Looking back at last week’s price action, I see that the best moves came from EUR/JPY. Since I already had a long EUR/JPY trade on, I wanna talk about how I could have used my framework to help me add to my position.
If you aren’t familiar with my framework, I suggest you go through my introductory post to familiarize yourself.
The main theme that everyone focused on last week was what would happen during the ECB rate decision. After consolidating and finding resistance at the psychologically round 120.00 mark, EUR/JPY broke through and rose more than 250 pips on Tuesday and Wednesday. The pair broke through all key resistance levels (MiPs, MaPs, and WATR) like Lebron James on a fastbreak. It seemed like everyone was pricing in a rate hike and expecting more hawkish comments from the ECB.
So what happened once Thursday rolled around? EUR/JPY dipped a little bite on not-so-hawkish comments by ECB President Jean-Claude Trichet, who didn’t commit to further rate hikes down the road. We also saw a small round of risk aversion as Japan got hit with another earthquake. But these losses were erased on Friday as overall euro strength and yen weakness sent the pair to as high as 123.00. Overall, the pair rose nearly 300 pips from its weekly opening price of 119.82.
First, I could have added on the break of 120.00 since this seemed to be a strong resistance point. I missed out on adding on the break of this level — had I went long at 120.20, I probably would be up another 1% right now.
The second setup was probably more legit, as it was a retracement setup. This would have been a higher probability trade because:
Looking at the chart, you can see that EUR/JPY struggled to move past the 38.2% Fib (which lined up with the top WATR and served as good support) and the 50.0% (which coincided with the psychological 121.00 level).
This shows that the framework isn’t only helpful for finding intraweek setups, but it can also be used to help add to established positions, allowing me to find better entry points.
Hopefully, my EUR/JPY trade works out well. I’ll hit y’all with another update soon! If you have any questions about my trades or my framework, you can also hit me up on MeetPips.com, Facebook, or Twitter!