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Hey, guys! I found a short-term trade setup that you might be interested in.

As you can see on the chart below, USD/JPY is lollygagging just above the 112.50 minor psychological area. What got my attention was that the MiPs is also near the previous week low (PWL) and bottom weekly ATR (bWATR) levels. Not only that, but a bullish divergence has also popped up on the 1-hour time frame!

USD/JPY Daily Forex Chart
USD/JPY 1-hour Forex Chart

As bullish as the setup looks though, I’m still a bit hesitant in buying the pair. You see, Trump’s recent announcements haven’t been bullish for the Greenback lately.

Instead of dollar-supportive policies such as deregulation, increased fiscal spending, and tax reform, we are seeing signs of increased protectionism and jawboning from Trump and his team.

It also doesn’t help that NFP report prospects are tilted to the downside. As Forex Gump mentioned in his trading guide, seasonality favors decreases in employment in January even though December’s numbers tend get upward revisions. ISM’s employment index also won’t be released until Friday, which makes it hard for market players to pin accurate guesses on the January release.

Despite that, I’m not ruling out an upside surprise. Janet Yellen and her team have been optimistic over Uncle Sam’s jobs sector, which is something that a few leading indicators also support.

For now, it seems like dollar bulls are successfully defending the 112.50 support. If the NFP report surprises to the upside, then we might see a move back to the weekly open price, if not the top of the range around the 115.50 handle.

But if the NFP release prints weak employment numbers, then dollar bears could come out to play and drag USD/JPY into a downside breakout. If this happens, then the pair could drop to the 111.50 psychological handle or the major area of interest around 110.00.

How about you? Which way do you think the pair will go for the rest of the week? Are you bullish, or bearish on the dollar?

Huck's Signature

See also:
Latest Weekly Trading Prep
My Q4 2016 Forex Trade Review and Reflections
HLHB System’s 2016 Performance Summary
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