USDJPY Buyers Extend Gains, but Key Test Remains

by Justin Bennett  · 

April 23, 2018

by Justin Bennett  · 

April 23, 2018

by Justin Bennett  · 

April 23, 2018

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Important: I use New York close charts so that each 24-hour period closes at 5 pm EST.

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USDJPY bulls had a difficult time breaking above the 107.40 handle. I wrote about it in the April 15 weekly forecast, noting that it would take a daily close above the level to push prices higher.

In that same forecast, I also mentioned the April 13 bearish candle and how I did not consider it a selling opportunity.

After two weeks of struggling to crack resistance at 107.40, buyers finally managed a close above it on Friday. Not surprisingly, USDJPY bulls are stealing the show so far in today’s session.

However, I’m still not overly bullish the USDJPY. In fact, I think this pair is perhaps the worst way to express a bullish view of the U.S. dollar. Pairs like the EURUSD, GBPUSD or just about any other major currency pair are better suited in my opinion.

Why am I hesitant to take a bullish mid to long-term stance on the USDJPY?

Namely because of the breakdown that occurred in mid-February. You may recall my February 13 commentary where I pointed out multi-year wedge support that extends from the September 2012 low.

That level broke just hours later when the pair closed the day (remember, I use a New York close chart where each session closes at 5 pm EST) below the 108.30 area.

There’s always a chance that the trend line from the September 2012 low is of little significance. But judging by the price action in late January and early to mid-February, I’d say it’s incredibly relevant.

Moreover, the USDJPY is fast approaching the 108.50 handle. This is an area that supported prices earlier this year just before sellers broke that 2012 trend line. It’s also the 38.2% Fibonacci when measuring from the November 2017 high to the current 2018 low.

With that in mind, I’d expect to see an influx of selling pressure around 108.50 if tested as new resistance over the coming sessions.

Of course, a daily close at 5 pm EST above 108.50 would expose former trend line support from September 2012 as new resistance. But for now, all eyes are focused on how much selling pressure materializes at 108.50 and if it’s enough to repel buyers.

To the downside, we have the 107.40/75 area. A daily close below 107.40 would take us back to 106.60 and perhaps even 105.50. For now, though, buyers are in control and are showing no signs of slowing.

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USDJPY key levels on the daily chart

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    1. The lower wick was too long, but more importantly, the pair had been hovering just below 107.40 for an entire week before the April 13 candle formed. I tend to stay away from long-tailed patterns that develop immediately after sideways price action.

          1. No. The question was why I didn’t see the April 13 candle as a selling opportunity. One reason was that the lower wick was too long. In other words, not enough selling pressure into the session close.

          2. But in my chart Upper wick is too long then lower wick. I didn’t understand which one is too-long? That means there is not supposed to be wick formation in lower end?

  1. Good morning Justin, meaning that if you close today (5pm NY) above the 108.50 zone, we could consider an upward entry, with an initial TP at the crossroads of the 2012 trend line with possible continuation until the next resistance in the area of 110.50 ?. In my analysis I draw a trend line in 4H (forming an ascending triangle) and observe that if this line is broken it matches the resistance of 108.50. which I think would be another possible bullish confirmation. otherwise he would wait for a downward configuration; or I’m in an error. I apologize I am a person with little experience and I try to get the most out of the tips and guides you give on your page. Hasta la vista
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    1. A daily close above 108.50 would be bullish, but I wouldn’t consider buying, at least not without good reason to do so.

  2. It is a great lesson but now I still cannot navigate the demo trade platform to be able to practice the platform.

  3. I´ve got some slightly different levels I´m looking at. If we take the last weekly swing from 118.71, then today´s candle closed right on the 50% level. If we then take the last daily swing from 113.70, we had a Bearish Engulfing 4H candle form right at the 50% level again. I think we could well see this turn down from here.

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