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Trade Closed: 2009-01-28 15:00

My trade was closed at the end of the US trading session yesterday as EUR/JPY continued to rally and hit my adjusted stop at break even.

1st Half: +170 pips
2nd Half: +00 pips
Total: +0.50% gain

So, a nice small profit, but no follow through to the downside as risk appetite grew across the markets in the last few sessions. This rally in risk appetite may be another opportunity to short my overall “global recession” theme, so stay tuned for another potential short idea on this pair. Thanks for checking my blog out!

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Trade Update: 2009-01-27 11:28

Good morning! My trade was triggered yesterday as EUR/JPY continue to rally throughout the morning Asia session. It was a bit of a scare as the pair rallied as high as 119.50, but sellers took over as soon as the European markets opened up for trading. This was due to dovish ECB talk and weak Eurozone data. Consumer confidence came out in the US this morning to a record low, bringing markets back to ‘risk aversion’ type behavior.

My first profit target was hit at 116.30 where half of my trade was closed to lock in profits. Time for some adjustments.

Half trade closed at 116.30 to lock in profits. Adjusting stop on remaining position to break even at 118.00. Will trail stop by 170 pips and continue to target second profit target at 112.50.

So, it looks like trouble for the Euro in the short term after today’s comments and data. I will continue to hold onto my trade and hopefully volatility will swing EUR/JPY my way. Stay tuned!

Trade Idea: 2009-01-26 17:34

crosseyed chart

Good Afternoon! Today the Euro rallied across the major currencies, bringing EUR/JPY up as high 118.00. This has created a couple of simple technical setups for a short trade. Will sellers dominate once again?

Technically, EUR/JPY is still in a downtrend on the four hour charts, and I drew a trendline to mark the tops of the downtrend. I also used the Fibonacci tool to find possible resistance points in the current retracement. Also, stochastics are entering overbought levels indicating the rally may be a bit overdone. Time to swing lower?

Fundamentally, the main theme in my opinion is still “risk aversion” as we are still in a global recession. The economic environment is bad everywhere, including Japan, but the Eurozone is heading to its own world of hurt as it begins to fight the global recession. ECB President Trichet has signaled that they may not be down with their rate cuts, and three members of the European Monetary Union have had their debt downgraded by debt rating agencies. This has sparked fears that the European Monetary Union may become unstable and break apart. Whether or not this scenario will play out is hard to tell, but as long as it’s on the minds of the markets the Euro will remain under pressure.

In the short term, I feel things are potentially much worse for the Eurozone than in Japan, and with the pair still trending lower, I will remain bearish on EUR/JPY for now. This retracement is another opportunity to short the pair and target previously tested lows around 112.50. We may not see an extended move lower as the “long Japanese Yen” trade seems a bit overdone, but we may see ranging behavior at this point and possible retest of previous lows.

I’m going to do wait for the pair to retrace a bit more before jumping in. My stop will be 170 pips – roughly half of the Average Daily Range of 330 pips.

Short EUR/JPY at 118.00, stop at 119.70, pt1 at 116.30, pt2 at 112.50

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

Plenty of data coming out in the calendar this week for both Eurozone and Japan. Most notable is the German Ifo Business data tomorrow and Japanese Retail Sales on Wednesday. Also, general risk tolerance will have a strong influence on EUR/JPY. Stay tuned for updates and adjustments!

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