Trade of the week: short USD/JPY
We would like to go short USD/JPY, ideally around ¥144.00, as we believe that the medium-term downtrend has resumed. The downside target is around the ¥138.00 mark or below with a stop loss above last week's high at ¥146.00.
(Video transcript)
This week's trading opportunity
Axel Rudolph: Hello and welcome to "Trade of the week" on Tuesday 6th May, 2025. And unfortunately for me, or for you actually, we are already well on our way for this new trade. And if you look at it, it's going short USD/JPY. And, for those of you who are subscribed to the Premium Daily Technical Analysis FX email that I send out, we are already short at ¥144.00 here, and we're coming off.
So, ideally, that's what I'd like to be short at. We also tried last week to go short at ¥146.00, but that didn't quite manage to reach that. But can you see here, what we're seeing is, basically, a continuation of the downtrend. And what I believe is going on here is similar to what we saw in March, where we have this ABC zigzag correction in Elliott wave terms, which is just a three legged correction to the downtrend and then the downtrend continued.
And I think the same thing is happening here again. So ABC, then we’ve got a sell signal here, and now we're heading back down again. So that reason, technically speaking, for me is enough to go short USD/JPY. I do think that we're going to fall through the low we saw in April longer term, and we could be heading towards ¥135.00 or even lower than that.
You've got the low going back to September 2024. That comes in at ¥139.58. And that's basically more or less where we held in April. But if we take both of these out, then you can see here we go back to levels last traded in July of 2023 between ¥138 and ¥137.50. So, I believe that that downtrend is going to continue. I like trading in the direction of the overall trend anyway. So, for me, for this week's "Trade of the week", we are short USD/JPY.
Previous trading outcome
But let's look at last week's because, basically, we had a similar pattern on the DAX 40 contract and I got that horribly wrong. As you can see here, we went up, down and up.
And I thought this whole resistance area here, going back to the March lows and February lows, would cap the upside. And I was completely wrong. And our stop-loss was above, I believe, the early April high. So we got stopped out here. And, yes, I mean the DAX, as you can see, is very close to making a new all time record high.
I shouldn't have gone short the strongest market because the DAX is actually outperforming the S&P 500 or the Nasdaq 100. I should have actually looked at the same pattern on the Nasdaq, maybe, and gone short that instead. So, we got this one wrong and we lost 2% of our capital, hypothetically, on that trade, having been long from down here.
We are testing really important resistance at the moment, but maybe we're going to come off it short term.
Coming back to "Trade of the week", I would like to go short USD/JPY for technical reasons, around current levels, or around ideally ¥144.00, with a stop-loss above ¥146.00, last week's high, and a downside target, let's say around ¥138.00.
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