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- DailyFX Quarterly Forecasts have been updated for Q3, and are available directly from the following link: DailyFX Trading Guides, Q3 Forecasts.

- For trading ideas, please check out our Trading Guides. And if you’re looking for something more interactive in nature, please check out our DailyFX Live webinars.

- If you’d like more color around any of the setups below, we discuss these in our live DailyFX webinars each week, set for Tuesday and Thursday at 1PM Eastern Time. You can sign up for each of those session from the below link:

Tuesday: Tuesday, 1PM ET

Thursday: Thursday 1PM ET

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

Continued Congestion Leads into Heavy Economic Calendar

This week saw more back-and-forth price action in the US Dollar along with continued build into the symmetrical wedge of EUR/USD. This continues the digestion that’s been seen in some very key markets so far in Q3, even as a series of highly-pertinent themes have continued to invoke strength across US equities.

This impasse may not last for long, however, as next week brings a significant outlay of risk events. We discussed next week’s calendar in our article earlier today entitled, US Dollar Pulls Back Shy of Resistance: Next Week’s FX Calendar is Loaded. Headlining the outlay are Central Bank rate decisions out of both the United States and Japan. Japanese rate policy has come into focus of recent as the Central Bank has been reducing purchases of long-dated bonds, giving rise to the idea that they may soon announce some form of stimulus-tapering strategy. This is taking place despite continued languish in Japanese inflation and, thus far, the Bank of Japan has shown no signs in letting up from their massive QE program.

For next week, I want to look for volatility in the Yen as an extension of last week’s setups. Last week I looked at three setups in the Yen, and only one has filled. I looked at bullish setups in USD/JPY and GBP/JPY in the effort of playing Yen-weakness, but neither market held support through Monday to allow for entry. On the other side of the Yen, I looked at short AUD/JPY on tests below 82.00, which has triggered and remains near break-even. This will build into next week’s setups.

It’s important to note – these setups are designed for next week’s price action, as a gap through support or resistance can vastly alter the nature of the setup.

Bullish USD/JPY on Hold Above 110.00

Coming into this week, I was looking for USD/JPY to halt the declines that started in the prior week. That didn’t happen, and prices continued to slide in the early portion of this week, negating that support-based setup I was looking at last week. But, so far, a deeper area of support has come into play around the 110.70 level, and this has held up through a few different tests throughout the week.

The attractiveness of this setup is proximity to the 110.00 psychological level, which can offer stops of less than 100 pips in playing for a continuation of the bullish trend. The 38.2% Fibonacci retracement of the March-July bullish move draws in at 109.91, and this could offer an element of confluence that could make the prospect of support even a bit more attractive. Stops can go below this zone, and initial targets could be cast towards the 14.4% retracement of that same move at 111.95. Stops can be adjusted to break-even at that point, and secondary targets could be cast towards the June swing-high around 113.00.

USD/JPY Daily Price Chart

usdjpy usd/jpy daily price chart

Chart prepared by James Stanley

Bearish Potential Remains in AUD/JPY

Last week I looked at the prospect of bearish breakouts in AUD/JPY on down-side tests of the 82.00 level. This happened, but what didn’t follow was a continuation of selling as support held around that same 82.00 area. Buyers weren’t much more decisive, however, as resistance has continued to hold below the 83.00 level, and this can keep the door open for bearish strategies as we move into next week.

This week’s low can be used to work with bearish breakouts, and that comes in around the 81.80 level in AUD/JPY. This can be coupled with a target at 81.00, which could allow for initial stops above 82.50 (70 pips of risk, 80 pips of target potential). Secondary targets could then be sought at the 2018 low of 80.53 or, alternatively, the remaining portion of the position can be held open in anticipation of a bearish breakout below the psychological level of 80.00.

AUD/JPY Daily Price Chart

audjpy aud/jpy daily price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for

Contact and follow James on Twitter: @JStanleyFX