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Good evening! With the new trading week kicking off, I thought I’d close off last week’s orders in USD/JPY to look for new trading opportunities. Why stick with a market that’s not moving right?

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

Well, many of the major themes I talked about in my original trade idea are still in play, with the European crisis story coming back into the forefront after weak Spanish and Italian debt auctions.

This has caused some pretty big moves in most of the major currency pairs on Friday, with the exception of USD/JPY…lucky me?! Yup, USD/JPY consolidated for most of the week and never got up to my short entry orders at 81.30. With the new week starting up, I’ve decided to let this go and move onto the next opportunity. Closed entry orders to short USD/JPY at 81.30. No trade.

For this week, it looks like risk aversion is back on the table, but I may take a counter-trend trade as some pairs hit strong support and resistance levels. As always, stay tuned to new trade ideas and market observations.

Thanks for checking out my blog; good luck and good trading!

Trade Idea

Good morning Forex friends! I’m back to looking at the USD/JPY as the pair has continued to make a steady move lower from its highs a few weeks ago around 84.00. I’d like to try to jump in this multi-week move–if the price is right!

On the 60m chart above of USD/JPY, we can see the tail end of a downward move formed over the last three weeks. Even with the trend lower slowing down, I still think it’s the right direction because some of the major themes pushing it are still in play:

  • Slowing China leads to global slowdown fears and risk-off flows.
  • Euro weakness fears, and austerity to keep risk aversion behavior around.
  • QE3 is being priced out in the form of a move from “risk-on” assets to “safe haven” assets.
  • Surprise weakness in the most recent US jobs data to hit the US Dollar.

All of these are major themes have different effects on currencies, pushing and pulling them in all sorts of directions, and for me, I see it pushing USD/JPY lower for the next few sessions.

Of course, I like to get in at better prices than the current market likes to give, so if we see a pullback to the previous area of consolidation marked on the chart (which is also a Fib retracement area), I’ll go short there for a short term play (possibly hold for a day or two).

My stop will be half of the daily ATR and should be well above the consolidation area, and my profit target will be this week’s lows around 80.50, which is also a major area of interest back between mid-to-late February. Here’s what I am going to do:

Short USD/JPY at 81.30, stop at 81.70, pt at 80.50

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.

This trade structure gives me a potential return-on-risk of about 2:1, and because I plan to only hold onto this for a day or two, I have decided to only risk 0.50% of my account on this trade.

We still have major data this week on the Forex calendar, so I may get the volatility I need to trigger my orders. As always, if the market environment shifts on a new catalyst, I’ll be sure to adjust my open orders or open position quickly. Thanks for checking out my blog…good luck and good trading!

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.