Another very interesting factor is that the current price action seems very similar to last years price action (Outlined by the box). In which price aggressively made its way up to the 189.50 area. Followed by price violently falling back down to support (outlined by green box), which led to an aggressive short squeeze / dip buying, back up to resistance (I would say roughly between the .786 / .886 ; outlined by the red box). The buying power started becoming exhausted once again (evidenced by the small bodied candles at resistance, and subsequent dojis). In which price very aggressively plunged back down, slicing through support just like butter. Later finding support down at the 175.20-176.00 area, which started the next wave higher.
Some notes to keep in mind:
- Any FX traders that were trading the Yen last year, might of read that the BOJ did announce that it will begin defending the Yen against the US Dollar around the 128.00 area (I remember not many people had read it, as it showed up in the middle of a large Wall Street Journal article; if my memory is correct). And price is near that area when in concern to U/J.
- Also, Pound pairs do have very impressive runs. But that also leads to pretty impressive pullbacks in currencies paired with the pound. Catching a lot of people buying the tops in these runs, which also adds to the violent drops due to buyers getting stops triggered left and right. The same goes for sellers getting short squeezed, by volatile runs.
- Short 2 Lots
- 2nd Target is near previous support (I prefer not to place the 2nd target exactly at prior because many times price will get near it only to reverse without the 2nd targets getting executed).
- Stops are slightly above resistance to account for any / stop hunts. Upon reaching the 1st target, they will be moved to break even.
A more conservative trade:
- Then move down to a 1HR chart wait for a retracement to the 192.85 area and go short upon receiving price action confirmation.
- I can't tell you where to place your stops, as they would have to be based on the current price action if this scenario plays out.
Cheers, good luck to all! =)