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Close Trade: 2009-03-23 19:53

With risk appetites growing strongly across the board, today’s daily candle closed strongly above 130.00. My focus on Eurozone weakness is being outweighed by a return to carry trades and money flowing away from the US Dollar and back into the euro and commodities. With sentiment changing for at least the short term, I have decided to close my trade early.

Closing trade at market (132.36).

Total: -236 pips/ -0.78% loss

So, a small loss as resistance at 130.00 did not hold out for very long with sentiment shifting back to risk tolerance. With the trend flowing higher, I will look for pull backs to catch a better price to ride the wave higher. Stay tuned!

Trade Update: 2009-03-19 11:40

Good morning! The EUR/JPY market and it looks like sellers were waiting as that area has held once again and turned buyers away. At least for now. What next?

My trade has triggered and here’s nothing much to do at this point but wait and see if sellers continue to push the pair lower. We do have data coming from the Eurozone this Friday with German Producer Prices and EU trade balance. We may see more weak data, and with the arguments I presented earlier, I am still short bias against the euro and this pair and I will continue to hold. With the end of the week quickly approaching I may lock in profits and take some of my position off the table into the week. Stay tuned for updates!

Trade Idea: 2009-03-17 21:47
crosseyed chart

Good evening ladies and gents! I took a break for a hot minute to cool down, but now I’m back and it looks like EUR/JPY is giving us a ridiculously simple resistance play on the daily chart. Let’s check it!

On the daily chart, we can see the pair has been in rangebound mode since October 2008, and reversing at the psychologically significant level of 130.00 two times before. Stochastics are indicating overbought conditions and have been for quite some time. The quesiton is, “are there buyers left and will sellers take control once again?”

Fundamentally, risk tolerance has grown as banks forecast profits, positive rhetoric from the G-20, and probably on Bernanke’s interview where he said that IF the government succeeds in calming the markets, the recession may end this year. Really? As much as I respect the Fed Reserve Chairman and his wisdom, I still remember that this is the guy who was late to doing anything to stop the credit freeze. And knowing how slow any government works, I think that 2010 call he made for recovery is a bit optimistic. In my opinion, his interview on 60 minutes was an attempt to instill confidence.

The reality is that there is still no positive data in sight pretty much everywhere. My main concern for the Eurozone is the loan issues between Eastern and Western banks as lenders are deleveraging their over inflated books. Japan has issues of their own, and the Bank of Japan has taken measures to weaken their currency to boost exports, but I see a bigger issue in the Eurozone as they try to handle slowing growth and their own banking problems.

But for now, I am focused on that 130.00 level as I think many traders are watching that area. It may hold and that the rangebound behavior may continue until we see a solid change in sentiment or stabilization in the markets. I will short there and use a large stop of 300 pips. My position size will be significantly smaller, but I have large profit targets for a very nice reward to risk ratio.

Short EUR/JPY at 130.00, stop at 133.00, pt1 at 127.00, pt2 at 122.00

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

Stay tuned and good luck!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.