USD/JPY: Support at 106.43 looks pivotal
Today’s USD/JPY Signals
Risk 0.75%.
Trades may only be taken between 8 am New York time Monday and 5 pm Tokyo time Tuesday.
Short Trade Ideas
- Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 106.62, 106.79, or 107.07.
- 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 Ideas
- Long entry following a bullish price action reversal on the H1 time frame immediately upon the next touch of 106.43, 105.97, or 105.73.
- 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
The action in this major currency pair has been characterized for quite a long time by ranging behavior and a low level of volatility, making it relatively unattractive to Forex traders.
This still has not changed, although we did see the price briefly make some new long-term low prices just a few weeks ago as the U.S. Dollar began to fall quite heavily.
There are signs that the new long-term bearish trend in the Dollar is going to resume this week with a more downward movement. However, it is not clear that the Japanese Yen will be poised to benefit from that, as the Yen is suffering from some weakness of its own after Japan just announced very poor GDP data for the second quarter of 2020, which was a little worse than even the worst-case consensus scenario.
Another problematic factor in trading this pair is that the Yen and Dollar still tend to move together, as both are acting as “safe haven” currencies.
Considering all these factors, it seems likely that the best trading strategy to apply here, helped by the relatively low spread, is to scalp bounces off key support and resistance levels, without overstaying, i.e. being prepared to exit for conservative profits.
The short-term price action suggests that the support level at 106.43 is very pivotal. It is being tested and may give some long pips again at another strong bounce. Alternatively, if the price gets established below 106.43 later, it might fall quite quickly to the 106.00 area.
There is nothing of high importance due today regarding either the JPY or the USD.