Moving Average Trading Plan For The USD/JPY
Shain Vernier • 1 min read
After the wide-open trading conditions of the early fall, the USD/JPY has tightened considerably. December’s range did not provide many opportunities for trend traders as the monthly range was a modest 234 pips. With a bit of luck, January will bring more volatility to this market.
One of the largest challenges to active trading is being able to adapt to ever-changing conditions. However, given the proper mentality, almost any market can be engaged successfully.
The relatively slow conditions in the USD/JPY may be ideal for taking a short trade from a key moving average.
The bullish action of the last two sessions have driven the USD/JPY to a critical area of topside resistance on the daily timeframe.
As of this writing, price is in an area of converging technical indicators near 112.75. Here are the topside resistance levels for the remainder of the U.S. session:
- Resistance(1): 20 Day EMA, 112.78
- Resistance(2): Bollinger MP, 112.78
- Resistance(3): Daily SMA, 113.02
Bottom Line: The 20 Day EMA and Bollinger MP have proven to be formidable resistance so far today. In the event that they are taken out, a shorting opportunity from the Daily SMA will come into play. Sells from in front of the Daily SMA at 112.94 with an initial stop placed at 113.26 yields 32 pips according to a 1:1 R/R trade management plan.
Although the Daily SMA will reset upon the forex close, I will be leaving sell orders in the queue at 112.94 for the remainder of the trading week. If you take this setup, be aware of the Markit Services PMI and Monetary Base reports for Japan during the U.S. overnight session. These releases may act as the catalyst for this trade being elected.
As always, trade smart and for tomorrow!