As I mentioned yesterday, FOMC is usually an extremely volatile event for the markets. But this volatility isn’t all bad for those trading the higher time frames. In fact I prefer it because it tends to dish out favorable setups once the US market closes.
The bearish pin bar that formed yesterday on the USDJPY daily time frame is a great example. Although the signal is technically counter-trend, it has a lot going for it to make it a favorable short setup.
The first thing that stands out is the well-defined nature of the pin bar. As we all know, the more obvious pin bars (those with longer tails) tend to work out better than those that are a bit more camouflaged by the surrounding price action.
Yesterday’s bearish pin bar is certainly obvious as its range is twice that of any of the previous three sessions.
The next factor is the key level. The 123.80 area has played an important role since the pair broke above it on May 28th. Between May 29th and June 9th this level acted as support before the bears were able to push the market lower on June 10th; after which time it began acting as resistance.
Last but not least is the next support level and target of 122.00. This level has yet to be tested as new support since the pair broke through it on May 26th. As such the market stands a good chance of seeing this level before another (potential) push higher.
Summary: Opportunity to trade yesterday’s bearish pin bar. Key support and target comes in at 122.00.