Various points of analysis here. First thing are the key zones. There are a number of fresh (price hasn't tested yet) zones drawn on here that I expect heavy buying or selling at or very close to.
The big grey box is a recent range that price has been stuck in for some time. Inside this is another (supplying shorts) however this zone was not respected as I thought it would be. This is due to Draghi opening the door for more EUR Quantitative Easing last week which weakened the Euro and strengthened the dollar. As a result I am now looking directly ahead to the higher supply zones of around 124 and 126.
Multiple reasons for this: They are the next significant zones that would supply a short orders significant enough for institutions. These stops would need to be taken for a good long move down. We have been expecting 116 due to the china black monday crash candle on the 24/08/15 that sticks out clearly on the chart. To get here we need a sufficient catalyst which could be more longs.
However my short target is very low at 106ish. The reason is looking at the chart before we reach 116 and start ranging we have a very thin (fast and sharp move up) move up. I believe this was more of a spike and related to some data release etc although I am not sure as I was not trading back then. As a result such a thin move in my estimation needs to be filled as there is a void area under 116 down to 103 now. This would be a very extended move down and would definitely need the 126 stops to be taken before facilitating such a move. However it is something I do see happening in the weeks and months to come.
Fundamentally this dollar strength comes from Euro weakness as the dollar is weighted about 66% in the Eur (incorrectly worded but the Eur is very significant in affecting the dollar). I still hold the view that the dollar is weak and amidst frequent weak data prints and FED rate hike uncertainty I expect weakness in the dollar.
Also the BOJ rate decision (likely unchanged) and more importantly speech comes at the end of this week. Honda said at the end of last week the BOJ do not need more at this point. However BOJ are prone to surprise decisions/changes and it has been popular opinion that the BOJ will implement another round of at the end of OCT meeting. This would be a sign of weakness in the Yen around a time of Dollar strength which further adds to my long bias held on this pair currently.
Directional Bias: On the DXY chart I had a drawn around 93.8ish which would facilitate longs and it certainly did as seen in my other published Ideas. DXY has also broken through the next so I see some more Dollar strength up until the around 98.30. (check my DXY published chart). This supports my USD/JPY analysis of more dollar strength now and a big short opportunity coming soon.
CHECK BELOW IN THE UPDATE/COMMENTS FOR THE REST OF THE ANALYSIS
This is all opinion and not trade advice/predictions.
A friend critiqued my use of fibs recently and it seems to have paid dividends. Initially I was placing the Fib on this thin move seen from the 105.1 area up to 122ish.. He advised against using such unreliable moves for fibs. As a result I placed two fibs, one long (black) and one short (Blue) from around 115.5 to 122ish As shown on the chart.
This move is more reliable as it is less sharp and more of a natural price flow.
The blue short retracement produced a 161.8% level of 125.5 right in the middle of the two supply zones I drew initially which means that my target was further strengthened in my mind. The black long retracement gave me two levels. A 261.8% level that lined up perfectly with the bottom of my previous demand zone and a 161.8% level at 111.56 which tells me to expect price to stall and bounce a bit at this level. with this short 161 target I can have some understanding of why price stalls here if and when it does as the thin move doesn't really show any significance.
All in all I am long biased up to about 125 to supply shorts down to 105. Massive targets both ways. It all really depends on the key grey box however. If price dropped on open tonight out of the box and retested I would be looking for shorts down to 116 Before any long up to 125 to facilitate the 105 short target.