USD/JPY Is Trending Down-Possible Buy On The Horizon
Shain Vernier • 2 min read
As my colleague Rowan covered in his daily forex brief, the signals have been off to a great start for this week. One of the nice wins from the past 24 hours was a short in the USD/JPY. Great work to all who got in on the action and took some money out of the market.
Since then, the yen has resumed its run against the greenback. Currently, it has posted a test beneath November’s low and is threatening October’s pre-snap election low. This is certainly a live market and one that may give us further opportunity in the near future.
USD/JPY Technical Outlook
As of this writing, the USD/JPY is trading under the 112.00 handle, in the neighborhood of 111.90. Today’s action has been dominated by the bears, providing a clean break from Tuesday’s tight range.
USD/JPY, Daily Chart
A few observations facing this market’s technicals:
Price tested the 38% Fibonacci retracement level (112.68) on two occasions and failed. This is a strong indication that a pronounced bearish trend is present.
A divergence between the Daily SMA and Bollinger Midpoint is a sign of directional price movement. This is a bit obvious by looking at the daily trend, but heavy action is likely to be the order of the day.
October’s low (111.65) will bolster participation and act as a formidable area of support. In the event that price trades beneath this level with velocity, we may be looking at a substantial trend for the intermediate term.
A macro 38% Fibonacci retracement from the Sept. 8 low to the Nov. 6 high is 111.90. This is a big level that is being tested with vigor.
Bottom Line: Personally, I am not a fan of going against strong trends. However, 1:1 R/R longs from 111.70 with an initial stop beneath 111.50 produces a 20 pip return. Buying in at this level is an affordable way to play strong participation and a return to the macro 38% level at 111.90.
Fading trends can be a tricky business. Be sure that proper risk management is in place to keep your trading account healthy!