JPY Trading Strategy: The Asian Session and the NFP

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JPY Trading Strategy

The Bank of Japan (BOJ) Governor refused to disclose any details to a possible FX intervention, which sent JPY pairs and crosses lower in the Forex market. We have been observing all JPY pairs and crosses but expected a coordinated intervention to take place at lower levels. However, we cannot dismiss the signals that are being painted on the charts. Our prime focus is EURJPY, we may also opt for USDJPY at an intraday level.

EURJPY Weekly Chart

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Although the corrective gains that may place last week may appear as a re-test of the resistance before the downtrend was resumed, a reversal pattern was noted. In addition, Euro yen has reached a strong monthly support. What has attracted our attention is that EURJPY has the potential of gaining approximately +300 pips in tomorrow’s session. We are not expecting an intervention nor do we believe the Non-Farm Payrolls (NFP) has the ability to force such gains in EURJPY. The only possibility is some event that may take place in the Asian session. We highlight these are the possibilities, we cannot guarantee such a move will take place in a such a short period of time.

USDJPY 60min Chart

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USDJPY 60min chart painted a reversed Head-And-Shoulders (H&S) with a diagonal neckline (in black). Once the price breaks above the neckline the gains are expected to continue. A stop below 100.58 may be sufficient.

We are considering opting for both trades around the daily close. From our experience in past interventions, the BOJ has only intervened once during the Asian session (at the daily close). If there will be an intervention this time it may be carried by 7 central banks.

What we must bear in mind is that there are numerous stops below 100.00 in USDJPY, using an intraday stop has its risks.

EURJPY Trade Alert

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EURJPY long at market price (111.41)
Take profit: 116.80
Protective stop: 109.60
Risk Ratio (RR): 1 : 2.7 (approx.)
Estimated duration: 7 days

USDJPY Trade Alert

This is a 60min entry in USDJPY. There are some risks to this trade but due to the size of the stop we are taking the trade.

Please click on the chart to enlarge:

USDJPY long at market price (100.76)
Take profit: 101.95
Protective stop: 100.35
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 24 hours

08/07/16 UPDATE: USDJPY triggered the intraday stop, we did not wish to maintain high exposure in USDJPY as we were large stops were layered beneath 100.00.

Had we used a larger stop it would have affected our ability to enter other trades as have little desire for drifting in a drawdown. The trade was in a minor profit during the Asian session but was unable to cling on to its gains.

11/07/16 UPDATE: EURJPY is trading at 113.29 at the time of this writing. We are shifting the stop to the entry for the time being and close 50% of the long trade at market price.

Please click on the chart to enlarge:

It is quite aggressive but we have used a higher take profit in case there will be an intervention, which has not taken place at the time of this writing. EURJPY has a clear path to 114.85. We are uncertain if the price will have the ability to break above 114.85. Although it is over +100 pips from current levels we have used a larger take profit, which is why we chose to be more aggressive with the partial’s realization.

We won’t have the ability to shift the stop above the entry until further gains take place.

11/07/16 UPDATE: EURJPY is trading at 113.66 at the time of this writing, we are closing 10% of the long trade at market price and shift the protective stop to 111.50.

12/07/16 UPDATE: EURJPY is trading at 115.78 at the time of this writing.

Please click on the chart to enlarge:

We are closing the long trade at market price with a decent profit.

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Last Updated on July 16, 2016