Shorting USD/JPY on a Pullback – Trade Closed

Trade Closed: 2013-08-29 4:00 ET

It was a snoozer for my USD/JPY position throughout the Wednesday US session, but it was Obama’s comments in the Thursday morning Asia session that pushed the USD around; first my way and then not my way!

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

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Around 3:00 GMT, word hit the newswires that the Obama Administration would go around the Congress and UN to take action on Syria sooner than later. This sparked risk aversion flows into the Yen, moving USD/JPY from 97.90 to about 97.50 within a couple of hours. But as always with currencies, sentiment quickly shifted as another report hit the wires that Obama has “not made a decision yet” on Syria. USD saw a broad based rally against all majors, pushing USD/JPY quickly above the Fibonacci retracement area and major psychological handle 98.00. My trade was quickly stopped out soon after the break.

Total: -50 pips/ -0.25%

This is one of those things that you can’t really foresee, but luckily you can prepare for it by setting stops and limiting your loss. It’s a really tricky situation right now to trade with so many uncertainties, but I’ll continue to stick with short-term trades and small risk for now, probably at least until mid-September when we see “The Taper.”

So, a very small loss on the day that can be easily overcome with one good trade. We’ve still got tier 1 news coming up in the US session, so I’ll be looking for a new opportunity then. Stay tuned and thanks for checking out my trading blog!

Trade Idea: 2013-08-28 10:46 ET

Good morning! As I mentioned in my last trade post, I was looking to buy some Yen on the current risk aversion flows sparked by geopolitical risk fears this week. With a nice pullback higher, I shorted some USD/JPY at market.

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It’s a simple technical setup on the 15 minute USD/JPY chart above. We’re seeing a pullback higher after a strong move lower this week, and with the story of geopolitical risk (potential Western action on Syria) still in play, I think this may be an opportunity to get in the rally at a better price. For Yen bulls, the 50% Fib retracement tends to be a nice area to jump in; this also coincides with potential resistance at the next major handle higher (98.00).

We’ve got US Prelim q/q GDP coming up to close out the week, and with recent weak US data (most notable is the big downside surprise to Durable Goods) it might be an event that adds to risk-off sentiment. So, I decided to anticipate that move by shorting at market with a really small position. Here’s what I did:

Short quarter position of USD/JPY at market (97.70), stop at 98.20, profit target at 97.05

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

I’m only risking 0.25% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.3:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!