About Pick of the Day

Pick of the Day Author

At the end of each trading day, I will find what I believe is the best looking short term trade setup for the upcoming trading day. If you're a forex newbie, it can be tricky in the beginning trying to figure out how to look at charts and draw lines. My goal is help you understand the psychology of price movements so you can learn to analyze your own charts and trade on your very own. Trades will be posted by 1 am ET, Monday through Thursday evening.

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March 2007

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Pick of the Day: EUR/JPY

Posted 00:50 02 March 2007 | 7

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With the whole "Yen carry liquidation" scare, whether it's real or not, has brought many of the Yen crosses down to what seems like an "extremely" oversold level. This may be a great opportunity to catch an upside move in EUR/JPY, as we may see an opportunity to catch a retracement and possible re-interest in carry trades.

Technically, the pair is trading near a psychologically important price area - 155.00. The stochastics and RSi are near oversold territory, so we may see buying interest during the Euro session. Here's a trade idea:

Long EUR/JPY at 155.00, stop at 154.50, pt1 at 155.50, pt2 at 155.90

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

Good luck and good trading!

Comments (7)

Hey man, The weakness in your system is that when stuff starts trending, ADX going up past 20 and rising on daily, and the ADX on 4 hour charts at 47 with no sign of let up or heading down, then maybe your system is more suitable for ADX below 25 and heading lower. Going against the trend in this instance is madness, any reading of fundamentals will show that any yen longs is crazy right now. ie check bloomberg's all their currency news is about the yen and how it is not good idea to go long the yen yet.
mdetlh | Posted 12:58 02 March 2007
I found from the past that relying on too many indicators is just going to result in missed trades because I tend to wait for all indicators to confirm the direction of the price.
Pete | Posted 14:36 02 March 2007
The market buzz on carry trade liquidation is so strong, I thought it might be a good time to play contrarian. Obviously not. Thanks for you comments mdetlh. I don't usually use ADX, but i'll definitely keep in in mind. Thanks for visiting BabyPips.com!
pipcrawler | Posted 14:36 02 March 2007
Crikey - hindsight is a great thing but surely this was a purely speculative and highly dangerous trade recommendation - although the caveat about only risking 1% of total account is great. Trying to pick a bottom is fraught with danger - and I've come to the conclusions that there is no such thing as oversold or overbought in this game and perhaps this sort of thinking is a dangerous thing to teach the babypips students?!. Obviously if you'd been right it'd be smiles all round - but...! Love this site though so keep up the good work.
shandy | Posted 15:00 02 March 2007
I've been hearing a lot recently about the Carry Trade: borrow Yen and invest somewhere else keeping the difference in interest rates. Can someone explain how this works? Are these 'loans' for a day or longer? If the exchange rate moves too far, any interest would be wiped out. How does one hedge this?
dcpeter3 | Posted 19:07 02 March 2007
You hedge it buy owning more short positions than long positions, then cover your shorts by 2pm PST/5pm EST to avoid paying the interst in these JPY pairs. That way, if you're inclined to earn interest you can while still profitting from the drops but, it'll be a long trek upwards to regain the long positions from these levels. although, it is speculated to recover in a short period of time. All I can say is, my broker loves me right now for all the entries I've been doing..lol.
CWaveFX | Posted 22:23 02 March 2007
With every opportunity for profit comes an inherent risk that must be managed. As long as you've got good money management practices in place, and you know your business, there's no reason to let fear of loss keep you from speculating. Of course, if you find yourself losing more money that you're making, it's probably a good indicator that your speculations need some adjusting. Keep pippin'!
GenghisClown | Posted 12:26 03 March 2007

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