USD/JPY: New gently descending price channel
Last Thursday’s signals were not triggered as there was no bullish price action when either the ascending trend line or 107.67 were first reached.
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 Ideas
Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 108.04, 108.21, or 108.59.
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 107.32, or the lower price channel trend line shown in the price chart below which is currently sitting at about 107.05.
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 last Thursday that we might expect low volatility to continue here, making this a relatively unattractive currency pair to trade. Having said that, I also thought that rising stock markets should cause a slight bullish bias in this pair.
I was right about this not being a great pair to trade, but wrong to look towards the bullish side as the price fell over that day. Luckily, the levels identified were enough to keep out of trouble.
The technical picture has become a little more bearish, as although we are basically seeing the price range between 107.00 and 108.00, we can now draw a new symmetrical price channel which is descending slightly.
Markets are showing strong “risk-on” sentiment, which has made the USD the weakest major currency, followed by the JPY, so as these two currencies have been very positively correlated lately, we see little movement here, ranging behaviour, and low volatility.
I think the most interesting and significant thing which might happen here is a breakdown below the 107.00 area and the weakly bearish price channel, which would be a bearish sign. I would be prepared to take a bearish bias following 2 consecutive hourly closes below that level, or a bullish bias following 2 consecutive hourly closes above the resistance level at 108.04.
There is nothing of high importance due today concerning the JPY. Regarding the USD, there will be a release of ISM Manufacturing PMI data at 3pm London time.