Trade Closed: 2012-02-09 22:45
Some risks are worth taking, and I think this trade is proof of that!
So as you can imagine, I was thrilled to see that this trade went my way… though it wasn’t exactly smooth sailing all throughout!
I got quite a scare soon after I entered my trade as the pair dipped back below the 102.00 handle for a few hours. (Yeah, monsters get scared, too… especially when there are pips on the line!) Luckily, it recovered and delivered the strong rally that I was hoping to see.
The announcement that Greece had agreed to the Troika’s harsh austerity requirements helped my trade a bit, and so did the ECB’s rate statement. ECB President Mario Draghi confirmed that the euro zone is showing signs of stabilization and that “substantial” downside risks are starting to disappear. But what really got this pair flying was the broad yen weakness that we saw yesterday. Euro strength + yen weakness = perfect conditions for my trade!
I’d like to hold on to this trade a while longer, but I also don’t want to expose myself to unnecessary risk by keeping this trade open over the weekend. Unlike with EUR/CHF, EUR/JPY doesn’t have a clear line-in-the-sand level that the central bank is keen on defending so I think EUR/JPY is more vulnerable to downside shocks. That being said, I decided to close this trade at a profit:
Closed manually at 103.02: +72 pips / +0.45%
Trade Idea: 2012-02-8 02:15
Apparently, Greek officials were rumored to be a step closer towards drafting an agreement that would appease the Troika (EU, ECB, and IMF). We also received news that the ECB would be making concessions over its Greek debt holdings, effectively reducing the debt burden and making it easier for Greece to receive the 130 billion EUR bailout that it so desperately needs.
Now that it seems as if a Greek debt deal is just around the corner, I think traders will be less hesitant to buy euros. With that said, I think it’s time to crank up the long euro positions, and this time around, I’ve got my eye on EUR/JPY!
The pair just made a solid, bullish candle close above 102.00, which could be a sign of another rise up the charts. If you take a look at today’s Chart Art, where Big Pippin pointed out resistance at 102.00, you’ll notice that there’s a cup and handle formation in the works. This pattern usually precedes a strong bullish move, and now that price is above 102.00, I feel like it’ll only rise higher!
I decided to buy at market (102.30) and set my stop at 101.50. I think that will give my trade enough room to breathe should we see any wild moves later today.
I’m undecided as to where I’ll place my profit target, but I think if a Greek deal gets passed without any hitches, it could lead to some risk-taking, which should benefit my trade.
Also, since I still have a long EUR/CHF trade, I decided to scale down my risk a bit by putting only 0.50% on the line with this trade. The two pairs are somewhat correlated, and I don’t wanna get burned should we see a strong anti-euro move in the market.