USDJPY Is Likely Headed Lower

The other week I wrote a post in which I laid out some reasoning for why I believed we’d be seeing some consolidation in the markets. Specifically, I looked at USDJPY, saying:

“Every time USDJPY has dipped below the 50-hour SMA since the election results, we’ve seen some extended consolidation. I’ve marked these three instances with blue rectangular boxes.

The first one lasted about four days, the second was a full seven days, and the last was just two days. We’re now trading below the 50-hour SMA once again, and I wouldn’t be surprised to see another period of consolidation.”

That post was nine days ago, and with Christmas behind us we’re starting to see at least some movement. Here’s what I’m observing in USDJPY now and why I’ve been selling the pair.

200-hour SMA gives way

Last night I went short (and covered a bit ago) USDJPY for the first time in a long time. While the longer term trends (daily and weekly) are still bullish, there are clear cracks forming on the lower time frames.

In fact, take a look at the 1-hour chart. This is the first time price has been trading convincingly below the 200-hour SMA in a long time:

USDJPY trades below the 200-hour SMA.

This is significant in its own right and deserves one’s attention. But there’s more.

Hourly SMA’s are purely aligned to the downside


Looking at the same hourly chart above, it’s clear that the SMA’s are purely aligned to the downside. That means the 50 SMA is lower than the 100 and the 100 lower than the 200-hour SMA. All are pointing lower. This is one of my favorite trends to trade, the obvious downtrend.

For more on trend types and how I break down classifying trends, read the ultimate guide to forex trends here.

It’s still the holidays

Yes, it’s exciting to see a potential change in trend. There could be a lot of juicy pips waiting for us to the downside. But it’s still holiday time.

Remember, just because we’re through Christmas doesn’t mean the holidays are behind us. Most folks are checked out at least until the new year.

So stay nimble and don’t commit too hard to any specific trade. It’s just not worth trying to force something in these market conditions.

Geppy Forex

I began trading forex in 2005. It took me seven years to figure out how to be consistently profitable. I blog in an effort to hopefully help other aspiring traders become successful much sooner than I did.

5 thoughts on “USDJPY Is Likely Headed Lower

  1. Hello Geppy: I would like to take this opportunity to wish you and your family A Very Happy and A Prosperous 2017 ahead. May you walk the path towards realizing your dreams and May the wind be always behind you. Take care and bye for now.

    PS: I still look forward to reading your thoughts as and when you share them with us. Cheers! Raja.

    1. Hi Sunil, The USDJPY trade definitely didn’t work out but you shouldn’t have lost much. EURGBP has been great. I’ve been in and out 3 times now. Two of those times were nicely profitable.

      Trade ideas I post to the blog are meant to be larger overviews of what I’m thinking. The problem with following these trades blindly though is that my thinking can change over the course of a day or even hour and I don’t have time to update the blog about it. That’s what happened with USDJPY… I’m currently long.

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