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It looks like USD/JPY bulls are no where to be found and that the support break might be the real deal. With momentum still strong, I adjusted my entry plan to catch the move.

Entry Adjustment: Major Support Break on USD/JPY?

USD/JPY Daily
USD/JPY Daily

My fundamental bias hasn’t changed in the last couple of days since my original USD/JPY trade idea, even with U.S. inflation data showing signs of pick up from the most recent CPI report. Given that positive news, the market has stayed bearish on the Greenback, possible due to the weak consumer spending data that not only saw a decline in January, but also downgrades to December’s holiday driven sales.

From a price action stand point, we’ve got two daily closes below that support area I notated in my original post and it doesn’t look like the bears are giving up anytime soon, so I decided to change my entry plan from hopping in on a pullback to original support break area to shorting at market because the momentum is still pretty strong.

Of course, with volatility picking up on USD/JPY to about a 200 weekly ATR, I did have to make adjustments with my stop (widening it out) and reducing my positions size slightly to compensate for the wider stop.

This does reduce my potential reward-to-risk, but it’s still a very good return if the market continues lower to that major support area around 101.00. Here’s my adjusted trade plan:

Short half position USD/JPY at market (106.49), max stop loss at 108.40, max target at 101.00 for a near potential 2.73:1 return-on-risk

I’ll be risking only 0.5% of my account on this position and as usual, I’ll look to maximize the trade by adding to my position/roll stop up to max out the trade if the conditions continue to favor the Japanese yen and the trade hits around 1:1 ROR. Of course, I’ll look to close out quickly if conditions or data changes back in favor of the Greenback.

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.

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.