USDJPY Tests Lows of July Range
Cory Mitchell, CMT
The USDJPY is testing the lows of an expanding range that has been in effect for the month of July. The hourly chart shows the pattern.
This sets up a potential trade in either direction, especially since the daily chart isn't trending strongly in either direction.
The price has formed a smaller range near the bottom of the pattern recently. A breakout to the downside would break the pattern and signal a further decline. The initial target is 106.90, just above the June 26 swing low.
If small range at the bottom of the expanding range breaks to the upside, the expanding range is continuing. Target is 107.70, just below the prior swing high.
If the price moves back toward the top of the expanding we may get a similar trade setup up again: a consolidation and then we can trade a breakout either higher or lower.
For a higher reward:risk trade, drop down to a 5-minute chart. Look for consolidation breakouts near the edges fo the small range that has recently developed. A consolidation breakout on the 5-minute chart provides a much small stop loss yet the same target can be used for a high reward:risk trade. This is because a 5-minute chart consolidation is being used instead of the range shown on the hourly chart above (blue box).
Always consider what to do if a false breakout develops.
By Cory Mitchell, CMT
Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.