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Before you take a look at the awesome setup that formed last week on EUR/JPY, you might wanna take a look at myintroductory post on the Weekly Winner to guide you on my trading framework.

June 27 to July 1, 2011: EUR/JPY Price Action Review

EUR/JPY Hourly Chart

What a crazy week it was last week for the euro wasn’t it?

Entering the week, there was a lot of tension in the markets, as nobody was quite sure how this whole Greek debacle was going to end. The pair was testing strong support around the 114.00, which had held strongly the two weeks prior.

However, it seems that the markets were actually quite optimistic about the Greek vote on austerity measures, as we saw a lot of euro buying ahead of the release of the vote. EUR/JPY traded up the charts, breaking through the previous week’s highs and top WATR.

As it turns out, the markets were correct, as Greece passed the austerity bill and the procedures neccessary to implement the new package. After trading as low as 114.00 within the week, EUR/JPY traded as high as 117.50, a gain of over 300 pips on the week! As Ric Flair would say, “Whooooooo!!!”

The question is, how could I have rode this sweet move up the charts?

Actually, it was pretty simple. I should have recognized that the pair wasn’t going to make new lows, as 114.00 had held pretty strongly the past few weeks. Stochastic was also showing buying momentum, giving another signal to go long.

I could have bought when price moved above the weekly open (114.20), at around 114.50. If I just went with a simple 75 pip stop and held onto the position, I would have caught the full move of nearly 300 pips, good for a decent 4:1 reward-to-risk ratio.

I will admit that I was quite bearish on the pair. I just didn’t think things would go down well, but once again, the market proved me wrong.

It’s situations like this where I should recognize the change in sentiment and do my best catch on. Now that risk appetite seems to be gearing up, I should probably be looking to go long on yen pairs. I just missed out on my CAD/JPY trade last week, but I won’t let that discourage me – I’m sure I can find a solid setup!

If you have any suggestions or pairs that I should keep my eye on, holler at me on Twitter or Facebook! Thanks fellas and happy Fourth of July!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.