USD/JPY: Yen in market’s focus now
Last Thursday’s signals were not triggered, as there was insufficiently bullish price action at any of the support levels which were reached that day.
Today’s USD/JPY Signals
Risk 0.75%.
Trades may only be taken between 8am New York time Monday and 5pm Tokyo time Tuesday.
Short Trade Idea
Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 108.50, 108.98, or 109.67.
Place 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.
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
Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 106.44
Place 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.
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 last Thursday that I would avoid trading this currency pair for the time being because the price was consolidating below 109.95 for such a long time before the recent bullish breakout, that I thought it was going to be very difficult for the price to fall much further.
I was totally wrong – the price actually fell strongly, especially on Friday, cutting right through many support levels from 109.95 down as global markets moved very strongly into risk-off mode due to coronavirus continuing global spread. Friday’s close was at a multi-month low price, which was a bearish sign.
Risk sentiment recovered a little late on Friday and since this week opened with central banks in the U.S. and Japan both expressing a willingness to intervene in the markets. This brought a little stability, but as long as this pair continues to reject the pivotal resistance level at 108.50 it will continue to look bearish. It seems likely that markets will remain prone to risk-off flows into the Yen unless and until it becomes clear that a real coronavirus pandemic is not going to happen, and that will almost certainly take a few days at least.
As this currency pair tends to mirror what happens in the U.S. stock market, and we are seeing very high volatility there, I expect that we will see a lot of price movement here as well. I would be happy to take a short trade from a bearish reversal at any resistance level identified above today.
There is nothing of high importance due today regarding the JPY. Concerning the USD, there will be a release of ISM Manufacturing PMI data at 3pm London time.