Since throwing CHF/JPY onto the watchlist, the sellers stopped the bulls once again to send the pair lower. Is the latest bounce another chance to join the bears?
CHF/JPY Short at 114.00?
As I mentioned above, I spotted CHF/JPY last week having a tough time at a previously strong resistance area around 115.00, and since then the bears have taken back control to slowly take the pair lower. With resistance being validated once again and the fundamental arguments I made back in my watchlist post also still valid, I’ve decided to take a nibbler short on this pair.
And besides the fundies and price action lining up (triple top breakdown from 115.00), I like that there is a divergence in monetary policy with the Swiss National Bank re-iterating its policy for a weaker franc today vs. a recently optimistic Bank of Japan that has already mentioned plans of tapering its easing policy a bit this year.
We do have the Bank of Japan presenting its latest monetary policy statement at the end of this week, so I’m going to be a little bit conservative with my entry strategy.
And as usual, I’ll use the two day average true range for my max stop and calculating initial/max profit targets. Here’s what I’m doing:
Short half position CHF/JPY at 114.15, max stop loss at 115.85, initial target at 112.45 for an initial 1:1 return-on-risk potential.
I’ll be risking only 0.5% of my account on this position and I’ll look to re-assess to potentially reduce my risk and maximize my gain if I’m triggered and the market still has strong downward momentum around my first target. My next target from there would ultimately be the April swing low around 108.00 for a very juicy potential return-on-risk.
As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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