If you trade FX Spot, this setup may be of interest to you. It is a short-term trade, it does not try to determine the long-term trend.
Simply put, USDJPY has been rising for 3 days and has reached a price area that based on our quantitative model USDJPY SHORT is OVERBOUGHT, thus it is ready for a quick SHORT trade that can last 1-3 days, on average (more if you’re lucky).
If we look at this specific “retracement up” pattern, our model shows that on average the largest number of retracements (about 52% of all retracements in fact) ends no later than the 119.29-120.06 range (see image below).
We suggest SHORT trades at the following levels, to take advantage of the upcoming USDJPY DAILY reversal, in particular from the 119.58 level the USDJPY market will start to be OVERBOUGHT, and if it rises further it will be even more overbought, so adding SHORT positions is recommended.
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