Pick of the Day: USD/JPY

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It’s a new month of trading as we enter December, leaving the bad memories of November’s trades behind! Historically, December is a little bit calmer in the markets due to the holidays, but I still think we can find a trade opportunity here and there.

After reviewing my trades from November, I have pin pointed the main culprit of our losses to our stops. For a lot of our trades, our directional bias has been pretty accurate, but with our tight stops we were always closed out of the trade before it can mature and profit. So, for my “Pick of the Day” trade ideas, we will be adding a new trade management technique. Because of the ranging nature of the current market environment, some of our positions will only trade one lot, with a wider stop, and two profit targets in which we may close out the trade when pt1 is hit or move our stop to breakeven and go for pt2. Tonight’s Pick will use that trade technique.

Pick of the Day: USD/JPY

Can USD take anymore punishment? Well, in the long term it may have to. As the major central banks look to raise rates in the upcoming year, the Fed is expected to cut rates sometime in 2007, which makes buying into other major currencies much more attractive. In the short term, USD has just taken a nose-dive after Chicago PMI dropped to 49.9 from the previous 53.5. So we may see a range bound day tomorrow up until the US ISM Manufacturing Index number at 10:00 am EST. We may even see a correction on profit taking in which we will look to go short and go with the fundamental and technical trend. Our profit target will be the 115.30 price level as we find points of support at that price in multiple time frames. Here’s tonight’s trade idea:

Short one lot USD/JPY at 116.00, stop at 116.40, pt1 at 115.70, pt2 at 115.40

So, we will short one lot at 116.00 with a stop at 116.40. If our trade reaches pt1 we will either: 1. Close out the trade for a profit of 30 pips or 2. move our stop to breakeven and go for pt2 at 115.40.

Good luck and good trading!

  • littlepips

    Hi Pipcrawler, I want to ask Why 115.31 is a strong support area? is it one of fib level from daily timeframe?

    TIA :-)

  • littlepips

    Hi Pipcrawler, I want to ask Why 115.31 is a strong support area? is it one of fib level from daily timeframe?

    TIA :-)

  • pipcrawler

    Greetings littlepips,

    Sorry I should have been more specific of what makes that area a strong support. Starting from about 115.35 down to 115.10 we have previous daily lows at 115.35, 115.20, 115.10,which combined act as a strong support area. Also, if you draw a Fib extension tool from 118.44 to 115.38 to 116.54 then we have a 38% Fib extension at 115.37 which will add to that area’s support. And finally, the S1 line from yesterday’s pivot calculations is at 115.31. So, there’s plenty of reasons to expect stalling around the 115.30 price area. I hope this helps Tia. =)

  • pipcrawler

    Greetings littlepips,

    Sorry I should have been more specific of what makes that area a strong support. Starting from about 115.35 down to 115.10 we have previous daily lows at 115.35, 115.20, 115.10,which combined act as a strong support area. Also, if you draw a Fib extension tool from 118.44 to 115.38 to 116.54 then we have a 38% Fib extension at 115.37 which will add to that area’s support. And finally, the S1 line from yesterday’s pivot calculations is at 115.31. So, there’s plenty of reasons to expect stalling around the 115.30 price area. I hope this helps Tia. =)