Difficult area to maneuver
The USDJPY has moved to the new lows in the last few hours but is in the midst of some rough waters as result of the January chop.
Looking at the hourly chart above, the pair has two area where there have been some swing lows of interest. The first comes between 117.18-26 and the second is between 116.46-66. In January, the pair spent most of the trading time above, but extended below as well. Hey...the market was not all that comfortable below this area (the yellow areas that is) given the fundamental dynamics perhaps.
Looking at the daily chart, the January chop occurred largely below what was a floor going back to February 2015. That floor was in the 118.06-118.50. Prior to January, there was one day where the price traded below that area (the August plunge on the stock tumble) Looking at the downside on that chart, there are mainly higher lows from 2014/15 at 115.55, 1.1584 and 116.09. In January, the low extended to 115.96 (see blue circles). Each of those represent potential downside targets if the ceilings above can hold the rallies....
So the combination of the charts - one closer in and one further out - outlines the potential for traders going forward.
So what do you do technically?
Define the extreme "lines in the sand" and lean against them.
The break below the 118.06-50 is one line in the sand. That is the higher one. Today, the price moved into this area and backed back down.
The closer line in the sand has the resistance at 117.188-36. Looking at the hourly chart, traders pushed below and is trying to stay below now. So that is close resistance now.
So shorts want to see the price stay below those lines in the sand. New trades can look to lean against those levels.
ON the downside, a line in the sand on the downside is 116.46-66. There should be support buyers (see lower yellow area on the hourly chart) on a test with stops below. A move below that area starts to target the lows on the daily chart from Dec 2014, Jan 2015, Aug 2015 and Jan 2016.
