Before reading this I want people to understand that this kind of trade doesn't always work (NO TRADING SYSTEM DOES) so if this single trade doesn't work, don't lose confidence in the technique - it has served me extremely well and I have used it many times before. Both for USDJPY (2 ideas) and USDCAD (1 idea) - you can find these ideas on my page.
The Euro keeps getting stronger and although the Yen has been getting stronger off late I think that trend is reaching a reversal point based on UJ's limited ability to fall today given the trend line break and negative USD news.
The trade is a typical trend continuation trade with a reward/risk of 2:1.
Attempt number 3 at this CHF trade. Lots of previous bounces and consolidation this time...
*something* is keep the value of CHF vs a basket of other currencies pretty stable within this 5% range since the 2015 crash; we're towards the bottom of this range at the moment.
* this is not financial advice.
I think we're getting pretty close to fair value for UJ now. But I can't resist another short. I don't have any great conviction for this trade but there are some technical and fundamental inklings which contribute to the trade idea.
- COT Positioning remains very long USD
- Today's unwillingness to break 111 during a hot USD buying session
- Lots of resistance...
Must come down.
The positioning for this market is extremely long. Are there any more buyers? I don't think so. The Australian economy isn't showing any signs warranting this valuation of its currency - a valuation far greater than 0.68 - the PPP.
Start small, build. This is counter-trend so be careful.
EURUSD has a "fair value" of around 1.36 according to OCED (data.oecd.org)
It was oscillating around that area for a while until a period of divergent monetary policy - the fed stopping their money printing presses and the ECB starting theirs. This brought the Euro to almost parity.
But now we are entering a...
By now you'd be wrong 5 times already if you had taken trades at significant points where people thought the Euro would turn around.
Why not just follow the trend?
Yes, if you keep guessing, eventually you're going to be right but the journey isn't worth it.
When there's a clear fundamentally-driven trend - its not a good idea to go against it.
This is how to set up a trend continuation trade.
Look at past retracements and see how big they are.
Wait for a retracement like on Euro Dollar today.
Arrange your S/L to be slightly bigger than the biggest relevant retracement.
Set your T/P at somewhere with 2x or 3x of your S/L
The COT report this week from the CME showed that Long USDJPY positions have actually gone up for the past 4 consecutive weeks. In those weeks UJ has been trading higher than the current price - substantially higher for the last 2 weeks. What does that mean? There are lots and lots of people with long positions in draw down... They are trapped and many have...
Mario Draghi has a difficult job - every time he makes a public appearance he has to convince people that they should sell the Euro. Why? Because its good for European exports and good for their recovering economic growth.
The problem is that a few days ago, it didn't work. In fact, the Euro rose over 1% against the dollar. This market wants to buy the...
A good risk/reward trade within this channel for the CHF.
Long CHFJPY, short the rest.
The move up last week was a very big move up and may be it means there will be continued momentum upwards. If there is a pullback, I think it sets up a trade with a decent risk/reward. The US Dollar seems to be getting weaker.