Can the Dragon Soar to New Heights Or Plummet Lower?

The start of 2024 has been remarkably bullish for this pair, and we're quickly nearing an important resistance point: last year's high at 188.700. Today's higher-than-expected UK CPI figures might just be the push needed to reach this level.


Taking a look at the daily chart, we see that since June last year, this pair has been in a sideways holding pattern. This could be seen as a distribution phase, especially as it's happening within a key monthly SUPPLY/SELL zone, the same one that sparked the massive 2015 sell-off.


My current thinking leans towards a sell idea, as long as last year's high remains unbroken and there isn't a decisive weekly/monthly close above this level.


I'll be on the lookout for SELL signals on the daily charts with my TRFX indicator as we near the 188 mark. This is a straightforward play at the top of a range-bound market, contingent on the right signal.


The aim for this trade idea is the lower end of the range at 179, which could likely trigger another upward bounce. But if the price breaks through the bottom of the range, we could see a plummet all the way down to 170 or even lower.


However, if there's a clear break of last year's high, a move towards the 192 monthly SUPPLY/SELL zone becomes probable, potentially targeting the 2015 high of 195.8.


I believe the best risk/reward scenario lies in selling at the top of the range, OFFCOURSE waiting for the right entry signal , and then setting a stop loss above the range far enough to avoid spikes and stop hunts.


Next week's BOJ meeting, where a shift away from negative rates might be signaled for later this year. But considering the letdowns from last year's meetings, I'm cautiously optimistic – though open to being pleasantly surprised.


With probable rate cuts in the UK sometime this year and a possible end to the BOJ's negative rates, this pair could experience a significant drop.


That's my take on it – I'd love to hear your thoughts.

Trade active:

We got the move up and slightly above last years high with price action clearly topping out.

Waited for the Daily signal on the TRFX indicator see image below

First target for this position will be around 185 and will see how price reacts here as if selling momentum starts to build this pair could plummet fast.

Comment:

First target was hit yesterday close 50% and moved stop to entry price