USD/JPY: Volume Profile and Price Action Analysis

Hello guys,

today, I would like to talk about a strong day trading Resistance on USD/JPY.

The USD/JPY started a very strong downtrend. It has started yesterday and the price has been dropping until now.

The price even shot past Point Of Control of the previous week, which was a strong Support!

Clearly, sellers are now dominating here, and for this reason, I now look for Shorts.

The “Trend Setup”

When there is a strong trend like now, I use my Flexible Volume Profile to look into the trend area.

I look for “volume clusters“. Those are significant volume zones, that got created within the trend.

This is a setup I call the “Trend Setup“.

You can see it nicely on the chart below.

USD/JPY, 30 Minute chart:

The price was dropping, and when it stopped for some time, strong Sellers started to add to their Short positions. They entered most of them around 105.22. That’s where the “volume cluster” is the thickest.

After that, they pushed the price even lower.

Now, when the price makes it back to this 105.22 area it is likely that it will react there.

The reason is that the strong Sellers who placed their volumes around 105.22 should defend this zone. It is an important level for them.

This should push the price downwards from there again and that’s why it should work as a strong Resistance.

I hope you guys liked today’s analysis! Let me know what you think in the comments below.

Happy trading!

-Dale

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2 Comments

  1. maxs

    Thank you for the analysis. A newbie question: How do the sellers who bought at 105.22 defend their position? What is happening in the background? Are these sellers taking on more short positions?

    1. Trader Dale

      Hello Maxs,
      That’s right, sellers are taking on more short positions to push the price lower again, as well as buyers will exit some of their positions to avoid fighting such strong sellers (if you’re buying and you have to exit, that means you have to sell). In short, both bulls and bears are expected to put some selling aggression in the market. 🙂

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