USD/JPY continues to grind away

USD_JPY_weekly_chartWhenever markets are in a consolidation or congestion phase many traders become very, very frustrated as price action oscillates, contained within a relatively narrow range. However, such periods should be seen as presenting wonderful trading opportunities as patience will be rewarded once a firm direction is established. As I mentioned in my books, congestion phases are the spawning ground of new trends, and for a brilliant example we need look no further than the weekly chart of the USDJPY.

This pair is, of course, a bellwether for market sentiment. In other words when markets are optimistic the USDJPY will be rising as traders and investors use the YEN for funding higher yielding (and riskier) assets. When the pair falls markets are usually retreating into the USD and treasuries for safety.

2014 has been characterised with the pair trading in an extraordinarily tight range between 100.50 to the downside and 104 to the upside and all on average volume. In many ways this is similar to the congestion phase last seen in mid to late 2012, prior to the BOJ’s shock and awe tactics which sent the pair rocketing skywards, price action which was accompanied by strong and rising volumes.

For trend traders the key is patience, and for others this is a great opportunities to apply some more sophisticated option trading strategies to take advantage of this lack of direction.

By Anna Coulling

 

About Anna 1036 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

2 Comments on USD/JPY continues to grind away

  1. Hello,
    I was in Albert Labos troop 11. I thought he was an amazing guy. However I have tried applying his ideas for years and so far things are not working out so well. In fact I am in a Dmp. But I can also see that the principles he taught work and I have to carry on with this because there is nothing else I can do. I am now retired.
    My computer hard drive went bad a couple of months ago and I was wondering whether to buy a trading computer or go for a gaming computer with a high spec chip. Which computer do you use?
    Kind regards
    Robert McAllister.

    • Hi Robert – gosh that’s taking me back – yes I think we were in troops!! To be honest I can’t remember our troop number but I think we were fairly early on. As I have said in my book on Volume Price Analysis, Albert was certainly a character, but I am eternally grateful that he set me on the right trading path using volume and price, and which I have used ever since – I’m sorry to hear that you have been struggling to make it work in your own trading. If I can help in any way please just drop me a line. With regard to your question on trading computers, I have to be honest and say that in all my years of trading, I have never used anything other than a simple laptop or desktop pc – nothing fancy. I trade both fx and futures using the laptop and my Interactive Brokers account and this works perfectly. I have never had any issues with speed etc So my advice for what its worth is to simply buy a good laptop and add extra screens if required ( or a desktop ) – hope this helps and many thanks once again for getting in touch, and please do keep going with the VPA – all best wishes and many thanks again and nice to hear from another Labos student:) – kind regards Anna

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