ICmarkets
Short

Thoughts on the USD/JPY...

FX:USDJPY   U.S. Dollar/Japanese Yen
290 0 6
The value of the USD/JPY             weakened in aggressive fashion on Wednesday, consequently taking out multiple H4 supports in the process. It was only as US traders entered the fray ahead of the 103 handle/H4 demand at 102.80-102.97 did we see price action begin to stabilize.

In addition to this, the daily support area at 103.50-103.89 (now acting resistance) was also engulfed, leaving the pair free to challenge the daily support level penciled in at 102.63. From the weekly chart, technicians should not really be surprised by this recent descent, even though it has been exacerbated by uncertainty surrounding the upcoming US elections. The weekly candle touched base with a resistance area at 105.19-107.54 a week ago and has since then sold off.

Our suggestions: In spite of the bulls seen making a comeback ahead of 103, our team is not really keen on buying this market at this time for reasons stated above in bold. To become sellers in this market, nevertheless, we see two options:

1. Look for a lower timeframe entry short (see the top of this report) from either the H4 mid-way resistance 103.50 or the nearby H4 trendline resistance above it (102.65). Taking partial profits is advisable around the 103 band as well as reducing risk to breakeven.

2. Wait for a close to be seen beyond the current H4 demand. This would, as far as we can see, likely indicate that daily support at 102.63 is the next line on the hit list to be taken out. A close below the daily level would potentially open up the path south down to the weekly support at 100.61 (the next downside target on the weekly timeframe ), which sits just above daily demand at 99.53-100.23. Therefore, a close below the H4 demand followed up with a retest and a reasonably sized H4 bear candle would, in our book, be considered sufficient enough to condone a short entry in this market, with an ultimate target set at 100.61: the weekly support.

Personally we favor option two.

Data points to consider: US jobless claims at 12.30pm and US ISM non-manufacturing PMI at 2pm GMT

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Watch for a close below the H4 demand at 102.80-102.97 and then look to trade any retest seen thereafter (H4 bearish close required – stop loss: ideally beyond the trigger candle).
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