Trade of the week: short USD/JPY
Since we expect the Bank of Japan to hike its rates further and sooner than many expect, we would like to sell USD/JPY on a bounce back to ¥152.60, with a stop loss at ¥154.80, and a downside target at ¥140.80.
(Video Transcript)
Previous trading outcomes
Axel Rudolph: Hello and welcome to "Trade of the week" on Monday 17th February, 2025. Let's get straight into that trade from last week where we went long EUR/USD. If we look at my daily chart here, basically, we went long EUR/USD. You can see here the EUR/USD chart and did so last Monday, down here at $1.0320. So that trade’s looking quite good at the moment.
And if you want to, you can now move your stop-loss level to your entry level, to your break-even level, making it a free trade, hypothetically. And otherwise you can just leave it below the last reaction low, that's the, to say, the low made on the Sunday chart, so we'll just ignore that one, but on Tuesday 11th, so that was at $1.0292. So yes, I still expect a long term trend reversal to happen in the euro against the US dollar with an upside target, I think for our "Trade of the week", around $1.0750, simply because we have a resistance up there. But it's quite possible that we can see a major reversal longer term, taking us much higher than that.
But, for me, we're in the process of reversing our downtrend and heading into a medium term uptrend.
This week's trading opportunity
And, for this week's "Trade of the week", what I would look at is USD/JPY. And what we've seen is strong gross domestic product (GDP) data out of Japan earlier today. Fourth quarter growth looking stronger than expected.
And on that, the Japanese yen was strengthening. You can see here the US dollar is on track for its fourth consecutive day of falling prices. And it looks to me as if the long term uptrend here has actually reversed this trend, and that we're now heading into a downtrend with regards to USD/JPY, as the Bank of Japan (BoJ) is likely to hike its rates more aggressively than had been expected previously, and sooner perhaps than had been expected.
I wouldn't get in here because my stop-loss is above the recent highs here, made last week at ¥154.80. And therefore what I would like to do is just wait for a bounce back and perhaps sell into that bounce to, let's say, ¥152.60, and then have a downside target, which could take us much, much lower, perhaps all the way back down towards the ¥140.00 area.
So this week's "Trade of the week" is to go short at higher levels than current levels on USD/JPY at around ¥152.60, with a stop-loss above last week's high, let me just check where that was, that was at ¥154.80, and a downside target around ¥140.80 or so.
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