Trade Idea: 2013-1-3 11:37 pm EST
I did a lot of pretty silly mistakes in 2012 and not buying USD/JPY back when it was still trading below 80.00 has got to be one of the biggest! But it’s okay. I think I can still get in on the rally.
I’m not going to rush and just buy at market though. Looking at the 30-minute time frame, we see that the pair could soon pull back and test its previous resistance. What makes this setup really nice is that the broken resistance lines up with the 50% Fibonacci retracement level.
I plan on taking advantage of this, so I will set a buy order around 87.25. I will then set a 50-pip trailing stop, putting the initial stop just below yesterday’s low at 86.75. As for my target, I’m eyeing the area around the most recent high at 87.75. That’s where I will take profit on half of my position while I let the remainder of it ride the trend.
Fundamentally, I think it’s pretty clear to most market participants that the BOJ has taken a firm stance against yen strength. The new Prime Minister, Shinzo Abe, continues to put intense pressure on the central bank to adopt further monetary easing measures.
In addition, Japan is caught in another recession, and the government wants to aggressively tackle the deflation issue to jumpstart the stagnant economy.
Buy USD/JPY at 87.25 with a dynamic 50-pip trailing stop. PT 1: 87.75, PT 2: to be determined. 1% risk. Risk disclosure.