USD/JPY: Price finally moves out of long-term range
Last Thursday’s signals produced an extremely profitable short trade from the strong bearish reversal off the resistance level I identified at 107.24. A long from the support level at 106.70 later would have been a losing trade.
Today’s USD/JPY Signals
Risk 0.75%.
Trades must be entered between 8 am New York time Monday and 5 pm Tokyo time Tuesday.
Short Trade Ideas
- Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 105.67, 106.15, or 106.43.
- Put the stop loss 1 pip above the local swing high.
- Adjust the stop loss to break even once the trade is 20 pips in profit.
- Remove 50% of the position as profit when the trade is 20 pips in profit and leave the remainder of the position to ride.
Long Trade Ideas
- Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 105.21 or 104.09.
- Put the stop loss 1 pip below the local swing low.
- Adjust the stop loss to break even once the trade is 20 pips in profit.
- Remove 50% of the position as profit when the trade is 20 pips in profit and leave the remainder of the position to ride.
The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.
USD/JPY Analysis
I wrote last Thursday that I was only interested in trading reversals from either 106.70 and 107.43 and that all traders except scalpers would probably do well to ignore anything else.
I saw this pair as unlikely to move significantly as the market was dominated by swings between risk-on and risk-off, and both of the currencies in this pair have been acting as risk-off assets.
This model has finally broken down over recent days, as we saw the U.S. Dollar begin to sell off more strongly from Thursday. The weakness in the USD is now so strong that even the Japanese Yen is beginning to advance against it, and we see the price now retesting multi-week lows.
This pair is far from being the big mover of the market, with the Yen relatively weak. Nevertheless, we are seeing significant price movement, and if the price can get established below the key psychological round number at 105.00 (after breaking below the key support level at 105.21), it could fall a lot further as it would be in “blue sky” with very few support levels remaining down there.
I am happy to take short trades today from any of the key resistance levels identified above if we get any firm bearish bounce there, but I would keep trade position sizes relatively light as I see stronger movement against the USD more likely in Gold, Silver, and the Euro.
There is nothing of high importance scheduled today concerning either the JPY or the USD.