ForexSpirit

After a brief lull (due to waiting for my new forex account to be funded) I was back trading early last week.

I even kept the spate of recent changes going by making my first trade in my new account be on USD-JPY. To date I have kept a singular focus on exclusively trading EUR-USD. There have been numerous good reasons why I did this. Amoungst those reasons are the fact that I know the European and US economies better than other countries or economic regions. I have close ties to both areas which helps bring a motivational reason to bare. It also doesn’t hurt that EUR-USD is the most heavily traded currency pair.

I have kept up-to-date as much as I can with the other major currencies, namely the Japanese Yen and the Great British Pound.

The recent unwinding of the carry trade resulted in some strength returning to the Yen. I am not alone in feeling that the Yen is rather undervalued at the present time. I have thus been biding my time waiting for some evidence to present itself that the Yen is going to appreciate; I think that the recent move triggered by the credit crunch is the start of such a move.

I have set up a grid on USD-JPY between 112 and 118. Each quadrant is 150 pips and my one direction is short on this pair.

On Monday last week I entered a Q2 trade on USD-JPY at 114.97 and closed it out at 114.22.

I then re-entered on Wednesday at 115.22 with a Q3 entry. The US dollar gained strength going into the Bank of Japan interest rate announcement and I closed out half of the position at 116.22. After reaching a top around 117 overnight price retraced back to 116 lows and I re-entered at 116.22 to have my full Q3 position back on. Price has since meandered around 116, rangebound between 115.50 and 116.50.

There are lingering doubts as to whether the carry trade is really over or not. Recent moves in the other Yen cross rates, such as EUR-JPY and GBP-JPY present decent evidence that traders are at least testing the waters, putting back on some small carry trades. I feel that the greater probability trades are long yen, which is why I am sticking with my current strategy for now. These renewed carry trades can crumble quite easily at the next bad piece of news.

I haven’t forgotten about my main trading mainstay, EUR-USD. After the sell off in EUR-USD, again caused by the credit crunch and sub-prime woes, it was necessary to adjust my grid. I reverted to my previous grid parameters, which means that my grid once again lies between 1.33 and 1.37.

For most of last week I was waiting for price in EUR-USD to retest its recent lows around the 1.34 level. If price had dropped below 1.3450 I would have gladly gone long. Price brushed with the idea of breaching the 1.345 level but eventually gave up and went decisively above 1.35 instead.

Not wanting to miss out on the party I entered a Q3 trade at 1.3572 on Thursday. The better than expected US Durable Goods and New Home Sales data were ignored on Friday as the euro surged up to around the 1.378 level by the end of the New York session.

I felt that there was a good chance of a sell-off today, so I exited my position for 100 pips once the market opened yesterday afternoon. Sure enough, there has been a slow decline in the EUR-USD price all today.