Trade Recommendation: USD/JPY

Trading an asset class that is trending is the best way to make money. However, at times, range trading can also be a good option to explore, especially if the range is large. The best way to trade a range is to buy at the supports when it is oversold and sell when it reaches close to the overhead resistance. Inside the range, trading can be volatile and is usually not advisable.

Important points

  1. USD/JPY has been trading in a range for the past 10-months.
  2. The pair has fallen to the lower end of the range and warrants a buy.
  3. We shall buy on a bounce from the supports at 109.5 and expect it to reach the upper end of the range at 114.

We believe that USD/JPY, after falling to the support of the range offers a good risk to reward ratio. Let’s look at its chart and determine the important levels.

Daily chart

Since March 2017, the USD/JPY pair has been trading inside a well-defined range of 108.195 on the downside and 114.390 on the upside. The pair has found support at the lower end of the range twice and has returned from the upper end of the range on three occasions.

The sole close below the range was on September 08 of last year. The bears could not capitalize on the breakdown and price climbed back into the range on the very next day. There has been no closing above the upper end of the range.

This shows the strength of the range. Also, the width of the range is large enough for trading.

With the sharp fall in the US dollar, the USD/JPY pair has again fallen to the lower end of the range. The RSI has also turned oversold, which points to a bounce.

However, due to the weakness in the US dollar, we shall wait for a bounce before initiating long positions. We can buy on a rebound to 109.5 and keep a stop loss of 107. Our target objective is a move to the upper end of the range at 114. This gives us an approximate risk to reward ratio of 1:2.

Featured image courtesy of Shutterstock. 

Rakesh Upadhyay is a Technical Analyst and Portfolio Consultant for The Summit Group. He has more than a decade of experience as a private trader. His philosophy is to use technical analysis for momentum trading and fundamental analysis for long-term positions. Rakesh likes to keep himself fit by lifting weights and considers himself to be a spiritual person.