Support: S1= 113.2(Fibonacci) S2= 112.8 (Fibonacci) S3= 111 (Previous Low)
Resistance: R1= 114.57 (Day’s High) R2= 155.55(Very Important) R3= 116.0
USD/JPY is coming off its largest drop on a monthly basis since the 2008. The higher demand for the JPY is believed to settle for the coming days given two main reasons:
- US Treasury Yields appreciation
- Equities markets rebound off the lows, especially the US market
While on a fundamental basis and in the bigger picture, Yen crosses might be headed down considering a possible shift in the risk aversion of carry trades which have been piling up due to relatively liberal central banks’ policies, on the short term a rebound is more likely considering that support level of 111.00 and 112.00 are holding for the moment.
The interesting fact is that today was the second time USD/JPY tried to breach the channel/ trendline and failed for the second time, however it made a higher low, forming a triangle. As practice shows, resistance is usually breached when attempted for a third time after being made a higher low thus a long setup is the most probable to yield result.
- USD/JPY has jumped above the Ichimoku cloud.
- It is being traded in an oversold zone as indicated by Stochastic RSI.
- MACD signal lines are starting to rebound from the oversold level and are crossing.
All of these three signals support our bullish thesis and Long entry attempts should be made around 113.22 with a stop at market price if USD/JPY falls below the Ichimoku Cloud, indicating a bearish signal. For a trader with a higher risk appetite, the stop can be placed at 61% Fibonacci level (112.39).
Target 1 near today’s high 114.55
Target 2 is at 115.00/115.55
If the position goes positive, it is advisable to put the stop at your entry price given the high volatility and uncertainty, thus lowering your risk to break even.