USDJPY: Pullback Looming as Greenback Pivots or Preps for Correction
The daily candle chart below shows the medium term price history of the United States Dollar (USD) versus the Japanese Yen (JPY), known as USDJPY, and trading around 108.45 around time of publication today.
Last time the pair was covered in Ideas You Can Trade the uptrend was strong with new multi-year highs within close reach. Since then the pair has retraced slightly with support building near 108.50. A range has developed between 1.1000 and current levels as the USD has started to pivot before either moving higher or is prepping for a more serious correction as a number of charts indicate potential resistance barriers across other major currency pairs.
While the USDJPY long term chart still looks very bullish - the very short term trend is failing as the steep uptrend line is being violated today. If this line (point 5 in green on chart below) cannot be regained a pullback towards 106.00 may follow. Whereas, if support on both the short term line, and longer term bullish line that intersects above current prices (point 8 in light brown color), then a push above the October 1st high should occur.
Below are example of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 109.45 with a Limit to take profit @ 110.18 and a stop-loss @ 108.98 Risk/Reward Summary: Limit risk = +73 pips profit / (-47) Stop-loss risk = Gain to Loss ratio =1.55
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 109.41 with a Limit to take profit @ 109.01 and a stop-loss @ 109.72 Risk/Reward Summary: Limit risk = +40 pips profit / (-31) Stop-loss risk = Gain to Loss Ratio = 1.29
Medium term daily candle chart: