[B]My picks:[/B] Pending Long AUDJPY Breakout
[B]Expertise:[/B] Combining Money Management with Fundamental and Technical Analysis
[B]Average Time Frame of Trades:[/B] 3 days - 1 week
While the momentum in risk appetite has ebbed for the currency market, this has not yet translated into a reversal in sentiment. As such, my short position on CADJPY from last week has fluctuated from profit to loss on a number of occassions. Ultimately, for this pair, resistance at 89 has been respected; but swing lows are still rising. In fact, the first bullish reversal after this position was entered was instigated just 10 points above my first target. at 87.25. Without a meaningful break in favor of my position, congestion will support the bullish bias that defines the longer term (since late January) and shorter term (since mid-May) trends. If there is not a break in favor of my position before the weekend, I will either reduce my risk or completely remove my trade.
In the meantime, I will look to partially hedge my short risk position with a setup for a potential bullish breakout for AUDJPY. Not only does this pair have a direct correlation to risk trends; but it is fully supported by yield and growth considerations. Considering the yield differential between the two and the clear relative strength of the Australian economy, there is a strong underlying fundamental current. Preparing for a breakout is difficult as either you have to speculate early and jump in without the actual break or you have enter late and set a wide stop to avoid a costly false surge. I am deferring to the latter. My entry orders will be placed at 80.05 (just above the psychological level) and my stop will be set below the short-term rising trendline. This will require position size adjustment to make my notional risk acceptable. My first target wil naturally equal risk and the second will be set below the 61.8 percent Fib of the July to October 2008 decline at 85.45.