Free Profitable Forex Newsletter
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Another week went by, and most Fx pairs are still trading without a clear direction, except for perhaps, USDJPY. But even the uptrend in USDJPY may not continue for much longer from here. As we noted in our weekly Fx analysis, USDJPY is now at a major resistance area, so a reversal near current levels is a real
possibility.
In fact, the potential trade idea that we are going to discuss below – short EURJPY – is partially based on a turn lower in USDJPY. Given that EURUSD is in a gradual downtrend and is likely to extend further, a potential top in USDJPY could supercharge a bearish move in EURJPY.
Today’s focus in Fx is on the Nonfarm Payrolls report, which is expected to print robust numbers, with risks for upside surprises. This should keep the USD generally supported today and well into next week. Perhaps, one aspect to pay attention to regarding this USD bull trend, and to be cautious about, is that the dollar has now reached important technical areas against several major currencies and also gold and
silver. So, it’s questionable how much higher strong US economic data can take the dollar.
EURJPY: Possible double top around those highs in the 130s
EURJPY is in an uptrend; however, a momentum reversal play could be created in the following days or weeks. The intraday timeframes show a narrow rising channel formation. If it breaks to the downside, a fast extension lower could transpire as is quite often the case with such narrow channels in the Fx market. Once they break, the reversals tend to be steep. This scenario would yield a downside target of at least around 150 pips (the prior
lows).
Presently, the support line of this narrow channel stands around the 130.00 round number level. Therefore, a break below 130.00 is needed for this short EURJPY setup to be triggered (see chart below).
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Correlation Analysis - Why are we looking to sell EURJPY?
USDJPY is at a heavy resistance area, one which the bulls seem to lack the momentum to break through. USDJPY is also heavily overbought (daily RSI is at 79 and weekly RSI is at 74). Some downside correction is long overdue. If it occurs, and if EURUSD stays in its downtrend, which seems likely, then EURJPY should get a supercharged move to the downside.
The euro remains a weak currency in the current environment due to the slow vaccine rollout in the EU and the new lockdowns, while other countries are starting to reopen their economies. Thus, we should look for currencies to sell the EUR against. The US dollar is certainly attractive for this purpose, given that EURUSD looks set to decline further toward the 1.16 area.
But, if USDJPY soon tops out and even starts to decline gradually, EURJPY will probably come out as an even better short play than EURUSD.
Entry:
- Wait for a break back below 130.00
- Wait for a bearish break of the support trendline (presently at 129.80)
- Enter on a confirmed break of the above two technical factors
Stop:
Targets:
- 1st - 129.00
- 2nd - 128.50 (near the prior lows)
- 3rd - distant target toward the 127.00 area
Trade signals from the past week
- March 29, 2021 – Short Silver from $24.60 (in progress); trade idea sent on March 24
TOTAL: 0 pips profit in the past week
TOTAL: +3900 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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