Undeterred by the bank holiday in Japan, last night currency moves continued to have some follow through on Friday’s big job miss. Despite the recent weakness, the major trend is still very much bullish for USD/JPY, so traders should embrace the recent pullback that has taken form so far this week.
Price action on the daily USDJPY chart has been trending comfortably above the 200-, 100-, and 50-day Simple Moving Averages (SMA) since November 8th. Last week, I highlighted the potential pullback to target the 102.75 area. Price temporarily broke below the 103 handle but has since stabilized since then.
The daily chart is identifying a potential bullish ABCD pattern that coincides with 23.6% Fibonacci retracement of the 96.55 to 105.43 rally. If valid, the confluence of technical indicators, along with the fundamentals still supporting a strong U.S. economy despite one poor jobs number, and sentiment remaining bid, the next major leg higher for USD/JPY could be upon us.
The trade: Buy half of your normal trade size of USD/JPY at 103.25 and buy the second half at 102.25 with a stop loss at 101.25 and a take profit at 105.95. If we are filled on both entries, your average price is 102.75 and the Risk/Reward Ratio is 1:2
Edward J. Moya
WorldWideMarkets Online Trading