The USDJPY has moved back above the 100 hour MA (blue line in the chart below) and it continues the up and down action seen in trading over the last few days. The 100 hour MA currently comes in at the 108.80 level.
The move lower last night was on the back of comments from Prime Minister Abe that he was concerned about the weakness of the JPY. The comments throws a bit of cold water on the JPY weakness trend. Traders might not be as aggressive on the upside now for the pair. This move higher off the better than expected New Home Sales data will be a test for the buyers. Do they really love the upside for the pair still or is a bigger correction on the horizon?
Technical Analysis: USDJPY trying to get back above the 100 hour MA and trend line resistance.
The move above the 100 hour MA also took the price back above trend line connecting most recent highs at the 108.80 level. Key level. If we do not get momentum toward the next target at the high from yesterday at the 108.93 level, be prepared for a rotation back to the downside.
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TRADING ADVISE: Become distrustful of market moves and trade the range.
Trading in this pair can be frustrating with the up and down action. If the pattern starts to develop further, it is important to change your focus to distrust. In other words, look for rotations back in the opposite direction when peaks and valley’s are reached. To guard against it, it is important to define targets on moves.
For example, the USDJPY was above the 100 hour MA for most of NY session yesterday. The price fell below on Abe comments and this shifted the bias back lower. If you were fortunate to sell on the break, the next target would be the 38.2% retracement at the 108.436 level. Not being able to get below that level, helped contribute to the slow grind higher. The market is distrusting of moves.
Now with the price moving above the trend line and the 100 hour MA, the bias once again shifts. This time to the upside. The next target is the high from yesterday. If the price does not move higher soon and say goes back below the current bar low, I become distrusting of the upside – despite the much better data.
Of course the other option, is to be real patient and trade at extremes high and low (and not in between) or not trade the pair until it gets out of it’s funk too. If you trade extremes you stand the risk at some point that the market breaks out, so continue to define risk and limit risk. You don’t have to risk a lot. You just need be patient and watch the action near key targets.
