Jumping In On the USD/JPY Rally… Again!

Trade Idea: 2013-1-11 2:20

In my pre-week market analysis, I pointed out that I had a bullish bias on USD/JPY. With price showing signs of retracement, I think it’s about time to think about jumping in long.

USD/JPY  30-Minute Chart

As you can see, USD/JPY seems to have found a temporary top. Price action is falling and is currently on its way to a former broken resistance. I don’t know about you, but this looks like a good area to consider going long as it lines up nicely with the 38.2% Fibonacci retracement area. Also remember that whenever price passes through a major resistance level, that level normally turns into support.

If I see some buy signals at around 88.40, I’m going to pull the trigger. After that, I’m going to set a 60-pip stop to allow my trade to breathe. I’m ultimately aiming for new highs but I’m going to close out half my position if price rallies to the 89.00 major psychological level.

On the fundamental side of things, we see that risk appetite has made a full comeback. As Pip Diddy reported, a successful Spanish bond auction, positive news from China, and a relatively more optimistic ECB rate statement has boosted the market’s mood. Of course, with market participants more confident about buying higher-yielding assets, the yen has been left at the bottom of the pack.

I know that I’ve missed the train before by being conservative with my entry. However, I really do feel that I would regret being aggressive if I pull the trigger too early. And besides, the pair has been on a seemingly non-stop rally. It’s due for a pullback sooner or later, right?

To recap, here’s my plan:

Long USD/JPY at 88.40, SL: 87.80, PT: 89.00. 1% risk. Risk disclosure.



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  • kingkevbo

    Surely you mean 88.40? It’s not been at 83.40 since around christmas. Or do you really mean 83.40, and don’t call you Shirley.

  • SwordOfManagement

    This really should be in the school section of BP: do NOT place a large initial stop within the long(er) term range. If you want to go long with a large stop then your stop should be at no other place than the 100% REt. If you want to go short with a large stop then your stop should be at no other place than the 0% REt. — IF THERE ARE NO TRADES from which a stop can be placed on the long(er) term extremes THEN USE A SMALL STOP! Additionally, if your short term trades add up to 25-33% of the stop size that you would use for a position trade then, then halt all short term trading until you execute a position trade with a stop of 66-75% ‘normal’ size; you COMPLETELY use up a unit of risk before reaching in your pocket for another.