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Trade Cancelled: 2010-11-04 22:45

New High Invalidates Trade Idea

De ja vu? A glitch in the matrix, perhaps?? This trade played out almost exactly how last week’s did! Drats!

And I was right! The ECB does seem to be shying away from further quantitative easing. ECB President Trichet seemed to speak quite confidently about the economy’s recovery when he announced that rates would remain unchanged at 1.00%. News of this, together with better-than-expected final services PMI, kept the euro from slipping yesterday. Euro bulls were overeager to buy and didn’t let EUR/JPY dip low enough to trigger my order.

With the pair making a new high, this invalidates my trade idea as the Fibs are all wrong now. Time to cancel this trade and take off my orders.

Oh, well. It happens! Time to get back on the horse and look for new setups!

Trade Idea: 2010-11-04 01:50

Fib Play on EUR/JPY

Just like last week, I’m looking to catch the euro on the pullback. But this time around, I’m gonna work with EUR/JPY. Actually, if you take a close look, you’ll see it’s almost identical to that setup I tried to work with the last time!

Right now, momentum seems to be favoring sellers, which might just be what I need to get triggered at 113.75. This level seems like the perfect place to buy since this was an area of resistance in the past, and it lines up perfectly with the 38.2% Fibonacci retracement level.

I’ll set my stop 125 pips, or a day’s range, below my entry point at 112.50. As for taking profits, I’m aiming to close half my position at a resistance at 115.00 for my first target, and I’ll probably let the remaining half ride higher.

Fundamentally, now that the smoke has cleared after the FOMC statement, it seems that traders are favoring higher-yielding currencies. If the reaction to the Fed‘s decision is any indication of market sentiment, I think that the euro could remain resilient in the short term. In addition, I’ve heard some rumors that the ECB will be moving away from more quantitative easing measures, which should give it a nice boost.

We also keep hearing that the Bank of Japan might try to intervene in the markets once again. This makes me skeptical that the yen can keep up its persistent gains. Who knows when the BOJ will strike again! All I know is, if they do and I’m triggered, I stand to benefit.

To recap, that’s:

Long EUR/JPY at 113.75, stop at 112.50, pt1 at 115.00.

A shout out to all those Giants fans out there! That World Series victory was 56 years in the making! Congratulations!

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