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Trade Closed: 2010-10-05 09:50

False breakout on EUR/JPY

Bahhh! Looks like I got caught up in false breakout! Yen crosses all rose early on Monday, helping push EUR/JPY past the 115.00 mark. However, the move quickly evaporated and the yen was able to avoid any major losses. A small case of bad timing as well, as the euro took some hits across the board to start the week. The yen’s intraday comeback plus euro weakness led to me being stopped out. It seems though, that the rising trend line is holding as support.

EUR/JPY is now back at the 115.00 area, as the euro has regained some strength today, while the yen stumbled once the BOJ announced that they would be cutting rates to 0.0% (seriously, how does that work?) earlier today.

Tough luck on my part, but in hindsight, I do think I committed some mistakes. First of all, while I was up for a little bit, I think that I should have acted more quickly once price failed to close above the 115.00 mark. This had been a significant price level in the past, so I probably should have closed earlier. I also probably shouldn’t have entered right smack on the level, and instead, I should waited for a full candle close above the level.

Stopped out at 114.00 = -100 pips / -1%

Not the start I wanted for the month, but hey, there will always be opportunities to bounce back. Just need to focus and get a better feel for the market.

Trade Idea: 2010-09-30 21:30

PoD Chart

The euro is on a roll! I’ve had my only eye on the euro for the past couple of days, and dag nab it, it just won’t stop gaining against its major counterparts! I don’t wanna miss all the action, I’ll take a shot at buying the euro against the yen.

That’s right, I’m still buying that showboat! See, it seems that the euro bulls can’t get enough of the positive economic data that has been pumping out of the region lately. In fact, they even overlooked the reports that Spain’s sovereign debt rating has recently been downgraded, and that threats of the other euro zone countries defaulting on their debts still exist.

Also, with the way the U.S. economy has been doing lately, I got all of my four fingers crossed that the Bank of Japan will do something about the plunging USDJPY. I hear that it’s playing the pre-currency intervention level recently, so a little yen-selling just might be what my trade idea needs to fatten up my pip-pockets. Oh wait, do I even have pockets in this animal skin?

Looking at the 4-hour chart, it appears that EURJPY has been consolidating lately and has recently formed a nice rising wedge. Time for a breakout?

Normally, I’d look to take a straddle trade on setups like this, but with sentiment shifting in favor of the euro and with the prospect of intervention still lurking out there, I’d rather take my chances with a directional bias.

I’ve set orders above the higher resistance line at 115.00. I’d enter earlier but there is major resistance around 114.70, so I’d rather wait for price to take out that level as well as a clear indication that we’re seeing a breakout to the top. I’ll be having a stop loss of 100 pips, which should give my trade enough breathing room. This would also place my stop within the wedge and would invalidate my trade idea.

I’ll be aiming for 117.00, giving me a take profit target of 200 pips. This is equal to the height of the wedge. This would give my trade a nice 2:1 reward to risk ratio. However, I do not see any major former support or resistance levels until 120.00. I may hold on to this trade longer and add as it goes my way. I will have to judge market sentiment towards the euro before making any decisions.

Again, here’s my gameplan:

Long at 115.00, stop loss at 114.00, pt at 117.00. As usual, I’ll be risking 1% of my account on this trade.

Let’s see if them euro bulls can go and push this pair higher. And if I get an assist from the BOJ, then that’d be awesome.

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