Now that traders have mostly priced in the Fed and BOJ’s plans, it’s no surprise that USD/JPY is stuck in a range. What do you think of this forex setup?
Looking at the 1-hour chart, we can see that USD/JPY has been stuck in a 130-pip range for more than a week now. More specifically, it has been finding support at the 117.40 handle several times. I’m thinking a 50-pip stop loss would be a good idea if I buy at another test of the support.
I’m comfortable buying the dollar some more because the Fed’s recent policy statement hinted that the central bank is still on track to tighten its policies despite the ECB’s decision to implement a QE program for the first time.
On the other side of the trade, today’s weaker-than-expected Japanese inflation numbers just put more pressure on the BOJ to deliver better results on their stimulus programs. Speculations of more BOJ easing wouldn’t hurt a long trade at this time.
I’m thinking of risking 0.5% of my account around the 117.40 area once Stochastic hits the oversold zone. I could place a 50-pip stop loss and aim for at least the 118.00 handle, if not the 118.50 range resistance.
What do you think? Will we see enough catalyst to move the currency pair around and hit those levels?