Not to miss a solid forex setup twice, decided to put orders up on EUR/JPY to get in the strong downtrend on a pullback.
In last week’s “Weekly Watch,” I said I would short on a retest of the falling moving averages as they be used as a dynamic resistance area. After seeing them retested, hold and reverse, and then kicking myself in the butt for not taking the setup, I decided that I wouldn’t miss that setup two weeks in a row. Plus it looks like risk-off sentiment is still in play with global economic concerns and with volatility picking up.
So this week, I’ve put up orders inside the moving averages, which also lines up with the 61% Fibonacci retracement level, potentially drawing in more technical sellers into this downtrend. One more argument to be made for a sell is that the pair broke the October 2014 low and is now retesting, so longer-term players may be watching as well. My stop is a wide one of about one full weekly ATR, and because of the FOMC meeting coming tomorrow, I’m going with a small nibbler position to get me started but add to later if the trade goes my way. Here’s what I’m doing:
Short half position EUR/JPY at 134.00, max stop at 137.00, max profit target at 130.00
I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.33:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned!