Buying USDJPY With Caution, 111.75 next?

First off, starting here on the Greater British Pound versus the US Dollar [GBPUSD]. Of course, yesterday we saw a significant rally on polls about the exit as the market turned from the 1.4400-level, all the way back up here into the 1.4600-level. Then it paused for a few hours as we approached the FOMC release yesterday at 2 PM Eastern US time. Shortly after that, we saw the market start to become a little bullish for the US dollar or bearish here for the GBPUSD.

Took a quick sell. A quick short here into the 1.4605-level. The market went down about 30 pips and then turned right back around and came back up. Fortunately, we had applied the trade manager to the trade. When I saw 30 pips of profit, the trade manager took us to break even on the trade. It came back up, took us out, went back down, and then right back up again. So, while it was a breakeven trade, there was an opportunity to see about 30 or maybe even a little bit more pips as it came all the way back down to the bottom of our previous four-hour candle.

Next, moving over to the Australian versus the US Dollar [AUDUSD]. We’ll study this a little bit more in the live Trade Room today, but we see the previous uptrend. The current downtrend. We’ve been playing the current downtrend over the past few days. You could see the trade still going. I have a small amount of lots left on the trade. Closed a majority of the profit already, but I have a small amount of lots on the trade, sitting with 127 pips.

Let’s go ahead and zoom it in a couple of times here on the daily timeframe. Our entry was all the way up here at the purple-shaded area. We typically often will suggest selling on rallies into resistance after breaking through support. So, we had the support back here. Broke through it. Rallied the resistance underneath the 100-period moving average and the trendline. Took a short there into the purple-shaded area and have seen significant profit all the way down here towards the 0.7190-level.

I have closed, again, a majority of the profit as it’s touched down here into our next target. If it continues to go lower today, of course, we’ll look for it. Low-0.7100s, down here closer towards the 0.7100-level, the blue-shaded area at the bottom of the chart. Otherwise, we want to protect as much profit as we can because if we see any bounce off of the 0.7200 or just in the upper-0.7100s, we want to protect as much profit as we can now on the AUDUSD.

Moving on over to the US Dollar versus the Japanese Yen [USDJPY]. Here, on this currency pair, we have a very similar situation as we’ve had on several other currency pairs. We had a previous trend, which is the red trend line. It was a downtrend, but over the past couple of weeks we’ve seen a little bit of a momentum shift, and we’ve seen that over on the USDCAD as well and the EURUSD on the way back down, where we saw a previous trend, and we’ve seen a little bit of momentum shift over the past two weeks. EURUSD is going down. USDCAD is going up. Here on the USDJPY going up. So, momentum shifts.

So, we want to begin looking for opportunities in the direction of that shift and momentum and potentially a change of the overall trend, which was a downtrend there under the red trend line. The little, blue trend line shows us what’s been happening over the past couple of weeks.

Let’s begin to zoom it in here a little bit and we could see yesterday we looked in the live Trade Room of this period of congestion inside this blue box, between the orange and the purple-shaded area. Yesterday, we talked about the possibilities of buying on any dips into the orange-shaded area. Well, after the Trade Room, it never went back down there. Never took a turn back down towards the orange-shaded area, so we never really had an opportunity to jump into any buys at the bottom of our congestion zone. Now it’s pushed right back up there through the purple-shaded area.

So, as we typically will talk about, we want to watch for dips into support or breaks of resistance for opportunities to go long on a currency pair. We can see historical resistance just over the past couple of days. About six or seven days we saw resistance into the purple zone, 109.35 to 109.75. You go back in time. You could see some congestion and resistance back here as well. So, as long as it sits on top of 109.75, I think this becomes our next opportunity to go long here for the USDJPY, targeting the next resistance level.

You could see the red circles on the left-hand side touching the blue-shaded area as support. So, that now becomes our next potential resistance target. That’s 110.65 to 111.00. So, if that’s the resistance target, we know we’re potentially breaking through the purple zone. Buying USDJPY becomes our opportunity to go long. Our risk in this scenario will be just underneath the purple-shaded area. I’m just going to put a little, red line there. That’s going to be our risk because we know that if the market turns around and gets back to that purple zone – 109.35 -, it’s probably turning back lower again.

So, with the trend and momentum, the blue trend line, we’re looking for buys on top of that level. The previous Fibonacci – high of the long, red candle, down to the lowest low puts the .618 fib at 109.46. That’s just at the bottom of our purple zone. So, again, that gives us a clue that we’ve pushed through that .618. The next Fibonacci level that we’d come in contact with would be the .786, and that’s right up here towards the blue-shaded area. .886 is just above it. I think we could probably move that Fibonacci up to that high there, and it doesn’t change it much. Just gives a couple more pips higher on that .786 and the .618 fib. But either way, blue zone, the purple zone are the main areas to focus here. Forex Black Book, by the way, has also turned green, giving us an upside bullish momentum.

Let’s take it on down to the four-hour timeframe. And again, now we could see with some clarity that the four-hour timeframe has clearly pushed through the purple zone. So, again, buying on dips to the purple zone become the opportunity for the day today. A break underneath it is the risk on the trade. There’s always a risk in trading, but that’s the risk. It pushes back underneath the purple zone, 109.35. So, stop loss underneath there. Maybe 109.30, 109.25 might be an opportunity for a stop loss. 109.75 is where I have my pending trade. That’s right there on top of the purple-shaded area. Actually, I think I have it at 109.70, just inside that purple zone.

So, my pending buy order: 109.70. Stop loss down around 109.20, 109.25, 109.30, just around where that red line is in the purple zone. We’ll target 110.65 to 111.00, the blue-shaded area. And we know what the risk is. Push through the purple-shaded area sends it back lower for the USDJPY.

Source: Forex Traders Daily