After years of observing individuals learn to trade forex, I observed that one big reason most individuals fail is because they zoom in to the ‘small picture’ but miss the ‘big picture’.
Let me share this example where an individual looking at the big picture of USDJPY can spot a very important price level which would explain this currency pair’s price action the whole of this past 3 months.
USDJPY big resistance at 124.20
124.20 is such an obvious resistance for USDJPY that I did a video on it. You can find the video in this article ‘USDJPY bulls, you have to mind this price level‘. When I did my last 3 monthly ‘Forex Du Jour’ lunch time talks with IG I talked about 124.20 as well. Let’s see these 3 slides.
124.20 a multi-year high; first slide in June ’15
This slide was first shown at that monthly talk back on 18 June 2015. We can see that USDJPY 124.20 was highest traded in 2007. As a historical high, it is a significant level that the market would be looking at. At the moment, 124.20 is a potential resistance that was breached occasionally but never convincingly broken.
124.20 was a 2007 high for USDJPY
This slide was shown in the July session on 22 July. We can see that 124.20 was breached but followed immediately by an U-turn. This is what I call a ‘failed rally’ or ‘bull trap‘. It shows that 124.20 is the boss. Following a correction, USDJPY came up to touch 124.20 and then recoiled. Still resistance.
124.20 still the boss on 22 July 2015
Forward to August we can see that 124.20 continues to be relevant to USDJPY. If traders did not know this level, they would be banging their heads in frustration against an invisible level.
124.20 for USDJPY is a level that just doesn’t go away even now in August
What’s next for USDJPY?
Since the big picture for USDJPY is so important, the higher time frame charts weekly and monthly is where we need to go back to.
In this updated monthly chart of USDJPY we can see that 124.20 remains the effective resistance. It is so powerful that price over the last 3 months never closed above this level. August looks like it is going to do the same.
No monthly candle closed above 124.20
Come to weekly chart and the picture is still the same. Unless there is some sudden U-turn, I think that this week is another week where price USDJPY could not breach that strong strong resistance.
USDJPY could not close above 124.20 for past 5 weeks and it looks like this week could be No. 6
This is what the daily chart looks like today.
Everything above 124.20 turns out to be false break
Key takeaway for USDJPY
This is what the big picture of USDJPY tells me:
- 124.20 continues to stand in the way. Both investors and traders including scalpers have to be aware of this level.
- 124.20 could be your best friend or worst enemy – depending which direction you are trading. In fact the level will switch between the role of support and resistance.
- Year to year USDJPY is still up since 2012.
- There is no sign of reversal yet.
- If resistance stays, the pair has no room to move except down.
- After 4 months of trying to break, USDJPY traders may have to consider the possibility of shorting this pair into a bigger retracement.
- 122 is a level to watch. To be exact 121.84. This is 2014 high. See second chart above. 121.80 – 122 could offer some support.
- If 121.80 – 122 is breached, then downside might speed up.
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Soh Tiong Hum is Director of TerraSeeds Market Technician Pte Ltd. TerraSeeds is a trading educator in Singapore since 2005.
Soh's Twitter account @sohtionghum
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"I do not have a financial advisor's license. I am not qualified by any regulator to give financial advice. I do not know you the reader. Your investment means and motive may be different from me. My posts here are based on observations and meant for education. I am not responsible for for any consequence from your actions."