Short-term Long on USD/JPY

Forex Trade Idea: 2014-08-28

With the U.S. printing more positive data and a slew of Japanese data coming up, I thought I’d take a small position in USD/JPY to see if I can grab a few quick pips before the long weekend.

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USD/JPY 1 Hour Forex Chart

USD/JPY 1 Hour Forex Chart

Today, the market was surprised with positive GDP data as the preliminary read of the second quarter came in at 4.2% vs. 3.9% forecast.  We also saw the weekly initial jobless claims data dipping lower once again, and a much better-than-expected number from pending homes sales (3.3% vs. 0.5% forecast).  So, this data has me bullish on the Greenback for the very short-term, and I’d like to play that against the Japanese Yen which has data coming up with potential to spark further volatility.

We’ve actually got a slew of Japanese data coming Friday: Tokyo CPI, unemployment, retail sales, and housing starts.  And while I don’t know what those numbers will end up being, or the reaction to them, with global data outside of the U.S. weakening a bit, the odds are better than not we’ll see the same from Japan.  I’m confident in this because much of Japanese economic data has been in a weakening trend over the last few months.

But with today’s risk-off reaction to geopolitical tensions in Ukraine, I’m looking for a slight pullback further in USD/JPY before pulling the trigger on a small, short-term long position.  My entry is the minor psychological support level that held earlier this week, with my target at this week’s high’s, and my stop at about half of the weekly average true range.  Here’s what I’m doing:

Long quarter position in USD/JPY at 103.50, stop at 102.90, profit target at 104.25

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

Because I don’t plan on playing this one for very long, I’m only risking a tiny 0.25% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.25:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!

  • liliku

    Hay welcome aboard, Why do you wait at 103.50 not at market? May big pips with us.

    • Pipcrawler

      Hey liliku, it looks like I should have jumped in at market instead of trying to wait for a pullback. USD/JPY jumped up after the weak Japanese data as expected!