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Trade Closed: 2013-10-15 5:20 ET

As it has been all year, sentiment shifted on a dime once again in favor of risk assets last week on optimism a debt deal will get done.  This was not good for Yen bulls like myself.

EUR/JPY review
EUR/JPY review

When sentiment shifted, the market made its way higher to my sell orders at 132.50.  And even though the trendline was already broken, I waited to see if that area would hold or if the story would once again shift to benefit risk-off traders.

Once 133.00 broke, I was convinced that it was risk-on from then on out, so instead of waiting for my stop at 133.85 to be triggered, I decided to save some pips and close manually at 133.28.

Total: -78 pips/ -0.29% loss

While I’m glad to have cut my loss to much less than my pre-planned loss, it probably should have been even less.  I should have closed much soon as the technical thesis of my trade was broken pretty easily.

The US government debt debacle looks to continue to be on the upside, so it may be risk-on from here. But I think I’ll wait until after the deadline on Oct. 17 before taking another position.  The uncertainty just makes for a low probability environment for trend plays to last, so I’ll sit patiently waiting for a better swing opportunity or shorter-term trade setup.

Trade Idea: 2013-10-08 09:19 ET

I might just get an opportunity to play the lower highs in EUR/JPY. Check it out!

EUR/JPY 1 hour forex chart
EUR/JPY 1 hour forex chart

In my pre-week workup, I mentioned how the 132.50 – 133.00 area could be attractive to sellers, and it looks like it just might get there. And if it does get up there, there are a few technical reasons for this area to potentially hold:

  • Minor psychologically significant level: 132.50
  • Fibonacci retracement area
  • Falling trendline

Fundamentally, we’re still in risk aversion mode thanks to fears of a US debt default and the potential affects of the US government shutdown on the global economy. No major economic data points from either Europe or Japan, but there are speeches from both the BOJ’s Kuroda and ECB’s Draghi this week, although it’s expected we won’t get any new future policy insights from either.

So, I’m going with the technical setup for now and here’s how I’m playing it:

Short half position EUR/JPY at 132.50, stop at 133.85, max profit at 130.50

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.

I’m only risking 0.50% of my account, and this setup provides a minimum potential reward-to-risk ratio of 1.48:1.  If the opportunity arises, I’ll look to trail my stop and scale into a bigger position if the trade goes my way to increase my R:R.

What do you guys think? Will the falling trendline bring in sellers?


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