USD/JPY Forex Signal: Firm Bearish Retracement

Adam Lemon

USD/JPY: 107.50 area looks pivotal today

Yesterday’s signals were not triggered as unfortunately the price action was not bearish enough when 108.04 was first reached to justify a short trade entry, although the level accurately capped yesterday’s high.

Today’s USD/JPY Signals

Risk 0.75%.

Trades may only be taken 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 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

  • Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 107.59 or the lower price channel trend line shown in the price chart below which is currently sitting at about 107.15.

  • 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.

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USD/JPY Analysis

I wrote yesterday that I thought we may not see a lot of price movement in this currency pair over the day.

I saw the level at 107.59 as likely to be pivotal, so I wanted to take a cautious bullish bias later today if we got two consecutive hourly closes after the New York open above 107.59, up to 108.04. This was a profitable, accurate call and gave about 30 pips of profit before the bearish reversal happened at 108.04.

The technical picture has become less bullish as the resistance confluent with 108.00 holds and drives the price back into the area of its former bullish channel, but it may now be that the resistance turned into likely support at 107.59 will provide a bullish bounce and a long trade entry worth taking, especially if the big psychological level at 107.50 is rejected in the same price movement.

I am prepared to take long trades from bullish bounces at 107.59 or at the lower trend line of the former price channel, and I am also prepared to take another short trade from 108.04.

I have no directional bias today as both currencies are moving together with high correlation, currently both are relatively weak due to risk-on sentiment in the markets.USDJPYThere is nothing of high importance due today concerning either the JPY or the USD.

About the Author
Adam Lemon

Adam Lemon began his role at DailyForex in 2013 when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. Adam believes that it is very possible for retail traders/investors to secure a positive return over time provided they limit their risks, follow trends, and persevere through short-term losing streaks – provided only reputable brokerages are used. He has previously worked within financial markets over a 12-year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy

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