Another trade that is likely to be much less neutral is the one on the USDJPY. As a reminder, I locked last month a profit on a long position carried from roughly 84 to 85 and I put back on a long, bigger than the previous one, on Friday as the pair was flying after the NFP at the price I let it, around 85. This morning, my stop loss was about to be triggered as the pair visited the neighbourhood of the 84-mark after weekend comments from Japanese Fin Min Noda admitting that it would be "difficult" to gain support for international coordination to halt the JPY appreciation. As I write the USDJPY is back to around 84.30, at the levels we've seen during the last week. Well, I'd say that I've had better entries...
To explain why I got back on the long USDJPY train, I could argue on a macro side that if Ozawa, aka "The Destroyer" aka "the Shadow Shogun" wins the Democratic Party of Japan (DJP) elections on September 14th, he could make "actively" huge investments "abroad [that] would be effective in controlling the rapid yen rise." and it looks like this chap doesn't give a damn about what the US or Europe could think about a Japan intervening alone to weaken the JPY. Of course, I've no view on these elections (that's the topic of an article in the Economist this week: Self-Destruction , that argues that "For the good of Japanese democracy, not to mention its own future, the DPJ must reject Mr Ozawa and all that he stands for") and I could argue that my play here is more a speculation that others guys after me will speculate that Ozawa may win and that could weaken the Yen...
I could argue all this but actually my position has been mainly driven by an experiment on my trading system: I'm experimenting here a pyramid system, still under development but I suspect it could lead to massive gains. A few more explanations at that stage: a couple of weeks ago, as the USDJPY reached a 15-month low (I didn't it was a low at that time...) I decided to initiate a long position for a good ride, say 400-500 pips, the USDJPY at 88-89, with the intention to pyramid all the way up, averaging up my purchases. I first entered at 84 and the currency pair went in my direction and I was able to take a profit of 1-ATR at 85, then I'd been waiting to get back on the position. After I got out of my position, if the pair kept on increasing, I'd take it back with a bigger size above where I let it at 85 (say at half an ATR above) : I'd have started to build my pyramid, I'd have missed 0.5-ATR of the move but I'd still be on the trend. Now if after I got out at 85, the pair decreased: good, I've sold at a top and I'd wait for it to come back (if it comes back) where I let it to put on the position back, with a bigger size (that's what precisely happened): that’s a kind of “whipsaw re-entry”. Be careful, Pyramid system under development, Pyramid under construction, guys!
Some TA (once again stands for Technical Analysis and not Tits and Ass) to end this post: I read this morning on the analysis from IFRMarkets, that the Kijun Sen line at 85.24 stopped the advance of the USDJPY on Friday. Don't worry, I don't understand neither what I just wrote and the chart above, I put it here because it's pretty colourful and I find it pretty cool... If like me this morning, you're wondering WTH the Kijun Sen line is, it's related to the Ichimoku chart system and it's the (HIGHEST HIGH + LOWEST LOW)/2 for the past 26 periods and that link could be of interest for you. Pretty Interesting I've to confess, at first sight, I guess that charting system should work not badly and it’s worth to have a closer look.
TLofT be with You.
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FYI As this post is published: SPX 1104 (C) // SX5E 2754 // NKY 9301 // DAX : 6155 // EURUSD 1.2880 // USDJPY 84.22 // XAUUSD : 1250
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