USDJPY: Breach Under Support Line as Pair Hanging on Lower Edge of Bullish Channel
The daily candle chart below shows the medium term price history of the United States Dollar (USD) versus the Japanese Yen (JPY). This currency pair is known as USDJPY, and is trading near 118.50 around time of publication today.
Earlier in December last time USDJPY was reviewed in Ideas You Can Trade, a pullback was underway and continued until support was subsequently found on the equidistant trend line that had already been drawn in that post.
That support is again being tested (on the same trend line) and was breached earlier in the trading session as the pair is barely hanging on to the bullish channel if this line cannot be regained. In the last post the pullback in USDJPY was noted as healthy, but now an exit of the bullish channel means a change of the short term trend, and a new trend developing (at least in the short term) although the longer term trend may still be the same (towards a weaker Yen).
On the other hand, If the support line of the bullish channel is regained and a recovery of USDJPY follows, then a continuation towards last month's high near 1.2200 could reoccur.
Below are example of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 119.53 with a Limit to take profit @ 120.58 and a stop-loss @ 118.99 Risk/Reward Summary: Limit risk = +105 pips profit / (-54) Stop-loss risk = Gain to Loss ratio = 1.94
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 117.89 with a Limit to take profit @ 116.35 and a stop-loss @ 118.55 Risk/Reward Summary: Limit risk = +154 pips profit / (-66) Stop-loss risk = Gain to Loss Ratio = 2.33
Medium Term Daily Candle Chart: