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Closed Trade: 2009-11-19 20:22

PoD Chart

I got home today from work and found out that my take profit point got hit! I was a little worried at first, because the pair seemed to range for a bit and actually tested the 89.50 price level twice before moving down. I was helped out by a run of risk aversion yesterday, as the dollar and yen were both able to get some gains against other majors.

Woo-hoo! My first win! Oh yeah, oh yeah.. Huck loves her bucks!

Profit Target hit at 88.80
Total +70 pips / 1.0% Gain

To be honest, it feels good to get that monkey off my back and nail that first win, especially after those missed trades that worked out. Hopefully I can keep this up and I get a win on my Cable trade as well! Wish me luck!

Trade Idea: 2009-11-16 22:05

Japan’s economic cupboard is empty for the rest of the week as nothing is coming up. However, this doesn’t mean that event risk doesn’t exist. Just yesterday, we got a reminder of this when US Fed Chairman Ben Bernanke rocked everybody’s socks with his comments about the value of the dollar. That said, I’m taking note of reports coming out later today, especially during the US session when the TIC Long-term purchases report comes out at 2:00 pm GMT. It is expected that the net amount of long purchases will decline to 27.3 billion, down from 28.6 billion in August. If this figure comes out to show a smaller figure, it could cause some more dollar weakness in the markets.

In my opinion, despite improved risk appetite, the yen has been resilient to the advances of its western counterparts. Notice how the yen remains strong against the euro and the pound even when risk appetite increases. This indicates that currency traders have a bias on buying up the yen than the dollar. Add this to the fact that Japan posted a growth much higher than expected (1.2% actual vs. 0.7% forecast), we could be in for another round of yen buying.

PoD Chart

On the technical side, I found out last night after reading the 7th grade of the School of Pipsology that triangles are one of the must-know chart patterns. Interestingly, I spotted one in the USDJPY’s 4-hour chart. The USDJPY pair fell to a low of 88.75 after it broke down from a descending triangle formation. Since stochastics show that conditions are oversold, the yen could retrace some of its winnings. If my understanding is correct, the triangle’s broken support could now act as a resistance which would put some selling pressures around the area. Magically, this mark almost falls in line as well with the 38.2% Fibonacci retracement level I drew.

After some analysis, I decided to place my stop at 90.20. Since the pair moves at an average of 90 pips per day, it could still move by about 50 pips upwards if my entry at 89.50 is reached. This means that the price could still reach the 90.00 mark before the buyers lose steam. I decided to set my stop 20 pips above the psychologically significant 90.00 handle to give the price action some more leeway.

Here’s what I’m going to do:

Short USD/JPY at 89.50, profit target at 88.80 and stop at 90.20. I will be risking 1% of my account in this trade.

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