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Moving over to the USDJPY. We’re in a pullback or downtrend phase right now. The overall trend has been bullish. You could see the black trend line, but last week we had a pretty strong sell off for the USDJPY. I think we’re coming into an interesting area. The 100-period simple moving average sits right around 111.80 let’s call it. 111.80, just underneath the green zone.
Now, we’re still a little ways from that. 50 to 60 pips away from that right now, but definitely something that we’ll want to make note of is that green zone right into the upper-111s if it continues to go down. Otherwise, back above the red trend line, the short red trend line over here could be the return of the upside. Here’s something else I want to mention. Fibonacci. Low to high. The black trend. Lowest low of the black trend line. Highest high of the black trend. Fibonacci there puts the .382 at 112.30. Guess where that is. That is right here at this blue zone and our current support.
So, we’re touching the .382 Fibonacci retracement level of the previous uptrend. What does that mean for us? Well, there’s one of two potential scenarios here because of that .382 Fibonacci. It either bounces off and returns in the direction of the black trend, which is an uptrend, and we watch for clues to that, or it breaks down that .382 and continues to go down towards the moving average. So, critical decision point here for the USDPY right around 112.30. Bounce, goes back up in the direction of the previous uptrend. If it does that, we might even look for a new high above the last ultimate high into the green zone at the top of the chart. Break above the red trend line would give us a better look at that.
Four-hour timeframe. Again, I don;t think that changes it, but definitely that blue zone comes into play as a critical decision point. We’re currently finding support there. .382 Fibonacci retracement level. A break there goes lower, but a bounce may see the return of the uptrend for the USDJPY.
Let’s take it over here to the AUDUSD. Here’s something very, very significant that we studied last week. Similar to the EURUSD, we have this long-term. We’re looking at the weekly timeframe here. This long-term range. We’re looking all the way back to February of 2016, so about a year and a half ago. We have been inside this black box, the range. Resistance at the green zone, 0.7720, 0.7750. What’s important? We’re above that right now, but we’ve actually seen it all the way back up to this yellow zone before.
If I take this black circle on the very left-hand side of the chart, let’s make it a different color. Let’s make it blue, so the big circles are a different color. So, the blue circle, left-hand side of the chart. We’ve actually seen it touch this yellow zone, 0.7830, before within this past year and a half ranging period and then suddenly reverse and went back down. I’m not saying that’s what’s going to happen now, but I just want to make note of that because that’s historical price action.
In fact, we can’t change that. So, if this week suddenly goes bearish and gets back under the green zone, which is 0.7750, 0.7720, wouldn’t that be interesting for a potential reversal opportunity? I don’t think you can say that yet, but definitely something to watch for. Now, a breakout above 0.7830, the top of the yellow zone, nullifies that. We likely look for the continuation of the upside. So, above the yellow zone, we go higher and that would be a multi-year new high if it gets above the yellow-shaded area.
Staying under the yellow zone, maybe some intraday reversal back to the green-shaded area as support. This entire area that was resistance back here, where the black circles are, will become our support, 0.7750, 0.7720. So, if you’re a buyer, you’re looking for a pullback to the green zone or a break above the yellow zone. If you’re looking for reversal, I think you need to wait for some evidence of reversal before you look for a short on the AUDUSD.
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