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Learn Forex:  Price Action Setups - January 8, 2013

Learn Forex: Price Action Setups - January 8, 2013

Article Summary: Price Action is a fantastic tool that can be used by traders to perform Technical Analysis. We covered many of the basics of Price Action in The Forex Trader’s Guide to Price Action; and this article illustrates a current trade setup based on these principals.

The New Year has come and the fiscal cliff was averted – but fundamental questions continue to plague currency markets around the world.

Now that unlimited expansion is here from many of the largest economies in the world, questions persist about how long this expansion may continue. In The United States, the ‘Evans Rule’ has investors concerned that positive US data may spell a quicker end to Quantitative Easing, and this continues to propagate the ‘good news is bad news’ side of many USD pairings.

China is releasing a slew of data announcements this week than can greatly shape future risk sentiment for Asian and Australian assets; with trade data and inflation due out on Thursday and Friday, with Growth Numbers coming in on Sunday.

Japanese Yen continue to price lower, as it’s largely anticipated that the Bank of Japan is going to increase the scope of their intervention activities when the BOJ meets on January 19th & 20th of this month. This brings in many interesting setups for traders in the FX market.

EURJPY continues to surge higher in the midst of a 2000 pip up-trend

(Created with Marketscope/Trading Station II)

We had investigated a EURJPY long in our Price Action Setups article for December 4, 2012; and at the time we had set a top-end profit target at 112.50, for a risk-reward of 1-to-5.5 on that part of trade. The pair has continued to surge higher, and this could open up additional opportunity for traders to get into the up-trend.

The next Bank of Japan meeting is scheduled for January 19, and 20th – and additional Yen weakness could continue to permeate into the market as we move closer to this meeting.

Traders may have the opportunity to buy this up-trend ‘cheaply’

(Created with Marketscope/ Trading Station II)

Long EURJPY at Market; Stop at 113.00, Limits at 115.50 (Risk-Reward of 1-to-1.5) and 117.20 (1-to-3.2 Risk-to-Reward).

--- Written by James Stanley

To contact James Stanley, please email You can follow James on Twitter @JStanleyFX.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.