USDJPY bulls are on the move after losing 550 pips between May 11th and June 14th. In fact, buyers have struggled to do much of anything since December of last year when the pair topped out at 118.60.
With Monday’s session closing above the 113.25 handle, we were watching for a subsequent close above the newly acquired support level on Tuesday. Sure enough, buyers stepped up after running into some trouble early on.
So far, today’s session has picked up where Tuesday left off. The USDJPY just carved a fresh seven-week high while respecting the 113.25 handle on a daily closing (5 pm EST) basis.
As long as the pair holds above this level, I’ll maintain a slightly bullish bias. I can’t fully commit to an upside bias given the range-bound price action over the last few months.
As a side note, while typing this, the pair has lost 40 pips and is currently trading below 113.25 on an intraday basis. Where the pair closes today at 5 pm EST will be significant in the sense that 113.25 is now the proverbial line in the sand between buyers and sellers.
The 113.25 area remains a key support for now but as mentioned above, today’s close will be critical. Key resistance comes in at the May high of 114.35. A close above that would target the confluence of resistance at 115.00/10.
Alternatively, a daily close back below 113.25 would negate the bullish outlook and re-expose the 111.70 support area.
Keep in mind that today at 2 pm EST we have the FOMC meeting minutes. The event usually triggers some volatility for the greenback as traders reposition themselves. But given today’s rather indecisive price action, waiting for the session close at 5 pm EST would be prudent.
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Not wise to buy now, but 112.4 is a good price to do so, right?
Many thanks
D.
Dimitris, it’s all explained in the post.
Justin, why is the 113.25 a ‘line in the sand’, as you put it, why such significance exists around that area?
Sometimes these levels just develop over time but the price action this week has confirmed the idea that 113.25 is significant.
Justin, I don’t see any real reason to draw a s/r line there at 113.25. BUT, there IS a trend line there is bouncing off (the 3 peaks at March 10th, May 11th and July 3rd is the trend line). THAT is the reason the price is having a reaction there. I’m surprised you didn’t see the trend line there.
Hi everybody, hi Justin, I saw a wedge in this price action. It could be correct? March 10th high, April 17th low, May 11th high, June 14th low and now we are at the resistence of the wedge. What do you think about?
not sure why focusing on 113.25 as a s/r level
I (as you) have no idea why he drew a horizontal line there at 113.25 as the s/r level. However, if you draw a trend line on the 3 peaks at March 10th, May 11th and July 3rd, then you will see it is basically bouncing of the July 3rd part of the trend line (at about 113.30). Justin should have drawn a trend line there but I don’t know why he didn’t. I believe 113.30 area is resistance due to the trend line – NOT because of the s/r line Justin drew.
Randy, look at the price action over the years and you’ll see why I mentioned the 113.25 area. Even if you concentrate on the movement since last November, you’ll see how 113.25 has served as a pivot of sorts. Not perfect (no level is), but it has been influential.
The truth is in the price action, which did indeed hold above the level on a daily closing basis since I released this commentary and rallied 100 pips from the area on Friday.
Justin, I guess we will just have to disagree. I have went back to my usd/jpy chart to see again what it did over the last several years, and yes I do see some instances here and there of S/R at the 113.25 level, BUT it is nothing major as you have basically claimed. I think the price recently at 113.25 was reacting due to the trend line I wrote about in my earlier comment. I still don’t know how you missed seeing that trend line while doing your analysis. It may be all water under the bridge now, because, as I write this, the price is currently rallying upwards past the 113.25 price level. Will it continue to go up? I don’t know. But at this moment it has moved on up to 114.00.