USD/JPY Forex Signal: Bullish Bounce at 104.00

Adam Lemon

We are seeing the U.S. stock market just beginning to look a little firmer after bouncing up just as it hit correction territory, and this is another reason why the bullish bounce yesterday might be significant over the medium or long-term, as we see a correlation between the USD/JPY currency pair and the S&P 500 Index.

USD/JPY: Long-term double bottom in place?

Yesterday’s signals were not triggered, as the bearish price action from 104.87 was too slow to generate a short trade signal.

Today’s USD/JPY Signals

Risk 0.75%.

Trades must be entered between 8 am New York time Tuesday and 5 pm Tokyo time Wednesday.

Short Trade Ideas

  • Short entry following a bearish price action reversal on the H1 time frame immediately upon the next touch of 104.87 or 105.39.
  • 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 104.37.
  • 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.

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USD/JPY Analysis

I wrote yesterday that we were seeing strong bearish momentum here, so I was ready to take a bearish bias if we had gotten a bearish reversal at a key resistance level, or two consecutive hourly closes below 104.00.

This was luckily enough to keep out of trouble as the price reversed strongly close to the time of the New York open from 104.00. The rise from there has been quite bullish and strong, with new higher support already established at 104.37.

These signs suggest that we may be seeing a long-term double bottom at this 104.00 area which has historically acted as support. Much will depend now upon whether 104.37 and 104.00 hold.

As I think the edge is now on the bullish side, I am prepared to take a long trade from a firm bullish bounce at 104.37, or if we get two consecutive hourly closes above the nearest resistance level at 104.87 after New York opens.

We are seeing the U.S. stock market just beginning to look a little firmer after bouncing up just as it hit correction territory, and this is another reason why the bullish bounce yesterday might be significant over the medium or long-term, as we see a correlation between the USD/JPY currency pair and the S&P 500 Index.

USD/JPY

There is nothing of high importance scheduled today regarding the JPY. Concerning the USD, the Chair of the Federal Reserve will be testifying before Congress at 3:30 pm London time.

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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