Making moves on my bearish EUR/JPY argument after the euro finds sellers after today’s volatile reaction to the ECB monetary policy meeting.
EUR/JPY Reversal To Continue?
On Tuesday, I pointed out that we may have a trend change in EUR/JPY after breaking higher “lows” on the longer-term chart, and that patterns holds as the market resists an initial pop higher from euro bulls after the ECB monetary policy meeting.
In case you missed, European Central Bank President Mario Draghi hinted that the road back to policy normalization would be a slower one than traders had hoped, and remained open to bond buying if inflation conditions down the road warranted a move.
During the decision, EUR/JPY popped up to touch 132.00 ( a strong area of interest this week) before sellers took back control to bring it back down below 131.00 as we roll into the Friday Asia session.
It’s there that I’m looking to enter EUR/JPY to play my longer-term short bias that I talked about earlier in the week, and I think volatility could possibly take the market back up there now that Asia traders could make the markets a little bit choppy as they get a chance to price in today’s events.
As usual, if triggered I’ll be using a wide stop of over one weekly ATR to give the trade room to breathe, and initial target is the early March lows, where I’ll re-assess and make adjustments if necessary. Here’s what I’m doing:
Short half position EUR/JPY at 132.00, max stop loss at 134.50, initial target at 129.50 for an initial potential 1:1 return-on-risk
I’ll be risking only 0.5% of my account on this position and as usual, I’ll look to maximize the trade by adding to my position/roll stop down to max out the trade if conditions continue to favor the yen over the euro and the trade hits around 1:1 ROR. Ultimately, if momentum picks up to the downside, I’m looking for a target of the 2017 and 2016 lows to exit this trade. Of course, I’ll look to close out quickly if conditions or the data changes.
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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