Pick of the Day: USDJPY – Close Open Orders

Close Open Orders: 2009-07-28 17:55

We saw a bit of volatility, and potential shift in sentiment today as we saw risk aversion in USDJPY beginning in the European trading session. A bit of help to Yen bulls when consumer confidence data in the US printed a worse number of -47 versus the previous month at -50.

Needless to say, while the direction was right, my entry point was a bit off as I didn’t get the any volatility to push the pair up to 95.70. Instead, USDJPY moved lower throughout the different trading sessions and hitting lows around 94.10. I have decided to close out my open orders for now and look for another opportunity.

Close open short orders on USDJPY at 95.70. No trade.

Is it back to risk aversion for the global markets? It’s hard to tell from just one day of price action, but it’s best to be prepared for a possible return to risk aversion if the main driving force of an economy, the consumer, is nervous about current conditions.

There’s plenty of data on the economic calendar for the rest of the week to bring more volatility to the markets, and new opportunities to play my beliefs of the economy and the markets. Stay tuned!

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Trade Idea: 2009-07-27 18:58

PoD Chart

Good evening everyone! For this week, I am checking out USDJPY as I see a couple of technical reasons this rally in the Greenback against the Yen over the past week may revert back to the longer term trend lower. Check it out!

I have the four hour chart up and we can see a few indications that the 95.00 to 96.00 area may an area of interest for sellers. First, USDJPY has been in a downtrend for quite some time, making lower ‘highs’ and lower ‘lows’ since April. Is the trend still our friend? 95.00 is a psychologically significant number that was short term support that was broken at the beginning of July. Now that the market has returned to 95.00, is it now support-turned-resistance? I see regular bearish divergence during this short term rally higher as price action makes higher ‘highs’ while the stochastic indicator is creating lower ‘highs.’ Are buyers running out of steam?

Fundamentally, the economy is still weak as unemployment is expected to continue to rise and peak well into 2010. We did get a bit of good news on the US housing front as new home sales clocked in better than expected at 384K vs. the consensus of around 355K. You would think this would have boosted risk tolerance, but USDJPY barely budged higher while equities fell just a bit lower.

I think the rally in risk over the past couple of weeks has probably lost some legs, and it may be time for a pull back. The catalyst this week for such a move may come from this week’s key events: durable goods orders, US GDP, and the incredibly large debt auction to the tune of $115 billion from the US government. Weak data and the auction itself could put some pressure on the Greenback in the short term.

So, I like a swing trade lower on USDJPY, but I am looking to get in a slightly better price than what the market is giving me now. I think volatility and momentum may take USDJPY just a bit higher before we start seeing major US data released this week. My stop will be above the previous swing high, above 97.00, to give me plenty of breathing room for my trade to take form. My profit target will be the previous swing low around 92.00, and I’ll probably take some off the table if the trade goes my way. Here’s what I am going to do:

Short USDJPY at 95.70, stop at 97.20, pt1 at 94.20, pt2 at 92.00

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

We’ve got some minor data coming up in the next US trading session. Risk sentiment will continue to dominate in this environment, so be aware, flexible and cautious always. Good luck and good trading!

  • MonsterTrader

    Where do you find your best sources of fundamental info? I’d like to begin to blend the fundamentals w/ my technical analysis for my trades.

    Thanks

  • MonsterTrader

    Where do you find your best sources of fundamental info? I’d like to begin to blend the fundamentals w/ my technical analysis for my trades.

    Thanks

  • FXAddict

    hi, how do you decide your entry level @ 95.7? Why not 95.8 or 95.6 etc?

  • FXAddict

    hi, how do you decide your entry level @ 95.7? Why not 95.8 or 95.6 etc?

  • Pipcrawler

    Hello! MonsterTrader – I usually just read bloomberg and the analysis from forexgump. That’s pretty much all I need. For longer term macro opinions I like to read John Mauldin. FXAddict – 95.70 is just outside of that blue area and intersects with that top rising trendline. It was conservative… looks like a bit too conservative as I missed the move lower…doh!

  • Pipcrawler

    Hello! MonsterTrader – I usually just read bloomberg and the analysis from forexgump. That’s pretty much all I need. For longer term macro opinions I like to read John Mauldin. FXAddict – 95.70 is just outside of that blue area and intersects with that top rising trendline. It was conservative… looks like a bit too conservative as I missed the move lower…doh!

  • Kdog

    When are you going to post more daily picks?

  • Kdog

    When are you going to post more daily picks?