USDJPY Major Support Bounce w/ Descending Channel
Daily Timeframe Analysis:
USD is finally retesting $126.269, a support area created back in May 2022. Ever since hitting all time highs of $151.946, USDJPY has been consolidating downwards within this massive descending channel making its way back to this strong support area. On 1/13/23, USDJPY hit a low of $127.460, bouncing right above the top of the major support zone between ($123.979 - $127.220). This recent bounce is not only in confluence with the support of the large descending channel but it is also in confluence with a major support zone and also the 50% Fibonacci level.
USDJPY is not back at a key resistance that was once a very strong support having bounced 5 times in June 2022, August 2022, December 2022, and January 2023, respectively. On January 12th, USDJPY broke below this level and is now retesting as resistance for the second time while at the same time retesting the resistance of the downtrend/descending channel.
Trade Idea(Daily Timeframe):
There are a few possible trades to take from this setup.
First idea you could watch for a confirm reject reversal and short to the downside with a target of support at 127.220 and a stop above key resistance.
Second idea you could watch for a break and close below 127.220 and catch a short entry targeting the low of the major support zone between 123.979 - 127.220 and also watching for another bounce of the support of the downtrend/descending channel.
Third idea is the one I’m focused on. I am watching for a break, hold, and retest above the overall downtrend/descending channel resistance line and the current resistance zone between 130.527 and 131.443. Once this break, hold, and retest happens, enter when current resistance has confirmed to have become support, creating a higher high, then use other confluence factors such key fibonacci levels, oversold RSI, etc to enter trade and target the next resistance for a TP.
There are other trade possibilities that could occur. My advice is to have a plan, trade the plan. If the plan doesn’t play out or present itself be open to making adjustments and trading with overall the direction.
USD is finally retesting $126.269, a support area created back in May 2022. Ever since hitting all time highs of $151.946, USDJPY has been consolidating downwards within this massive descending channel making its way back to this strong support area. On 1/13/23, USDJPY hit a low of $127.460, bouncing right above the top of the major support zone between ($123.979 - $127.220). This recent bounce is not only in confluence with the support of the large descending channel but it is also in confluence with a major support zone and also the 50% Fibonacci level.
USDJPY is not back at a key resistance that was once a very strong support having bounced 5 times in June 2022, August 2022, December 2022, and January 2023, respectively. On January 12th, USDJPY broke below this level and is now retesting as resistance for the second time while at the same time retesting the resistance of the downtrend/descending channel.
Trade Idea(Daily Timeframe):
There are a few possible trades to take from this setup.
First idea you could watch for a confirm reject reversal and short to the downside with a target of support at 127.220 and a stop above key resistance.
Second idea you could watch for a break and close below 127.220 and catch a short entry targeting the low of the major support zone between 123.979 - 127.220 and also watching for another bounce of the support of the downtrend/descending channel.
Third idea is the one I’m focused on. I am watching for a break, hold, and retest above the overall downtrend/descending channel resistance line and the current resistance zone between 130.527 and 131.443. Once this break, hold, and retest happens, enter when current resistance has confirmed to have become support, creating a higher high, then use other confluence factors such key fibonacci levels, oversold RSI, etc to enter trade and target the next resistance for a TP.
There are other trade possibilities that could occur. My advice is to have a plan, trade the plan. If the plan doesn’t play out or present itself be open to making adjustments and trading with overall the direction.
Dennis Butler Jr.