Dollar Index Strength and USD/JPY Targeting 106.800

DXY – US Dollar Index 6 month sell off due to FED stimulus and investors seeking larger returns from the equity market has possibly found a short-term floor.

In September, DXY has already risen 1% and has more room to move technically to support the  USD/JPY  106.800 level. 

 

Key Points:

  • Price holding above the 200 EMA
  • Price holding above the 50 EMA
  • Price finds support at Fibonacci 50% of September range
  • Support cluster with trend line
  • The 50 EMA may be violated before the next move up. This is not a reason to exit the trade.
  • IF: The 200 EMA is met, it is critical to wait patiently for a candle reversal that you have back tested and proves to have an edge with USDJPY.
  • Optimal entry is the 61.8% Fibonacci retracement level.

 

Key Levels:

Support – 105.850, 106.000, 200 EMA

Resistance – 106.550, 106.700, 106.800, 106.944

 

Entry Zone:

Optimal entry provides the greatest reward to risk ratio while supporting entry is a zone for reversal signals.

Optimal Entry – 105.960

Supporting Entry – 106.060 – 106.150

 

Candle Reversals for entry

  • Bullish Hammer
  • Bullish Engulfing
  • Bullish Piercing

The Risk:

As traders, it is your job to mitigate the risk and only trade structures that provide high probability and great reward to risk ratios.

If you are not comfortable with defined exit levels, experiment with Moving Averages to help set solid exit rules to protect your capital.

 

IF: Price breaks below 105.850 level and violates 200 EMA – this would suggest the structure is not in our favour and would be wise to reduce exposure or close the trade until a solid signal gives us reasons to re-enter.

 

Reward / Reward Targets:

Optimal Entry 105.960 – Target 1 106.550 = 4x Reward to Risk

Optimal Entry 105.960 – Target 2 106.700 = 5x Reward to Risk

Optimal Entry 105.960 – Target 3 106.944 = 6.7x Reward to Risk

 

Supporting Entry 106.060 – Target 1 106.550 = 2x Reward to Risk

Supporting Entry 106.060 – Target 2 106.700 = 2.7x Reward to Risk

Supporting Entry 106.060 – Target 3 106.944 = 4x Reward to Risk