H4 supply at at 110.54-110.25 back on the radar...

FX:USDJPY   U.S. Dollar / Japanese Yen
USD/JPY bulls went on the offensive amid Wednesday’s segment, swallowing the 109 handle and reaching highs of 109.44. This recent bout of buying also completed the D-leg to a H4 AB=CD (see blue arrows) 127.2% Fib ext. point at 109.42, located just ahead of the H4 mid-level resistance at 109.50. While selling has already been seen from this angle, it failed to overcome 109, which is now an acting support.

Turning the focus over to the daily timeframe , daily resistance at 108.78 was engulfed during yesterday’s movement in reasonably strong fashion. By and of itself, this could spark another round of buying, since upside is relatively free until we shake hands with daily resistance printed at 110.21.

Weekly action, on the other hand, shows us that the USD/JPY still has some wiggle room to probe as low as a weekly trendline support taken from the low 98.78, followed closely by a weekly support area at 105.19-107.54.

Market direction:

As of current prices, buying is not something we would label high probability. In fact, even with a H4 close above 109.50, we would still not consider buying to be valid, given the threat of additional selling on the weekly timeframe at the moment.

An area we do have an eyeball on, however, is the H4 supply zone coming in at 110.54-110.25, as it is positioned nearby the aforesaid daily resistance and merges with a H4 mid-level resistance at 110.50, as well as a H4 trendline resistance taken from the high 111.87.

An ideal sell signal, in our view, would be a H4 selling wick that penetrates through 110 and connects with the underside of the above noted H4 supply (see H4 chart). That way stop-loss orders above 110 would be filled and therefore provide liquidity to those wishing to sell from the H4 supply. One could look jump aboard following the close of the candle, with stops either placed above the candle’s wick or above the H4 supply itself. The first target objective from here can be set at 109.50.

Data points to consider: US unemployment claims at 1.30pm; US ISM manufacturing PMI at 3pm GMT .
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