USD/JPY Forex Signal: Bullish Retracement - 7 May 2020

USD/JPY: Resistance at 106.42 looks pivotal

Yesterday’s Signals were not triggered as none of the key levels were reached until after the end of the Tokyo session.

Today’s USD/JPY Signals

Risk 0.75%.

Trades must be entered from 8am New York time Thursday to 5pm Tokyo time Friday.

Short Trade Ideas

  • Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 106.42, 106.55, or 107.02.

  • 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 106.15.

  • 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 I took a bearish bias on this currency pair today as long as the price was below the lowest resistance level identified at 106.42.

This was a good call over the New York session as the price stayed below that level and continued to move down. However, later there was buying at 106.00 and at the new higher support level printed at 106.15 which has driven the price back up to just below the resistance at 106.42, where it was yesterday – and this level survives intact.

It looks like we are just seeing a normal bullish retracement within a medium-term bearish trend, and this will be confirmed if the resistance levels at 106.42 or even 106.55 hold, so I would be prepared to take a short trade from a bearish reversal at either of these levels later. In fact, I would even have faith in 107.02 so would look for a short trade there too.

If the price can get established above 107.02, that would be an important sign of doubt in the medium-term bearish trend.USDJPYConcerning the USD, there will be a release of Unemployment Claims data at 1:30pm London time. Regarding the JPY, there is nothing of high importance scheduled for today.

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.