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The USDJPY is rebounding this week from the 105.00 support area.
I wrote about the potential for a bounce from here in Sunday’s forecast.
There is a descending channel that extends from the March low and April high. You can see how the pair encountered buyers here on the 6th and 7th.
For this reason alone, I was not interested in shorting USDJPY.
In fact, I haven’t been interested in buying or selling the pair. I felt that the market needed more time to figure out where it wants to go.
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But just because USDJPY caught a bid at 105.00 doesn’t mean it’s time to buy, at least not for me.
Notice how that 106.80 region has attracted sellers on the last few attempts.
That isn’t surprising given that 106.80 was the June 25th low. As we know, former support becomes new resistance.
Until USDJPY climbs back above 106.80 on a daily closing basis (using a New York close chart), buyers are going to continue to struggle.
I also won’t entertain a long until I see a close above 106.80.
At the same time, shorts are unfavorable at the moment.
Tuesday’s 160-pip rally is not something I want to sell into, and 105.00 support is too close to the current price to secure a favorable risk to reward ratio.
Furthermore, a close back above 106.80 could take USDJPY back to channel resistance at or above 108.00, so there’s no need to rush an entry.