Do’h! Instead of dropping like a rock, the pair actually broke up top and rallied towards 76.50! Even though the AUDJPY‘s price action on the 4-hour chart is starting to form a rising wedge, I’m going to close my open orders because my initial trade idea has already been invalidated.

The move we saw yesterday was pretty strong and could be a signal that sentiment has shifted. Still, I remain hesitant about joining the “bull camp,” as I feel the debt problems in the eurozone are just being swept under the rug.

Sooner or later, it’s going to come back in full force in the form of a big bad risk aversion monster! I guess we’ll all just have to see together what happens in the next couple of days!

Trade Idea: 2010-06-08 23:23

PoD Chart

I won’t let my last missed trade let me down! Time to bounce back and grab some pips! This time, I’m planning to make a short play on the AUDJPY

Looking at my charts, I notice that the pair is on a strong downtrend but the price appears to be consolidating for a bit. In fact, there’s a bearish flag formation and I’m hoping to short at the breakdown.

I set my short order around 20 pips below this week’s low of 73.67 and my stop 100 pips above my entry, just above the previous lows. I think this will give my trade enough breathing space in case of any wild moves.

I placed my first profit target close to the 72.00 handle, at which the price seemed to find a floor. In case of this support breaks, I have another profit target waiting at the 68.00 handle. Of course, I’d want to hold on to some of my profits so I’ll be using a trailing stop on my second position once my first profit target gets hit.

Fundamentally, it seems that the Reserve Bank of Australia will be sitting on their hands on their next interest rate decision meetings. Although it is true that Australia’s underlying fundamentals are comparatively strong to other G20 nations, the uncertainty regarding the euro zone’s debt situation is putting risks on the global recovery. This could adversely affect growth in Australia, and temper speculations of further rate hikes from the RBA.

In any case, I am hoping that Australia’s report on its labor market would provide the volatility the pair needs to stage a breakout. The market is expecting the report to show that the unemployment rate remained at 5.4% and that an additional 16,100 net jobs were created in May. If the actual figures come in below the forecast, we could see the pair breakout and test last month’s low.

Here’s the game plan:

Short AUDJPY at 73.45, stop loss at 74.45, pt1 at 72.10, pt2 at 68.00. I’ll risk 1% of my account and I’ll put a trailing stop on my remaining position after my first profit target gets hit.

I just wanna give a shout-out to John Wooden, who passed away last week! As you all know, I’m a big sports fan and I think that Mr. Wooden was one of the best coaches of all time! May he rest in peace in basketball heaven!

With that said, I just wanna leave everyone with a little quote from Coach Wooden:

“Failure is not fatal, but failure to change might be.”

I think that this is applicable to forex trading. The markets are always changing and as traders, we all have to adjust. We must adapt and survive!

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