USDJPY to 110 and eventually 200: a few cases for staying Long or Buying on a Dip, or Adding to a Long Position

This is my Daily Chart for USD/JPY, and though I did not post this idea originally when I started establishing my long position months ago, there is new information pertaining to the possible future, and some new technical developments to merit a look back and a look forward.

USD/JPY Daily Chart taken September 09, 2014 at 23:20 EST

When I started establishing this position, I had recognized both the trend from 2012 (I bought much lower that year and cashed in because I did not recognize the opportunity (below 0.80 -which I am still kicking myself for). This currency pair has gone up since then, and was playing between 101 and 103 when I decided not only to start buying, but to hold (a bit unusual for me). In hindsight that previous area of range 100.70ish to about 103.10 now serves as a deep base for the move higher.

I began buying at around the 102 level, and on dips towards 101.50ish, and then even a few tiny additions in the 102/103 level. Now, I should have bought more on the break of 103.10 which was a plan, but instead I trimmed my position to take a minor profit. Nevertheless, I am currently long from 101.85 (Average contract price).

What has gotten interesting as of late is that downward sloping red line from left to right labled (16 year bearish (-ve) trendline...). This is trendline has been indicating that in fact USDJPY was headed downwards over a period of 16 years FXstreet article indicating major resistance started from 16 years ago with tops in place from 150 down to 124,  which by extrapolation put resistance to this trend at about 105.50ish. Price is now not only above 105.50 (closed on daily at 106) On Friday September 06, 2014 and the weekly candle had only a small wick, which technically establishes a daily and weekly break of this 16 year trendline. A monthly close above 105.50 would probably confirm price continuing higher.

For me personally, I am now cautious to add to this position because it is now at highs not seen since October of 2008, and because I have other trades in play as well (margin is precious).

Nevertheless, I have come across some interesting posts today that speculate that price will continue into the 110.00 / 112.00 area before year's end, for example Citi's Case for establishing long USDJPY

This article illustrates Kyle Bass' case for USD/JPY to reach 200 (Yes, pretty much doubling from here) in the next 3-5 years if you have the intestinal fortitude.

A few minutes ago, I came across a article adding to Japan's economic woes on Zero Hedge, as Japan began Monetizing Debt at Negative Rates which could begin the slow process of crashing the Yen.

Another piece of the puzzle is the potential United States Federal Reserve (ironic name considering it is a private bank, but never mind that) to schedule rate hikes in 2015, which would only add fuel to this position as it would become a proper carry trade in full.

After reading all of this and watching the exciting price action over the last couple of weeks, I myself have to take time to pause and reflect on the possibilities here, but I have begun to consider adding to my position on breaks higher should price continue to elevate. Another case, is to try to buy anything approaching that 16 year trendline should price go towards it.

Naturally, none of this information comes with anything close to a guarantee.

Knowing Which Style to Play and When to Play it

It has been a strange couple of years for me, my head has been in a serious fog for a while and the last couple of years have been bleak. Lost a fairly decent job a couple of years ago, and this year I lost two very good friends who passed away. To make own matters worse, I isolated myself from my remaining friends. Though I did make some seriously bad mistakes and still do, both in life and in my trading, I have learned a few things about both and about myself.

Sometimes I make the same mistakes over again, because well, a painful lesson is often my best teacher, learning it twice or three times creates a deeper impression.

I have learned the strength of a diverse trading style, with contracts spread among several currency pair trades, rather than placing everything in one idea. This used to put immense pressure on me as my progress would be either halted when one idea failed, or stalled while that idea languished in limbo, or reversed as the idea turned against me and cost me more than I should have allowed.

The lesson is that no one idea should or can realistically make a person that trades wealthy; it can happen under the right circumstances, but it it not likely and therefore not highly probable.

Someone that studies and takes positions in the market with an aim to be an "expert" or at the very least professional about it should have more ideas to employ than they know what to do with as they progress, then it is a matter of choosing the right ones, in other words, best risk/reward for your efforts - life on the other hand is not so simple.

When I realized sometime over the last year I had issues with the way I operated, I tried to take steps to improve myself, and what I did was I took the margin I had left over (from carrying some -ve positions) and choosing a bit more carefully where I put my money, and by taking several months to use smaller positions and also to scale into said positions, by buying or selling in blocks, at different levels, rather than the whole position at once, and also waiting for price reversals at extreme levels and then having the patience to wait for that tiny position to be worth something substantial (weeks, and months as opposed to hours and days), which means essentially swing trading with small amounts to reduce the amount of stress I carry day to day. It has not worked out perfectly but I am still a human being with some degree of psychological issues - so bad I went to see help.

