Fading USD/JPY Post-Earthquake: Still Viable?


Only last week we were talking about the moral dilemma concerning profiting from natural disasters presents and then we brought up the opportunity to possibly fade the New Zealand earthquake in NZD/USD.

Well here we go again this morning, with a major earthquake striking off the coast of Fukushima, Japan.

No, markets are not as sensitive to these sorts of events as they once were, but the triggering of a tsunami warning off the coast where Japan’s nuclear power plants lie, will never fail to at least get some trader’s (and don’t forget the algos!) hearts pumping and their trigger fingers clicking.

The US Geological Survey initially registered the Japanese earthquake at a magnitude of 7.3 but later downgraded it to 6.9, with the epicentre at a depth of around 10 kilometres and a tsunami warning predicting waves of up to 3 metres high.

From national broadcaster NHK:

“Please remember the Great East Japan Earthquake and move to higher ground.”

USD/JPY 5 minute

USD/JPY 5 minute

As you can see on the intra-day USD/JPY chart, the opportunity to potentially fade any initial panic selling in the pair like we had on NZD/USD, was never really there. Price simply just chopped up and down in barely a 50 pip range.

USD/JPY daily

USD/JPY daily

If you’re trading USD/JPY, it’s still all about this daily level. If the resistance level holds, you would be looking to sell intra-day pullbacks and likewise if the level breaks, you would be looking to buy intra-day pullbacks.

This means that you are trading in the direction of the higher time frame chart, while at the same time you are allowing yourself to study inta-day price action and give yourself the best possible risk:reward ratios when you take your trade.

Let us know what you are thinking about trading around this major daily support/resistance level in USD/JPY by mentioning @VantageFX on Twitter.

Best of probabilities to you!

This Tuesday

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This is a guest post originally appeared on Vantage FX. Reposted with permission.

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