JPY Strength Disappeared

Thought I would share a comment from the weekly setups section.  I have added a few extra comments to this trading post that I think will help cement some ideas even further.

SD. why did the jpy pairs not play like you wrote?

As I mentioned in the update, many of the crosses depended on the JPY holding strength into this trading week.   “Why” it didn’t does not affect the trading decision…..it just didn’t hold strength in most of the crosses.

Note:  That is one thing as a Forex trader you better understand.  Forex trades in pairs and as we saw, strength in the JPY can set up trades in many of the crosses.  But they depend on the strength of the one currency, the JPY.

You may also note that on the weekly charts, many of the JPY crosses mentioned are in either a trading range of very weak trend. EURJPY and CHFJPY are great examples.

Strong momentum thrusts have the odds in the favor of another leg down (or up) after a brief consolidation or pullback.  Do the testing over a large sample and you will see that to be the case.

That said…..if you look at the CHFJPY as an example….that is a strong move against the previous leg down. What do I say about pullbacks? We want a lazy pullback.

In hindsight, I should have discounted that chart because as of time posting, the strong move was already present. It was on the watch list because there was still a chance of a consolidation (I wrote that) and Monday it could have been argued that price was starting to show the weakness we needed. It failed to materialize.

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Once price started to take off on that pair (after the break high on Monday), lower time frame trades to the upside could have been had with the range context of the weekly.

 

Lower Time Frames Help Decipher Higher Time Frames

If you look at the lower time frames, you will see that although price broke upwards, the size of the wicks and large red candlesticks does not scream bulls fully in charge.  You can infer that from the daily charts but lower time frames can be an x-ray into the higher time frame charts.

Keep in mind that is impossible for me to list out all the things that can happen with each chart and how to handle it.  Not only will it be time consuming but it is not the purpose of the setups and there are a number of things that can happen.  It would be like writing a book.

For example, a failed pullback – one where price rips up or down against the previous leg – can give you setups in the same direction on lower time frames.  Why?  Because pattern failures generally fail with momentum.  You’d be playing the higher time frame momentum with the lower time frame trades.

My hope is that people see how these charts play out over time…over weeks and months….and from that learn to navigate each chart and resolution for trading opportunities or lack of.