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Trade Closed: 2009-06-05 09:05

US Jobs data just came out and the US economy only lost 345K jobs (much less than forecast) and the unemployment rate came it at 9.4%. The markets took this as a sign that the recession is abating. There was a mixed reaction in currencies, and EURJPY rocketed higher, invalidating my original trade thesis.

My reversal signals were proven wrong today and my trade was stopped out at 138.00

Total: -250 pips/ -1.0% loss

So, I took a hit for the week, but no biggie thanks to money and risk management. The rally in risk we’ve seen over the past couple of months will probably continue if job losses continue slow as this months report indicates. Are carry trades back for good? We’ll just have to wait and see. Have a great weekend!

Trade Idea: 2009-06-03 15:18

crosseyed chart

What up! I’ve been looking at the daily charts and I found a nice candlestick pattern indicating a possible reversal on EURJPY. Is the Euro rally over?

On the daily chart, we can see an evening doji star pattern form. This is a strong bearish reversal pattern, and with stochastics in overbought territory we may see buyers run out of steam and get out of this trade. Also, we are seeing this pattern after the pair has tested recent resistance last seen at the end of March.

Fundamentally, we’ve see a rally in risk as “better-than-expected” economic data has been released over recent weeks. This has given the impression that the recession has hit rock bottom and traders are buying up assets on that sentiment. This week’s job data may prove otherwise and this possible shift back to risk aversion may continue. For me, the more I see job losses, the more I think consumers won’t spend, businesses won’t thrive, and demand for goods and raw materials won’t grow. I think we have a bit more recession to get through until job losses slow down significantly. Even then, consumers won’t start spending right away. I am risk adverse for now.

So, I like the short trade for technical reasons and I think that job losses will bring investors back to reality. I will short at market, currently around 135.50, and set my stop a bit more than the daily pip range of about 220 pips. I will ultimately target 130.00, which we may not see until next week if price action goes my way. Here’s what I am going to do:

Short EURJPY at market (135.50), stop at 138.00, pt1 at 133.00, pt2 at 130.00

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

There’s still plenty of data left this week, include the ECB interest rate decision and US Non-Farm Payrolls report. Please be very cautious around these news events as markets may become fast and difficult to execute orders in. Stay tuned! EURJPY Forums Forex Chatroom
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