- Long EURCHF from 1.2018, Stop at 1.1990, Target 1 at 1.2500, Target 2 at 1.2750
Recently Closed Positions:
- Closed Short EURAUD from 1.2720 at 1.2450 for +270-pips (Monday)
- Exited Long USDJPY from 83.88 at 83.55 for -33-pips (Monday)
Time Frame: 1-day to 1-week
This was a quiet week of trading for me overall, as I was feeling a bit under the weather and don't like to trade when I'm not "100% there," mentally speaking. With that said, the Short EURAUD trade was closed on Monday for a solid +270-pips, a trade initialized back in mid-December, while my only stab at trying to buy the dip in USDJPY was stopped out; more prudent analysis would have seen the gap at the weekly pivot and placed the stop below there (hindsight is 20/20), as the pair has traded well-above the original entry point.
The Japanese Yen is the biggest focus this week: the January 22 meeting is around the corner as markets price in new ultra-dovish policies from the Bank of Japan. Put simply, the Japanese Yen is a very oversold currency (highest weekly RSI in USDJPY since December 2005; highest weekly RSI in EURJPY since December 2006). In fact, according to the CTFC’s COT report, net non-commercial futures positioning is at its shortest level since July 2007; the short trade is very crowded. A look at the weekly chart shows that the USDJPY hasn’t posted a negative period since the first week of November. Accordingly: seeing the Japanese Yen bottom (xxxJPY pairs top) after the BoJ would not be surprising; the conditions are ripe for a significant turnaround. I'm watching for an exhaustion point, especially considering that another round of US debt negotiations is around the corner.
--- Written by Christopher Vecchio, Currency Analyst
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