Welcome back to another blog by AspireFX. Today we’ll be looking at USDJPY and to be more specific we’ll be looking at how pivotal certain key areas between the 108.000 – 106.000 region are when analyzing this pair. There are, of course, outliers as you will see and those are mainly fundamentally driven moves but when within the above mentioned region, it likes to obey certain levels nicely.
Above we can see the daily time frame going back to mid-April. We have the 107.500, 107.000 as well 106.500 region boxed out to illustrate how these levels have provided support and resistance over the last few months, the arrows drawn show that more clearly. 107.500 in particular seems to be a magnet for this pair and if we look at the huge push to the upside labelled outlier, we first consolidated just above 107.500 (May 18 until June 1) until we had a huge wick to the downside to exactly 107.000. Both of these levels provided support before the big move to the upside. From the high around 110.000, price melted through 107.500 and then came up to retest that same level finding resistance before continuing to the downside.
On the 4 hour time frame above we have a more detailed look at how we broke through 107.500 and came up to retest that level multiple times where each time we closed either on or below that region which validated that level as resistance. We, in actual fact, formed a double top on 107.500 which took us further to the downside.
The 1 hour time frame shows us just how strong these levels are. Looking at the highlighted box, which is exactly where we formed the double top on the 4 hour time frame, we can see that price consolidated nicely between 107.500 and 107.000, showing how these levels act as support and resistance on an intra-day level. Placing the Fibonacci tool on the most recent downward leg, we can see how the 61.8 Fibonacci level lines up perfectly with 107.000. We printed an evening star pattern on the 61.8 which took price lower amounting to 40 pips in downside movement.
When looking for setups on USDJPY, keep these key levels in mind when executing trades. Know that price may not always bounce off of these levels and there may be consolidation or false breakouts involved as there are other factors that influence price besides technical analysis. That is why it is always important to take news events into account as well as maintaining sound risk management. As always, trade safely and subscribe to our blog for updates instantly!