Trading Opportunity: Following the Latest Trends

Written by: Dime Levov • Wednesday, September 12, 2012 • 2 min read

• Last updated: Wednesday, September 12, 2012

As always we’re looking for some good trading opportunities and it looks as though we’ve found a couple of good ones.

USD/JPY

Last Friday’s market events really hit the USD/JPY trade. The ECB’s announcement of their new bond buying program combined with the surprise ADP data caused the USD/JPY to immediately drop down towards 78.00 (see graph below).

trading opportunity on usd jpy

It seems that this downwards trend may continue, especially since last Friday Fed Chairman Bernanke argued for more quantitative easing. As a result, and considering that no major news is expected from Japan in the near future, it looks as though the Japanese Yen is the only really safe currency. It is also likely that more capital will be flowing into Japan’s markets following the recent weak economic data which prompted fears of a global slowdown.

To take advantage of this it would be good to short the USD/JPY pair up to the minor support area and target the major support area. For instance a good strategy would be to short the pair at 78.45 and stop at 78.90 with a profit target at 78.00.

EUR/USD – GBP/USD

Over the past 4 months the US Dollar has lost 4% of its value and it is now approaching some significant support levels against 4 major currencies. This suggests that the US Dollar sell off might be mature and about to reverse.

As the EUR/USD approaches resistance the rally of the EUR is likely to slow down and the USD may regain strength. A downwards slope on the graph below represents a strengthening of the USD. Over the few months there have been three points of resistance for prices which could suppress future advancements. In both May and June (red and yellow circles) the prices were near horizontal resistance and at present they are at the top of a trend channel (blue circle). If there is a press back within the trend channel then it would suggest that a reversal may be happening.

euro dollar 5 hours chart

Similarly, as the GBP/USD approaches resistance it means that the GBP is about to suffer and the USD about to strengthen. The graph below shows a downtrend in the GBP/USD lasting from April 30th – June 1st and it is now gradually climbing. Prices initially stopped around 61.8% but have since climbed above it and are now getting closer to an important resistance level of 1.6083, the 78.6% retracement level.

gbp usd daily chart

While it is not well known, many traders believe the 78.6% Fibonacci retracement is the last resort. Traders tend to like this level as it offers a good risk to reward ratio.

By looking at both of these markets it seems that there is a high chance for a rise in the US Dollar. This means it is a good idea to look for the RSI to lesson and then implement a break out strategy which should prove that the Dollar is strengthening.

What’re your thoughts on the Dollar and Yen; let us know in the comments section below!