On December 22nd, I wrote about two USDJPY equidistant channels.
The first, larger ascending channel broke down in November, and the smaller descending one remains intact.
There was a confluence of resistance near 134.20 that I also mentioned on December 22nd.
That was the target for a USDJPY long setup that I mentioned to Discord members when USDJPY was trading at 132.50 last month.
USDJPY didn’t quite reach the confluent area, but it did reverse from 134.50.
Fast forward to today, and USDJPY is testing the 130.60 key support again.
This is a must-hold level for bulls, as a close below would open up the May 2022 lows at 126.70.
However, I’m seeing a decent amount of bullish divergence building on the 4-hour time frame.
Although USDJPY is still carving lower highs and lows, indicators like On Balance Volume (OBV) are starting to show intraday bullish divergence.
For the most part, I don’t use indicators. But I do occasionally glance at OBV to look for divergences.
I use OBV and not RSI because the former is calculated using price and volume, whereas RSI only uses an asset’s price.
That said, the USDJPY price action trumps any indicator. And right now, things remain uncertain with the price barely hanging on to 130.60.
Bullish price action from here and a close above resistance between 133.70 and 134.50 would expose levels like 138.10.
Alternatively, a daily close below 130.60 would flip the area to resistance and open up 126.70.
Lastly, markets remain relatively choppy and indecisive due to the holidays, which is likely to last another week or two. So keep that in mind when managing risk.
