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Taking another shot on my USD short bias with this trend retracement setup on USD/JPY.

Will sellers hop back into this trend on the pullback?

USD/JPY Downtrend Pullback

USD/JPY 4-Hour Forex Chart
USD/JPY 4-Hour Forex Chart

In addition to my GBP/USD long idea to play my USD short bias, it looks like USD/JPY is presenting an opportunity to play that theme at a better price than yesterday.

On the four-hour chart above, we can see the pair has bounced higher from its lows of around 104.20, and resistance has formed around the broken minor support area (around 106.65) and the Fibonacci retracement area.

We’re already seeing sellers starting to take back control, so with my USD short bias that I’ve already laid out in my GBP/USD long idea, I’m taking a shot on USD/JPY as well.

I also like this pair in case we do start seeing broad risk-off behavior (usually an environment favorable for the Japanese yen) if traders start to price in expectations of economic slowdown as COVID-19 cases continue to persist.

I’m going to start with a nibbler position at market for now and see how it all goes after this week’s U.S. employment updates before considering getting bigger in the trade.  My stop will be above the previous consolidation area around 107.00, and my max target will be two times my risk for now. Here’s what I am doing:

Short half position USD/JPY at market (105.62), max stop at 107.60 with 0.50% risk, initial target at 101.75.

Again, I’ll be risking only 0.50% of my account to start with an initial rough 2:1 potential R:R. I may add to this position depending on what we see from the U.S. employment update. If the data and market reaction doesn’t close my way, then I may close the down the position early upon re-assessment.

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.