Pick of the Day: USD/JPY – Close Trade

Close Trade: 2009-01-13 19:45

What is up my peoples! It looks like the move lower has run out of juice as USD/JPY stalls at previous support. I have decided to close my short position for now on the possibility we may see a retracement back higher and look for another opportunity to short on any retracement.

Close remaining position at market (89.50)

1st Half: +203 pips
2nd Half: +345 pips
Total: +0.91% gain

So, a nice little gain for my account. I expect some profit taking after four days of down movement we will see a bit of retracement. I will probably look to short once again around 91.00 or 92.00. Stay tuned!

Trade Adjustment: 2009-01-12 13:34

Hello! Just a quick update and adjustment as USD/JPY continues to fall further at the beginning of the trading week.

Not much going on today in the way of news events and the Japanese markets were closed for holiday. So, last week’s events and risk aversion continued to be priced in, along with further expectations of continued weakness on the consumer and job front.

So, I will continue to hold but make a quick adjustment to my stop to lock in some profits.

Adjusting stop on my remaining position from 92.95 (breakeven) to 90.65 (just above the opening price levels this week) to lock in 230 pips.

Stay tuned as this week is filled with plenty of US data to move the markets one way or another.

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Trade Adjustment: 2009-01-09 08:10

Good Morning! US employment data is set to be released within minutes, so I have decided to lock in some profits ahead of the very volatile US Non-Farm Payrolls report.

Close half position at market (90.92) to lock in +203 pips. Adjust stop of remaining position to breakeven. Will continue to target 86.95 and adjust stop on remaining position along the way.

Please be very cautious making trades around US NFP as the markets become very fast and orders can be filled at a very different price than you intended. I’m staying away from trading for probably an hour or so myself.

I expect a bad number, but look for revisions to November and October’s numbers at well as they could be just as market moving. Stay tuned!

Trade Idea: 2009-01-07 10:54

PoD Chart

Greetings and Happy New Year! I’m back and it looks like currencies are back to their volatile ways. For my first trade of the year, I’m going short USD/JPY. Let’s take a look at the fundamental and technical reasons why I think this pair may continue to trend lower.

This week we are receiving fresh economic data and it still looks pretty bad in the US. Manufacturing, housing, and employment data has come out weak this week, and most notably we saw today’s ADP employment report print a loss of 693K jobs last month. That is a significant number and if the Bureau of Labor Statistics number is anywhere near it this Friday, we could see a pull back in short term confidence in the Greenback. Also, the FOMC meeting minutes were released this week, and the Fed projects a sharp decline in GDP for the first half of 2009 and a continued rise in unemployment to 2010. Even with talks of another big stimulus package for the US, it may not help bring back risk tolerance as I think traders will focus on the thought that we may see low interest rates and a very slow recovery in the US into 2010.

Technically, we can see USD/JPY has been in a downtrend since August 2008. The recent rally may just be a pullback and new opportunity to jump back in the downtrend. Stochastics are indicating overbought conditions, and the retracement made a high roughly in between the 50% and 61% Fibonacci retracement area – potential resistance. I am going to build a short position in this area with a stop of around 300 pips. I picked 300 pips for my stop as that is roughly twice the daily average range of 168 pips. This should give me enough breathing room to weather the volatility. Of course, to stay within my plan of not risking more than 1% of my account, I will have to reduce my position size. Here’s what I’m going to do:

Short USD/JPY at market (92.95), stop at 95.95, pt1 at 89.95, pt2 at 86.95

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.

So, I’m going short on the basis of the downtrend and that traders will focus on the fundamental weakness of the US. We’ll see how it plays out. Stay tuned!

  • johnnykanoo

    allright first trade idea of 09. Im in!!! I like your analysis and you have a very good track record :)

  • SmArTaLiCuS

    What is your time horizon? Are you looking past jobs report? What are your thoughts on BOJ attempting to prop dollar to slow yen appreciation?

  • Babysteps

    Happy new year pip,
    I’m with you on this trade, Also EUR/USD reverse and go up since 1.3480 so I’m LONG with this pair.
    Good luck to all

  • johnnykanoo

    allright first trade idea of 09. Im in!!! I like your analysis and you have a very good track record :)

  • SmArTaLiCuS

    What is your time horizon? Are you looking past jobs report? What are your thoughts on BOJ attempting to prop dollar to slow yen appreciation?

  • Babysteps

    Happy new year pip,
    I’m with you on this trade, Also EUR/USD reverse and go up since 1.3480 so I’m LONG with this pair.
    Good luck to all

  • MonsterTrader

    Pipcrawler, how did you come up with your 1st tgt? was it just based on a 1-1 rr ratio of the stoploss?

    ps. i’m in, smaller position size too

  • MonsterTrader

    Pipcrawler, how did you come up with your 1st tgt? was it just based on a 1-1 rr ratio of the stoploss?

    ps. i’m in, smaller position size too

  • Mati

    Nice Trade pip Crawler.

