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Trade Update: 2011-04-07 23:43

EUR/JPY Weekly chart

I actually skipped the FX-Men Call of Duty session to watch the ECB rate decision and ECB President Trichet‘s accompanying statement. For the most part, Trichet didn’t really reveal much. Yes, the ECB did raise rates by 0.25%, but he didn’t say whether this was a one-and-done deal or not.

To further complicate the situation and confuse the markets, he acknowledged that inflation would continue to be a problem for the euro zone. Ahhhh… Classic Trichet indeed!

The following market reaction was just like the response to that sci-fi movie Source Code – underwhelming. EUR/JPY didn’t shoot off in any particular direction and just bounced up and down. I thought I was in the clear and that we would see the pair edge higher when BAM! – Japan got hit with another earthquake!

This sparked a mini-run of risk aversion, and naturally, the yen started to rally. At the end of the day though, the move wasn’t sustained, and the market went back to their long EUR/JPY ways. In fact, EUR/JPY is now right back up at its weekly highs around 122.50, making my trade look mighty nice right now. Boo yeah!

You might be thinking, “Whoa, wait a second there Cyclopip, didn’t you get stopped out at that sharp spike down late yesterday?

Well, it seems that I FINALLY caught a bit of luck. You see, I had placed “Stop if Offered” orders on all my stops. This means that my stops would only get hit if offer prices hit 120.80.

Considering that the sharp spike down occurred after news of another earthquake hit the airwaves, spreads probably widened at that time. So while the bottom of the day might have been around 120.77, the widened spread saved my butt this time around!

It seems luck works both ways! The spread has worked against me before, but this time, it gave me a break.

My trade is still alive and kicking!

I am a little cautious now that EUR/JPY is testing the 122.50 mark, which served as resistance earlier this week. However, I am still optimistic that this pair can head higher. After all, the euro has fared pretty well even though Trichet did not confirm future rate hikes. In addition, the yen weakness is still rampant, as it is falling across the board.

For now, I’m going to be keeping all my positions open and I will consider adding another position if price manages to break above the 123.00 handle.

For those of you still in this trade, kudos to you for having the guts to keep your position open. Let’s just hope that this move ain’t done yet and that this pair is headed for new highs! Peace!

Trade Update: 2011-04-07 02:29

EUR/JPY Weekly chart

So what has happened since I last updated this beautiful trade? A lot!

For starters, Portugal basically asked for a bailout yesterday, but the euro still managed to edge higher across the board. I guess everybody really has high expectations for rate hikes from the ECB!

In any case, price bust above the 122.00 handle during the New York session, triggering my buy order at 122.15. Basically, I’ve got three long positions on EUR/JPY now. Two of these positions are deep in the green, and one is slightly in the red.

Just a couple hours ago, the BOJ announced it will be making no changes to its policies and will be offering quake-aid loans. At the same time, it downgraded its economic assessment. So far, the yen has been feeding off this news, which is why my third position is currently in the negative.

As for the ECB’s big announcement, in the past few months, its rate statements have generated quite a lot of volatility in the markets, so I think there’s a good chance we’ll see a frenzy later on. Of course, the direction in which the euro will swing is still up for grabs, but I think it’s worth playing.

Anyway, I’ve decided to hold my position open during the ECB rate statement, but I’ll be adjusting my trade to limit my risk exposure. I’m moving the stops of all positions to 120.80, just below the 121.00 handle.

By tightening my stop, I’m essentially risking a small amount in exchange for potentially huge profits. If the ECB doesn’t come out as hawkish as some feel, the euro could drop but at least I’ll still be walking away with some handsome profits. On the other hand, if the ECB outright says that it plans to hike rates several times this year, or heck, even raise rates by FIFTY basis points today, then we could easily see EUR/JPY rise another 300 pips or more.

I feel this alone is enough justification to let this trade ride and NOT take profit right now. Still, I’d also like to get your thoughts and comments, guys. We still have a bit of time left before the rate statement, and I’m open to your suggestions. What do you think I should do?

Trade Update: 2011-04-06 02:32

Remember the trade I dubbed my trade of the year? Well take a look at that baby now!

EUR/JPY Weekly chart

To be honest, even I’m a lil’ surprised with how quickly this pair has risen up the charts. Seriously, 700 pips in less than 2 weeks?! It’s absolutely %$#%$% ridonculous!

Despite weaker-than-expected euro zone retail sales figures and a Portuguese debt downgrade, the euro edged higher up the charts yesterday.

The reason for this was continued speculation that the ECB will be raising its baseline rate tomorrow by 25 basis points. Of course, this is big news in the markets but I would have thought that this was priced in already and we’d see consolidation for the beginning part of this week. Guess not!

Meanwhile, the yen took another beating as more and more Fed officials are sounding as if the Fed plans to ends its QE2 program and possibly even raise rates by the end of the year. This caused a massive surge in USD/JPY, which had a spillover effect on other yen crosses.

Now, as I said before this trade was even triggered, I had planned to add to my position every 200 pips or so. I was simply waiting to see how price would react to the 120.00 level, which is a major psychological, round figure.

I saw that EUR/JPY was above 120.00 late in the London session yesterday and decided to wait before adding. I decided to take off to grab some lunch and play some Call of Duty and by the time I was through, the pair was trading above 120.50.

I decided that I would try to get in on a pullback but unfortunately (or is it fortunately?), this sucker just kept climbing and climbing and climbing! It was like it was on NZT-48 (what, you haven’t watched Limitless yet? Bradley Cooper? Check it out bro!)!

My dilemma right now is two-fold:

  1. Should I even be considering adding to my position? After all, the ECB rate decision is tomorrow.
  2. And if I do decide to add, the question is WHERE?!

This is the problem with trying to press my advantage. I would love to add to my position on a retracement, but the market has yet to provide me with a solid pullback. I could add at market, but there’s always the worry that I’ll be adding at the top (although in hindsight, this was clearly what I should have been doing).

For now, I’ve got some orders set to buy at 122.15, but I will be flexible and look to add if this pair pulls back. I may also consider locking in profits tomorrow ahead of the ECB statement – can’t let those profits get away!

If you joined me on this trade, then congrats to us! If you haven’t, then no worries! Remember, this is potentially a 1,000 pip move and we’re only halfway there. Just be patient and wait for the best setup!

That’s all for this posts, folks. I’ll be sure to update you later this week after the aftermath of the ECB rate decision. For now, lemme leave you with this video of Derrick Rose, my choice for this year’s NBA MVP. Don’t believe? Just watch!

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