Learn Trading – Forex Update: Watching the News then Trading USDJPY from Resistance
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Let’s take a look at the current setup though. If we go down here to the four-hour timeframe and zoom it out a little bit, I did put these circles here just to kind of give us an idea of what we’re looking at, at the current moment. If you look here, on the way down from the pink-shaded area, we broke the green zone. Sat underneath it. Went down. Now we broke the yellow zone. Over the past few days, sat underneath it. Used it as resistance at 113.85, and then it went down. And now we’re underneath the orange zone and it settled out underneath it as resistance.
So, again, this gives us a clear setup with fairly minimal risk and higher potential reward. Rallies to resistance gives us a better idea, just like it was here. As it sat underneath the yellow zone, you would’ve preferred to go short. Same setup here. As it sits underneath the orange zone, we would prefer to go short because our risk at the yellow zone was a push back above it. The risk now at the orange zone is a push back above it. So, we know that at least right now if we’re going to trade the direction of the trend and momentum, selling resistance, we look for a lower risk opportunity. That’s selling into the resistance, and that becomes an opportunity to trade the trend.
Again, we want to watch the news to be sure that it’s going to be another move and a weaker USD move because we don’t know that for sure, but this becomes an area that we would look for it. Your stop losses, if you’re going to take a trade like this, would be above the last resistance high. And I would say this high of the last four-hour candle. 113.62 is what the high is, so 113.65 to 113.70 might be an appropriate stop loss. If you’re in a downtrend, you don’t want to see a new higher high, so that’s really the main focus, is that you want to see it stay within and under this orange zone, not get higher than that high, target back first to the purple-shaded area, and of course if it breaks the purple zone, the pattern continues and you look for it to run all the way back down towards the green zone at the very bottom of the chart as your next target.
First target: purple zone. Second target: green zone at the bottom. All that in the direction of the longer-term trend that we’ve seen basically since the beginning of 2017. And the Forex Black Book trend bar. We don’t have a new signal. No yellow or red bearish signal for the Forex Black Book, but definitely an opportunity to sell resistance here, especially if we get a weaker USD on news today for the USDJPY.
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