A new year but an old story from China

The market hasn't waited long to jump into an early theme and China looks to be taking top billing as 2016 trading takes off in full. I'm still a little sceptical of the early moves as we have to let a couple of sessions pass to see how markets settle down. In the same way that we saw year end flows playing a part as December closed, so we see the new year flows in play also

From experience it usually takes a couple of days for the early year trading to take place, to see closed positions reopened, new trades put on etc etc

Even so, we've had some big moves and USDJPY has been one of them. The 118.00 area was the bottom of the range for most of 2015 and it's facing a test today. 118.80 has been a big level I've had my eye on within that range, and despite the 10 pip break today, it is holding

USDJPY daily

It's a level that has had multiple tests and multiple breaks, but it's a level that we haven't managed to stay below, bar one occasion back in August. That alone makes it significant. Ultimately from 118.80 down to 118.00 has proved to be where the buyers have really been confident and successful in taking the price back up from

As you know, I have been looking for the dollar to show a weaker side after the Fed hike. It's certainly done that. I'm not looking for it to collapse but to move into a consolidation phase. This level marks an important part of seeing that develop. Should we hold here for a good amount of time it's going to reinforce the range in play and that consolidation.

If we are to see further bearish moves then I would want to see 118.80 smoked and the price holding below. The bigger break will come if 118.00 is taken out and confirmed

The US open will be very important as it will give us an early sense of how the yanks react to these moves. Strong early buying will likely calm the rest of the market and we could see a quick trip back up to 120.00, and the fear washed out. These early moves are a bit like the opening moves in a chess game, so let the big players make them and look to see how they develop