Cross-Eyeing: AUD/JPY – Stopped Out

Stopped Out: 2007-03-19 12:45

My idea to short AUD/JPY proved to be wrong as Bank of Japan Governor Fukui’s comments outweighed the Chinese rate hike. The Yen sold off throughout the rest of the Asian and Euro trading session, stopping out our trade along the way. So, we took a total hit of -120 pips and I hope everyone followed the 1% rule and traded low risk position sizes.

Trade Idea: 2007-03-18 21:30

crosseyed chart

Today we are looking at the AUD/JPY. We just saw a report this weekend that the People’s Bank of China raised interest rates to 6.39 percent. The markets’ view on this change is that a rising Yuan increases their export prices, which has a positive effect on the Japanese Yen as Japan’s exports become more competitive. This affects the the Australian dollar as well as a rise in the value of the Yuan slows economic growth in China, it slows China’s demand for Australia’s exports (China is Australia’s second largest export market).

So, with an expected drop in the Aussie Dollar and a rise in the Japanese Yen, we look to short AUD/JPY.

On the chart, we see a resistance level at 93.00. This price area lines up with the 61.8% Fibonacci retracement level drawn from a swing high of 95.91 to a swing low of 88.45. Stochastics are trending lower, implying weakness in the pairs’ bull run. Now, we see the pair trading higher on Fukui’s comments that the BoJ won’t rush to raise rates. I think China’s interest rate raise will have a longer term affect on the pair, so we will scale into a short play.

Short half normal position size of AUD/JPY at 93.00, stop at 93.75, pt at 92.25

and

Short half normal position size of AUD/JPY at 93.30, stop at 93.75, pt at 92.80

Remember to never risk more that 1% of your account on any single trade, so please adjust your position sizes accordingly.

Good luck!

2 comments

  1. PIPPOPPER

    This criticism comes from a novice that barely graduated from the Freshman Class. While I have a few years to go before I’m a really good trader (that’s what all the upper classmen say), I think I’ve learned a few things.

    I am certainly not a pro – I’m only a sophmore, still learning but getting better. BUT, looking at the ADX, BB and pSAR (and the 3 wave of the Elliot Wave and just about every other indicator) going into 3/19/07, and most importantly your Friend the Trend who happened to be on a serious uptrend yet whom you betrayed, I only hope nobody was following your short recommendation for this pair(especially the newbies who can get really confused).

    Your “idea” was apparently based on a fundamentals “hunch” (gamble) that had not played-out in the TA yet, and it never did. Having made really dumb mistakes in my Freshman year, I can humbly say in all humility and lowliness that your short recommendation on the AUD/JPY on 3/19/07 was a really, really bad one.

    Yours truly,
    PIP POPPER

    Reply
  2. PIPPOPPER

    This criticism comes from a novice that barely graduated from the Freshman Class. While I have a few years to go before I’m a really good trader (that’s what all the upper classmen say), I think I’ve learned a few things.

    I am certainly not a pro – I’m only a sophmore, still learning but getting better. BUT, looking at the ADX, BB and pSAR (and the 3 wave of the Elliot Wave and just about every other indicator) going into 3/19/07, and most importantly your Friend the Trend who happened to be on a serious uptrend yet whom you betrayed, I only hope nobody was following your short recommendation for this pair(especially the newbies who can get really confused).

    Your “idea” was apparently based on a fundamentals “hunch” (gamble) that had not played-out in the TA yet, and it never did. Having made really dumb mistakes in my Freshman year, I can humbly say in all humility and lowliness that your short recommendation on the AUD/JPY on 3/19/07 was a really, really bad one.

    Yours truly,
    PIP POPPER

    Reply

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