US Presidential Election 2020: Yen Trades

Yen trades could prove an intriguing prospect due to the US presidential election. The Dow and gold setups discussed in previous posts have not triggered their respective Blue Boxes as of this weekend. It is worth emphasising that the setups are valid even if they trigger after election night. The actual results of the election may be delayed for several days, with mail-in ballots being counted. Furthermore, the technical setup is valid regardless.

Table of Contents

Takeaways
  • Why Yen trades are looking attractive

  • Technical patterns coming into play

  • How this trades fits into others

Best Award Winning Brokers

Show Search Filters
  • OANDA (www.oanda.com) boasts of a high level of trust and reliability, as evidenced by its impressive Trust Score of 93 out of 99. While OANDA is not a publicly traded company nor does it operate as a bank, it is subject to regulation by seven Tier-1 regulators, signifying a highly trusted status. Additionally, it is supervised by one Tier-4 regulator, which means that users should utilize a cautious approach to risk management.

    OANDA Corporation is regulated by the CFTC/NFA. OANDA is a member Firm of the NFA (Member ID: 0325821). CFDs are not available to residents in the United States.
  • eToro.com is a reputable trading platform, famous in the social trading industry. In 2018, the brand decided to conquer the US market and launched the local brand there. First, the company functioned solely as a crypto trading broker. Yet, later it added other items to its list of tradeable assets. Therefore, now it offers stocks and ETF trading as well. 

    With a history dating back to 2007, eToro has amassed a large user base across more than 140 countries. When cryptocurrency emerged, the brand used a unique chance to enter the American market.

    One of its key features is CopyTrader, the social trading tool and a proprietary product of the project. It allows novices to repeat trades from top traders with just a few clicks. Thus, the tool offers a fresh approach to this asset class.

    This guide aims to provide a comprehensive eToro review to help traders make informed decisions.

    etoro USA

    eToro offers trading services across many regions worldwide including the USA

  • A standalone copy-trading ecosystem, providing equities, foreign exchange, commodities and cryptocurrencies markets. Provides a global selection of brokerages.

Yen trades in a risk off environment

For trades that are more likely to trigger prior to the election, we turn to the lower timeframes. With most currencies in consolidation on the higher timeframes, high probability trades are few.

The best setups seem to be occurring in with Yen currency trading pairs, and even then only on one or two of the pairs. USDJPY is the logical pair to be looking at, as the USD is a safe haven. Yen also tends to do well in risk-off environments as well. We will therefore focus on Yen trades. 

With uncertainty overall rising, it seems likely that this will spark a trend in one or the other (or both) of the risk-off currencies. In each situation, the trading community will tend to prefer one more than the other, but with no apparent hard and fast rule. Thus, technicals come into play.

Yen trades: Downtrend developing after a choppy consolidation period

The USDJPY daily chart (Figure 1) shows a downtrend developing after a choppy consolidation period. The current move down could develop in several ways. One would be to rise to test the high of the channel, as shown by the upward-pointing arrow in Figure 1.

Process the various scenarios

However, a manual read of the swing shows that it is still moving down at relatively high speed. Although not an exceptionally great momentum trade, it is sufficient to be valid. Pattern trading-wise, curvature of the bottom currently formed appears to be too sharp to signal a bottom, although that is a value judgement and could easily be proven wrong.

Perhaps the most value argument for a potential short here is not in terms of probability, but in terms of potential reward. The current low shows a level that has been tested thrice since July 2020. It is significant that with each bounce, lower highs were formed. Using descending triangle type logic, this suggests that a break of this level will result in a significant move.

Do not forget the four hour chart

Yes trades on the four hour chart

The four-hourly chart shows promising developments, with a recent 5-wave Elliot move recently having been completed. Strict Elliott wave traders will note that wave 4 went slightly above the low of wave 1, but for the style practiced here, it has been noted that the penetration is extremely slight, and it is a wick-penetrating-wick situation.

Thus, this is an acceptable setup. If the reading is correct, one might expect an a-b-c retracement to a higher zone of resistance, given here as 104.88-105.16, corresponding with previous levels of support and resistance. Thus, we shall be looking for a valid potential entry short from this zone on the hourly chart.

Technical analysis extraordinaire

Figure 3 shows the hourly chart of USDJPY. The a and b waves are marked. In line with typical Elliott theory, the c wave can be further decomposed into five smaller waves: i-ii-iii-iv-v. We shall theoretically assume that wave ii has been formed.

Yen trades on the hourly chart

Wave iii needs to be relatively larger, and as a rule of thumb, we shall assume that it will only be formed once the Blue Box has been activated. Thus, once the Blue Box is touched, we would note any hourly candlestick reversal patterns (bearish engulfing, bearish harami and pin bars are most common).

Once these reversals trigger, usually by going below the low of the relevant setup candlesticks (i.e. the first candlestick of of the engulfing and the harami, as well as the low of the pin bar), we will consider wave iii to have formed and wave iv to be in progress.

If you fail try try again

We would then want another high to form a wave v. With the second set of reversal candlestick patterns to the downside (same as above), we would go short. The hope is to ride the beginning of a large potential wave.

Given market choppiness, we might be stopped out with the stop just above the candlestick trigger. However, we would be willing to try a second time if the opportunity arose. Attempts are limited to two per Blue Box.

All scenarios have been covered

If this triggers, it could provide a nice trend to the downside, with limited risk. Of course, there is a possibility that the market could continue down without even activating the Blue Box or after the first reversal. In this case this trade would likely miss the election trend.

There is little that can be done about that, but solace can be drawn from the fact that in that scenario, one of the other setups is likely to be triggered. I wish you all the best with your election trading and with your yen trades.

Further content from Kaye Lee can also be found on his website: Straight Talk Trading

You May Also Like…