Pick of the Day: EUR/JPY

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We’re back to another wonderful week of forex trading, but unfortunately, it’s going to be a short and possibly boring one. We have a light economic release schedule this week, and with the US markets on vacation from Thursday on, we will probably see low volatility and maybe a spike here or there…pretty much tough trading conditions. Don’t worry though, I’ve managed to come up with any idea or two this week, and for tonight we will be taking a look at EUR/JPY.

We have a couple of events this evening which will hopefully cause a stir in EUR/JPY. First, we have the release of the Bank of Japan meeting minutes at 12:00 am EST. There is speculation that the minutes will show no hurry for the BOJ to raise rates and that the Yen will weaken leading up to the report. This may setup a classic “buy the rumor, sell the fact” trade if the pair reaches the previous high near 151.70.

Also, ECB Pres. Jean-Claude Trichet will be speaking later today, in which he may reiterate the ECB’S idea that higher borrowing costs are needed to keep inflation in check.

So, we have a couple of fundamental reasons for the pair to drift higher. So, we will have a sell order at 151.70 for this possibility.

Of course, we will have a long trade ready in case the pair drifts lower in which it may meet resistance or reverse at the 151.00 – 151.10 area. This would be a good long area as the pair is showing higher lows on the longer term charts. We may possibly get in an uptrend at a good price.

If either trade is triggered, please close the other entry orders to avoid the open position closing
prematurely.

Long EUR/JPY @ 151.10, stop @ 150.90, pt1 @ 151.30, pt2 @ 151.65

Or

Short EUR/JPY @ 151.70, stop @ 151.90, pt1 @ 151.50, pt2 @151.30

By the way – there’s an article on the current low volatility environment in the forex market at
DailyFX
. It’s definitely an eye opener and gets ya thinking on what may lay ahead for us in 2007. Check it out!