Again, this Friday turned out to be a huge trading day. As I mentioned in a previous post, Fridays are normally reserved for low volume profit-taking, traders/institutions liquidating their positions in anticipation for the market close. The past few Fridays have seen absolutely huge moves, and have been easily trade-able; in other words, not a lot of PA chop/spikes...a smooth definable trend.
This particular Friday saw the continued dissolution of the Bank of Japan's latest (BoJ) monetary intervention/QE campaign. When it first intervened, the Yen strengthened by a few hundred pips (their implicit goal), but there is just too much fiat out there folks. The combined printing presses of the West soon out-diluted the Yen, forcing its fiat value down once again (opps, ryhme...but it's Friday).
If you have been following my other posts, you would know that we were closely watching PA (price action) and its relationship to the 300 EMA. Since early Thursday's trading session, PA broke the 300 EMA, and has been below it ever since (indicative of a bearish trend). In today's early trading session, PA briefly flirted with the 300 EMA, playing above the 100 EMA, but failed to firmly break through. I recommended that shorts were to be held until the 300 EMA was broken (which it has not been).
Since Thursday's 300 EMA break, EUR/JPY has fallen by more than 140 pips, and now rests approximately 90 pips below the initial break; not a bad trade to have been in. Remember, my "10 pip TPs" are guidelines; if you feel comfortable with following/reading moving averages, feel free to stay in the trade as long as you believe it to be profitable!
My "prognostication" for this pair is that there will be continued intervention by either the BoJ, FED (indirectly) or the ECB...or a combination of efforts from all three. Again, watch PA and the 300 EMA. It's still very much in the downtrend, and until we effectively cross the threshold of the 300 EMA, my recommendation is to hold short. Next week's trading session could see a return to the upside however, so keep a close eye on early Monday's session.
Have a great weekend!
- PA has remained below the 300 EMA from Thursday into Friday, hold your shorts.
- BoJ's intervention(s) have failed, expect future interventions
- 90+ pips gained from 300 EMA break on 10/8/20120 @ 3:45 AM EST