Every now and then fundamentals and technicals collide to give us an outstanding trading opportunity. Monday’s recommendation for the USD/JPY was one of those scenarios. In the wake of Shinzo Abe and LDP winning a landslide victory in the Japanese snap election, the USD/JPY opened gap up creating a great opportunity to get long.

Kudos to everyone who took the 50+ pips from the USD/JPY gap. If you are still in this trade, be sure to adhere to a solid management plan to preserve gains.

Currently, the USD/JPY is still very active. Let’s dig into the technicals and see if we can find another trade or two.

USD/JPY Technical Outlook

This week’s opening gap has been filled in, and the yen has continued fading against the dollar.

USD/JPY, Daily Chart

A few observations facing this market:

• Japan’s economic calendar is fairly clear until Wednesday, with the Ministry of Finance releases. As the market digests the impact of Sunday’s election results, no news is good news.

• October’s high of 113.43 has repeatedly brought buyers to the market, a strong signal that the bulls are in complete control.

• Monday’s price action above 114.00 did not take hold. Today’s high of 113.96 serves as a proximity test of 114.00 and Monday’s high of 114.09. With two tests of this area, a third is likely to give us a run to the May/July Double top at 114.36-114.49.

Overview: Today’s closing range may provide a position trade going into the midweek sessions. For now, I am on the sidelines, looking for further compression and a run at topside resistance.

In the event that the bulls drive the USD/JPY higher today, I will be selling 114.36 with a stop above 114.55. Profit targets will be modest as holding position shorts in this market is not a good idea.

As always, trade smart and watch the risk management!