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Decided to close out my USD/JPY trade early in the U.S. session after waiting to see how Yen traders would price in the positive inflation data.

Original Trade Idea: USD/JPY Retesting Major Support

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USD/JPY 1 Hour Forex Chart
USD/JPY 1 Hour Forex Chart

During the Asia session, we got the Corporate Goods Price Index (CGPI) data from Japan, posting a big positive surprise of 4.1% vs. 1.7% previous.  This is a level of inflation not seen since November 2012!  Because this is not a closely watched data point, the initial reaction was muted, but the ball got rolling at the London open, probably also supported by the positive Japanese machine tool orders data.

I’m guessing it took forex traders a while before realizing that if prices are going up, then the likelihood of more stimulus from the Bank of Japan decreases as it gets closer to its inflation goals.  Of course, no stimulus means that there will be Yen bears lightening up on their Yen short positions.  USD/JPY has fallen -0.48% since the Asia session, a relatively lively move for this pair. Overall, yen pairs are down on the day with momentum still to the downside.

I think today’s data may be a signal of positive reads from the upcoming preliminary Japanese GDP and Price Index numbers, and potentially hawkish rhetoric from BOJ Governor Kuroda in his upcoming speech.  At the very least, signals of additional stimulus will most likely not be mentioned.  So, I decided to closeout my USD/JPY long manually at 101.83 early in the morning U.S. session:

Total: +23 pips/+0.16% gain

Overall, I was looking to close this trade out earlier because it seemed like USD/JPY would be in chop mode for a while.  Tomorrow’s data might be a catalyst for a breakout, but I don’t think I’d wanna be short ahead of it after today’s data.  And after some thought, I don’t think there was anything I could have done differently to manage my trade as the CGPI number is not closely watched or usually a market mover.

What do you think? Is there something I could have done differently to improve the outcome of this trade? Please leave a comment below…much appreciated!

I’m still in the market with my EUR/USD short, so I’ll have that to watch for now, as well as a possible adjustment to getting into an AUD/JPY long position since it rallied higher after narrowly missing my initial entry levels.  Stay tuned!


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