Free Profitable Forex Newsletter
Hey! This is Philip with this week's trade idea of the Free Profitable Forex Newsletter!
In light of the busy trading week and the jam-packed calendar (ECB, BOE, NFP, etc.), we are considering a tactical EURJPY trade setup for this week’s edition of the Fx newsletter. We are looking for entries at higher levels (maybe with a pending order), aiming for a tight
stop and a hefty risk-reward ratio. This should help to minimize our risks in the current volatile week.
Without further ado, let us get right into the charts.
Looking to enter short EURJPY at higher levels
January was bearish for EURJPY, unsurprisingly given the strong correlation to risk sentiment and major stock indices. The distance from the January high to the low is around 340 pips, while the last leg down from Jan 20 to Jan 25 is around 180 pips.
This week so far, we are seeing some reversal in the risk-off moves, including in stocks. EURJPY is also recovering, but we are not completely out of the woods yet.
The EURJPY consolidation takes the shape of a bearish harmonic bat pattern, which can potentially give us an opportunity to join another risk-off wave, should it come.
And, even if another broad risk aversion sell-off doesn’t come, the bat pattern can still give a successful trade (see trade plan below).
As you can see on the chart above, the harmonic resistance area of the bat pattern is 129.78 - 129.92. This is based on the special Fibonacci relationships between the
retracements and extensions that define this pattern.
Moreover, the 50% Fib retracement from the January move from high to low exactly coincides with the harmonic area at 129.92. So, this 129.78 - 129.92. confluence Fibonacci zone is robust, and some price reaction seems highly likely if it is reached in the coming
days.
Harmonic patterns provide very distinct and precise entry, stop, and target levels. Trades taken are successful if they reach the 1st target of the pattern, which is the 38.2% Fib retracement of the CD leg. Those are described below for this EURJPY trade. If you want to learn more about how to trade the harmonic bat pattern, check out this post at fxtradingrevolution.com.
Entry:
- Wait for the EURJPY to reach the 129.78 - 129.92 zone, and then look to short the pair on the initial price reaction here. Note that it could go a little higher than the 129.92 level, but it must not
exceed the 130.09 starting (X) point of the harmonic bat pattern (this would invalidate it).
- Alternatively, you can also place a pending order at the 129.78 - 129.92 zone and enter automatically as soon as it’s reached.
Stop:
- Above the 130.09 high;
- the price should not exceed this level even on a brief test, so the stop doesn’t need to be too wide above this level.
Targets:
- 1st - 38.2% harmonic Fib target at around 129.30
- 2nd - 61.8% harmonic Fib target at around 128.90
- If the bearish move potentially accelerates, the position can be held onto beyond the above two targets. In this case, use larger timeframes such as the daily to determine other targets
down.
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Trade signals from the past weeks
- January 26, 2022 – Long USDCAD from 1.26, stop below 1.2560 lows (open in progress); trade idea sent on Jan 21
- January 26, 2022 – Short EURUSD from 1.1260, 1st target reached at 1.1150 = +110 pips profit (rest of position now also closed as the move reversed this week; new short trades could still be appropriate after the ECB tomorrow)
TOTAL: +110 pips in the past week
TOTAL: +5185 pips profit since October 1, 2018
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Thank you!
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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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