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Decided to shut down my USD/JPY as the risk environment has turned much more optimistic in the last couple of weeks. Here’s a quick review and what I’m looking for in the pair going forward.

USD/JPY Returns to the Downtrend?

USD/JPY Daily Forex Chart
USD/JPY Daily Forex Chart

At the beginning of the month, I decided to short USD/JPY on the basis of a negative global risk environment sparked by worsening geopolitics (Trump says it might be better to wait until after 2020 election for a China trade deal) and weakening U.S. economic conditions, all ahead of more potentially negative U.S. economic updates. I paired that idea with a very solid technical setup on the daily chart, where we saw a bearish divergence between price and stochastic in a major downtrend, at a retest of a falling ‘highs’ pattern and bearish red candles forming. Technical setups don’t usually get stronger than that.

Since then, though, the environment has shifted to a risk-on vibe with the U.S. posting up surprisingly strong employment data (U.S. Job growth soars in November as payrolls surge by 266,000), as well as the U.S. and China coming to a ‘Phase One’ trade agreement last week.  We also saw the Conservative Party winning handily in the U.K. general elections last week, likely resulting in the possibility of the Brexit saga ending sooner rather than later–another argument for risk taking to rise off of waning geopolitical fears and the Japanese yen to see some pressure.

With risk sentiment back in the swing towards positive and positive catalysts for the U.S., I decided to close my nibbler short position in the afternoon session manually at market (109.62). 

Total: -105 pips / -0.32% on 0.50% max risk

With expectations of USD/JPY breaking the falling ‘highs’ and risk-on sentiment hanging around as long as the U.S.-China trade situation improves, I think this was a good adjustment, and I’ll be watching out to see if the market can hold above this area, or even break above the 110.00 major psychological handle. If so, this makes for a solid long position setup, which I’ll put up fresh orders for as long as the geopolitical environment holds.

So, stay tuned for that, and until then thanks for checking out my blog!  Good luck and good trading!

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