USDJPY moved up drastically during the NFP and later on. This move is seemingly dropping to correct the move.

- Market structure: USDJPY is in a bearish trend on the daily unless it breaches the 110.80 level. On the daily, head and shoulder pattern is also being formed which means a trend reversal. On the H4, market broke down from the resistance and is currently at 110.35. At this level, we need the market to leave the resistance zone and then we will short at the same resistance.

- Trendline: USDJPY had broken out of an ascending trendline inferring to a breakout sell. This breakout has been validated by two factors: bearish pressure of the candle and the candles opening and closing below the trendline.

- Retracement: We had trendline breakout sell at the resistance. After this breakout, we will wait for the retracement at the resistance level. The golden retracement level aligns completely with the resistance level of 110.80. This is the level we will be looking to short at.

- EMA's: EMA’s have a bullish death cross which indicates the continuation of the buys. That being said, it should be noted that after the EMA’s breakout buys, USDJPY did not retest the EMA. This retest is due and could be our potential profit target.

- RSI/CCI: RSI is at 52, which is the bullish region, whereas CCI is at -84, which is the bearish region. As both the oscillators have different directions, we will wait for RSI to pounce down below the 50 level, into the bearish region.

USDJPY has a good setup but a challenging one. Since trendline breakout has incurred, we will wait for the market to retrace to the resistance level in order to take a short. The EMA’S and oscillators both represent a bull factor. But on a higher time frame of daily, the structure remaining bearish gives us an anticipation of USDJPY dropping.

Lets short USDJPY

Aug 12 2021