Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
Our last trade idea on CHFJPY worked almost exactly as we laid it out here in the newsletter, and it hit the first target at 107.00 for a gain of around 200 pips. The Japanese Yen remains an attractive currency to bet on this week too, especially that stocks are extending the fall.
Time for another wave of risk aversion? - Short EURJPY Is An Attractive Trade
In this regard, EURJPY remains one of the best short plays in the current environment, and especially if risk sentiment worsens and risk aversion flows increase further. With the large drops in the S&P 500 index this week, it seems that EURJPY has already started the next bearish leg to the downside. We discuss the technicals of EURJPY below and the potential targets and entry/stop levels.
EURUSD & USDJPY both moving gradually lower - Means EURJPY should also follow them lower
Now, to get a better understanding of where EURJPY might be heading, we can examine the EURUSD and USDJPY pairs separately. Taking a look at those two pairs, we can see that both are gradually moving down and are likely to continue in this direction further.
In particular, the economic data from the US this week is of interest. Weakness in the data will cause a sell-off in the Dollar, but still, in such a case, USDJPY would likely fall more than EURUSD would rise - pushing EURJPY lower also.
The weak ISM Non-Manufacturing report today confirms this notion as EURJPY was also pushed lower, not just USDJPY. However, the big focus is, of course, on the NFP and other US employment reports tomorrow.
- USDJPY seems ready to take a new bearish swing to the downside. Especially if tomorrow’s US data is also weak, USDJPY will likely accelerate to the downside as expectations for more Fed rate cuts will intensify.
- USDJPY is already breaking the 107.00 support and could embark toward 105.00 on further USD weakness, or a further slide in stocks.
- EURUSD, on the other hand, remains in a bearish trend and looks set to reach the 1.0800 support area that we discuss in our weekly analysis here.
Technicals: EURJPY in a downtrend since the beginning of 2019
The technicals are generally well defined here, with a large channel inside of which the downtrend has traded for the whole year of 2019.
Switching to the 4-hour chart, we can see more details of the price action. There is a smaller bearish 14-day channel within the larger (more significant) yearly channel, which is also well-defined, as shown on the chart below.
Judging by the overall fundamentals and technicals, it’s quite possible that this smaller bearish channel will be broken to the downside - accelerating the bearish trend. Hence, looking to sell EURJPY toward the resistance trendline of this smaller channel (118.00 area) could offer excellent opportunities to position for potentially large bearish moves.
Look to enter on bullish retracements (rallies) toward the 118.00 resistance trendline as described above. It’s unlikely that the bulls can push EURJPY much higher beyond 118.00, but it’s quite possible that such a rally could occur and offer a selling opportunity.
Alternatively, you can enter short on a bearish breakout of the small channel (better visible on the 4-hour chart). However, keep in mind that this would be a riskier entry and will need to be underpinned by risk aversion flows and overall strength of safe-haven assets in order to have greater confidence that indeed a big bearish move is underway on EURJPY.
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1st: Look to sell a rally toward 118.00; likely to allow a tighter stop
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2nd: Enter short on a bearish breakout of the small channel (currently that is below 117.00); likely will need a larger stop and will require more confirmation from fundamentals and technicals against a fake breakout.
Stop loss:
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1st: Above 118.00 in the 1st scenario
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2nd: Above breakout point in the 2nd scenario; the 117.50 - 60 area looks interesting in this regard. Still, however, this stop level needs to be considered at the time of entry, so a different level might be more appropriate according to the situation.
Targets:
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1st: - At the 117.00 support trendline of the small channel - This could be an initial target in the 1st scenario (of entry around 118)
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2nd: Main target toward the support trendline of the channel (presently around 115.00 - 114.50 area);
Trade signals from the past week
- September 27, 2019 - Short CHFJPY from 108.95, 1st target reached at 107.00 = +195 pips profit;
TOTAL: +195 pips in the past week
TOTAL: +1960 pips profit since October 1, 2018
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