Is Friday's Flight to Safety the Beginning of a Trend?

[B]My picks:[/B] Pending NZDJPY Breakdown (short)
[B]Expertise:[/B] Combining Money Management with Fundamental and Technical Analysis
[B]Average Time Frame of Trades:[/B] 3 days - 1 week

When combining technical and fundamental analysis; it is impossible to give them equal weighting for evaluating and placing trades. Sometimes, a technical break spurs us into action even if the fundamentals didn’t necessarily support the move or a build up in pressure from event risk can precede a move on the charts. There is a unique balance between the two with each new scenario; and finding this equilbrium is often the key to success for discretionary traders.

Looking for a balance between tech and fundamental analysis is what I am doing at the beginning of this week. Once again, risk appetite is in question after Friday’s sharp drop in sentiment-based markets. Among the victims of this shift where commodities, equities and the yen crosses. However, the drive and trend to such a move is what should concern us. A tentative break of a six-week rising trend and short-term support range at 95 for USDJPY presents an opportunity; but without follow through, it could just turn to a broader range of chop. There are few foreseeable events that could catalyze momentum outside of pure market sentiment itself. And, to ride such a trend, we would need to see breaks from other critical markets or the development of trends from key asset classes. Since this will come with time, I will hang on the sidelines with a setup that develop along with the market while producing a notable technical shift on its own. NZDJPY will fit this role nicely. This pair is highly sensative to risk; yet it has not jumped the gun on market progression. I will monitor the rising trendline pulled from lows going back to February, the 50-day SMA, pivot and Fib retracement confluence around 59.20/50. Should we see a higher time frame close (4-hour, daily) below 59.25/00, I will look across the market and access risk levels. If the ingredients for fear be there, I will place a short and set a wide stop above the wide congestion zone we are currently testing and set my first target equal to risk. My second target will aim for something around 55. I will trail the stop on the second half of my position when the first target is hit to improve risk.