The stock markets are under some slight pressure, which could see the Japanese Yen strengthen in the short term. This could offer us a day trading opportunity on USDJPY.
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Today, we’re going to take a look at USD/JPY as there could be an opportunity for a short-term trade.
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We had a bearish close last week. We also recently spoke of the potential for the US Dollar to continue to weaken. On the other hand, I was not necessarily looking for that much JP Yen strength.
However, we saw a dip in the stock markets. This could give the JP Yen a little bit of strength, which would help our situation.
We’re also looking to go long on CHF/JPY. But the CHF/JPY is not in a position to bite yet because the price is too high. We need to see a drop first.
All those things make me think that the USD/JPY could be a good opportunity on short-term trading, and this bearish weekly close is the first sign.
The real sign, for me, is down in the four-hour timeframe. However, the price is finding support down at the 108.40 level. The market keeps bouncing from that area. We also had some strong buying from there recently.
However, I noticed that we are still making lower lows and lower highs. The market dropped lower, consolidated, broke to the downside, and we’re now consolidating again.
The USD/JPY could be offering a short-term day trading opportunity as the stock market comes under some pressure. Usually, when the stock market falls, the JP Yen gets short-term strength. Looking at the four-hour timeframe, the price is making lower lows and lower highs. However, the price is finding support at 108.45. Ideally, we need to look for an opportunity that will allow us to have a great reward to risk ratio.
Are we getting another breakout? Well, the first breakout came through, then the market broke out to the downside.
We traded it lower, and we got that again. The price broke out of the consolidation.
So, that’s making me think that we could see more downside to this market. I’m actually anticipating a run down towards the 107.80 level because we had a lot of bullish demand from there in the past.
I’m expecting some buyers to sit around that area or at least for some targets in a downtrend because it was previously a support.
I’m looking for the price to downtrend, breakthrough the 108.40 area, and continue to 107.80.
The market has broken out of the counter-trend trendline and continued to make lower lows and lower highs. We could see that continue. The demand zone at 107.80 would be a good area to target if the price breaks below the support at 108.45.
We have to think of how we could trade this. Trading in the breakout could be an option; with the stop losses above the highs. But, the risk-reward ratio is quite high, and there’s no space for us to take profits at 108.40.
So, I dove down to the 30-minute timeframe. I noticed that this market had a consolidation breakout. The market consolidated, had a double-top pattern, and now, we broke to the downside.
The most-traded level within this zone is 108.89. If the price goes up to 108.89, then we could look for a short opportunity here because that maximises our reward-risk ratio. We would only have a very small risk in terms of pips, and we can also take first profits at 108.44.
Going down to the day trading timeframe of the 30-minute chart, the price has recently broken out of a consolidation. Using the volume tools, we have identified a high volume level at 108.89 where the price could find resistance. First targets will be the support at 108.45. If the price breaks lower, then we can target the main demand zone.
If the price then breaks lower, then we can look for a longer-term target. But, at least we have an option to take some profits off the table if the price goes back to that area.
The risk is to the upside. If the price breaks these highs at 109.05, then we would likely see a continuation of the trend.
We also have to look at what would happen alternatively. But ultimately, there could be a short-term trading opportunity on USD/JPY that I think you should consider.
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