USDJPY 12-12-06

12-12-06

USDJPY

The USDJPY continues to move higher since testing the 1.1500 area on Friday with the areas of supply along the way acting as speed bumps. The 1.1620 area of support held on Sunday, and a breakout support area between 1.1645 and 1.1620 has now formed. The 1.1720 area of supply is in the process of being absorbed this morning, but the possibility of a pullback to the 1.1645 area of demand is increasing since the MA has reached the trading range between 1.1676 and 1.1699 and is flattening out. Because of this, I would pass on trading the USDJPY until it tests both the 1.1645 breakout area and the 1.1674 breakdown area at least once. If you are interested in trading that tight range, be sure to reverse your position using buy and sell stops and use tight 10 pip stops on both trades. Watch the action the second time down to 1.1645 for a break of support. It is possible that the USDJPY may move down to the 1.1620 area and below if the dollar downtrend resumes. The next area of supply to overcome is the 1.1760 area if the USDJPY absorbs the supply and moves higher instead.