No one is talking about USD/JPY because nothing much as happened in the pair over the past two weeks. What we see is a pair that is ready to make a big move.
For the past week USD/JPY has been locked in a 200 pip range between 90 and 92. The past three sessions have traced out doji stars and the week earlier also displayed a series of indecisive patterns.
It’s time for the market to make a decision on USD/JPY. We believe the trade is to buy on a break above 91.87 and sell on a fall below 89.91 but we also want to develop a bias.
To us, the downside looks more attractive for a short-term trade. The plunge on May 19 was the last major technical move. As such, we are noting that 91.87 (the high from that day) is a significant point of resistance. From a risk/reward perspective, we are only 50 pips from that high but a 135 pips from our most significant support level. That alone makes us baised to trade this from the short side. What’s more is that the slow stochastics appear ready to start turning over.
On the whole, we want to stay nimble with this pair. We think the next move is going to a big one and we are prepared to give up an early portion of the gains in order to ride the momentum. Keep a close eye on USD/JPY over the next 24 hours.