USD/JPY has been sharply bullish bu is staking a break, consolidating around 109.00 after a high of 109.45. Let's look at this market as a neutral-bullish market, which would suggest buying around support.
The support to the current consolidation is around 108.50. We can expect at least some short-term bounce here, if not a bullish continuation swing (it can turn into a bullish swing, and that is why we should follow the trend).
(USD/JPY 1H Chart 9/22)
Let's say we put a buy order at 108.50. Price has been ranging below 50 pips a day during the consolidation, and if price falls to 108.50 during the 9/23 session, tha twould satisfy this 50-pip volatility because price is right now just below 109. Let's put a stop below 108.50 by half a day's volatility. Essentially if price breaks lower with a volatility that's 150% of the daily range during consolidation, we should probably put away the bullish outlook in the short-term and wait for further consolidation/bearish correction.
So, we have the stop at 108.20. Our target will first be the current high around 109.40. With this conservative bullish target, the potential reward for an entry at 108.60 would be 80 pips. The risk at stop-loss would be 40 pips, giving us a reward to risk of 2:1. We know that there is still upside risk above 109.45, but we should limit the outlook to the key psychological level of 100 for now. This gives us 140 potential pips, and a 3.5:1 reward to risk ratio.
The support to the current consolidation is around 108.50. We can expect at least some short-term bounce here, if not a bullish continuation swing (it can turn into a bullish swing, and that is why we should follow the trend).
(USD/JPY 1H Chart 9/22)
Let's say we put a buy order at 108.50. Price has been ranging below 50 pips a day during the consolidation, and if price falls to 108.50 during the 9/23 session, tha twould satisfy this 50-pip volatility because price is right now just below 109. Let's put a stop below 108.50 by half a day's volatility. Essentially if price breaks lower with a volatility that's 150% of the daily range during consolidation, we should probably put away the bullish outlook in the short-term and wait for further consolidation/bearish correction.
So, we have the stop at 108.20. Our target will first be the current high around 109.40. With this conservative bullish target, the potential reward for an entry at 108.60 would be 80 pips. The risk at stop-loss would be 40 pips, giving us a reward to risk of 2:1. We know that there is still upside risk above 109.45, but we should limit the outlook to the key psychological level of 100 for now. This gives us 140 potential pips, and a 3.5:1 reward to risk ratio.
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