After a very good run on Monday, Yen is hitting the brakes today, resulting in all kinds of bounces. It is very much of interest to me, because of trades in JPY pairs I have made. There was a continuation of yesterday’s move during Asian session, followed by sharp bounce. Well, it remains to be seen if this is just a bounce or a reversal. For now I operate under assumption that prices are making a small correction within intermediate term down move, which , in turn, is only a pull back in major up trend.
Frankly, currencies’ behavior shouldn’t be too surprising to me. For one, FED’s monetary policy meeting will conclude tomorrow, with an interest rate announcement. Central bank is expected to keep its key rate near zero, but everybody is waiting for the “hints” about the future. Is the FED worried about inflation? Do they indicate rising rates soon? Is the statement going to be “hawkish” in nature? Also, will there be any new recession fighting initiatives, like buying more T-bonds, in order to suppress long term rates.
If they decide to do that, buy treasuries again, many of us will be raising eyebrows. Well , maybe just the ignorant ones, like me. Why? Treasury Department plans to auction $104 billion in government debt, including $60 billion today. Any evidence that demand for government debt is waning could give investors a scare. Treasury demand needs to stay strong for the government to finance its bailout and stimulus programs without significantly raising yields. That’s why I want to see what FED is going to do, especially if rates jump during the auction.
Since Yen pairs typically respond to FOMC statement, it really is no surprise they are active today. Both ways. Which brings me to my NZD-JPY trade.
Price broke under 59.70 and my sell order was filled. A little later price reversed, ran up to 100 SMA, where I sold it again. I closed both of them at about flat. I jumped the gun here, with the second trade. Original set up was on 4H chart, not hourly, so that trade also should have been done on larger time frame. Now that I’m flat, I can do over.
New sell order is placed 61.50, with a decent target of 59.75. Recently most of Yen moves had these fairly deep corrections and we’ll see if this pattern repeats itself.
Yesterday I also suggested a sell of AUD-JPY. With this pair I decided to wait for a bounce before entering, which is currently developing.
I’m looking for an entry at 76.20. As of this writing, looks like 100 SMA and 50% FIB of last swing down could be converging at about that level. This cwould suggest strong resistance for price and a good entry point, with objective of 74.30. Depending on the reaction to FED statement tomorrow, this could take 2-3 days.
Mike K.
This is getting a little too complex for me. Going to sit it out and wish you luck!
I will need it. Thanks.
This was a nice exit from the kiwi trade. I understand your that you may regret it, because of not using 4h chart, but from what you wrote, this seemed the best thing to do. Pound is getting weaker, also.
Pretty cool post. I just came by your site and wanted to say
that I’ve really liked reading your blog posts. In any case
I’ll be subscribing to your blog and I hope you post again soon!
Thank you, Jenna.
Hi Mike,
I like your blog, even when I don’t understand most of it. I’m new to trading and newer still to Forex. I have question and hope you could answer it. In this post you right about
“100 SMA and 50% FIB of last swing down could be converging”
Why do you think this is important? Hope you don’t find my question silly.
Kramer.
Gbp-chf is at about 1.7550 right now. I;m thinking about going long here, for about 150 pips. Stop loss is small r/r is good. Any thoughts?
S/L is great here, and your target is very reasonable. Myself I’d be using 15M chart breakout for entry, but that would shave potential profit by 20-30 pips. At any rate scenario is not bad at all. Good luck
Thank you!
Hello Kramer,
people use different tools to determine where to enter/exit trades. They are placing their orders at those levels. These could be FIBs, previous highs/lows, trendlines, moving averages etc. Sometimes they overlap. In this case we can expect more orders to entered at those levels, therefore stronger, more important reaction. This does not guarantee your outcome, but enhances probabilities of something to happen in such areas.
I took profit at 1.7670, for 124 pips. Move was so fast, I decided to close it earlier. Thanks!
Did I make a mistake or what? It ran another 300 pips!
Renata, you did good. The follow up move was on SNB intervention, unpredictable event. You can’t kick yourself over something like that.