USD/JPY: Possible bullish head and shoulders formation from 106.60
Yesterday’s Signals produced a short trade from the bearish reversal at the resistance level of 107.02 soon after yesterday’s New York open, which gave a maximum profit of about 35 pips.
Today’s USD/JPY Signals
Risk 0.75%.
Trades must be entered 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 107.02 or 107.34.
Place 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 105.21.
Place 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 this pair was very evenly balanced between bulls and bears, so I thought that while the price remains between the resistance at 107.02 and the recent swing low at 106.40, it will be hard to predict. I was looking for breakouts to one side or the other, but this did not happen.
Over the past day we saw the bears hold the key resistance level at 107.02 again, but we are also seeing the continuation of the building of a bullish head and shoulders base from the 106.40 to 106.60 price area. So again, I see the price as hard to predict between 107.02 and 106.40, but I would be prepared today to take a short if we get another strong failure following a retest of 107.02. That level will be likely to be very pivotal, so if the price pops above it, we might see it shoot up to 107.34 or even higher very quickly.
Regarding the USD, there will be a release of ISM Non-Manufacturing PMI data at 3pm London time. There is nothing of high importance due today concerning the JPY as it is a public holiday in Japan today.