USD/JPY: Wide bearish wedge formation
Yesterday’s signals were not triggered, as there was no bullish price action when the anticipated support level at 105.78 was reached.
Today’s USD/JPY Signals
Risk 0.75%.
Trades may only be entered between 8 am New York time Tuesday and 5 pm Tokyo time Wednesday.
Short Trade Ideas
- Go short following a bearish price action reversal on the H1 time frame immediately upon the next touch of 105.81, 106.07, or 106.50.
- 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.
- Removal 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 104.87.
- 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 it seemed clear that the support level at 105.78 was going to be pivotal today. I was ready for a long trade there but wanted to closely monitor it.
The long trade set-up at 105.78 did not happen. I was correct to expect the price to fall to reach that level, however.
The situation now is more bearish still, as the U.S. Dollar mostly weakens in line with its long-term trend, and we are beginning to see some strength in the Japanese Yen.
We can draw a broadening bearish wedge, as shown in the price chart below, yet I do not put a lot of faith into the lower trend line. It is the upper trend line which is significant and important and exerting bearish pressure on the price.
It seems like we have new lower resistance at 105.81 and as long as this level holds, I would suggest looking for short trades only. In fact, I would not look to take a long trade until we see a bullish bounce at 104.87.
Volatility is low, so it will probably be worthwhile to monitor any short trade taken on shorter time frames.
There is nothing of high importance due today regarding either the JPY or the USD.