FX.co ★ USD/JPY: trading plan for the US session on January 12th. COT reports (analysis of yesterday's deals)

In my morning forecast, I drew attention to the level of 144.86 and planned to base my trading decisions on it. Let's look at the 5-minute chart and analyze what happened there. A drop and the formation of a false breakout around 144.86 led to an entry point for buying the dollar, increasing by more than 30 points. Since trading continues within a sideways channel, there were no significant changes in the technical picture for the second half of the day.

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

A correction in the pair is necessary, but with each attempt by the bears to push the dollar lower, they encounter active buying action. One of the reasons for this could be today's data on US producer prices, which may increase similarly to yesterday's jump in the overall consumer price index. If inflation in the US suddenly spikes at the end of the year, it is evident that the Japanese yen will continue to decline, and the dollar will return to a bullish market, strengthening the USD/JPY pair. If the data surprises and inflation decreases, the pressure on the yen will decrease, leading to a downward correction in the pair, which I will try to take advantage of. I will only consider buying after a drop and the formation of a false breakout in the support area of 144.86, which performed well in the first half of the day. This will provide an entry point for buying with an upward target of around 145.52, where moving averages are located. A breakout and a retest from above to below this range will lead to another good opportunity to increase long positions, pushing USD/JPY to around 145.96. The ultimate target will be the 146.38 area, where I plan to take profit. In the scenario of a pair decline and the absence of activity at 144.86 from buyers in the second half of the day following weak inflation, pressure on the dollar will return, leading to a significant downward correction in the pair. In that case, I will consider entering the market around 144.29. But only a false breakout there will signal the opening of long positions. I plan to buy USD/JPY immediately on a rebound only from the minimum around 143.69, aiming for a 30-35 point correction within the day.

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

Sellers can only hope for a sharp decline in inflation at the end of the previous year. I will only act against such a bullish market after an unsuccessful consolidation at 145.52, where the pair is currently heading. This will provide an entry point into the market based on a small downward correction around 144.86, which the pair failed to break out of earlier today. However, the main movement will depend on how the sellers deal with this level. A breakout and retest from below to above 144.86 will deal a more serious blow to the positions of the bulls, leading to the removal of stop orders and opening the path to 144.29. The ultimate target will be the 143.69 area, where I plan to make a profit. The bullish market will likely continue to develop in the scenario of further growth in USD/JPY and the absence of activity at 145.52 during the American session. In this case, postponing selling until testing the next resistance at 145.96 is best. Without downward movement, I will sell USD/JPY immediately on a rebound from 146.38, but only with the expectation of a pair correction down by 30-35 points within the day.

In the COT report (Commitment of Traders) for January 2nd, there was a decrease in both long and short positions. The recent earthquake in Japan seriously impacted the Bank of Japan's plans to abandon its negative interest rate policy earlier this year. Consequently, we are witnessing a significant weakening of the Japanese yen, which will likely continue until it becomes clear how the regulator plans to act further. However, the dollar's rise against the yen is also limited, as the Federal Reserve will likely start lowering interest rates as early as March this year. This will be confirmed by the expected inflation data in the US this week, so be extremely cautious with buying at current highs. The latest COT report states that long non-commercial positions fell by 3,736 to 33,585, while short non-commercial positions decreased by 2,109 to 90,780. As a result, the spread between long and short positions increased by 1,137.

Indicator signals:

Moving Averages

Trading is taking place below the 30 and 50-day moving averages, indicating a possible correction in the pair.

Note: The period and prices of moving averages considered by the author are on the H1 hourly chart and differ from the general definition of classical daily moving averages on the D1 daily chart.

Bollinger Bands

In case of a decline, the lower boundary of the indicator, around 144.70, will act as support.

Description of indicators:

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

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

• MACD Indicator (Moving Average Convergence/Divergence — measures the convergence and divergence of moving averages). Fast EMA period 12. Slow EMA period 26. SMA period 9.

• Bollinger Bands (Bollinger Bands indicator). Period 20.

• Non-commercial traders - speculators, such as individual traders, hedge funds, and large institutions, use the futures market for speculative purposes and are subject to 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 net non-commercial position is the difference between non-commercial traders' short and long positions.