Trade Update 2010-05-2 22:54
Oh my! It looks like the yen is rallying across the board on the news that China raised its reserve requirements for banks… With the USDJPY daily chart showing overbought conditions and pointing downwards, I think it’s time for me to make some adjustments.
The first thing I’m going to do is close half my position to lock in a 0.41% gain. After that, I’m going to move my stop loss on my remaining position to my entry point while still aiming for 97.75. This essentially creates a risk-free trade. Ahh, how I love playing with the bank’s money!
Trade Update 2010-04-18 22:46
Finally, after days of waiting, my long USDJPY order got triggered! It seems that risk aversion was the name of the game last Friday as the yen gained versus all other majors.
I’ve been reading up and I think that this shift in risk sentiment was caused by news regarding the Goldman Sachs fraud issue. As risk aversion pushed equities lower and caused an unwinding of carry trades, the yen took this as an opportunity to gain strength. Still, I believe that the yen is fundamentally weak and traders will see this as an opportunity to buy the dollar at a cheaper price versus the yen.
Trade Idea 2010-04-12 22:24
If you look at the chart that I posted, you would see that I’m watching the 38.2% Fibonacci retracement closely, as it coincides nicely with the previous resistance level. As we all know, whenever price passes through resistance, that price level turns into support. By that time, I suspect stochastics would be at or nearing oversold territory, which gives me the confirmation I need to go long.
Still, I know that I can’t catch tops and bottoms all the time so I’ll be setting my stop roughly equivalent to the pair’s weekly average true range of 210 pips. This places my stop beyond the 61.8% Fibonacci retracment, giving my trade enough room to breathe. As for my targets, I’ll be aiming for the recent significant highs.
On the economic front, minutes from the latest BOJ monetary policy meeting showed that a couple of BOJ officials were strongly opposed to expanding the central bank’s lending program to commercial banks, claiming that there wasn’t enough economic basis for such move. Still, they were out-voted as the rest of the policymakers believed that additional easing was necessary to ward off deflation in Japan.
And it looks like they have a point… The recent corporate goods price index posted a worse than expected 1.3% drop in March, confirming that deflationary pressures are still present. BOJ Governor Shirakawa is set to testify tomorrow and if he hints at another expansion of their lending program, the yen could weaken further against the greenback.
Meanwhile, the US is set to release its trade balance data later today. It could show that their deficit widened again in February and trigger risk aversion in the markets.
Tomorrow, US retail sales and inflation data are due and these could spur some extra volatility for my trade to get triggered. Although traders seem to be back to their risk-hungry selves, risk aversion could come back to haunt the markets and push the safe-haven greenback higher if there are more setbacks in the Greek bailout plan.
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