Forex Analysis #1
Buy Setup On USDJPY
Hello there, Trader Saan is here. Hope you all are doing very well. Today I am going to share an upcoming BUY setup on the FOREX pair USDJPY.
I am a swing trader, that means I hold my position few days and trade at the timeframe of H4, H1 and occasionally at M30. And I do market analysis based on both fundamental and technical confluences which give me more confidence in opening a position. I use tradingview for the chart analysis and take trade on MT4 (Forex) and Binance (Crypto).
Firstly, I will cover the Fundamental parts behind taking the BUY trade on USDJPY and then will give an insight of the Technical chart - Price action, indicators, entry, exit etc.
Fundamental Outlook: Bullish
USD
In the last meeting of the Fed, the monetary policy maker has uttered to rate hike of a 300bps. And that has caused many traders and investors to appreciate the USD.
The USD is in uptrend from June, 2021, that is when the Joe Biden policy has been published. Till now the uptrend is intact.
The invasion of Russia and the COVID pandemic in the EU and south asia are another causes of appreciating the US dollar as the USD is one kind of safe asset.
To conclude, I am bullish on USD.
JPY
It's been one month now JPY is in free fall. Till now the BOJ is under the foggy conditon about their bank rate hike while other major counterparts of it have already made their rate hike decision.
The differential of bank rate between Fed and BOJ is currently very wide which is a strong sign of JPY's weakness.
Carry traders have put themselves aside as they usually buy higher yeilding currency and sell lower yeilding currency.
Retail sentiment: 81% of ratail traders are currently short while 19% are long which indicates a strong BUY scenario if we consider the contrarian view. On the other hand, the commercials have their long position on USD.
To conclude, I am bearish on JPY
Technical Outlook: Bullish
- USDJPY is in an aggressive uptrend, price is making higher highs, higher low, breaking resistance zone again and again. The 50 & 200 MA are aligned upwardly which is a good indication of upside momentum in the market. That means BUYERS are in control.
USDJPY, H4, 50 &200 MA
Image source: tradingview, prepared by me
- Currently price has broken the highest resistance zone and my perception is that price will come back to the broken resistance zone to test it for pullback or profit taking move as I have shown by arrowing in the chart below.
USDJPY, H4, resistance breakout has happened
Image source: tradingview, prepared by me
- Now to take a guage of how much pullback move is going to happen, I use Fibonacci retracements tool for this. As USDJPY is in an aggressive uptrend, my take is that pullback move can happen to the 50% Fib level.
USDJPY, H4, Fib 50% level is a important level
Image source: tradingview, prepared by me
- In here, I am going use the Breakout-Pullback strategy to get into the market. Resistance is broken, when the pullback move is happened, I am going to jump in for buying the pair as it is shown in the chart below. One can use this concept at any technical chart.
USDJPY, H4, breakout-pullback strategy
Image source: tradingview, prepared by me
- Let's see the possible entry and exit.
Entry price is 124.744, in the broken resistance zone.
Stop Loss is at 124.318, which is below the broken resistance zone and only 42 pips.
Target profit is at 128.759, which is the previous resistance zone and 401 pips.
Risk to reward ratio is of 1:9 which is pretty good.
And also I will be trailing my stop loss if the price goes on my favour - just to book some profits. And I will be risking only 1 to 2% of my margin for this trade.
USDJPY, H4, entry, stop loss, tp
Image source: tradingview, prepared by me
I always take trade when my fundamental and technical analysis say the same thing. Otherwise I choose to wait for the right time.
Disclaimer: This post is not a trading mantra or get rich quick method, it is made only for educational purpose. I truely want to help others who want to learn Forex and Crypto trading and investing. Trading in the financial markerts involvs a lots of risk.
Thank you so much if you make it to the end.
Hope it helps
Happy Trade 😊