Trade review and tips for trading the Japanese yen
The price test at 156.74 occurred as the MACD indicator began moving down from the zero mark, confirming a valid entry point to sell the dollar. As a result, the pair fell nearly 40 pips.
The yen begins the week in a difficult role because the market received exactly what usually weakens safe-haven currencies. The weekend proved calmer than feared. Donald Trump did not launch an active war with Iran, and when tensions ease, demand for the yen as a refuge falls and it cedes ground.
U.S. data last Friday added color. The U.S. composite PMI was 57.6, and the manufacturing index rose to 56.0 — the best reading since May 2022 — versus forecasts of 55.5 (and 55.9 previously). Readings above 50 indicate expansion, and such levels show noticeable economic strength. However, the probability of a Federal Reserve rate hike at the next meeting is very low, so this did not provide a decisive push for the dollar, keeping USD/JPY from rising confidently.
The yen also has its own support. On Friday, Japan's CPI was 2.1%, and the core index excluding fresh food was also 2.1% versus 1.8% a month earlier; the market prices in roughly a 25% chance of a Bank of Japan rate hike at the October 30 meeting. That expectation limits the yen's downside potential, especially since Kazuo Ueda on October 6 confirmed rate increases will continue. I believe that while global markets remain calm, USD/JPY can retrace some gains, but the BOJ meeting and U.S. yields remain the main factors that can quickly change sentiment.
For the intraday strategy, I will rely more on Scenarios No. 1 and No. 2.
Scenarios for Buying
Scenario No. 1: I plan to buy USD/JPY today when it reaches an entry point around 157.18 (the green line on the chart), targeting a rise to 157.57 (the thicker green line on the chart). Around 157.57, I intend to exit long positions and open short positions in the opposite direction (expecting a 30–35-pip move away from that level). It is best to return to buying the pair on corrections and significant pullbacks in USD/JPY. Important! Before buying, make sure the MACD indicator is above the zero line and is just beginning to rise from it.
Scenario No. 2: I also plan to buy USD/JPY today in the event of two consecutive tests of 156.92 when the MACD indicator is in the oversold area. This will limit the pair's downside potential and lead to an upward reversal. One can expect a rise to the opposite levels of 157.18 and 157.57.
Scenarios for Selling
Scenario No. 1: I plan to sell USD/JPY today only after 156.92 is refreshed (red line on the chart), which will lead to a rapid decline of the pair. Sellers' key target is 156.47, where I intend to exit shorts and immediately open longs in the opposite direction (expecting a 20–25-pip move away from that level). Sellers will return at any moment — only a hint from the central bank is needed. Important! Before selling, make sure the MACD indicator is below the zero line and is just beginning to decline from it.
Scenario No. 2: I also plan to sell USD/JPY today in the event of two consecutive tests of 157.18 when the MACD indicator is in the overbought area. This will limit the pair's upside potential and lead to a downward reversal. One can expect a decline to the opposite levels of 156.92 and 156.47.
What's on the chart:
Thin green line — entry price where you can buy the instrument.
Thick green line — approximate price where you can place Take Profit or manually lock in profits, because further upside above this level is unlikely.
Thin red line — entry price where you can sell the instrument.
Thick red line — approximate price where you can place Take Profit or manually lock in profits, because further downside below this level is unlikely.
MACD indicator. When entering the market, it's important to consider overbought and oversold zones.
Important. Novice Forex traders must be very cautious when deciding to enter the market. It is best to stay out before major fundamental reports to avoid getting caught in sharp price swings. If you decide to trade during news releases, always place stop orders to minimize losses. Without stop orders, you can quickly lose your entire deposit, especially if you don't use money management and trade large volumes.
Remember: successful trading requires a clear trading plan, like the example above. Spontaneous trade decisions based solely on the immediate market situation are, by definition, a losing strategy for an intraday trader.
