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Close Open Orders: 2010-02-03 21:50

PoD Chart

Argh! The EURJPY pair climbed only until 126.98, missing my entry order at 127.00 by 2 measly pips. After lingering a hairline close to my entry order, the price tumbled all the way down to a low of 126.07 but unfortunately, I wasn’t able to take advantage of this price action. Apparently, the EUR weakness was partly caused by euro zone’s disappointing retail sales report, which showed that consumer spending stayed flat in December.

Trade Idea: 2010-02-01 21:46

PoD Chart

Seeing how risk appetite boosted the euro yesterday, I’ll be on the lookout for potential reports that could influence risk appetite. Retail sales data from Germany and the euro zone are due over the next two days, with both accounts expected to show that sales rose in December. I don’t think that these will cause too much of a market reaction since sales normally rise during the holiday season.

I’m going to keep my ears open for any comments made by the ECB officials ahead of the rate decision due later this week. If there is any indication that the ECB has concerns over the state of the euro zone, this could shift traders back into risk aversion mode.

Technically, we can see that the EURJPY has been on an extended downtrend, topping out at 134.38 in January before dropping almost 1,000 before finding significant support. Now, it looks like the EURJPY is starting the week with an upward momentum, which gives me a good chance to sell the pair at a more expensive price.

The pair is currently making its way to 127.00, which is a both a psychological number and a major area of interest. Couple this with the hidden bearish divergence on the 4-hour, I suspect the pair is about to swing lower once resistance at 127.00 is hit.

In order to give my trade room to breathe, I have set my stop roughly equal to the pair’s average true range (the average amount of pips the pair moves per day). As for my profit targets, I’ve set one just a couple of pips above the previous week’s low and another one at 123.00 in case the pair trends strongly.

Here’s my game plan:

Short EURJPY at 127.00, pt1 at 125.00, pt2 at 123.00, stop at 128.50.

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

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