Haven’t seen many great swing opportunities lately, but this setup on USD/JPY just might do with potential volatility coming from NFP right around the corner.
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
We’ve got the U.S. Non-Farm payrolls report coming out soon, a potentially monster, volatile short-term event for the Greenback. My main man Forex Gump did an excellent write-up on what we may see coming up for the U.S. employment data, and I’m on board with his analysis so if you want to see the fundamental argument for this trade, I highly recommend reading his post.
As for the technical side, if we see a pop in volatility and the market is brought up higher, I’ll look to short with my short-term fundamental bias to the downside at the previous consolidation area around 109.00. This area could draw in sellers, but if the volatility is strong, we could see 110.00 as well before enough sellers can hold the fort (all assuming we don’t get a huge surprise in NFP data). My stop is above that 110.00 major psychological level (also 1/2 of the weekly ATR), and my max profit target is the next major psychological level lower. Here’s what I’m doing:
Short half position USD/JPY at 109.00, max stop at 110.75, max profit target at 105.00
I’m only risking 0.50% of my account on this one because it is a news trade, and with this structure, I have a potential reward-to-risk ratio of about 2.28:1. If this position does go my way though, I’ll likely roll down my stop or close entirely lock in profits ahead of the weekend.