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Close Trade: 2009-07-24 15:18

Good afternoon friends! While we didn’t see much of a push higher in EURJPY this week, it has gained a bit as traders have focused on the the idea that fundamentals are getting “less bad.” Are we at the end of the recession? Is it time for a recovery?

I don’t know, but it looks like EURJPY bears didn’t have a chance as investors decided to come back into the markets and buy riskier assets. My short play triggered at 133.45, came close to stopping out, but managed to come back down below 135.00.

Since it’s the end of the week, it’s time to close out my position for a small loss to avoid weekend event risk.

Close at market 134.65.

Total: -120 pips/ -0.55% loss

EURJPY is looking a bit toppy here around 135.00, so I think I’m going to sit back for a minute and watch where the markets take us before jumping back in. Earnings season in the US is making price action a little more erratic in the global, so it may be a good idea sit back and wait for earnings season to pass before making longer term swing trades. Shorter term ideas may be the way to go for now. That’s friends. Thanks for reading my blog. Stay tuned and have a great weekend!

Trade Idea: 2009-07-21 16:38

crosseyed chart

Are we seeing a shift in EURJPY? We may be as the pair has broken a rising trendline on the one hour chart. Is this a false breakout or a sign that the pair will move lower?

It is a pretty simple setup as the break lower indicates that sellers are beginning to take control as the rising trendline failed to hold. The break was fast and strong, and came after testimony from US Fed Chairman Ben Bernanke testified that the economy is showing “tentative signs of stabilization.” There were no mentions of an “exit plan” as some have speculated, and Bernanke also stated that dangers still remain and that a sustained recovery has not taken hold.

Traders took this as a sign to take a bit of risk off of the table as equities sold off and bonds rose. Risk tolerance also took a hit today as CIT Group takes the spotlight once again as a company that may be of systemic risk to millions of businesses around the US. Finally, the fact that earnings have been positive on cost cutting and not revenue growth may finally sink into investors that earnings may not be as rosy in the third and fourth quarter.

So, I continue to remain bearish on the economy until we see not just a bottom, but a new trend towards growth in jobs and housing prices. I believe risk aversion is slipping back into sentiment, and with this trendline break, there are indications both technical and risk sentiment pointing towards a move lower in EURJPY.

Since the move was fast, I think we may see a retracement before a move lower. I drew a Fibonacci retracement tool on the chart, and we can see potential resistance area between 133.20 and 133.70. This also happens to line up with last week’s high around 133.50, which has been an area of minor support and resistance since then. I’d like to go short around there and my stop will be above this week’s highs and the average daily range for EURJPY. My ultimate target will be in the area of last week’s lows around 127.00 Here’s what I am going to do:

Short EURJPY at 133.45, stop at 135.65, pt1 at 131.25, pt2 at 127.00

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

My stops are wide and profit targets are huge, so I may be riding this one for a while. Let’s see how it goes. Stay tuned and good luck!

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