Trade of the week: short USD/JPY
Explore a strategic short position on USD/JPY as strong GDP data and potential Bank of Japan rate hikes drive yen strength, indicating a reversal of the long-term uptrend.
Current trade overview: short position
For this week, we are focusing on the USD/JPY currency pair. Following strong GDP data out of Japan, which exceeded expectations, the Japanese yen has strengthened. This has led to a decline in the USD/JPY, with the US dollar showing weakness for four consecutive days. The long-term uptrend in USD/JPY appears to have reversed, and we now anticipate a shift toward a downtrend.
Trade setup
- Entry point: short USD/JPY at ¥152.60
- Stop loss: set above the recent high at ¥154.80
- Target: aim for a downside target around ¥140.80
Risk-reward ratio
This setup offers an attractive risk-reward ratio, especially if you can enter at the identified level. With a stop-loss placed above the recent high, the potential downside target provides ample room for profit. However, keep in mind that the market's volatility may cause fluctuations, and it’s essential to manage your exposure accordingly.
Market context
The recent strength of the Japanese yen, paired with expectations of more aggressive rate hikes from the Bank of Japan, has created a potential shift in the USD/JPY trend. The pair’s long-term uptrend may be reversing, presenting an opportunity to enter into a short position.
Cautionary note: while this trade presents a structured opportunity, market conditions can change rapidly. Traders are advised to consider their risk tolerance and market outlook before engaging in this trade.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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