USD/JPY Breakout -Forex Swing Trade Setup

The USD/JPY has been approaching the the resistance level at 99.50 and ultimately the psychological level of 100.00. With a few daily tests back in early March we may have another run that this level by the end of the month. This could lead to a much larger upward move as we have a “cup and handle” formation underway (not a completely classic formation, but it is there).

Generally the pattern is formed by a rounded bottom (this one has a spike in the middle of it, which actually created a smaller cup and handle), a test of old resistance/support (99.50-100.00), a pullback (we pulled back to 96.00), and then a potential break out.

We have yet to see the break, but if it occurs we have a trade. While actual resistance appears in the 99.50 area, the 100.00 area also could pose resistance.

Therefore, BUY at 100.10. Several tactics point to a profit target between 102.00 and 103.00 on the initial swing up. RSI offers us a profit target, via an internal trend divergence, of 102.42.  Therefore place a conservative target at 102 or a more aggressive target near 102.50.

This formation typically has a “throwback” to the breakout point. For this reason we will consider this a swing trader (we want to get in and out before the throwback) and not a longer term trade.

Place a 70 pip stop order on the trade. If we enter at 100.10, the 70 stop puts below the old resistance level of 99.50 (100.10 – 0.70 = 99.40 stop level)

~Cory Mitchell