So much fear going on at the forex markets that currency traders, as usual, have been fleeing to the Japanese yen. Unfortunately, that took my long USD/JPY position to its invalidation point.
Original Trade Idea: USD/JPY Buy Opportunity on Pullback?
After entering half of my intended position a couple of weeks ago, the 50% Fibonacci level held well as support and it looked like it wouldn’t be too long before the trend resumed higher. But unfortunately, risk sentiment turned negative in the last week thanks to a series of economic and political factors weighing on the markets.
And seeing China’s stock market crash in the last week, at the beginning of the week I decided to close my second set of orders to buy another half position at 121.60 to reduce my potential exposure, but left my first half position ride in case it was all just short-term noise. Unfortunately, it wasn’t and risk aversion flows picked up to push the Japanese yen higher across the board, and taking USD/JPY to my invalidation level of 120.80 to stop me out:
Total: -220 pips/ -0.50% loss
The technical setup was sound, as well as the fundamental stories behind both the U.S. and Japan, but risk sentiment won out on this trade. And if I could have done one thing differently, it would have been to just close out the trade on the strong break of both the support at the 50% Fib and the 61% Fib level. So, a small scratch to the account to start off the third quarter, but easily shaken off and moving on to the next opportunity!
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