Daily Timeframe: Friday’s trading action shows that price has well and truly consumed a daily supply area seen at 119.196-118.041, and as a result, the path north in our opinion is now relatively clear up to a daily supply area seen at 122.610-121.540 (within this area is the aforementioned weekly Quasimodo ). It will be interesting to see what the 4hr timeframe shows
4hr Timeframe: The 4hr timeframe shows that from Thursday onwards, price was seen grinding north just missing a fresh pocket of 4hr supply seen at 119.899-119.668 before the market closed. This to us does not resemble price action, quite the opposite, especially as price is trading just below supply at the moment.
Assuming that there are active sellers located around the aforementioned 4hr supply area, price will with a high probability see a healthy decline in value. The reason being is simply because of how price approached this area. We used the word grinding above, what this word really means to us is ‘consumption’. Check out how every time the buyers made a new high; they spiked south to collect unfilled buy orders to continue rallying. What this also did at the same time was likely clear/consume any buying opposition for future selling.
Therefore, if there are indeed active sellers around the 4hr supply area, we see very little stopping price from dropping down to at least 118, or possibly the 4hr decision-point demand area seen at 116.807-117.304 given enough time (as per the red arrows). We have not ignored the round number 119, we just see this as already being consumed of demand, and hence the 118 level being the first area of interest to us should a decline be seen.
Our bias for the USD/JPY is ultimately north (partly the reason why we are not keen on selling this pair), because of where price is located in the bigger picture (see above), even though we are expecting a small decline. With that being said, we are comfortable setting a pending buy order at 117.380, with a stop loss set below at 116.726. However, trading long off of 118 (tentative buy orders are seen just above at 118.074), would for us require lower-timeframe confirmation since we see no logical area to place our stop-loss order on this timeframe.
Current buy/sell levels:
• Buy orders: 117.380 (Predicative stop-loss orders seen at: 116.726) 118.074 (Predicative stop-loss orders seen at: dependent on where one confirms this level).
• Sell orders: Flat (Predicative stop-loss orders seen at: N/A).