The USDJPY traded up and down in the holiday trading yesterday (see chart above) with the North American session particularly non-trending. That non- trend continued into the Asian session today with modest moves in the USDJPY pair.
However, in the European session, the price started to pick up steam to the upside. After first testing the highs from Friday and yesterday, the price was able to extend above those levels with momentum and also above the high from last week at 135.577. Moving above that level gave the buyers the go ahead to push even higher. The price is trading at a new high going back to the week of September 28, 1998 nearly 24 years ago (see chart below).
Looking at the hourly chart above, connecting recent highs targets 136.91. That still some 80 or so pips away from current levels (and moving higher).
When the price is trending it is hard to stop. Also when trading at 24 year highs, there is little in the way of history to search for targets. As a result, risk levels become just as important. For traders today, falling back below the old high last week of 135.577 will be needed to hurt the bullish bias. Absent a move below that level, and the sellers are simply not winning. The buyers are still in firm control.
Nevertheless, after a sharp move higher with a key break of resistance what we saw today, traders can focus on shorter-term clues.
Looking at the 5 minute chart below, the trend move to the upside from the 135.00 swing low has the 38.2%/50% retracement between 135.823 and 135.666. If the price can move below those levels, it would weaken the bullish bias at least in the intraday. There is hope.
On the corrective move off of the initial high at 136.328, the price of the USDJPY came down to 135.90 which was still above the 38.2% retracement of the last leg higher at 135.823. The sellers are still not winning. The buyers are still in control.
I know....The price is high for the USDJPY. I am sure the relative strength index and other oscillators are also high and in overbought territory (I just looked at it and the 14 bar RSI is currently above 80 on the hourly chart).
However, trend markets tend to go farther than what people expect, and overbought becomes more overbought.
As a result, if I were to sell, I would prefer to look toward the upside targets like near 136.91 (with the stop on a move above), or a break below the 38.2 and then 50% in the short-term (and hope for increase momentum to the downside without a failed break).
Unless one of those conditions are met, selling a high is simply selling yet another high and hoping the trend ends. How has that worked?