Hey guys! I think I spotted an opportunity to buy the dollar against the yen. Think the trend will be our friend on this one?
As you can see, USD/JPY took a break from its uptrend just before it hit the 111.50 area. And, thanks to a bit of profit-taking and concerns that Trump won’t seal the deal with China and North Korea anytime soon, the dollar has retraced significantly in the last couple of sessions.
I’ve got my eye on the 110.00 psychological level, which happens to line up with this week’s bottom ATR, 100 SMA, 50% – 61.8% Fib retracements, rising trend line, AND previous resistance levels. Talk about the stars lining up!
I also believe there’s still room for the dollar to extend its gains. For one thing, the Fed is still on track to raise its interest rates and a lot of traders continue to price in their hawkish biases.
Trump and his teams also continue to power through with their goals to reach trading deals with China and NAFTA counterparts, as well as get some form of positive engagement from Kim Jong Un.
I gotta watch out for bearish catalysts, though. This profit-taking trend could still go on, for example, and drag USD/JPY below the trend line that I’m watching on the 4-hour chart.
Trump could also hit more snags in his geopolitical and trade pursuits. Even worse, the POTUS could react to them by tweeting (how else?) aggressive, inflexible demands that could spark risk aversion.
And if those aren’t enough to rock the boat, investigations against Trump’s campaign, or Trump ordering investigations on the investigators, could pull the dollar lower if the headlines are juicy enough or traders are bored enough to price them in.
In any case, I’ll be ready with my buy orders around the 100.00 area and look for the first signs of bullish momentum. I’m planning to put my stops just below the rising trend line and aim for new highs closer to the top weekly ATR.
What do you think? Will the dollar have enough momentum to extend its gains over the next few days?
See also:
My Q1 2018 Forex Trade Review and Reflections
Latest version of the HLHB Trend-Catcher System
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