USD/JPY – 110 Holding Once Again, What Now?
Skerdian Meta • 2 min read
On Tuesday and on Thursday last week, USYD/JPY dived to 110 twice. When we say 110, we mean a 20-30 pip range from 110.00 to 110.30, so when you hear us refer to it, please know that we have included this buffer zone to the 110 support level.
On Friday though, the sellers had another two attempts at this level, which got as close as 110.10. Personally, I thought that this finally was the time this massive support level had to let go.
We know that the more the price knocks on a level, the weaker it becomes and sooner or later it will get broken, particularly when the jumps higher become lower every time. You can see the ascending trend line connecting last week´s highs.
But strangely enough, that wasn´t meant to be. It´s true that these big support/resistance levels get weaker when there´s too many attempts, but if these attempts all fail then these levels turn into even stronger support/resistance.
It´s like a war, the longer an assault lasts, the more demoralized the attacking troops become, losing hope they will win the war after every attempt. On the opposite, the moral of the defensive side increases.
Forex is pretty much the same, there´s an attacking side and there´s a defending side. The defending side in USD/JPY has been doing a hell of a job recently.
That makes you think that the sellers might have given up, or at best, they have lost confidence. The problem is that the buyers can´t push much higher either and if they fail to do that, then the sellers might grow confident again.
We´re above last week´s trend line now
No one knows how things will be in a week or even a day, but at the moment the 110 is safe. I´ve seen some big names issuing trade ideas to sell this forex pair at whatever price you get with 108 and 105 targets, but we´ve seen quite often that when the big names make a call the market goes the opposite direction.
This definitely looks to be the case so far and if the buyers push higher above the 100 SMA (green) on the H4 chart which stands at 111.40-50, then up we go, at least for a few hundred pips.
I have to say that the 111 level has become an even stronger support now with the 50 SMA around there, so that might be a good place to look for a short term buy forex signal today.
For a long term signal things become a lot more complicated, because we have to add the political events (terrorist attacks and Syria) and the global sentiment, so let´s stick to short term trading for now until the bigger picture becomes clearer.