Just a Pullback in USD/JPY?

Forex Watchlist: 2014-09-22

Can it be? Finally, a decent pullback in this massive USD/JPY rally? It’s too early to tell but there might be a setup for a short-term swing in this raging bull.

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

USD/JPY 1 Hour Forex Chart

USD/JPY 1 Hour Forex Chart

With my USD/CAD long position back in profit and cooking, I thought I’d look around for new opportunities. Finally seeing a decent pullback in USD/JPY might be what I’m looking for.

Fundamentally, this rally from all the way back around 101.50 has been supported by a few things: improving U.S. data, the expectation of the FOMC ending QE and raising rates, as well as the expectation that the Bank of Japan will continue their own easy monetary policy to combat economic weakness in Japan.  It doesn’t look like these conditions will change any time soon, so I’m fundamentally still bullish on this pair.  It looks like the rally might actually be ready for a breather, but because of the big move, I’ll be cautious on hopping into this rally by going into watch mode for now.

On the one hour chart above, we can see 109.00 holding as resistance with sellers taking control at the moment, pushing the pair lower today.  It’s heading to a potential short-term support area formed by the 100/200 moving averages, and the Fibonacci retracement area drawn on the most recent swing move higher.  Because of the large rally to this point, if it does retest that area between 107.80 – 108.40 and shows support (bullish reversal candles, consolidation, upside break, etc.), I’ll look to go with a small nibble trade for a short-term swing.  No orders at the moment, just sitting back in watch mode.

What do you think? Is the rally over or is this another opportunity to ride a strong momentum trade in currencies? Would love to hear your thoughts so please leave a comment below!

  • ForExchange

    Hi Pipcrawler,

    what would you think on a EUR/CHF long or an even better setup: USD/CHF long trade? I like those maybe more as the SNB would defend peg at the 1.2000 level which means we have a quite good edge that CHF will not get stronger which gives us a great risk/reward ratio to go against it. If it does not work, then probably we would end up around breakeven.

    Good luck

    • Pipcrawler

      Hey ForExchange… I’m watching the 1.2000 on EUR/CHF as well, but for my trading style, I’m waiting for that level to hit before hopping in. Anything can happen between now and then, so I won’t set a hard bias or plans until I see it happen. That’s just how I trade. Hope that helps.