The interest rate decisions made by the FOMC gave us the push we needed on our NZD/USD 2-hour trade. We were risking approximately 48 pips and going after about 160. At this time we are still in that trade actively and awaiting the target to be struck. I am up about 125 pips on this trade currently, however the market has appeared to slow down significantly. We may have a pullback before we hit that target we set. This might be an opportunity to close out a winner and look to get back in as we have earlier on this pair after our entry. We may see another small wedge form here after a pullback. However, I am holding the original trade as it fit our entry plan and gave us great risk versus reward.
With that out of the way, I wanted to look at the USD/JPY on the 2-hour with you. We have a clearly established long range here. This is due to uncertainty in the market and it might offer us a nice support and resistance trade if we can collaborate that with something more substantial (say a very important price calculation…).
Now on a support or resistance trade (even though it sounds easy), we need to make sure we have the fibs and targets in our favor before we go getting all revved up for a trade that could offer too much risk. Hopefully, you notice at the bottom of the above chart where the stochastic and momentum indicators look like they have room to go north. This again I think is the market hinting that we may have a good trade here. What else might we need to make a stronger case for a trade? How about some targets from MTI to help us see where the market might be going this week according to the price calculations…
The weekly target in purple does give us an indication that we might want to start looking at buying the market this week after we have the price above that black horizontal line. There is a clear small mini-range established there and the black line represents the top of the range. I think it makes sense for this to fail before we look to enter buying to this un-hit weekly target from MTI. I believe this trade makes sense because we see the weekly target lining up with a down fib .236 (that will likely fail due to support). This is the minimum level of pullback expected in just about any fib chain. So what might a possible entry look like here and what kind of risk versus reward are we possibly looking at?
Here I would look to enter around the 112.773 area with price action showing me that price wants to go up (candlestick wicks to the south are showing buying pressure). This will confirm the bounce of the trend line in black and again confirm the top of the range will fail. For my stop, I would look to place below the 1.27 of this current swing (price 112.350) as it puts us out of the way safely and still offers us good risk versus reward. I would look to exit at the 113.468 and this trade will offer us a risk of approximately 40 pips and a reward of about 80.
Good luck and as always I hope this message finds you in good health! Shoot for the pips and keep your equity management in check!