I always consider fundamental factors governing the direction of the price before analyzing Chart because if I don’t do that, it looks like a blind drives a car. FA must be considering previous TA: That’s the way I trade Forex.
- What we had recent days?. That is FED decided to unwind their Stimulus QE3. They begin taper next month from 85 billion to 75 billion. They also they will taper gradually in each Minutes and hike the interest rate in 2015. The QE3 will end before 2015.
- The 10 years T-bond rises to 2.9 today, and it could hit 3.0 benchmark next weeks due to FED taper. The demand for USD will be stronger next weeks.
- GDP Q3 of USA is better than expect: 4.1% vs. 3.6% forecast.
BoJ keep their unchanged and in the long term they will keep going inject money into market to restrict the impact of hiking consumption tax.
Thus the direction of USDJPY will be no change: .
One more problem: FED taper didn’t affect too much on the rally of US Stock, so Nikkei225 will not crash – benefit for the uptrend of U/J
US 10 year-T Bond rise to 2.9 and will be hit 3.0 benchmark next weeks – benefit for U/J cause Japanese will sell JPY and buy USD to buy T-Bond .
I can see 103.40 now becomes a key level. Price test this level three times before piercing this level.
103.40 coincide with 50% Fib extension and SMA10. Consolidate for the strength of this key level.
103.40 is also 50% Fib retracement of 1 I show on the chart. 50 % Fib retracement is also 50% retracement. level usually is used to gauge the price could hold a trend, in this case, if price breaks 50% level, uptrend cannot hold longer.
In Forex, Price once break a key or a strong level, it will be trade above this key level, if market doesn’t provide a catalyst which is enough strong, price is very difficult to break this level. Thus, I could consider this key level as a good stop loss.
Now U/J will be trade above 103.40 levels.
Next, I can see on the chart price very respect Fib Extension level, and this will be maintained next days. Now price is in the 76.4% and 61.8% Fib extension range.
Finally, here is the strategy to trade USDJPY next weeks; I recommend trader should close position before NFP report is released on Jan 9, 2014.
- If price breaks 61.8% Fib extension, it will test 103.40. You can hit an BUY Limit order at 103.40/103.30, Stop loss at 102.97 and target is 104.34: 76.4% Fib extension.
- If price breaks 76.4% Fib extension, hit an BUY limit order, target 105 : This is psychological level, stop loss at 103.40, should be 103.30 to avoid broker scam.
- Or you can hit a BUY position now, stop loss at 103.40, target 105.
I know a lot of big traders set take profit at 105 level from 1-2 months ago, when price test 105 level, it will be meet a SELL force from those big trader, so don’t set target above 105 level.
I will open three positions: 1- BUY limit at 103.40, 2 BUY limit at 104.34, and BUY at current price.