On Sunday we looked at where USDJPY bulls might run into trouble this week. The 107.30/80 area marks former trend line support from the September 2012 low. I first commented on this level during the February 13 session.
The bottom portion of that range between 107.30 and 107.80 is the 2017 low. It’s an area that buyers are confronting as I type this post.
However, I’m not interested in shorting the USDJPY just yet. Last week’s 250 pip decline suggests that some consolidation is in order before the next leg lower begins.
That isn’t to say the pair won’t sell off from 107.30. Nobody knows where this or any market is going. But I would prefer to see a retest of that five and a half year trend line as new resistance before considering a position. At the moment that level is near 107.70/80.
Such a retest would also return prices to their daily mean as measured by the 10 and 20 EMAs, which is something I prefer to see before putting capital at risk.
Furthermore, the 50% retracement from the last leg down between the 2nd and 16th of February comes in at 108.00. We’ll see if this level becomes a factor over the coming sessions.
If I miss an entry at current levels, I’ll look to support at 105.50. A daily close (New York 5 pm EST) below that would expose 103.70 followed by 101.75.
As I mentioned over the weekend, I think that the 100.00 handle is a realistic target over the coming months. I would, of course, have to reconsider my bearish bias if the USDJPY were to close back above the 108.00 area.