back to our current time here on the 4-Hour. Here we are settled out into the bottom of the orange zone. We could see that support developing over the past few days. Again, if you’re looking for a new buy in the direction of the trend, you’re about at your very lowest risk, highest reward opportunity risk probably is just underneath this last low right here. That last low of that candle is 103.50, so you could go to 45 or so. So, you’re only looking at about maybe a 20 to 25 pip stop if you’re looking for a buy here and you’re targeting at minimum back to the purple-shaded area and a continuation of the uptrend, which would be for a new higher high above the purple zone, which we already know is that blue zone up closer towards the 105-level.
Again, if it breaks here, you wait for it to go back down towards the green zone and, again, in the direction of the trend. The green becomes your next buying opportunity for it to go back up in the direction of the trend. If you’re looking for reversal clues or reversal indicators, I don’t think we have sufficient evidence of that yet, but an open and close breakout under the orange zone may give you enough momentum to take it back down to the green zone if you’re looking for a sell.
Forex Black Book trend bar being green. Of course we’re looking for new green or buy signals. I don’t know if this has been a deep enough dip to see a new green arrow. I do think that the longer it stays here in the mid-103s, the bottom of the orange-shaded area is more likely over time to see a new green arrow. It could be today. It could be even into tomorrow. But for the most part, I’m looking for buys in the direction of our current trend a momentum, which has been up into support, which is first off the orange-shaded area, then the green-shaded area, targeting the purple zone, and then higher above there we’d go all the way back up towards 105 for the USDJPY this week.
