FX.co ★ USD/JPY: trading plan for the US session on December 21st. COT reports (analysis of yesterday's deals). The Japanese yen continues to rise

In my morning forecast, I emphasized 143.36 and planned to make entry decisions based on it. Let's look at the 5-minute chart and analyze what happened. The rise and formation of a false breakout around 143.36 allowed for an excellent selling signal, resulting in a pair's decline by more than 30 points. Considering that the morning levels were not violated, I did not reconsider the technical picture for the second half of the day.

To open long positions on USD/JPY:

Whether the yen will continue to rise and the dollar will fall directly depends on the statistics scheduled for the second half of the day. Figures on the number of initial claims for unemployment benefits and GDP for the third quarter of this year are expected. Even if the final GDP figure is revised slightly downward, it is unlikely to harm the downward correction observed in the pair over the past few days. If the report is revised upward, USD/JPY is likely to gain in growth. I plan to act on the decline after forming a false breakout around 142.80, to recover to the daily maximum of 143.36, which was not surpassed in the first half of the day. Moving averages are also located there, limiting the pair's upward potential. Only a breakout and a reverse test from top to bottom of this range will be a suitable option for me to buy, capable of leading to a larger correction of the pair to around 143.96. The ultimate target will be the area of 144.47, where I will take profit. In the scenario of further decline in USD/JPY and the absence of activity at 142.80 from buyers in the second half of the day, pressure on the pair will persist, leading to a new sell-off. In this case, I will try to enter the market around 142.32.

I will consider opening long positions only if there is a false breakout in that scenario. I plan to buy USD/JPY immediately on a rebound only from 141.86 with the goal of a pair correction downward by 30-35 points within the day.

To open short positions on USD/JPY:

Sellers applied serious pressure to the pair and handled their task excellently by protecting 143.36. As long as trading is conducted below this level, I expect pressure to persist on the pair. With strong U.S. statistics and a surge in USD/JPY, I will act similarly to the morning signal I discussed above: forming a false breakout at 143.36 is a suitable scenario for me to increase short positions, expecting a decline to 142.80. A breakthrough and a reverse test from the bottom to the top of this range will deal a more serious blow to buyer positions, removing stop orders and opening the path to 142.32. I expect the presence of large buyers. A more distant target will be the area of 141.86, where I will take profit. In the case of USD/JPY growth and the absence of activity at 143.36, which is more likely since this level has already worked once, demand for the dollar will return. In this case, postponing sales until testing the next resistance at 143.96 is best. If there is no downward movement, I will sell USD/JPY immediately on a rebound from 144.47, but only counting on a pair correction downward by 30-35 points within the day.

In the COT report (Commitment of Traders) as of December 12, there was a reduction in both long and short positions. The anticipated increase in interest rates by the Bank of Japan negatively affected yen sales, leading to a significant reduction in short positions. However, the absence of positive dynamics in long positions speaks for itself. Given that the present report needs to capture the regulator's recent stance of maintaining an extremely accommodative monetary policy, the most prudent course of action would be to disregard the current balance of forces reflected in this report. The Federal Reserve's soft position will, in any case, exert pressure on the dollar, so with each active rise in USD/JPY, I advise opening short positions in continuation of the bear market in the pair. In the last COT report, it is stated that non-commercial long positions fell by 40 to the level of 28,226, while non-commercial short positions decreased by a significant 23,865 to the level of 109,357. As a result, the spread between long and short positions increased by 4,634.

Indicator Signals:

Moving Averages:

Trading is below the 30 and 50-day moving averages, indicating further pair decline.

Bollinger Bands:

In case of decline, the lower boundary of the indicator, around 142.80, will act as support.

Description of Indicators:

• Moving Average (50-day): Yellow color on the chart.
• Moving Average (30-day): Green color on the chart.
• MACD Indicator (12-26-9): Fast EMA period 12, Slow EMA period 26, SMA period 9.
• Bollinger Bands (20): Period 20.
• Non-commercial traders: Speculators, including individual traders, hedge funds, and large institutions, use the futures market for speculative purposes and meeting certain requirements.
• Long non-commercial positions: The total long open positions of non-commercial traders.
• Short non-commercial positions: The total short open positions of non-commercial traders.
• Total non-commercial net position: The difference between short and long positions of non-commercial traders.