Heya, forex friends. If you’re a long-term dollar bull like I am, then you’ll be thrilled with the stars lining up on USD/JPY’s 4-hour chart!
As you can see on the chart below, USD/JPY is finding support at the 116.00 major psychological handle. And why not? The level has been a resitance and support are for the pair back in December AND it currently lines up with the 200 SMA on the 4-hour chart. But perhaps the most convincing part for me is how the level also lines up with the previous week low and bottom weekly ATR that we marked earlier this week.
As attractive as the setup is though, I’ve also pinky sweared on my Q4 2016 trade review that I’ll give more weight to the current fundamental picture and not just look at technical setups. And, well, sentiment over the dollar for the past couple of days has been shaky at best.
See, profit-taking from the Trumponomics rally as well as speculations of a weak NFP release later today have dampened the dollar party. It also didn’t help that PMIs in the euro zone and the U.K. have mostly printed to the upside and encouraged risk-taking.
Despite that, I still believe that an uptrend is the path of least resistance for USD/JPY. The Fed is one of the few central bankers contemplating rate hikes and Trump’s plans are about to take shape in the next couple of days. So, if the NFP report doesn’t do too much damage on the dollar, buying at current levels might be a pretty good idea.
I’ll wait for the NFP report for confirmation on the dollar’s direction. If a downside surprise drags it lower, then I’ll likely throw on Fibs on the daily time frame and look for entry points there. But if the dollar takes off at the release, then I’ll start building positions again in anticipation of a longer-term rally.
What do you think? Does the dollar have enough room for an extended uptrend? Or are we about to see a deeper retracement over the next trading sessions?
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