USDJPY: Strong recovery from near-historic low prices
Last Thursday’s signals were not triggered, as the reversal off the resistance at 106.73 did not come until the close of the Asian session.
Today’s USD/JPY Signals
Risk 0.75%.
Trades must be taken from 8am New York time Monday until 5pm Tokyo time Tuesday.
Short Trade Idea
- Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 106.73.
- Put the stop loss 1 pip above the local swing high.
- Move 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 Idea
- Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 105.66.
- Put the stop loss 1 pip below the local swing low.
- Move 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 we had a bearish wedge which looked prone to a sharp breakdown, so I saw a fast downwards movement as the opportunity that was waiting to be picked up on this currency pair.
I was correct but unfortunately, this scenario did not play out until the next day, after my forecast expired.
The price fell Friday very sharply as the U.S. imposed new tariffs on Chinese goods, with safe haven assets everywhere seeing capital inflows.
This week opened with a strong gap down and the price got to within just a few pips of making a new 18-month low price.
However, the price has bounced back very strongly from this bearish gap, not only filling the gap but sending the price back up above the old resistance level at 105.69 which has become probable support now at 105.66.
This leaves a confused situation which looks unreliable and which probably requires some time to settle before it can be traded again.
If the price can end the day below 105.66 that would be a bearish sign. Below 105.20 would be even more bearish. However, for today, I would stand aside here.
There is nothing of high importance due today concerning the JPY. Regarding the USD, there will be a release of Core Durable Goods Orders at 1:30pm London time.