Almost there! The risk-off vibes in the forex market are working in this trade’s favor, taking EUR/JPY close to the bottom of the descending channel I’m watching. If you’re wondering what I’m talking about, make sure you look at my initial trade idea here.
As I’ve mentioned in my earlier update, I got a bit worried when price edged close to my original stop just above 134.00, but thankfully the previous week high and top WATR were able to keep gains in check.
I’ve already adjusted my stop loss just a bit below my entry to lock in some gains even if a sudden pop higher takes place. So far, I’m looking at a neat 1:1 return-on-risk or a potential 0.5% gain for this setup if price makes it all the way down to my target at 126.75.
Data from the euro zone has been coming in mostly weaker than expected lately, with industrial production figures from the region’s top economies all indicating contraction. There have been no major reports out of Japan but it looks like the yen is just taking advantage of the recent run in risk aversion.
In case EUR/JPY still doesn’t make it all the way down to my target before the end of the week, I’ll be keeping close tabs on the euro zone preliminary GDP readings due on Friday since these might trigger a quick bounce. I don’t really plan on keeping this trade open over the weekend as sentiment might shift quickly and gaps might be seen.