Friday brought strong moves, after my post . All started with NFP report, which was already discusses, and continued through the rest of the day. Some currencies came under severe pressure, including Euro and Swiss Franc. I closed my trade in EUR-CAD just before the huge sell off happened. It was almost 300 pips drop. Franc also suffered, even against Euro. More on that later.
While these moves were big, they paled in comparison to the Yen, which dropped like a rock. All JPY pairs appreciated dramatically. The trends that developed, were very strong and lasted just about the rest of the day, before slowing down a little bit before the close. I had a sell order for AUD-JPY, as explained in MACD divergences. It was placed just before the low of that day, 79.30. Price didn’t return to this level and order was cancelled on Friday. My CAD-JPY trade, however, was stopped out before the day was over, for a loss of a little over 100 pips.
I already mentioned it in one of the comments that even though the trade turned out to be a loosing one, the set up itself was very promising. I’d do it it again even situation was to repeat. Risks to reward ratio was good, too. No strategy is 100% successful and missed trades happen even is the set up seems “perfect”. Costs of doing business, like paying a utility bill or something of that sort. This was also the reason why I didn’t want to load up on all JPY pairs. After all, daily charts were used so one had to be ready for large losses.
Normally, after such strong show on Friday, markets tend to have few hours of continuation after Sunday open. Well, this time around there are news which could influence the market. Strong earthquake was reported near Tokyo, measured at 7.1 magnitude. It apparently didn’t inflict any severe damage, but this could change. Markets have funny way of reacting to unexpected news. I’m staying away from short term Yen trading for at least few hours after the open.
Friday’s wild price swings distorted charts to some degree. A lot of hourly chart are overextended in relation to previous few days. I’d like to see them settle down. It could be a day or so. Meantime, I will try my hands on a cross that doesn’t move too much lately. EUR-CHF also had a strong spike, but the swings, in terms of pips, are not large. Much smaller than earlier this year. For now price pulled back a little bit, leaving a well defined top. I’m placing a buy order at 1.5360, trying to catch breakout, if it happens. At the same time, another buy order is at 1.5290. I’m looking for very modest 50-60 pips movements for both of these trades.
To be perfectly honest, I don’t expect the earthquake news to be of any concern. At the same time don’t want to get myself into a guessing game over it. I will, however, look for opening gaps, as I always do on Sunday. Later on in the week I might return to trading EUR-CAD and maybe other CAD crosses on the long side. Will see.
Mike K.
The ramp up in the usd/jpy was just as strong as in the yen crosses. This breaks the mold of the recent past, where there was no volatility in the usd/jpy. What is your opinion of fading the usd/jpy ramp? It gapped 20 pips, not that strong, and is not moving.
The earthquake here was not bad at all and it hardly made the news this morning. Instead the arrest of former idol and actress Noriko Sakai (Ms.) for possession of narcotics was everywhere.
Keep in mind that this is the Obon week in Japan. There are no national holidays but it is traditionally a period where people take a week off and travel or go back to their hometowns. The market during Tokyo hours should be very quiet.
Vlad, maybe JPY will finally move more in tandem with CHF than USD? It is time to decouple that relationship.
When it comes to gaps, I’m looking for 40+ pips and don’t play anything smaller. Anything smaller doesn’t really give enough room to play. Also, due to differences between brokers, times of open etc, 10-20 pips could be visible on one platform but not really on another. Larger threshold tells me that this is indeed a gap and not just a peculiarity of the trading platform. Nothing interesting today.
Hi Paul, good to know it wasn’t serious. I wrote the post kind of early, before other updates. 7+ magnitude sounds kind of serious.
How is trading going for you?
I hope you are right. This 100 percent correlation, or inverse, in all asset classes, is just mindnumbing.
Second earthquake was a little bigger. No problem in Tokyo, but Shizuoka Prefecture had damage.
Trading is not going well!! Being on Tokyo time is not a good thing. None of the moves that happen during the Tokyo market have any staying power or follow-through. Especially after the decline in US unemployment last week people are so sensitive to US news. So I should really limit my trading to London and New York (which is my evening). Still learning!
Asian session is difficult to trade. I normally don’t take any short term trades during this time. Besides, that’s when I try to sleep. West Coast of US is also not an ideal place to trade from. You pretty much have to flip your schedule.
I cannot wait to see more of this fantastic topic. So much than it Ive never even contemplated. You sure did put the latest twist on something that Ive heard so much about. I dont believe Ive actually read whatever does this subject of the same quality justice as you merely did.