The USDJPY has formed a double top formation inside of its resistance area which signals the potential end of the rally. This currency pair started to rally after the breakout above its support area which is marked in light blue in the above H4 chart. After initially reaching the resistance area, visible in light grey, the USDJPY sold-off briefly before rallying once again inside of its resistance area from where the double top formation was complete.
The Bollinger Band Indicator has confirmed the strong rally and the upper band was able to break out above the resistance area twice. Price action is now trading between the middle band and between the upper band. Forex traders may decide to realize floating trading profits after a strong rally and close their existing long positions. The profit taking sell-off is expected to increase once the USDJPY will break down below the middle band of the Bollinger Band indicator.
Forex traders are advised to enter short positions at 123.300 and above in order to be well position for the expected profit taking sell-off in this currency pair and a break in the up-trend. Conservative forex traders should wait for price action to break down below the middle band of its Bollinger Band Indicator which will increase selling pressure. A take profit target of 119.300 has been selected for a potential trading profit of 400 pips.
Forex traders should protect this trade with a stop loss level at 125.000 for a potential trading loss of 170 pips which will result in a Risk-Reward (RR) ratio of 2.35.
USDJPY
Short @ 123.300
TP @ 119.300
SL @ 125.000
RR: 2.35
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