USD/JPY: Yet strong support at 107.32
Yesterday’s signals were not triggered as there was no bullish price action when the support level at 107.86 was reached. However, a nicely profitable short trade from the hourly doji candlestick which rejected this level as resistance a little later did set up, so the pivotal level was correctly identified.
Today’s USD/JPY Signals
Risk 0.75%.
Trades must be entered from 8am New York time Wednesday to 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 107.86, 108.21, 108.54, or 108.61.
- 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
- Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 107.32, 106.74, 106.43, or 106.14.
- 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 due to the strength of the current fall in price, I would be prepared to take either long or short trades despite the fact there was a long-term bullish trend.
This was not a great call as in fact the downwards move has continued to extend, with the support at 107.86 which I thought was looking firm breaking down and then acting as good resistance.
The price is currently sitting on the support level at 107.32, after showing some bearish momentum. The long-term bullish trend seems to have no effect as the movement is driven by a general continuing weakness in the U.S. Dollar against almost all other currencies.
We have the FOMC monthly releases later, which are very important to the Forex market generally, and typically especially important for this pair. This means that once the release hour is close by, technical analysis will usually become unimportant, as high volatility and wild price movements are quite usual if there is any surprise in the data.
Therefore, I am prepared to take a short trade from any of the resistance levels which produce a bearish reversal, but only during the early part of the New York session. Once the FOMC releases are made, the best approach would probably be to fade any spikes at key levels which are relatively far away from the price at the time of the release.
There is nothing of high importance due today concerning the JPY. Regarding the USD, there will be a release of CPI (inflation) data at 1:30pm London time, followed by the FOMC Projections, Federal Funds Rate, and Statement at 7pm, followed by the usual press conference half an hour later.
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