I expect the easterly winds to push down the AUD/JPY this week. The Reserve Bank of Australia (recent dovish rhetoric) did not hike rates recently. Also the Chinese slowdown is putting overall downward pressure on commodity currencies.
However, I always rely on charts for navigable water, such as:
- a weekly high-test with cci divergence
- daily decelleration with cci divergence
- top of a head & shoulders pattern on the daily chart
The Japenese Yen, a safe-haven (funding) currency, may rise above the AUD a bit this week to offset the expected decrease in the DXY. I will be on the lookout for an updraft to the DXY to signal a flattening or decreasing of the Yen.
Use wide stops, in this case above JPY89. Cap risk at a predetermined limit that does not change unless something outside of emotion justifies the change. My target holding period is no more than 10 days, depending on the Winds.
trade closed: stopped out at JPY89.2 risk capped at -1.9% of equity.
High probabilility of the DXY rebounding off 93, good probability of weekend gap in price action to fall, good CCI divergence on daily & weekly. Conservative lot size and wide stop due to Fed meeting this week. Stop loss set above USD00.75
trade closed: stopped out at USD.755 risk capped at -1.1% of equity.
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