Cross-Eyeing: EUR/JPY Trade of the Year – Post-ECB statement Update!

Trade Update: 2011-04-07 23:43

EUR/JPY Weekly chart

I actually skipped the FX-Men Call of Duty session to watch the ECB rate decision and ECB President Trichet‘s accompanying statement. For the most part, Trichet didn’t really reveal much. Yes, the ECB did raise rates by 0.25%, but he didn’t say whether this was a one-and-done deal or not.

To further complicate the situation and confuse the markets, he acknowledged that inflation would continue to be a problem for the euro zone. Ahhhh… Classic Trichet indeed!

The following market reaction was just like the response to that sci-fi movie Source Code – underwhelming. EUR/JPY didn’t shoot off in any particular direction and just bounced up and down. I thought I was in the clear and that we would see the pair edge higher when BAM! – Japan got hit with another earthquake!

This sparked a mini-run of risk aversion, and naturally, the yen started to rally. At the end of the day though, the move wasn’t sustained, and the market went back to their long EUR/JPY ways. In fact, EUR/JPY is now right back up at its weekly highs around 122.50, making my trade look mighty nice right now. Boo yeah!

You might be thinking, “Whoa, wait a second there Cyclopip, didn’t you get stopped out at that sharp spike down late yesterday?

Well, it seems that I FINALLY caught a bit of luck. You see, I had placed “Stop if Offered” orders on all my stops. This means that my stops would only get hit if offer prices hit 120.80.

Considering that the sharp spike down occurred after news of another earthquake hit the airwaves, spreads probably widened at that time. So while the bottom of the day might have been around 120.77, the widened spread saved my butt this time around!

It seems luck works both ways! The spread has worked against me before, but this time, it gave me a break.

My trade is still alive and kicking!

I am a little cautious now that EUR/JPY is testing the 122.50 mark, which served as resistance earlier this week. However, I am still optimistic that this pair can head higher. After all, the euro has fared pretty well even though Trichet did not confirm future rate hikes. In addition, the yen weakness is still rampant, as it is falling across the board.

For now, I’m going to be keeping all my positions open and I will consider adding another position if price manages to break above the 123.00 handle.

For those of you still in this trade, kudos to you for having the guts to keep your position open. Let’s just hope that this move ain’t done yet and that this pair is headed for new highs! Peace!

Trade Update: 2011-04-07 02:29

EUR/JPY Weekly chart

So what has happened since I last updated this beautiful trade? A lot!

For starters, Portugal basically asked for a bailout yesterday, but the euro still managed to edge higher across the board. I guess everybody really has high expectations for rate hikes from the ECB!

In any case, price bust above the 122.00 handle during the New York session, triggering my buy order at 122.15. Basically, I’ve got three long positions on EUR/JPY now. Two of these positions are deep in the green, and one is slightly in the red.

Just a couple hours ago, the BOJ announced it will be making no changes to its policies and will be offering quake-aid loans. At the same time, it downgraded its economic assessment. So far, the yen has been feeding off this news, which is why my third position is currently in the negative.

As for the ECB’s big announcement, in the past few months, its rate statements have generated quite a lot of volatility in the markets, so I think there’s a good chance we’ll see a frenzy later on. Of course, the direction in which the euro will swing is still up for grabs, but I think it’s worth playing.

Anyway, I’ve decided to hold my position open during the ECB rate statement, but I’ll be adjusting my trade to limit my risk exposure. I’m moving the stops of all positions to 120.80, just below the 121.00 handle.

By tightening my stop, I’m essentially risking a small amount in exchange for potentially huge profits. If the ECB doesn’t come out as hawkish as some feel, the euro could drop but at least I’ll still be walking away with some handsome profits. On the other hand, if the ECB outright says that it plans to hike rates several times this year, or heck, even raise rates by FIFTY basis points today, then we could easily see EUR/JPY rise another 300 pips or more.

I feel this alone is enough justification to let this trade ride and NOT take profit right now. Still, I’d also like to get your thoughts and comments, guys. We still have a bit of time left before the rate statement, and I’m open to your suggestions. What do you think I should do?

Trade Update: 2011-04-06 02:32

Remember the trade I dubbed my trade of the year? Well take a look at that baby now!

