In my morning forecast, I paid attention to the level of 147.60 and planned to make trading decisions based on it. Let's look at the 5-minute chart and analyze what happened there. The decline and the false breakout at 147.60 led to a buying entry point for the dollar, resulting in a 25-point rise, after which pressure returned to the pair. In the second half of the day, the technical picture was revised.
To open long positions on USD/JPY, the following conditions are required:
Everything depends on the US GDP data. Suppose the report is better than economists' expectations. In that case, the pair is likely to continue its rise because the bullish trend is still in place – especially after the dollar was actively bought twice near the weekly low. In the case of very weak US data, another USD/JPY sell-off may occur, and I will also try to take advantage of it. If the indicators disappoint, only a false breakout around 147.44 will confirm the right condition for entering long positions, counting on a recovery towards 147.83 – a resistance level formed during the European session. A breakthrough and a retest from top to bottom of this range will lead to another option for increasing long positions, capable of pushing USD/JPY upwards to around 148.25. The ultimate target will be in the 148.71 area, where I plan to make a profit. In the scenario of the pair's decline and the absence of buyer activity at 147.44 in the second half of the day, pressure on the dollar will persist, continuing the downward correction. In such a case, I will try to enter the market around 147.08. Only a false breakout will signal the opening of long positions. I plan to buy USD/JPY immediately on a rebound only from the minimum around 146.70, aiming for a 30-35 point correction within the day.
To open short positions on USD/JPY, the following conditions are required:
Sellers are currently inactive, so exercise caution when considering short positions. It is necessary to have sufficient grounds to go against the trend, even despite the sideways nature of the market. Weak US GDP data can be just the reason. In the case of a positive reaction to the numbers, I will prefer to open short positions only near the resistance level of 147.83 and only on a false breakout. This will provide an entry point for selling, with a drop target of around 147.44. A breakthrough and a retest from the bottom to the top of this range will deal a more serious blow to the bullish positions, triggering stop-losses and opening the path to 147.08. The ultimate target will be in the 146.70 area, where I plan to make a profit. In the scenario of USD/JPY rising and the absence of activity at 147.83 in the second half of the day, which will happen if any reasonably decent US data is released, buyers will continue to build their advantage. In such a case, postponing selling against the trend until testing the next resistance at 148.25 is best. If there is no downward movement, I will sell USD/JPY immediately on a rebound from 148.71, but only in anticipation of a pair correction down by 30-35 points within the day.
In the COT report for January 16th, there was an increase in both long and short positions. Recently, inflation data in Japan was released, and the numbers were only partially positive. Slowing price pressure may restrain the Bank of Japan, which is increasingly considering scaling back its ultra-loose monetary policy. In the near future, there will be a regulator's meeting, where a decision will be made to keep rates unchanged. It is essential to pay attention to how the head of the Bank of Japan characterizes future policy and whether there will be any changes in the plans for normalization in the first half of this year. If everything goes according to plan, pressure on the USD/JPY pair may return. The latest COT report mentioned that long non-commercial positions increased by 2,816 to 44,180, while short non-commercial positions jumped by 3,427 to 100,740. As a result, the spread between long and short positions increased by 1,516.
Indicator Signals:
Moving Averages
Trading occurs around the 30 and 50-day moving averages, indicating a sideways market.
Note: The author analyzes the period and prices of moving averages on the hourly chart (H1) and differs from the general definition of classical daily moving averages on the daily chart (D1).
Bollinger Bands
In case of a decline, the lower boundary of the indicator at around 147.44 will act as support.
Description of Indicators:
- Moving Average (a tool that determines the current trend by smoothing out volatility and noise). Period 50. Marked in yellow on the chart.
- Moving Average (a tool that determines the current trend by smoothing out 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, such as individual traders, hedge funds, and large institutions, use the futures market for speculative purposes and meet certain 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 short and long non-commercial positions.
