USD/JPY has been lacking inspiration lately. USD/JPY has been unable to penetrate the resistance trend line formed since 2015. As a result, the market may be trading on its heels for the first part of 2018.
The sentiment reading for USD/JPY is currently +1.5 that means 60% of traders are currently long. Sentiment is a good contrarian signal in that if most traders are long, we will look for a short trade.
The Elliott Wave model we are following illustrates we are in the middle of a zigzag pattern. Under the current pattern, we are looking for price to drop down towards 108 while holding below 114.
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USD/JPY Elliott Wave Count Jan 3, 2018
A nice support shelf has formed at 111.99 on the past three dips (see image below). As a result, we will look to initiate a breakout trade at 111.98 while placing risk on the trade near 113.80. The first target is 110 where half of the trade is closed out. A secondary target is at 108.
If price is successful on reaching 111.00, then we will move the stop loss to break even.
This trade yields a positive risk to reward ratio. Read why that is important in our Traits of Successful Traders research.
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---Written by Jeremy Wagner, CEWA-M
Jeremy Wagner is a Certified Elliott Wave Analyst with a Master’s designation. Jeremy provides Elliott Wave analysis on key markets as well as Elliott Wave educational resources. Read more of Jeremy’s Elliott Wave reports via his bio page.
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