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USDJPY: New Battleground Is 113.15

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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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I’ve been discussing a rather bearish outlook for USDJPY throughout October. The way buyers struggled to extend rallies in July and early October was a bit concerning. Then came the aggressive selloff during the first half of the month.

I was using the trend line that extends from the year-to-date low as a barometer for trend strength. The idea was that a daily close (New York 5 pm EST) below the trend line near 112.00 would open up downside targets.

That break came last Friday. On Sunday, I mentioned how the 112.00/40 area would likely attract sellers if tested this week.

However, buyers had other plans. Instead of selling off from the area, they closed Monday’s session back above the 2018 trend line.

For those who read what I wrote on Sunday, you knew that a daily close back above 112.20 would negate the bearish outlook. Worst case scenario, Monday’s close at 112.35 cost you just 15 pips if you entered at 112.20.

Here’s what I wrote on Sunday:

Alternatively, a daily close back above the year-to-date trend line (currently near 112.20) would negate the bearish outlook.

And if you were waiting for bearish price action to develop, well, you never entered as nothing worthwhile formed during Monday’s retest.

As it stands, Friday’s close below our trend line was a false break. Chalk it up to the fact that it was an end-of-week breakout which tends to be less reliable.

I also included something to that effect in Sunday’s commentary.

My only reservation is that the breakdown occurred on a Friday. Since volume tends to dry up before the weekend, Friday breakouts can be less reliable than those that occur mid-week.

Before you get too bullish here though, keep in mind that USDJPY is testing the 113.15 resistance area today. I’ve pointed out this level a few times in recent weeks as it’s the (prominent) July swing high.

If buyers can clear 113.15 on a daily closing basis, it would give me a reason to suspect further gains toward the year-to-date high at 114.50. But until that time, I’d be very careful not to get too bullish here.

For now, this is a “wait and see” market. The last few months of price action still give me a reason to suspect weakness ahead, but Friday’s false break and this week’s strength are enough to give me pause.

Do keep an eye on the daily price action at 113.15 though. The area promises to be the new battleground for USDJPY over the next few sessions.

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USDJPY 2018 trend line on daily chart

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25 comments
Joseph says

Thank you sir for the analysis.

Reply
    Justin Bennett says

    You’re welcome.

    Reply
      Joseph says

      It seems like it will form a bearish rejection sir. I know it’s too early to say. But if it formed a bearish pin bar, do you think it will be a good set up to sell?

      Reply
        Justin Bennett says

        As you say, it’s too early.

        Reply
Pierre Mifsud says

I see the resistance at 113.63…when reached it will retest the support once again at 111.40

Reply
    Justin Bennett says

    We’ll see what the market wants to do here.

    Reply
      Pierre Mifsud says

      Justin on the GBPCHF daily there is a potential CUP & HANDLE pattern forming probably reaching the 1.3650 handle or more after the break on the handle…..Can you also CONFIRM on this?….Thanks

      Reply
        Justin Bennett says

        I don’t trade the franc, sorry.

        Reply
Sumantra kumar halder says

Nice analysis

Reply
    Justin Bennett says

    Cheers, Sumantra.

    Reply
isa says

thank you sir

Reply
    Justin Bennett says

    You’re welcome.

    Reply
Juan Carlos Landa says

At this moment it has fallen to 112.85 and with force to keep falling, there is a whole battle as you mention it

Reply
Trader says

Iam lost trade usdjpy, but tonight usd jpn to become rock n roll who want to sell.

Reply
Zulfikar says

You are simply genius…Salute!!!

Reply
    Justin Bennett says

    I don’t know about that, but I try. 🙂

    Reply
TYDOLLAR says

Thanks so very for your effort and your time to update us always, may God bless you. Justin, how I wish to see you one on one in my life

Reply
Yusuf Ahmad says

Thanks

Reply
    Justin Bennett says

    Anytime, Yusuf.

    Reply
Aniewo francis says

Thanks so much

Reply
    Justin Bennett says

    You’re welcome.

    Reply
james says

good analysis

Reply
joel says

Despite it being choppy, it respects trend direction. Thanks Justin

Reply
    Justin Bennett says

    You’re welcome.

    Reply
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