USDJPY: BoJ buying below 106.00?
Yesterday’s signals produced a profitable long trade from the pin / doji hourly candlestick combination which rejected the resistance level at 106.73. This trade is in profit but should probably be closed quickly, or at most 106.25 as there was strong buying nearby.
Today’s USD/JPY Signals
Risk 0.75%.
Trades must be taken from 8am New York time Tuesday until 5pm Tokyo time Wednesday.
Short Trade Ideas
Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 106.73 or 107.21.
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.
Take off 50% of the position as profit when the trade is 20 pips in profit and leave the remainder of the position to run.
Long Trade Idea
Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 106.17.
Pu 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.
Take off 50% of the position as profit when the trade is 20 pips in profit and leave the remainder of the position to run.
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 yesterday that technically, the price may be bottoming out now near 106.00 and I had seen this area as probably support. However, I just could not see any long trade opportunity here now, so I was simply ignoring this level, which seemed to have become technically invalidated anyway.
I was ready to take a bearish bias on this currency pair, which was at the heart of the Forex market, if the price could make an hourly close below today’s low at 9am New York time today.
The price did not make such a new low, so this call was enough to stay out of trouble. The price later fell to new lows not far above 105.50 in line with the very bearish long-term trend before suddenly rising quite dramatically during the Asian session, before being held by the resistance level at 106.17.
It looks like we have seen long-term selling of the Japanese Yen, perhaps by the Bank of Japan, who have expressed a willingness to stop the Yen strengthening further, which is usually quite easy for a central bank to do as they can simply increase supply to more than match the market’s demand in all but the most unusual circumstances.
Although sentiment is still relatively “risk-off”, this pair is in a strange position right now, and it will probably be wise to avoid trading here for at least a day.
There is nothing of high importance due today concerning either the JPY or the USD.