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USDJPY: Where to From Here?

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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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On July 6, I pointed out the 110.30 area on the USDJPY. Given the confluence of support that had gathered there, I deemed it a “must hold” for buyers.

I was skeptical at the time as to whether buyers could pull it off. The pair was having trouble moving higher from the region and was beginning to lean on ascending channel support quite heavily.

However, the two-day rally below speaks for itself. The pair is up an impressive 150 pips since Tuesday’s close, and I see no indication of fatigue.

Yesterday’s close puts the USDJPY back above the 112.00 handle. The level supported prices throughout December 2017 and also helped attract a bid on January 2nd of this year.

As long as the pair stays above this level on a daily closing basis (New York 5 pm EST), the bullish outlook is intact. The next key resistance doesn’t come in until the December 2017 highs near 113.60.

That doesn’t mean we won’t see a pullback though. In fact, judging by the gap between the current price and the 10 and 20 EMAs (which I use to find the mean), a pullback to 112.00 would only benefit the rally effort.

Additionally, if we treat the smaller descending channel as a bull flag, then the USDJPY may not exhaust itself until the 115.00 region. That also happens to line up with several highs between January and March of last year.

In summary, I’m bullish the USDJPY, but I won’t consider an entry at the current price. A pullback into the 112.00 support area would pique my interest for a move higher to 113.60. Alternatively, a daily close below 112.00 would put the bullish outlook on hold.

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USDJPY two channels on daily time frame

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11 comments
Katerina says

Also, it does look like a cap and handle pattern, with neckline at around 111.3, which now broken. If it is a c&h, then measured target is around 118 level.

Reply
    samuel says

    Enter your comment…how can I make profit in forex trading ,please can you help me ?

    Reply
Lodza says

There is a probability that it might continue bullish to second resistance because there is also a confluence of the pivot point being breached and aso the price mantains closing above the mean

Reply
Hatinder says

Very nicely explained sir
Thanks a lot

Reply
Dan B says

Buying here is madness. I’m short from 112.40. Fundamentals all point to a weaker USD and possible inflows to JPY with equity markets looking overstretched and mounting concerns for global equities in general. My target is 104.00. See you down there. 🙂

Reply
    samuel says

    Enter your comment…how can I make money in the forex market

    Reply
      mato says

      No chance for you samuel, You are looser.

      Reply
    Justin Bennett says

    Everyone has to make their own decision. To your point, though, one could argue that equities have been stretched for years. That’s nothing new.

    The same goes for those “mounting concerns for global equities”. We’ve heard that tune for years.

    I’m not saying you’re wrong and I’m actually relatively bearish equities long-term, but if you’re trying to pick a top in risk assets, all I can say is good luck.

    Reply
      Dan B says

      Fair point, Justin. Picking tops and bottoms is rarely easy. However, I’m basing my analysis on the S&P struggling to push higher than 2800 throughout 2018, the ongoing trade tensions and the pair (and USD in general), looking overstretched after a good run up.

      I have found my groove as a contrarian trader/investor, it suits my personality. But, as we all know, anything is possible and it’s just a game of probabilities and speculation. I wish us all the best of luck with our positions. Cheers.

      Reply
Gordan says

Hello Justin. As you said before you always look for head and shoulders. Can we consuder that for this pair we have inverse head and shoulders somewher from October last year? Of course daily chart. I think there was confirmation and that this rally is for +700 pips

Reply
    Justin Bennett says

    I see no such pattern here.

    Reply
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