Trade Adjustments: CAD/JPY & USD/JPY Shorts

With chatter of intervention from the BOJ & the yen giving back some of its recent gains, it was time to make adjustments to my latest forex trade ideas on CAD/JPY & USD/JPY.

Short USD/JPY

Original Trade Idea: News Trade Idea: USD/JPY Fibs Ahead of NFP

USD/JPY 4-Hour Forex Chart

USD/JPY 4-Hour Forex Chart

Price action in USD/JPY has been volatile recently, starting with the Japanese yen has giving back its recent gains (a rally sparked by lack of action at the last Bank of Japan monetary policy meeting), likely on fresh speculation that the Bank of Japan will step in to weaken their currency if it continues to strengthen.

On the USD side of the pair, we’re seeing a little bit of support, likely on “risk aversion” sentiment as global economic data disappoints, including a weaker-than-expected April U.S. employment report.

This has pushed USD/JPY up to my short orders at 109.00, opening up a small position there with a 110.75 stop and only 0.50% risk. 

With the market very far away from potential BOJ intervention levels (around 90.00 – 95.00 on USD) and economic data slipping around the globe, I think this yen selloff could be short-lived and it could regain its “safe-haven” status among the major currencies.  So, I’ll hold onto this position for now, but likely close manually if it does break above the 110.00 handle and holds above there.

Short CAD/JPY

Original Trade Idea: Forex Trade Idea: CAD/JPY Rising Wedge

CAD/JPY 4-Hour Forex Chart

CAD/JPY 4-Hour Forex Chart

CAD/JPY continues to consolidate in a wedge-like pattern, recently bouncing off of the bottom rising trendline on not only the recent weakness described above, but also on recent oil strength (the Loonie has a strong correlation to oil prices) sparked by wildfires in the “heart of Canada’s oil patch.”

I don’t know how long this development will support the Loonie, but I think in the short-term it may be enough to get the market up to my first short orders at the 86.00 handle.

But with BOJ intervention talks currently making rounds with yen traders, and since I already have long yen exposure with my USD/JPY trade, I’ve decided to close my second set of orders to short a half position at 87.70. 

This means that my max risk for my CAD/JPY idea is now only 0.50% with a potential max reward of 1.71 at my target of 80.00.

Combined with my USD/JPY short, my total risk is only 1.00% of my account and both trades have wide stops to weather any short-term volatility that may continue from BOJ speculation or whatever may come. And with global economic growth fears rising, I’m good with staying long Japanese yen for now as it could benefit if fear sentiment does pick up steam.