LONG $YEN - RISK OFF & 2ND MOST IMPORTANT SUPPORT LEVEL @105.5
Updated
*Long JPY, preferably buy limits at 105.5*
1. at 105.5 there are 3 significant UNSUCCESSFUL tests of the level over the last 3 years thus it is a great entry point. Also another plus is if you look at the monthly chart you will notice 105.5 is the 2nd most important level in Yen's 20y+ history, the 1st most important/tested is the 101 level.
2.Further, over the last 3 years the level has been tested 4 times in total and it only broke once when USDJPY rose to 127 so that means LONG at this level has a 75% chance of success (based on the simple discrete math).
3. By looking at this weekly chart we can see JPY has a habbit of making ONE large RED candle before pulling back several smaller GREEN candles.. this week is one of them big red candles so bar patterns suggest a price retrace is likely.
4. as you can see the weekly bar has closed below the 5 year -3SD (and -2SD 2.5year) once before, by the red bar 5 weeks ago which was also at the 105.5 support level- at which point USDJPY rallied back up to 111.5 from 105.5 after closing below the -3SD and -2SD line and on the 105.5 so we could see topside like this again.
- in addition to this, it is worth noting that the 5y -3SD blue line that was violated but rejected 5 weeks ago and is being tested again, based on normal distribution theory, says that prices touching this line have a 99.5% probability of reverting BACK UP towards the mean at 122.5. The -2SD 2.5year line that was also violated has a 95% probability of retracing up towards the mean at 126.
5. if this level doesnt hold things will get interesting, if JPY can get to 101, this level will be all but unbreakable, it sits in the middle of all the prices, and is USDJPY's history mean - so depending on your Risk levels i would say they are limited to 450pips from 105.5 to 101 as 101 level will not break.
6. Because of these key levels be careful to place tight stops as liquidity will be thin after these key levels, and if 105/101 is broken, there will be massive long squeezes - where 50% of the markets' long SL is hit which causes further selling - so keep tight stops otherwise a 105 break will see 103 and a 101 break will see 99.
For more fundamental reasons why YEN long is a good trade please see the attached article where i go into detail on the fundamentals that support the long.
1. at 105.5 there are 3 significant UNSUCCESSFUL tests of the level over the last 3 years thus it is a great entry point. Also another plus is if you look at the monthly chart you will notice 105.5 is the 2nd most important level in Yen's 20y+ history, the 1st most important/tested is the 101 level.
2.Further, over the last 3 years the level has been tested 4 times in total and it only broke once when USDJPY rose to 127 so that means LONG at this level has a 75% chance of success (based on the simple discrete math).
3. By looking at this weekly chart we can see JPY has a habbit of making ONE large RED candle before pulling back several smaller GREEN candles.. this week is one of them big red candles so bar patterns suggest a price retrace is likely.
4. as you can see the weekly bar has closed below the 5 year -3SD (and -2SD 2.5year) once before, by the red bar 5 weeks ago which was also at the 105.5 support level- at which point USDJPY rallied back up to 111.5 from 105.5 after closing below the -3SD and -2SD line and on the 105.5 so we could see topside like this again.
- in addition to this, it is worth noting that the 5y -3SD blue line that was violated but rejected 5 weeks ago and is being tested again, based on normal distribution theory, says that prices touching this line have a 99.5% probability of reverting BACK UP towards the mean at 122.5. The -2SD 2.5year line that was also violated has a 95% probability of retracing up towards the mean at 126.
5. if this level doesnt hold things will get interesting, if JPY can get to 101, this level will be all but unbreakable, it sits in the middle of all the prices, and is USDJPY's history mean - so depending on your Risk levels i would say they are limited to 450pips from 105.5 to 101 as 101 level will not break.
6. Because of these key levels be careful to place tight stops as liquidity will be thin after these key levels, and if 105/101 is broken, there will be massive long squeezes - where 50% of the markets' long SL is hit which causes further selling - so keep tight stops otherwise a 105 break will see 103 and a 101 break will see 99.
For more fundamental reasons why YEN long is a good trade please see the attached article where i go into detail on the fundamentals that support the long.
Note
Also, i just noticed, as a bid for confidence for the indicators chosen - you can also see that the week beginning 4.4.16 USDJPY closed BELOW the 126 week period -2SD channel at 108.0. Directly following this event, the graph shows the price rally up from 108-111.5 for the next 2 weeks #meanreversion
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