FX.co ★ USD/JPY: trading plan for the US session on December 20th. COT reports (analysis of yesterday's deals). The Japanese yen is trying to regain its position

In my morning forecast, I drew attention to 143.55 and recommended making decisions based on it for market entry. Let's look at the 5-minute chart and analyze what happened there. The decline and the formation of a false breakout around 143.55 provided an excellent buying signal, resulting in the pair's rise by more than 20 points, which is quite modest given the high volatility of the yen. Upon returning to 143.55, I decided not to enter the market anymore and reviewed the technical picture for the second half of the day.

To open long positions on USD/JPY, the following is required:

Considering how long we have been hovering around the level of 143.36, formed at the end of the first half of the day and serving as a significant support, weak data on the US Consumer Confidence Index and existing home sales volume could lead to a breakout of this range and further decline in the pair. For this reason, I will only act on a false breakout around 143.36, which will allow entering the market with the target of further growth to the resistance area of 143.96, formed at the end of the first half of the day. The moving averages, favoring sellers, are located there. Breaking and reverse testing from top to bottom of this range against good US statistics will provide another entry point for buying, pushing the pair towards an update of 144.47. The ultimate target will be the area of 144.91, where I will make profits. In the scenario of a decline in USD/JPY and the absence of activity at 143.36 from buyers in the second half of the day, I will attempt to enter around 142.80. Only a false breakout will signal the opening of long positions. I plan to buy USD/JPY immediately on the rebound, only from 142.32, to correct within the day by 30-35 points.

To open short positions on USD/JPY, the following is required:

Sellers are putting serious pressure on the pair, but so far, all attempts to break below 143.36 have not been successful. For this reason, the most optimal scenario would be selling on the rise at around 143.96. Movement there may occur after strong US statistics are expected in the second half of the day. A false breakout at 143.96 will be an ideal signal for increasing short positions in anticipation of another drop to 143.36. Breaking and reverse testing from the bottom to the top of this range will deal a more serious blow to buyer positions, removing stop orders and opening the way to 142.80. I expect the manifestation of buyers. A more distant target will be the area of 142.32, where I will take profits. In the scenario of USD/JPY growth and the absence of activity at 143.96, the market will remain under the control of buyers. In this case, postponing sales until testing the next resistance at 144.47 is best. If there is no downward movement, I will sell USD/JPY immediately on the rebound from 144.91, but I am only expecting a pair correction down by 30-35 points within the day.

In the COT report (Commitment of Traders) for December 12, there was a reduction in both long and short positions. The anticipated interest rate hike by the Bank of Japan negatively affected yen sales, leading to a significant reduction in short positions. However, the lack of positive dynamics in long positions speaks for itself. Given that the present report has yet to capture the recent stance of the regulator, which involves maintaining an exceptionally accommodative monetary policy, the most prudent choice would be to disregard the current assessment of the balance of forces in this report. The Federal Reserve's soft position will pressure the dollar, so with each active rise in USD/JPY, I advise opening short positions to continue the bearish market for the pair. In the latest COT report, it is stated that non-commercial long positions fell by 40 to the level of 28,226, while non-commercial short positions decreased immediately by 23,865 to the level of 109,357. As a result, the spread between long and short positions increased by 4,634.

Indicator signals:

Moving averages

Trading is conducted below the 30 and 50-day moving averages, indicating further decline in the pair.

Note: The author considers the period and prices of moving averages on the hourly chart (H1) and differs from the general definition of classic daily moving averages on the daily chart (D1).

Bollinger Bands

In case of a decline, the lower boundary of the indicator, around 143.36, will act as support.

Indicator Descriptions:

• Moving Average (MA) - determines the current trend by smoothing volatility and noise. Period 50. Marked on the chart in yellow.
• Moving Average (MA) - determines the current trend by smoothing volatility and noise. Period 30. Marked on the chart in green.
• Moving Average Convergence/Divergence (MACD) - Fast EMA period 12. Slow EMA period 26. SMA period 9.
• Bollinger Bands - Period 20.
• Non-Commercial Traders - speculators such as individual traders, hedge funds, and large institutions using the futures market for speculative purposes and meeting certain requirements.
• Long Non-Commercial Positions represent the total long open positions of non-commercial traders.
• Short Non-Commercial Positions represent the total short open positions of non-commercial traders.
• The Total Non-Commercial Net Position is the difference between non-commercial short and long positions.