The trend has been strong in AUD/JPY, which means I never got to jump in at the previous resistance area. But after the recent bounce and fresh reversal back down on a catalyst, I made my moves on my fundamental biases.
Entry Adjustment: Shorting AUD/JPY
For a while, I was watching AUD/JPY for an opportunity to play my fundamental biases of buying some Japanese yen against the Aussie, and those biases haven’t really changed since my original AUD/JPY watchlist post. You can visit that post to see why I’m leaning in favor of the yen.
And in April, I saw a technical setup opportunity to short some AUD/JPY at a better price, but the market took off further to the downside without another retracement, having me kick myself for a bit as I watched the pair go further in my favor without me.
Fortunately for my trading style, the pair did bounce in the past week (most likely on a mix of improving global risk sentiment, rising bond yields, and maybe even a little support for the Aussie from rising gold prices), which was enough to get the market up to the Fibonacci retracement area of the latest swing move lower. And thanks to weak data coming out of China today to bring in a round of both risk-off vibes (usually favoring the yen), it looks like a real reversal lower and the downtrend continues.
With price action lining back up with my fundamental bias, I decided to hop in short at market this morning as I didn’t want to miss the potential pick up in volatility coming up with a slew of mid-tier Japanese data on the way, and most notably the Australian jobs data tomorrow. Here’s what I did:
Short half position AUD/JPY at market (82.20), max stop loss at 84.20, max target at 76.20 for a potential return-on-risk of around 3:1
I’ll be risking only 0.5% of my account on this position and as usual, I’ll look to maximize the trade by keeping the trade open and adding to my position/roll stop down if that 80.00 handle is broken and the fundamentals continue to favor a short play.
Of course, I’ll look to close out quickly if conditions or data changes back in favor of the Aussie, or if global risk sentiment flips back to positive.
Stay tuned and 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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