EUR/JPY Weekly chart

To be honest, even I’m a lil’ surprised with how quickly this pair has risen up the charts. Seriously, 700 pips in less than 2 weeks?! It’s absolutely %$#%$% ridonculous!

Despite weaker-than-expected euro zone retail sales figures and a Portuguese debt downgrade, the euro edged higher up the charts yesterday.

The reason for this was continued speculation that the ECB will be raising its baseline rate tomorrow by 25 basis points. Of course, this is big news in the markets but I would have thought that this was priced in already and we’d see consolidation for the beginning part of this week. Guess not!

Meanwhile, the yen took another beating as more and more Fed officials are sounding as if the Fed plans to ends its QE2 program and possibly even raise rates by the end of the year. This caused a massive surge in USD/JPY, which had a spillover effect on other yen crosses.

Now, as I said before this trade was even triggered, I had planned to add to my position every 200 pips or so. I was simply waiting to see how price would react to the 120.00 level, which is a major psychological, round figure.

I saw that EUR/JPY was above 120.00 late in the London session yesterday and decided to wait before adding. I decided to take off to grab some lunch and play some Call of Duty and by the time I was through, the pair was trading above 120.50.

I decided that I would try to get in on a pullback but unfortunately (or is it fortunately?), this sucker just kept climbing and climbing and climbing! It was like it was on NZT-48 (what, you haven’t watched Limitless yet? Bradley Cooper? Check it out bro!)!

My dilemma right now is two-fold:

  1. Should I even be considering adding to my position? After all, the ECB rate decision is tomorrow.
  2. And if I do decide to add, the question is WHERE?!

This is the problem with trying to press my advantage. I would love to add to my position on a retracement, but the market has yet to provide me with a solid pullback. I could add at market, but there’s always the worry that I’ll be adding at the top (although in hindsight, this was clearly what I should have been doing).

For now, I’ve got some orders set to buy at 122.15, but I will be flexible and look to add if this pair pulls back. I may also consider locking in profits tomorrow ahead of the ECB statement – can’t let those profits get away!

If you joined me on this trade, then congrats to us! If you haven’t, then no worries! Remember, this is potentially a 1,000 pip move and we’re only halfway there. Just be patient and wait for the best setup!

That’s all for this posts, folks. I’ll be sure to update you later this week after the aftermath of the ECB rate decision. For now, lemme leave you with this video of Derrick Rose, my choice for this year’s NBA MVP. Don’t believe? Just watch!

  • Packygee

    Haha, dang it. I closed early at the fake.

  • Cyclopip

    @Packygee – Which fake? The one of DRose? LOL.

    Did you make some profits at least? Maybe you can try hopping back in.

  • Packygee

    Haha, dang it. I closed early at the fake.

  • Cyclopip

    @Packygee – Which fake? The one of DRose? LOL.

    Did you make some profits at least? Maybe you can try hopping back in.

  • DrYdEn217

    I’m sitting at a solid 800 pips right now and may get into one more position by tomorrow. Set Buy orders at 119.79 was a little late on this one but glad I got it, then set orders at 121.40, and 122.40. Think I may get out before the ECB interest rate decision. Buy the rumor sell the news is what I am concerned about. will let you know on twitter how I finish out the trade.

  • Packygee

    I closed at 550 pips profit.
    To be honest, a mentor of mine was asking to see my demo portfolio to see my progress so I went ahead and closed all my positions. Just feels better to think to myself I had a real reason. Haha!

  • DrYdEn217

    I’m sitting at a solid 800 pips right now and may get into one more position by tomorrow. Set Buy orders at 119.79 was a little late on this one but glad I got it, then set orders at 121.40, and 122.40. Think I may get out before the ECB interest rate decision. Buy the rumor sell the news is what I am concerned about. will let you know on twitter how I finish out the trade.

  • Packygee

    I closed at 550 pips profit.
    To be honest, a mentor of mine was asking to see my demo portfolio to see my progress so I went ahead and closed all my positions. Just feels better to think to myself I had a real reason. Haha!

  • Cyclopip

    @ DrYdEn217

    I added another position at 122.15 (update to follow), but I’m gonna be spending the next few hours deciding how I’m going to tackle the ECB rate decision. I agree with you – there’s a lot of potential for a “buy the rumor sell the news” scenario, so we might just see a euro sell off later today.

