Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
Coronavirus Fears Hit US Stocks; S&P 500 Wipes Out Over 2 Trillion USD In Market Value
The coronavirus is finally biting stocks this week due to the surging spread rate outside of China in the past several days. Most notably, Italy has become the epicenter of the coronavirus outbreak in Europe, and now the rate of infection is higher outside of China than within China.
Stock investors finally got scared this week after several weeks of complacency in the face of the virus risks. The US S&P 500 is plunging hard this week and is down by almost 10% from last week’s close.
But, despite all the jitter in stocks, the reaction in currencies is so far muted. This is an indication the markets are currently confused as there are many uncertainties in play at the moment.
Short EURJPY In This Risk-Off Environment Could Be A Winning Trade
The Yen recoupled with its safe-haven character this week, though the moves are very contained both in JPY and CHF compared to previous equity sell-offs of this degree.
In either case, since the Yen reversed all its losses from the last week, it is a reliable sign that the currency may now continue to move in the opposite direction (Yen strength), especially on a further escalation of coronavirus fears and selling of stocks.
In the meantime, our long EURUSD trade that we sent last week, worked out beautifully, and the pair reached the target at 1.10 today for a profit of +185 pips. However, further gains are unlikely to come easily, especially now that the coronavirus is hitting Europe and Italy hard.
In fact, this should only make matters worse for the already weak Eurozone economy, thus the Euro may turn down again soon. For these reasons, the EURJPY pair seems like a potentially attractive short trade.
Technical Analysis EURJPY
Given all the puzzling price action in JPY crosses in the past week, we are turning to the EURJPY technicals and waiting for some clear patterns before triggering a trade.
Looking at the short-term charts, the 4-hour EURJPY chart shows an overall downtrend and a rally right now that appears to be a consolidation. The pair reached the 121.00 area today, which is strong resistance. The initial attempt was rejected here, but a more convincing bearish signal here will be preferable.
For a higher probability trade, look to sell on a bearish breakout of the small ascending channel. The support trendline stands at 120.25. A bearish breakout of this trendline should signal further downside, potentially leading EURJPY to the 118.50 lows again.
The technical situation is shown on the chart below:
- Look for the support trendline of the small ascending channel to be broken to the downside (trendline currently in the 120.30 - 120.25 zone);
- The fact that the price is getting rejected at the 121.00 area is in favor of this trade; a breakout of the trendline should provide higher confidence in this trade
Stop loss:
- Look to place the stop above the entry pattern (that would depend on the way that happens when it happens);
- but EURJPY shouldn’t return above daily resistance trendline (120.80) if such a bearish breakout will work
Targets:
- 1st - 119.50 area
- 2nd - 119.00 area
- 3rd - 118.00 area
- Consider that these are wider areas (+/- 10 - 15 pips) as highlighted on the chart;
- Also, be ready to book profits on bullish signs if a possible reversal happens before the targets are reached
Trade signals from the past week
- February 21 – Long EURUSD from 1.0815, target reached now at 1.10 = +185 pips profit
TOTAL: +185 pips profit in the past week
TOTAL: +2735 pips profit since October 1, 2018
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Thank you!
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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