Cross Eyeing: GBPJPY – Trade Closed

Trade Closed: 2010-02-09 21:50

PoD Chart

Higher yielding currencies surged yesterday as traders reacted to news coming out from the EU summit that European leaders would help out Greece with their debt problems. This caused risk appetite to rise, leaving the safe haven currencies in the dust. Unfortunately, this busted my range play idea as the GBJPY rose sharply. As you can see from the chart above, the 140.00 resistance was only able to keep the pair from rising for some time. As buying interests picked up, this barrier eventually got breached.

Now, while it hurts to close my trade early and take a loss, I have to follow my trade plan and close before the BOE inflation report later today. The inflation report normally causes a lot of volatility and with price near my stop loss point already, chances are I will probably get stopped out anyway.

Close positions at 141.00.

Total: -100 pips / -0.66%

Trade Idea: 2010-02-08 21:30

PoD Chart

Looking at the economic calendar, looks like not much data is coming out today. The two reports that I’m keeping my one good eye out for are the UK trade balance report and core machinery orders report from Japan. The UK’s trade deficit is expected to shrink slightly to £6.6 billion. Meanwhile, Japanese core machinery orders are expected to have rebounded 8.1% in December. Still, I don’t expect these reports to cause too much of a ruckus in the markets, as they have traditionally been medium impact reports.

With that said, we could see more range-bound movement today, much like what we saw yesterday. I plan to close my trade ahead of the UK inflation report tomorrow. Pound pairs are normally pretty volatile, so I don’t want to get caught up in all that volatility that normally happens following the report.

I generally have a bearish bias on the pair so I’m looking for ways to sell it. From the hourly chart we can see that the Guppy has been trading in a relatively tight 150-pip rectangle, bouncing around yesterday session’s highs and lows. Stochastics has yet to reach overbought territory so I suspect I can sell it higher, probably around 140.00, a support-turned-resistance price level.

My profit target will be the bottom of the range at 138.50. In order to give my trade enough breathing room, I have placed my stop 150 pips away from my entry point, roughly equal to the pairs average true range. Here’s the game plan:

Short 140.00, pt at 138.50, stop at 141.50.

Lastly, congratulations to the New Orleans Saints for winning the Superbowl! Can you feel the Brees now? Like I said, the eye never lies…