FX.co ★ USD/JPY: trading plan for the US session on December 28th. COT reports (analysis of yesterday's deals)

In my morning forecast, I drew attention to the level of 141.02 and planned to make trading decisions based on it. Let's look at the 5-minute chart and analyze what happened there. A breakout and a retest of 141.02 from bottom to top provided a good entry point for selling the pair, which resulted in a drop of more than 35 points. The technical picture was only slightly revised for the second half of the day.

To open long positions on USD/JPY, the following is required:

With strong statistics and a significant reaction of the pair to the data on initial jobless claims in the United States and changes in pending home sales, we can expect a small recovery in USD/JPY, which has already exceeded the monthly minimum. If the numbers disappoint, the pressure on the pair will persist, and we will eagerly observe further decline toward the support at 140.45, where I expect active buying to occur. Forming a false breakout would be the optimal scenario for opening long positions during the American session. The target for buyers in this case will be the resistance at 141.02, which played a supportive role earlier in the morning. A breakout and a retest from top to bottom of this range will lead to another entry point for buying, pushing USD/JPY to 141.49. The ultimate target will be the area around 141.91, where I plan to make a profit. This area also coincides with the location of the moving averages, which support bearish sentiment. In the scenario of a decline in the pair and the absence of activity at 140.45 from buyers, and keep in mind that our trend is downward, the pressure on the pair will increase, leading to a new round of selling. In this case, I will consider entering the market at around 139.91, but only a false breakout will signal long positions. I plan to buy USD/JPY immediately on a rebound only from the monthly minimum at 139.32 with the goal of a 30-35 point correction within the day.

To open short positions on USD/JPY, the following is required:

Sellers performed excellently in the first half of the day. To maintain the bearish trend, bears need to show themselves around the resistance at 141.02, where there will be a surge in case of positive labor market statistics in the United States. Only the formation of a false breakout at 141.02, similar to what I explained earlier, will confirm the presence of large players in the market and provide a selling signal capable of pushing USD/JPY towards 140.45. A breakthrough and a retest from the bottom to the top of this range will deal a more serious blow to the buyers' positions, triggering stop orders and opening the path to 139.91. The more distant target will be the area around 139.32, where I plan to take profit. In the scenario of USD/JPY rising and the absence of activity at 141.02 in the second half of the day, profit-taking may begin, leading to an upward correction in USD/JPY. In this case, postponing sales until testing the next resistance at 141.49 is best. In the absence of downward movement, I will sell USD/JPY immediately on a rebound only from 141.91, but with the expectation of a downward correction of the pair by 30-35 points within the day.

In the COT report (Commitment of Traders) for December 12, there was a decrease in both long and short positions. The anticipated increase in interest rates by the Bank of Japan negatively affected the yen's sales, leading to a significant reduction in short positions. However, the lack of positive dynamics in long positions speaks for itself. Given that the present report has yet to incorporate the regulator's recent stance, which involves the continuation of an extremely accommodative monetary policy, the most prudent choice would be to disregard the current assessment of the situation in this report. The accommodative stance of the Federal Reserve will put pressure on the dollar, so I recommend opening short positions with each active rise of USD/JPY, continuing the bearish trend in the pair. The latest COT report stated that long non-commercial positions decreased by 40 to 28,226, while short non-commercial positions decreased by 23,865 to 109,357. As a result, the spread between long and short positions increased by 4,634.

Indicator signals:

Moving Averages

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

Note: The author on the H1 chart determines the period and prices of moving averages and differs from the general definition of classical daily moving averages on the D1 chart.

Bollinger Bands

In case of a decline, the lower boundary of the indicator at 140.45 will act as support.

Indicator Descriptions:

• Moving Average (determines the current trend by smoothing volatility and noise). Period 50. Marked in yellow on the chart.

• Moving Average (determines the current trend by smoothing volatility and noise). Period 30. Marked in green on the chart.

• MACD Indicator (Moving Average Convergence/Divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9.

• Bollinger Bands. Period 20.

• Non-commercial traders - speculators, such as individual traders, hedge funds, and large institutions, use the futures market for speculative purposes and meet specific requirements.

• Long non-commercial positions represent the total long open positions of non-commercial traders.

• Short non-commercial positions represent the total short open positions of non-commercial traders.

• The total non-commercial net position is the difference between non-commercial traders' long and short positions.