Yesterday several entry points into the market were generated. Let's take a look at the 5-minute chart and figure out what happened there. In my previous forecast, I paid attention to the level of 147.57 and planned to make decisions on entering the market from there. USD/JPY actually went down, but the test of the designated level never took place. For this reason, it was not possible to catch suitable entry points into the market. In the afternoon, a false breakout at 147.57 gave a good buy signal. As a result, the pair grew by more than 60 pips. Protection of 148.15 and selling from this level did not bring much profit. So, after the breakout and reverse test of 148.15, I exited the market and opened long positions in the development of the bullish scenario, which allowed me to grab about 20 more pips.
What is needed to open long positions on USD/JPY
Upbeat American statistics encouraged strengthening of the US dollar. Everyone immediately forgot that the Bank of Japan signaled the hawkish reversal in its ultra-loose monetary policy. The central bank is poised to introduce changes this month. Today, the best thing to do is to trade following the uptrend. A false breakout in the area of the nearest support at 148.08, where the moving averages are located, playing on the side of the bulls, will be a suitable condition for this. The bullish target will be resistance at 148.63, which was tested today during Asian trading. Only a breakout and consolidation above this range will allow buyers to strengthen their positions in the market, giving a chance to open long positions with the target at 149.06. The farthest target will be a high of 149.42, where I will take profit. In the scenario of a decline in the pair and lack of buying activity at 148.08, USD/JPY will come under selling pressure again. In this case, I will try to enter the market at about 147.48. But only a false breakout there will be a suitable condition for opening long positions. I plan to buy USD/JPY immediately during a dip from 147.11, bearing in mind a correction of 30-35 pips within the day.
What is needed to open short positions on USD/JPY
In case of further growth of USD/JPY, I expect the bears to show up in the area of 148.63, where only a false breakout will provide a good entry point for selling with a movement to 148.08 – the support formed yesterday. A breakout and reverse test from the bottom to the top of this range will deal a more serious blow to the positions of the bulls, which will activate their stop orders and open the way to 147.48, which will be a significant gain for sellers. A more distant target will be the area of 147.11, where I will take profits. However, we will be able to reach this level only after the publication of weak data for the US in the afternoon. Under the bullish scenario for USD/JPY and the lack of selling activity at 148.63, the instrument will extend its bullish sequence. Therefore, it is best to postpone selling until the test of resistance at 149.06. If there is no downward movement even there, I will sell USD/JPY immediately during a rebound from 149.42, but only in anticipation of a downward correction by 30-35 pips within the day.
In the COT (Commitment of Traders) report for March 5, there was an increase in long positions and a sharp reduction in short ones. Under the current fundamentals when the Bank of Japan is seriously talking about the need to move on to monetary tightening, it is not surprising that traders add more long positions on USD/JPY. Many traders expect monetary policy adjustments as early as March this year, which will continue to support demand for the risky asset. However, do not forget about the Federal Reserve's policy, which now relies on inflation data. A new portion of statistics is expected in the near future, so the dollar can seriously improve its position in the market. The latest COT report said that long non-commercial positions rose by 3,410 to 54,671, while short non-commercial positions decreased by 10,452 to 173,514. As a result, the spread between long and short positions grew by 1,755.
Indicators' signals
Moving averages
The instrument is trading above the 30 and 50-day moving averages. It indicates a further upward correction in USD/JPY.
Note: The period and prices of the moving averages are considered by the analyst on the 1-hour chart and differ from the general definition of classic daily moving averages on the daily chart.
Bollinger Bands
In case USD/JPY goes down, the indicator's lower border at about 147.80 will act as support.
Description of indicators
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 50. It is marked yellow on the chart.
- Moving average (moving average, determines the current trend by smoothing out volatility and noise). Period 30. It is marked green on the chart.
- MACD indicator (Moving Average Convergence/Divergence — convergence/divergence of moving averages) Quick EMA period 12. Slow EMA period to 26. SMA period 9
- Bollinger Bands (Bollinger Bands). Period 20
- Non-commercial speculative traders, such as individual traders, hedge funds, and large institutions that use the futures market for speculative purposes and meet certain requirements.
- Long non-commercial positions represent the total long open position of non-commercial traders.
- Short non-commercial positions represent the total short open position of non-commercial traders.
- Total non-commercial net position is the difference between short and long positions of non-commercial traders.
