Saturday, May 13, 2017

Forex Gaps follow up (and short eurjpy)

At the end of April I wrote a post about many technical gaps on main fx euro crosses (eurusd, eurchf, eurgbp and eurjpy)

I wrote that usually these gaps in main crosses tend to be closed in short time. I admit that they are lasting longer than I thought.

My favorite position on the short was the eur/gbp and it's the only one that has closed the gap. I haven't traded eurgbp, because I already have a strategic Brexit long gbp positions since last year, therefore I didn't like add further risk on that idea.

After thinking for a while I decided to open a short on eurjpy. I dismissed the chf because of SNB is continuing to complain about Franc strength. I also avoided the eurusd because I have a structural long $ position already in portfolio.
The choice was the JPY. It's usually a "risk on/off" currency and being long equity ETF by models, the short eurjpy could be an hedge.



Of course is not going well so far....
I shorted eurjpy a bit below 123 and now the cross trades above.
It's stronger than anticipated, but I confide in the power of "gap magnet"..
I would have been definitively more confident if eurjpy never closed above 123.50 (an important resistance level), but I didn't use leverage and can sit tight on the chair waiting for developments.
The target is 118.50
Above 129 I could stop the short and place a sell limit order at a lower price if touched in the case after my stop is hit, price will begin to drop.



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