  • Pipcrawler

    Good morning and thanks for the comments! Smartalicus – USD events and sentiment usually outweighs what’s going on in price action in USD/JPY. Not that Japan is any less important, it’s just the US Dollar is so heavily watched and traded across all currencies. MonsterTrader – My first target was picked because of its proximity to a psychologically significant number (90.00) and yes, because it marked a 1:1 reward-to-risk ratio.

  • Mati

    Nice Trade pip Crawler.

  • Pipcrawler

    Good morning and thanks for the comments! Smartalicus – USD events and sentiment usually outweighs what’s going on in price action in USD/JPY. Not that Japan is any less important, it’s just the US Dollar is so heavily watched and traded across all currencies. MonsterTrader – My first target was picked because of its proximity to a psychologically significant number (90.00) and yes, because it marked a 1:1 reward-to-risk ratio.

  • camelman

    Thanks Pipcrawler, i just had to depart the party after 140 pips based on “pigs get slaughtered” idea :) …. Thanks again and keep it up.

  • SmArTaLiCuS

    that was a great trade…. I got 120 pips over two of them ;) Thanks a bunch! Post a new idea soon!

  • camelman

    Thanks Pipcrawler, i just had to depart the party after 140 pips based on “pigs get slaughtered” idea :) …. Thanks again and keep it up.

  • SmArTaLiCuS

    that was a great trade…. I got 120 pips over two of them ;) Thanks a bunch! Post a new idea soon!

  • komissar

    Thanks a lot, was a good suggestion. I made 130 pips. Are you still holding position?

  • Babysteps

    Close usd/jpy with nice profit, and close half position of eur/usd with nice profit but still think there is much more profit coming ….

  • komissar

    Thanks a lot, was a good suggestion. I made 130 pips. Are you still holding position?

  • Babysteps

    Close usd/jpy with nice profit, and close half position of eur/usd with nice profit but still think there is much more profit coming ….

  • Pipcrawler

    Thanks again for the comments everyone! I hope everyone has a great weekend!

  • xaser

    you gonna leave half of the position open over the weekend? I am not sure if I want to do that myself…

  • Pipcrawler

    Thanks again for the comments everyone! I hope everyone has a great weekend!

  • xaser

    you gonna leave half of the position open over the weekend? I am not sure if I want to do that myself…

  • MonsterTrader

    sweet pick, thank you

  • MonsterTrader

    sweet pick, thank you

  • Pipcrawler

    Thanks for the comments! Let’s see how far USD/JPY will go!

  • Pipcrawler

    Thanks for the comments! Let’s see how far USD/JPY will go!

  • PipWolf

    Hey Pipcrawler, another great trading idea that I’ve gone in on with you. However, looking at the daily USD/JPY chart, do I see a hidden bullish divergence forming? I’m looking at the stochs beginning to form a lower low than the previous low around 12/18/08, yet the candlesticks today are forming a higher low compared to the same point in December. Does this mean that our downward run is coming to a close and we should think about reversing our trade? Could a new sense of optimism (whether founded in reality or not) with the inauguration of a new President next week also help reinforce a move upwards for the dollar? What are your thoughts?

  • PipWolf

    Hey Pipcrawler, another great trading idea that I’ve gone in on with you. However, looking at the daily USD/JPY chart, do I see a hidden bullish divergence forming? I’m looking at the stochs beginning to form a lower low than the previous low around 12/18/08, yet the candlesticks today are forming a higher low compared to the same point in December. Does this mean that our downward run is coming to a close and we should think about reversing our trade? Could a new sense of optimism (whether founded in reality or not) with the inauguration of a new President next week also help reinforce a move upwards for the dollar? What are your thoughts?

  • Pipcrawler

    Thanks for pointing that out PipWolf. I was just looking at how prices are in consolidation mode at previous support on the 4hour chart. I am going to close this trade. Will we see an “Obama” rally? I think that there was an attempt at the end of Dec./beginning of Jan. that really didn’t amount to much. That says alot. Fundies are bad, sentiment is bad, and it’ll probably get worse as we continue to get data. There’s too much negativity and uncertainty for any confidence in risk taking any time soon. Reversal trades are possible, but I wouldn’t go for too many pips as USD/JPY can return back to the downside very easily on risk aversion.

  • Pipcrawler

    Thanks for pointing that out PipWolf. I was just looking at how prices are in consolidation mode at previous support on the 4hour chart. I am going to close this trade. Will we see an “Obama” rally? I think that there was an attempt at the end of Dec./beginning of Jan. that really didn’t amount to much. That says alot. Fundies are bad, sentiment is bad, and it’ll probably get worse as we continue to get data. There’s too much negativity and uncertainty for any confidence in risk taking any time soon. Reversal trades are possible, but I wouldn’t go for too many pips as USD/JPY can return back to the downside very easily on risk aversion.