Our take on the USD/JPY...

FX:USDJPY   U.S. Dollar / Japanese Yen
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The USD/JPY             had a rather eventful week last week! The pair collectively erased 550 pips after price aggressively plummeted from the underside of weekly supply drawn from 113.80-111.59. In consequence, the buyers and sellers are now seen battling for position within the confines of a major weekly demand zone given at 105.19-107.54. Therefore, one has to be prepared for the possibility that the buyers may bite back this week!

In-line with the weekly timeframe , daily flow is, after Thursday and Friday’s round of aggressive selling, now seen teasing the top-side of daily demand coming in at 105.19-106.31 (sits within the extremes of the aforementioned weekly demand). On the assumption that the bulls do indeed fight back this week, the next upside target seen from this scale falls in around a recently broken daily demand-turned supply at 107.60-108.35. What is more, notice that the recent sell-off has potentially formed the D-leg of an AB=CD bullish approach completing around the 105.60 mark (see blue arrows), thus possibly adding more weight to a reversal taking place.

Over on the H4 chart this morning started around 106.22, slightly lower than Friday’s close and has since then retested the H4 mid-way resistance at 106.50, following Friday’s sharp sell-off. To our way of seeing things right now, our analysis is relatively straight forward. With both the weekly and daily charts seen trading around demand zones (see above), and the 106.00 handle lurking just below current price on the H4 with ‘trade me’ written all over it, we’re going to be looking to buy from this number today. One could, if they so wished simply place a pending buy order at this level and a stop below the higher-timeframe demands. However, this would equate to a hefty 80-pip stop and when price could potentially half around the H4 mid-way resistance 106.50, the risk/reward is not exactly favorable. Our plan, therefore, is to simply watch the lower timeframe action around 106.00 today – if we manage to pin down a lower timeframe buy setup, we’ll enter long, targeting 106.50 first and foremost, followed by H4 supply at 107.41-107.09 and then perhaps H4 resistance seen at 107.91 (sits within daily supply at 107.60-108.35).

Levels to watch/live orders:

• Buys: 106.00 region Tentative – confirmation required (Stop loss: dependent on where one confirms this area).
• Sells: Flat (Stop loss: N/A).

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