Trade Review and Tips for Trading the Japanese Yen
The first test of the 163.68 level occurred when the MACD indicator had already moved significantly above the zero line, limiting the pair’s upward potential. The second test of 163.68 coincided with the MACD entering the oversold area, allowing Sell Scenario #2 to play out and resulting in a decline in the U.S. dollar.
The Japanese yen strengthened once again following another currency intervention by the Bank of Japan. However, even this sharp decline in the pair toward the 159.00 level was quickly bought back, helping to maintain market equilibrium. Ahead, the market is awaiting the release of the University of Michigan Consumer Sentiment Index and the U.S. inflation expectations reading. Consumer sentiment reflects households’ willingness to spend, while inflation expectations are closely monitored by the Federal Reserve when assessing future inflationary pressures. Strong readings could weaken risk appetite and trigger a stronger U.S. dollar at month-end.
As for the intraday strategy, I will primarily rely on the implementation of Scenario #1 and Scenario #2.
Buy Signal
Scenario #1: Today, I plan to buy USD/JPY if the price reaches the entry point around 160.24 (the green line on the chart), targeting a rise to 161.03 (the thicker green line on the chart). Around 161.03, I plan to close my long positions and open short positions, expecting a 30–35 point move in the opposite direction from that level. A further rise in the pair is possible today, although the upside is expected to be limited.
Important: Before buying, make sure that the MACD indicator is above the zero line and is just beginning to move higher from it.
Scenario #2: I also plan to buy USD/JPY if there are two consecutive tests of 159.87 while the MACD indicator is in oversold territory. This will limit the pair’s downward potential and trigger a bullish market reversal. In this case, a rise toward the opposite levels of 160.24 and 161.03 can be expected.
Sell Signal
Scenario #1: I plan to sell USD/JPY after the price breaks below 159.87 (the red line on the chart), which should lead to a rapid decline in the pair. The key target for sellers will be 159.03, where I plan to close my short positions and immediately open long positions, expecting a 20–25 point rebound from that level. Selling pressure on the pair is likely to return today if the Bank of Japan intervenes.
Important: Before selling, make sure that the MACD indicator is below the zero line and is just beginning to move lower from it.
Scenario #2: I also plan to sell USD/JPY if there are two consecutive tests of 160.24 while the MACD indicator is in overbought territory. This will limit the pair’s upward potential and trigger a bearish market reversal. In this case, a decline toward the opposite levels of 159.87 and 159.03 can be expected.
Chart Explanation
- Thin green line – the entry price at which the trading instrument can be bought;
- Thick green line – the projected Take Profit level, or the level where profits can be taken manually, as further upside beyond this level is considered unlikely;
- Thin red line – the entry price at which the trading instrument can be sold;
- Thick red line – the projected Take Profit level, or the level where profits can be taken manually, as further downside below this level is considered unlikely;
- MACD indicator – when entering the market, it is important to use the overbought and oversold zones as guidance.
Important: Beginner Forex traders should exercise great caution when making market entry decisions. It is generally best to stay out of the market before the release of major economic reports to avoid sharp price fluctuations. If you decide to trade during news releases, always use stop-loss orders to minimize potential losses. Without stop-loss orders, you can lose your entire trading account very quickly, especially if you do not apply proper money management and trade with excessively large position sizes.
Remember that successful trading requires a clear trading plan, such as the one outlined above. Making spontaneous trading decisions based solely on the current market situation is inherently a losing strategy for an intraday trader.
