Trade Idea Marathon: Riding the Trend on USD/JPY

Trade Idea: 2011-5-19 4:02

USD/JPY 1-hour Chart

Since I’ve tackled all the other majors already (EUR/USD, GBP/USD, USD/CHF), I decided to make my last trade idea for the week on USD/JPY. What’s my take on it? I’m going long!

On the economic front, we saw that the GDP report for Q1 2011 came in at -0.9%. According to Pip Diddy, it was the second consecutive quarter that the economy printed negative growth. This means Japan has plunged back into recession! Yikes!

USD/JPY’s reaction to the report seemed muted. After all, almost everyone expected the economy to bear the scars of the tsunami and earthquake that hit the country in March. However, I think that just like any girl, the market can only take so much. I’m expecting that the BOJ’s statement tomorrow would convince traders to dump the yen.

What makes me think so?

Well, BOJ Governor Shirakawa has already expressed his pessimism on the economy, describing it being in a “severe” state. Uh-oh… With that, I’m bracing myself for the bank to announce further stimulus to spur economic activity.

On the technical side of things, USD/JPY seems to be trending upwards. It has consistently been making “higher lows” and has been supported by a rising trend line. I believe the pair has more room to go up, but since I’m a girl who doesn’t like to settle, I’m going to wait for my desired price!

I’m hoping to jump in the overall trend once price tests the intersection of the rising trend line and the horizontal support area around 81.30. Of course, I’ll wait for bullish reversal candlestick patterns to confirm going long (thank you candlestick cheat sheet)!

To give my trade enough room to breathe, I’ll place my stop below 81.00, which is a major psychological level. I don’t know my profit target yet though, as price could make new highs if the trend holds. I don’t want to miss out!

There ya have it! My fourth trade idea for the week! What setups are you looking at? Share your ideas in the comment box below! You can also write them on my Facebook wall or tweet them to me!

  • JackL

    I’ve been bearish about JPY for quite. I think the rally from 85.5 – 79.55 is the dead cat bounce of the Yen. It will weaken from here and reach probably 85-90 by EOY, or even higher.

    Japanese economy cannot sustain the ex-rate of yen at current level anymore, big exporters already threat to move their production out of the country if Yen strengthen further. Either speculators ignore those fundamentals, push yen higher and bust the economy. Or people realise the severity and start winding down their long yen position. Either way I see Yen weaken. So I am with you.

    I think you actually pointed out a good entry point, but I want to wait over the weekend and try to get in at around 81.15.


    • huck

       Yeah, the pair moved up without retracing first. Perhaps I can get in after the weekend too. 🙂