USD/JPY – Charts and Thoughts

Often when I plan my blog posts I have intentions of writing a bit of commentary to go with the charts. I end up writing nothing because I don’t have much to say. And this week would have been no different. I don’t know if the market will go up or down. I don’t have an opinion on which way it could go nor do I even know which way I want it to go.

I kept one position open over the weekend – long USD/JPY so I do have something to say on this occasion. I entered this trade based on TA and held it based on TA. But in the back of my mind are the NFP numbers from Friday and what a perceived improvement in the US economy may do for this pair.

Last week I tweeted a chart that I had constructed for USD/JPY. In it I outlined step by step how I derived the lines on the chart.

Although I didn’t mention it at the time, (because I forgot), the lower line at step 4 was to be my long entry. And I got it at 76.20.

As can be seen on the up-to-date chart below, the lower parallel did provide enough support to prevent a stop-out (my stop was 20pips).

With that entry out of the way and the uptrending structure still in place, I needed to look for an opposing downtrending structure to look for potential resistance. On the chart below I first found the lower pink line and then duplicated it on top of the high to form a (potential) parallel channel with potential resistance. I will keep a keen eye on the upper pink parallel.

Although I’m holding a long position based on the hourly chart, it’s important to keep in mind the bigger picture. I want to highlight two things on the weekly chart below; 1) a long term downtrend and 2) several significant corrective rallies.

There’s also a clear trendline which price is currently pushing against. I’m not silly enough to try and pick a bottom on this pair but I can’t help wondering how the latest positive data from the US combined with the recent negative data from Japan will affect this pair. I’m swaying towards taking partial short term profits on the hourly chart whilst keeping a smaller position open. You can never know. I know I don’t know. I can always add to a winning position.

One of my favourite quotes:

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.
Donald Rumsfeld
(click on his name above to see more quotes, some are soooo relevant to trading you’d think he was a successful trader himself.)

10c

EDIT

This trade has gone really well for me so below are progress charts as the trade played out. It’ll be for my own future benefit to look back here. These are charts I also posted on Twitter.

 

BELOW is the parallel pink line acting as resistance as I imagined it would. I drew in a blue channel for shorter term action. I took some off the table here at the top of the blue channel and fortuitously added again when it touched the bottom blue.

——————————————————————————————————————–

BELOW shows the pink line getting broken, backtested and then price made a run for it. I used the circled area to take profits again. I also replicated an equidistant pink channel above the first one.

——————————————————————————————————————–

BELOW shows price as at the weekend close having stalled at the green median line.

I have exited all positions here. There is resistance at the rising green line above and there is also a key horizontal level at 78.30. Even though this pair doesn’t gap much at weekly open, the news environment is uncertain and I’m exercising caution.

10c

 

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