USDJPY: New Short Term Bullish Line Meets Bearish Resistance as Pair at a Crossroad in Uptrend
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 107.95 around time of publication today.
Last time USDJPY was reviewed in the Ideas You Can Trade series, in mid-October, a pullback was underway and had worsened shortly thereafter. However, support was found near 105.20 and has since enabled the pair to recover towards current levels aided by a newly developed short term bullish support line (parallel to point 5 in green on chart below).
At the same time a bearish trend line drawn from the October high over 110.00 towards current prices, parallel to the previous potential steep short bearish continuation (point 1 in purple color on chart) shows that the pair may be still facing resistance and at a crossroad.
With the new bullish support line under current prices - a slight pullback may enable the pair to find support on that line - meanwhile the bearish resistance line has already been overcome although it has acted as bearish support over the last few days and appeared to have affected prices.
A more clear direction is needed and should be confirmed in coming days depending on whether the pair finds support on the bullish line, with a push to 110.00 thereafter, or if support fails (including bearish support) then 105.20 could re-visited sooner.
Below are example of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 108.26 with a Limit to take profit @ 108.85 and a stop-loss @ 107.75 Risk/Reward Summary: Limit risk = +59 pips profit / (-51) Stop-loss risk = Gain to Loss ratio =1.15
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 107.53 with a Limit to take profit @ 107.23 and a stop-loss @ 107.78 Risk/Reward Summary: Limit risk = +30 pips profit / (-25) Stop-loss risk = Gain to Loss Ratio = 1.20
Medium Term Daily Candle Chart: