Forex Trade Idea: USD/JPY Range Play

Big potential catalysts for forex this week, sI’m going with a super simple range play as the market in USD/JPY retests a major resistance area.

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USD/JPY 4-Hour Forex Chart

USD/JPY 4-Hour Forex Chart

Lots of economic data coming out this week, most notably the monthly U.S. jobs data, but the rest of the globe ain’t no slouch with their reports with Canadian GDP, European inflation data, global PMI data and more! So, I expect price action to pick up in the currency markets, especially with many traders coming back from the long holiday weekend.

Today, I’m going with a super simple range play on USD/JPY as I think a pick up in volatility will get me up to that strong resistance area between 114.00 – 115.00. If the market does retest, we could see sellers, especially those who may be betting that the Fed will not raise interest rates in April, a possibility with the first quarter GDP outlook being revised lower today by the Atlanta Fed.

I’m keeping my risk small by only going with a half position this time, but I would be open to add another half if the major psychological level of 115.00 is test and holds. My max stop is well above the resistance area, and my max target is the bottom of the range, creating an acceptable potential reward-to-risk ratio. Here’s what I’m doing:

Short half position at 114.00, max stop at 115.75, max profit target at 111.00

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.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.74:1. 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!