Pick of the Day: USD/JPY – Continued

PCPOD.ff.png

12/19/2006 – 12:00 am EST

Tonight’s Pick will be a continuation of yesterday’s short trade idea of USD/JPY after the US Current Account number was released. Again, we took off a small profit of 10 to 15 pips in the first half of our trade, move our stops to break even, and adjusted our pt1 to 117.70. We’ll see what happens after the BoJ interest rate decision and comments from BoJ Governor Fukui soon afterwards. So, we’ll keep our exit strategy the same and see what happens.

Tomorrow we will trade the market reacting to US Housing starts and and Producer Price Index reports. Check again in the morning for new trade ideas!

12/18/2006 – 4:50 pm EST

It was a pretty slow trading day as our trade has gone from 118.25 to as low as 118.05, but it is currently trading around 118.15. We do have the Bank of Japan interest rate decision this evening and comments from BOJ Governor Fukui soon afterwards. The market has pushed expectations of a rate hike to January instead of later today. Again, market volatility will all depend if we see a surprise rate hike or how the BOJ perceives future economic conditions.

If you are still in our trade you have 3 choices: 1. you can avoid event risk by closing out your position and locking in a small profit. 2. you can create a risk free trade by moving your stops to break even and leaving the trade open. or 3. You can close half of your position, and move the stops to break even to lock in a very small profit and create a risk free trade.

I like option 3, don’t you? :) If you decide to go with option 2 or 3 I would move pt1 from 117.95 to 117.70, which is the hourly low, and keep pt2 at 117.50

12/18/2006 – 11:30 am EST

Our short trade was triggered at 118.25. The pair has drifted back down to the 118.15 level and pretty much hanging out there. We probably won’t see much movement for the rest of the day as we are approaching the end of the Euro trading session. So we will keep our exit orders unchanged, unless there’s a change in the market, or you may exit your position at your discretion.

12/18/2006 – 09:40 am EST

The market was expecting a $225 bln US Current Account deficit and that’s pretty much what we got – the third quarter US Current Account widened to a record number of -$225.6 bln versus -$217.1 billion in the second quarter. Market reaction was muted as the number came inline with expectations, also probably due to the holiday season. The dollar did jump slightly against the Yen, probably due to profit taking as the pair drifted lower ahead of this report.

Couple this information with speculation that we may hear hawkish rhetoric from the BOJ and a that they may hike rates in January, I’m looking for a short play today in USD/JPY. Profit taking may take us all the way to the previous high at 118.30, so I will look to short near there and target the previous day’s low.

Short USD/JPY at 118.25, stop at 118.65, pt1 at 117.95, pt2 at 117.50

Please remember to never risk more than 1% to 2% of your account on any one trade – even on demo accounts! Adjust your position sizes to this rule accordingly.

Good luck and good trading!

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>