  • Cyclopip

    @ Packygee

    Congrats on the profits! Perhaps you’ll have a have a chance to jump back in after today’s ECB statement. We should be in for some crazy volatility later today.

  • Cyclopip

    @ DrYdEn217

    I added another position at 122.15 (update to follow), but I’m gonna be spending the next few hours deciding how I’m going to tackle the ECB rate decision. I agree with you – there’s a lot of potential for a “buy the rumor sell the news” scenario, so we might just see a euro sell off later today.

  • Packygee

    you know, im trying to figure out what time that ECB statement will be in my time zone. I feel like an idiot, i find time zones utterly confusing. im in central time zone.

  • Cyclopip

    @Packygee

    Aren’t we all confused? Haha. But if I’m not mistaken, central time zone is (GMT – 6:00) so the ECB announcement should be around 5:45 am there.

    You can double check with our economic calendar. Just be sure to set the time setting at (GMT – 6:00) central time zone.

  • Cyclopip

    @ Packygee

    Congrats on the profits! Perhaps you’ll have a have a chance to jump back in after today’s ECB statement. We should be in for some crazy volatility later today.

  • Packygee

    you know, im trying to figure out what time that ECB statement will be in my time zone. I feel like an idiot, i find time zones utterly confusing. im in central time zone.

  • Cyclopip

    @Packygee

    Aren’t we all confused? Haha. But if I’m not mistaken, central time zone is (GMT – 6:00) so the ECB announcement should be around 5:45 am there.

    You can double check with our economic calendar. Just be sure to set the time setting at (GMT – 6:00) central time zone.

  • Enkhbat

    eurjpy to go up ?????

  • Enkhbat

    I long eurjpy :) let’s go

  • Enkhbat

    eurjpy to go up ?????

  • Enkhbat

    I long eurjpy :) let’s go

  • DrYdEn217

    It appears that is what happened my last position I entered at 122.40 was stopped out at 121.90 and I had all my other positions at the 121.90 handle as well so I lost out on a couple hundred pips that I was up but was able to bank 600 pips.

    Last two positions broke even combined and the first two positions pulled in approx the rest.

    Thanks for the trade and commentary Cyclopip

  • DrYdEn217

    I may jump back in after the profit taking is done though

  • DrYdEn217

    Oh shoot just looked at the chart Im assuming you got wicked on around 11:40 with price dropping just below 120.80?

    tough luck

  • DrYdEn217

    It appears that is what happened my last position I entered at 122.40 was stopped out at 121.90 and I had all my other positions at the 121.90 handle as well so I lost out on a couple hundred pips that I was up but was able to bank 600 pips.

    Last two positions broke even combined and the first two positions pulled in approx the rest.

    Thanks for the trade and commentary Cyclopip

  • DrYdEn217

    Oh shoot just looked at the chart Im assuming you got wicked on around 11:40 with price dropping just below 120.80?

    tough luck

  • Preciousguy

    It seems I am meeting for the first time, a trader that can guess the right moves of Eurjpy. Thanks Cyclops.

  • Cyclopip

    @Dryden217 – Congrats on the win. Luckily my stop wasn’t hit on the dip down, so I’m still in this trade. Maybe you can get in on a retracement or on a break above resistance. Good luck

  • Cyclopip

    @Enkhbat – Nice. Where did you enter?

  • Enkhbat

    Entered in at 121.93 and looking for second position around at 122.55

  • Enkhbat

    if it breaks 122.50, how far can it go, guys? 123.0?

  • Cyclopip

    @Enkhbat

    Glad to have you on board! Over the past few days, this pair has shown a lot of respect for major (00s) and minor (50s) psychological handles, so if it breaks and holds above 122.50, my guess is that 123.00 could be the next resistance.

  • Enkhbat

    Cyclopip, you super lucky not stopped down there :), yeah this pair going mad:)

  • Preciousguy

    It seems I am meeting for the first time, a trader that can guess the right moves of Eurjpy. Thanks Cyclops.

  • Cyclopip

    @Dryden217 – Congrats on the win. Luckily my stop wasn’t hit on the dip down, so I’m still in this trade. Maybe you can get in on a retracement or on a break above resistance. Good luck

  • Cyclopip

    @Enkhbat – Nice. Where did you enter?

