Last week opened with a candle that would become a Bullish Engulfing pattern by the close of Monday’s trading session. We noted that should this happen, we would buy USDJPY above 102.40 with a stop near 101.05, targeting 105.60. A spike wick low took out our stop, locking in loses of 138 pips. USDJPY would end the week just above support at 100.70, a level that acted as the range top for price action following the pair bouncing up from a multi-year low near 96.00.
The current candle looks to be forming an inverted Hammer. If the candle closes as-is, this will be a bullish reversal signal pointing to USDJPY upside momentum. If confirmed, we will go long USDJPY above 100.70, revising our profit target lower to aim just below 104.00.
USD/JPY Strategy
1. If the Inverted Hammer is confirmed, long USDJPY above 100.70
2. Set stop-loss near 99.97 below recent wick lows.
3. Set profit target just below 104.00, risking about 73 pips to gain 330.
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