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We’ve got potential catalysts this week for the Greenback, and after a strong bounce from a previous support area, I decided to adjust my USD/JPY short trade to lock in further profit.

USD/JPY Downtrend Pullback

USD/JPY 4-Hour Forex Chart
USD/JPY 4-Hour Forex Chart

Last week, I adjusted my short position in USD/JPY to lock in a profit after the Fed’s latest monetary policy statement.

The weak move lower in the Greenback after the event signaled to me that the Dollar weakness may have run out of steam and was due for a short-term bounce. So I closed half my position and rolled my stop down on my remaining position to 106.60, essentially locking in +0.20% even if stopped out.

Since then, we actually saw further weakness in USD/JPY, likely on broad risk sentiment continuing to shift towards negative, recently on the rapidly rising cases of coronaviruses, especially in Europe.

Second lockdowns started to get priced in, which seemed to benefit the Japanese yen the most last week. USD/JPY made its way lower to retest the 104.00 handle (a major bullish reversal area in August) before drawing in buyers on Monday.

With U.S. PMI data and commentary from various Fed officials coming soon to potentially affect USD biases, I’ve decided to roll down my stop further to just above the latest Fib area and broken support area marked above to lock in a further profit.

Rolled stop down from 106.60 to 105.70

This adjustment increases my locked in profit from 0.20% on 1.00% risk to 0.48%, or a 48% return-on-risk. My max gain remains at 1.70% at my 101.75 target for now. 

I’ll be watching this area for bearish reversal patterns to potentially add back to this position, especially if we get disappointing U.S. PMI data this week, or if the COVID-19 pandemic continues to worsen and increases speculation of more lockdowns.

If traders think lockdowns will be coming to the U.S. (a low probability scenario at this point), then we could see the move lower in USD/JPY pick up quickly.

So that’s it for now.  Stay tuned and as always, 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 simply follow what I do.