  • Enkhbat

    Entered in at 121.93 and looking for second position around at 122.55

  • Enkhbat

    if it breaks 122.50, how far can it go, guys? 123.0?

  • Cyclopip

    @Enkhbat

    Glad to have you on board! Over the past few days, this pair has shown a lot of respect for major (00s) and minor (50s) psychological handles, so if it breaks and holds above 122.50, my guess is that 123.00 could be the next resistance.

  • Enkhbat

    Cyclopip, you super lucky not stopped down there :), yeah this pair going mad:)

  • Enkhbat

    r u still on eurjpy, it is testing 123.0

  • wolfpup77

    WOW Cyclo; your stop almost got hit, lucky you! I pulled the trigger last night and locked in my profits @ 122.25 just to take a breather so I can enjoy the weekend. I’ll be coming back in though, and will pull for 126.00 just as you predict.

  • Enkhbat

    r u still on eurjpy, it is testing 123.0

  • wolfpup77

    WOW Cyclo; your stop almost got hit, lucky you! I pulled the trigger last night and locked in my profits @ 122.25 just to take a breather so I can enjoy the weekend. I’ll be coming back in though, and will pull for 126.00 just as you predict.

  • pankajbhag

    Cyclopips, ure the best!!!

    Thanks to you, I’ve managed to earn alot on this trade (~300 pips!) and even I closed my trade early at 121.85!

    Nevertheless, as you mentioned, I’m with you on the thought that Japanese currency will continue to depreciate and Euro will continue to appreciate, so I might jump back in later on!

    Just tell me, looking at the news coming up this week (April 11 onwards) do you think there is any scope for Japanese currency to appreciate or Euro to depreciate just on news alone???

    Tough question, but I would like your frank opinion!

    Thanks buddy!

  • pankajbhag

    Cyclopips, ure the best!!!

    Thanks to you, I’ve managed to earn alot on this trade (~300 pips!) and even I closed my trade early at 121.85!

    Nevertheless, as you mentioned, I’m with you on the thought that Japanese currency will continue to depreciate and Euro will continue to appreciate, so I might jump back in later on!

    Just tell me, looking at the news coming up this week (April 11 onwards) do you think there is any scope for Japanese currency to appreciate or Euro to depreciate just on news alone???

    Tough question, but I would like your frank opinion!

    Thanks buddy!

  • MRFlump

    You lucky bunny eating pipster, talk about a company saying about we give the tightest spreads I got stopped out :( . o well have to try and get back in. nice trade Cyclopip keep the trades flowing

  • MRFlump

    You lucky bunny eating pipster, talk about a company saying about we give the tightest spreads I got stopped out :( . o well have to try and get back in. nice trade Cyclopip keep the trades flowing

  • Enkhbat

    Eurjpy seems to be back on track. are u guys still on this pair with long position?

  • Cyclopip

    @wolfpup 77 – congrats on the locked in profits. I actually just added again above 123.00. Let’s see if the rally can continue all the way up.

  • Cyclopip

    @pankajbhag

    Congrats on the 300 pip win!

    I think for this upcoming week, the major news to watch out for is anything about Portugal and Spain. If there are concerns that Spain may need a bailout too, then it could pose a threat to the euro’s rally.

    As for hard data, I’m keeping my one and only eye on the German ZEW and CPI data coming out later this week. If those beat expectations, then it could boost the euro.

  • Cyclopip

    @MRFlump

    Yes, very, VERY lucky I was indeed. I’ve added above 123.00, hopefully this keeps rising.

  • Enkhbat

    Eurjpy seems to be back on track. are u guys still on this pair with long position?

  • Cyclopip

    @wolfpup 77 – congrats on the locked in profits. I actually just added again above 123.00. Let’s see if the rally can continue all the way up.

  • Cyclopip

    @pankajbhag

    Congrats on the 300 pip win!

    I think for this upcoming week, the major news to watch out for is anything about Portugal and Spain. If there are concerns that Spain may need a bailout too, then it could pose a threat to the euro’s rally.

    As for hard data, I’m keeping my one and only eye on the German ZEW and CPI data coming out later this week. If those beat expectations, then it could boost the euro.

  • Cyclopip

    @MRFlump

    Yes, very, VERY lucky I was indeed. I’ve added above 123.00, hopefully this keeps rising.