The Usd/Jpy broke higher and through a key resistance level (121.719) last month and after it pushed on higher we can now see price is retracing back down to this key level. What we should be looking for now is what happens to price if it does manage to fall lower and test this key level because it has acted as such a strong resistance level the chances are more traders are also watching this level, if price produces a large bullish price action signal to indicate to us that the level is now acting as support it would be a great place to get long with this pair.
The lower time frames are key because we know the level which is marked from the daily time frame is strong and so looking for price action signals at this location on the lower time frames means we can be sure we are hunting for signals in a solid location. The types of signals we should be looking for are bullish pin bars or engulfing bars which are large in size and stand out from the rest of the price action because we want to be trading dominant, powerful signals and not weak, minor signals.
Below is the 4hr chart of the Usd/jpy and you can see where I have highlighted is the location where we should be hunting.
All questions are welcome.