USD/JPY Rally Sweeps Out Thursday’s Trading Plan

The USD continues to rally against the Japanese yen, spelling doom for Thursday’s trade recommendation. Positions from a moving average on the daily timeframe are typically very strong. However, this trade was a blowout loser featuring no chance for escape.

As of this writing, the USD/JPY is trading near 113.20 having posted an intraday high of 113.33. The bull run seems to be subsiding amid some two-way action hitting the market over the past three hours.

There is no way to sugarcoat a losing trade. All that can be done is to learn from the experience and look for shortcomings in the trading strategy. So, here are the contributing factors to this trade falling into the loss column:

• Japan’s Monetary Base (YoY, Dec.) came in well below expectations.
• The Japanese Markit Services PMI (Dec.) lagged under the previous release.
• Participation in the European pre-market hours favored strong numbers from the upcoming U.S. Unemployment reports. The action generated a short-term rally in the USD across the majors.

So, where does the USD/JPY go from here? Let’s take a look at the day’s technicals and find out.

USD/JPY Technicals

Today’s action for the USD/JPY is decisively bullish. Price is currently above the Daily SMA, having already retraced once and rejected this level.

Current pricing of the USD/JPY is firmly inside of December’s range. If bulls remain in control of this market, a test of the December high (113.74) will be coming very soon. Here are the levels to watch for the remainder of the forex session:

• Resistance(1): December high, 113.74
• Support(1): Daily SMA, 113.07
• Support(2): 20 Day EMA, 112.82
• Support(3): Bollinger MP, 112.80

Overview: After a losing trade, I am never in a big hurry to enter the same market. Some time is needed to analyze and prepare a fresh game plan moving forward.

Early next week may provide a test of the December high and create a shorting opportunity. In the event that this scenario sets up, check back for details on how to capitalize on the action.