USD/JPY: Technical outlook and review.

FX:USDJPY   U.S. Dollar / Japanese Yen
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Weekly Timeframe: The USD/JPY pair continues to hover just above a major weekly swap level coming in at 115.50.

Daily Timeframe: The daily timeframe picture reveals that the upward momentum seen from the daily demand area at 115.55-116.38 may be diminishing, as price begins to stall just below a daily supply area seen at 119.95-119.14.

4hr Timeframe: Recent movements on the 4hr timeframe show that price did indeed see a reaction around the 118.00 region consequently sending prices back down towards the 4hr demand area at 116.91-117.22. We were unfortunately unable to catch this move on the lower timeframes – well done to anyone that did! The market clearly likes this aforementioned 4hr demand area as price was seen rebounding strongly from here, taking out the118.00 handle and pushing into a weak-looking 4hr supply area coming in at 118.84-118.52.

With the weekly timeframe showing price hovering above major support, and the daily timeframe indicating that there is room to move north, we are naturally expecting the current 4hr supply area to be consumed and 119.00 to be tested. 119.00 could be a nice area to look for a ‘bounce trade’ as we would then be trading just below the aforementioned daily supply area. In addition to this, notice that just above 119.00 we have a nice-looking fresh 4hr ‘sell zone’ at 119.31-119.12. Pro money will likely see this as an opportunity to fake above 119.00 into this supply area, one can only imagine the amount of buy stops lurking just above this number. Dependent on your style of trading (and if price reaches 119.00 of course), we intend to wait for lower-timeframe selling confirmation around the 119.05 mark, as we mustn't forget where we are located on the weekly chart! (See above).

Current buy/sell levels:

• Buy orders: Flat (Predicative stop-loss orders seen at: N/A).

• Sell orders: 119.05 (Predicative stop-loss orders seen at: 119.38).

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My take, FWIW: BB mid (daily) 118.73 roughly. Having trouble holding above that px lends slight bearish bias, but whipsaws here indicate most comfortable to stay in this 400-500 pip range. No follow through, even with a couple of nice chances on the downside. Maybe time for an upside try, which frankly I'd expect to fail as well. 119.05 short with a 33 pip stop? I think it gets stopped. :) If, however, we can't even get above 119, then surely we're going down for another try at 115.50-116. Huge DXY moves (much based on Euro of course), but we still cannot (so far) really threaten new highs on this pair. It's tempting to say "something's not right" because we're still this low, but that ignores how far we've come from Oct 15.
ICmarkets SetagayaGirl
Hi SetagayaGirl,

As always, a nice explanation of your thoughts!

Do you use correlations when forming trading ideas? If so, what is your opinion on the following:

The DAX 30 and USD/JPY state clear correlation, but what is your opinion on this from a fundamental standpoint?

Also, what's your opinion on the EUR/USD - DAX correlation at the moment, which correlated relatively well until mid last year?

IC Markets
Thanks for your kind words. As for correlations, these days, I want to find *uncorrelated* trades, but it seems it's more and more difficult. :)

We all know the risk-on/risk-off mantra, but it seems that more and more vehicles get sucked into this massive black hole.

Correlations work, and then they don't. You know this, and I know this. At the moment, EUR/USD - DAX correlation makes a lot of sense from the standpoint of what has happened to US equities in a similar circumstance.

Is it similar, is the question. We can only make (tenuous) assumptions, manage risk, and take our losses while preserving our capital.

The winners take care of themselves -- as long as we manage risk.

Am I wrong?

ICmarkets SetagayaGirl
There's no wrong answer I guess, everyone has an opinion, this is what makes the market move :)

Thank you very much for the detailed response, your posts are very interesting.
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