Cross-Eyeing: Shorting EUR/JPY Again! – Trade Closed

Trade Closed: 2011-12-06 23:23

EUR/JPY 4-hour Chart

ARGH! Looks like I played this trade just a little too tight! If I had set my stop just 12 pips higher, I would be chest deep in the money right now!

And I thought I was in the clear, too! I got triggered on Thursday, and things were going great for a while. I was actually up about 40 pips at one point. But just when I was getting comfortable, EUR/JPY rallied and stopped me out!

Improved risk appetite towards the end of the week helped me get triggered, but high volatility in the hours surrounding the NFP report caused a massive spike that killed my trade. Since then, price has been drifting down the charts, crawling closer to 103.40 (my PT) just as I had anticipated. The only problem is, I’m not in the market anymore! What a bummer, dude.

I think we all stand to learn a thing or two from this trade. When trading cross currency pairs, it’s important to monitor developments in other major economies too. This is especially true with U.S., since news from the U.S. tends to affect price action on non-dollar pairs too.

To be honest, I had taken the NFP report into consideration when I entered this trade, and I thought that I had given this bad boy enough room to breathe by setting my stop 70 pips away. But with economic reports, you never really know what will happen, and sometimes, the markets will throw curveballs at you. Then again, that’s exactly why they call economic reports “event RISKS!”

Anyway, I hope you guys had better luck than I did with this trade. As for me, I’mma keep my chin up and keep looking for setups to take. Peace out and thanks for following, fellas!

Trade Idea: 2011-12-01 00:47

EUR/JPY 4-hour Chart

Risk appetite has picked up this week as rumors of progress in the euro zone have been circulating the airwaves. In addition, we saw central banks around the world make a coordinated effort to free up liquidity in the markets, lowering the cost of emergency dollar loans by .50%.

The markets reacted positively to the news and started buying up higher-yielding currencies. This allowed the euro to rally up the charts and post new highs.

Still, I can’t help but feel like this could be a good opportunity to short EUR/JPY. If you ask me, the fact that central banks had to inject more liquidity is a sign that they’re acknowledging more weakness in the global economy! In addition, I think the euro zone is still a long way from implementing any “stability bonds,” so I don’t see euro pairs shooting much higher.

Technically, the setup is a real beaut. The pair is slowly approaching a former support/resistance zone around the 104.80 to 105.00 area. If you scroll back, you’ll see that price has reacted to this area strongly many times.

In addition, it also happens to lineup with top WATR at 104.96 and is just below the 61.8% Fibonacci retracement level. I have a feeling that traders will be keeping a close watch on this area!

My plan is to:

Short EUR/JPY at 104.85, stop loss at 105.55, take profit at 103.40.

I think if price reaches 105.55, it would signal a break of the support/resistance level and invalidate my trade idea. As for my profit target, the WO held as a support level in the past as well, so I think this would be a reasonable target.

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.

So what do you guys think? Will we see support-turned-resistance or is this wave of risk appetite just too strong?

  • Daffi Akhtar

    It seems to be pretty uptrend at the moment. Could there be a reversal any time soon?

    • cyclopip

      That’s what we’re hoping for! 105.00 seems to be holding up quite well, though the markets seem to be inactive at the moment. They’ll probably remain range-bound until the NFP report is released later tonight.

  • Pipgirl00

    Is this a general rule of thumb most traders follow?
    Never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.

    • cyclopip

      We’ll, with short-term trades like this, we advise not to risk too much considering the trade can get triggered and close within a matter of hours. You can adjust your risk exposure according to what you feel is appropriate, but we believe 1% is a pretty good figure to work with.

  • MaxiV

    im still in :-)

    • cyclopip

      Sweet! Congrats mate!