Daily Observations: May 14, 2013
- Short AUDUSD (1/4) from 1.0150, Stop at 0.9980 (+170-pips locked-in), Target 3 at 0.9900 (+250-pips), Target 4 at 0.9860 (+290-pips) [final reward:risk 1.61]
- Long USDJPY (1/2) from net 100.07, Stop at 101.10 (+103-pips locked-in), Target 2 at 102.00 (+193-pips) HIT, Target 3 at 103.20 (+313-pips) [final reward:risk 2.32]
Recently Closed Positions
- (05/13) Short AUDUSD (1/2) from 1.0150 at 0.9980 for +170-pips.
- (05/13) Long USDJPY (1/2) from net 100.07 at 102.00 for +193-pips.
- (05/14) Short AUDUSD (1/4) from 1.0150 at 0.9900 for +250-pips.
Typical Time Frame: 1-day to 1-week
Further Australian Dollar weakness on the back of the government's FY2013-14 budget has achieved the third target on the AUDUSD short initiated last week, netting +250-pips on 1/4 of the original position. Assuming the last 1/4 of the short AUDUSD position is stopped out at 0.9980 or the limit is hit at 0.9860, my net-profit on the entire trade will be between +190- and +220-pips.
I'm close to adding back in on USDJPY, now that it is behaving like a breakout/momentum pair once more. Per my full time frame continuity EMA crossover system, with the 4H and daily time frames issuing bullish signals (8-EMA > 21-EMA, >200-DMA on both time frames), a 1H bullish crossover will issue a buy signal in USDJPY as long as price holds >101.75 by European market close on Tuesday.
Something to watch for: the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is showing bearish RSI divergence, with price eclipsing the mid-March highs but RSI not confirming. Accordingly, we need to be on alert for a naer-term technical pullback. In such an event, and assuming the Yen remains weak, I prefer long EURJPY to long AUDJPY or GBPJPY on a recovery. If the Yen corrects as well, AUDJPY and GBPJPY are likely to bear the brunt.
I also host a weekly Live Trading Q&A in DailyFX Plus, on Tuesdays at 07:15 EST / 12:15 GMT, in which I delve deeper into my positions and thought processes behind my analyses. [View the archive of my most recent webinar here]
--- Written by Christopher Vecchio, Currency Analyst
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