USD/JPY: Real story is weak Japanese Yen
Yesterday’s signals were not triggered, as there was no bearish price action when any of the three resistance levels identified in yesterday’s forecast were reached.
Today’s USD/JPY Signals
Risk 0.75%.
Trades must be entered between 8am New York time Wednesday and 5pm Tokyo time Thursday.
Short Trade Ideas
Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 109.23 or 109.59.
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
Go long following a bullish price action reversal on the H1 time frame immediately upon the next touch of 108.43, 108.21, or 108.04.
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 yesterday that the best approach here would be following a breakout from the range between 107.00 and 108.04. This was a great call, although I was not correct in excepting that it would not happen yesterday, as we did get a bullish breakout beyond 108.04.
The price has risen by more than 40 pips from its second hourly close above 108.04, so it was a profitable call.
The technical picture is more bullish, and this is almost the only currency pair that is seeing the U.S. Dollar advance significantly against another major currency. The real story is that the Japanese Yen has weakened a lot over the past day.
We can now draw a wide ascending price channel, with its upper limit currently at about 108.90.
The non-farm payrolls forecast is due close to the New York open, and this pair typically is quite reactive to this data, so what happens in the first hour or two after that release is likely to be significant if it has a bullish effect – if we see the price hold above 108.90 it is likely that the next resistance level at 109.23 will be reached quite fast.
There is more action in other Yen crosses with stronger currencies than the USD, for example AUD/JPY or EUR/JPY, so these may be more interesting to trade today.
There is nothing of high importance due today concerning the JPY. Regarding the USD, there will be a release of the ADP Non-Farm Employment Change at 1:15pm London time followed by ISM Non-Manufacturing PMI data at 3pm.