So the EUR/USD setup that we checked out last week didn’t work out. Heck, the pair blew way above the top WATR this week!
So now I’m turning my attention to USD/JPY. As you can see, the pair is dilly-dallying at the 112.00 major psychological handle, which also happens to be this week’s top weekly ATR. Coincidence? I don’t think so!
Thing is, the 112.00 handle isn’t so convenient on the daily chart since it’s already above a symmetrical triangle. Not only that, but the current setup opens the pair to both a breakout AND a fakeout play given how May’s “breakout” turned out to be fake.
Fundamentally, I also don’t have a strong bias for the pair.
On one hand, doubts on the Fed’s hawkish stance, lack of follow through from Fed members, and the dollar’s muted reaction to Uncle Sam’s strong reports this week are telling me that the dollar bulls have taken a breather.On the other hand, the Fed IS officially hawkish while the BOJ is firmly on its easy monetary policy path. If traders decide to start their Q3 2017 by buying dollars, then buying USD/JPY might be one of the fundamentally sound trade ideas out there.
Stochastic is currently in the overbought area, so I’m expecting a bit of bearish pressure for now. But how long will it last?
Will the pair go back down to this week’s weekly open price near the 200 SMA before popping back up? Or are we looking at another fakeout that would take the pair back to its rising trend line support?
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.