EUR/JPY Short Trade Review

Decided to close my EUR/JPY short trade manually after the BOJ meeting today as my fear that the BOJ expands easy money efforts come to pass.  Here’s a quick review.

Original trade idea: Swing Short on EUR/JPY

EUR/JPY 1 Hour Forex Chart

EUR/JPY 1 Hour Forex Chart

It looks like my one fear about putting this trade on from my original trade idea happened as the Bank of Japan announced increased support of its easy money policy.  It is doing so by growing its lending programs and increasing the limit of how much banks can borrow, and this obviously had a negative effect for the Japanese yen.  The yen spiked lower on the news across the board, including against the euro.

After the event and spike higher, I decided the market was definitively back to yen selling, so I decided to close out my EUR/JPY short manually at 140.40. 

Total: -105 pips/ -0.42% loss

I was actually already looking to close early as my driver for a EUR/JPY short already passed.  I was looking for a move lower on risk-off sentiment flows, but it looks like the scare that the emerging markets gave us in January had already faded away by last week and traders were already back to selling the Japanese yen.

Even thought the buying support was pretty evident as we saw higher ‘lows’ last week in price action, I wanted to hold short as ECB members mentioned the possibility of negative interest rates in the Euro zone.  Also, economic data around the globe was starting to look weak, which tends to favor the Japanese yen if risk aversion behaviour were to re-emerge.  Unfortunately for my trade, it looks like traders are brushing off any economic weakness fears for now.

So, a very small hit to my account and now it’s time to switch biases and trade along with the risk-on sentiment we’re seeing and yen weakness.  I’m looking at shorting the yen now based on today’s events, hopefully against some of the relatively stronger majors like the British pound and New Zealand dollar.  Stay tuned!