Over the last week or two, I have tried to take day trades or larger positions (with recently freed margin), and made a few mistakes and a few good decisions. I am not sure if I will be as fast as I used to be, as this takes good health, an even emotional state (something I have not had in a long time), and plenty of rest. Trading when your life is in a survival mode is difficult, and I realized that I have been in that way of thinking for the last year and a half.

Baby steps it seems, for now, in life and in my trading, and if I learn to run again, it will be nice, but I need to make more progress before that can happen, and continue trying to cut out the bad behaviors that mess me up. I am not trying to be perfect; I will settle for better though.

Trading financial markets should be something you approach with a happy and healthy attitude, but then I realize, so should life.

EURCHF Update, Potential for Intervention, 240 Minute (4-hour) Chart, Analysis, Order Plan, News, and History

I have been reading and studying possibilities based on my latest idea, buying (long) EUR/CHF above the 1.20 level. The first and foremost fundamental reason for this trade is the theoretical "floor" that the SNB (Swiss National Bank) has set for this currency pair. The premise of this floor is that in order to maintain (inflation / deflation?). The last time 1.20 came into play, this currency pair touched a low of 1.2012 in June of 2012 (numerically poetic?). This happened on June the 9th, of 2012, at 1:02 pm. The Swiss National Bank promptly intervened by selling their own currency / purchasing foreign currency thus driving the exchange rate higher on the pair.

Over a period of weeks, several interventions, to keep the 1.20 minimum exchange rate in place, the last occurring in September of 2012, the pair had a sustainable rally.

After a period of 9 days after the last intervention, the pair touched a high of 1.2180. Over a period of two weeks, once the rally was over, the pair retraced down to 1.2037 over a period of 10 weeks. After which additional movements led to the EUR/CHF pair to move up to 1.2571 (peak) on January 22nd, 2013, and later to 1.2648 on June 22nd, of 2013 (which was were to take profits if you were long this pair at that time).

Obviously, the profits on the successive movements for this pair, occurred well after the last intervention, where patience would have been the key to getting the most out of the investment (months).

My idea on this pair (I have already started purchasing) and laying the groundwork and conditions for additional purchasing (with a small fraction of the margin I have available) is to scale into the investment. Rather than purchasing at a set price with my entire allotment (the cash/margin) I intend to use, I am placing several orders to purchase as the price drops closer to the 1.20 "floor". I have started purchasing as of 1.20562 on August 28th at 06:04. I have additional contract orders to purchase in increments of roughly 10 points below said purchase price down to the 1.20 area.

As illustrated in this 4 hour chart, my pending orders are placed and will not be activated unless the price visits those levels, whereupon additional contracts are added to my position. Should those areas not be touched, my risk level remains even, and the potential reward is also remains even. Should intervention occur successfully, additional contracts could be purchased as the currency pair moves higher, but this would have to done carefully. My stop loss is established, but fairly lower that the 1.1950-1.20 mark where I imagine stops placed by other institutions and traders to have them, (my policy is to not publish my exact stop so that I do not feed the algorithmic traders/black boxes).

So why the floor of 1.20? According to a press release the risk of deflationary pressure on the Swiss Economy increases below this level. Fair enough.

There is a rumor that the SNB will introduce additional measures to maintain their exchange rate with the Euro. First, the possibility of negative rates where the SNB imposes negative interest rates to discourage foreigners from holding Swiss Francs (CHF). This has been done already, during the 1970s. Such an event would make holding Swiss Francs more expensive, and thus encourage other currency pairs to appreciate vs the Swiss Franc over time.

Another rumor is that the SNB will raise this line in the sand from 1.20 to 1.25 or even 1.30...raising the possibility of a profit of approximately 500 to 1000 pips just for buying at or near 1.20, mind you it is just a rumor, and the amount of CHF selling that the SNB would need to manifest a move like that and maintain it is staggering, but again, trading is about ideas followed by action, with no guarantees.

The other side of this trade probably has a mess of Stop-loss orders on the EUR vs the CHF below 1.20 where positions would be liquidated, thus driving the currency pair down even further below 1.20. Should intervention not occur as planned or even fail, I have skimmed one academic paper that states that the currency pair would be trading about 1000+ points lower, say at 1.10 or lower.

This is a game of patience, and it is not for the faint of heart.

Possibly Looking to Pick up An AUDJPY Contract if My Price is Met

Looking at AUDJPY ~ I would love to have bought in the high 80s the last time it was in that vicinity - oh wait, I did, but I did not hold. My living circumstances at the time contributed to a poor trading environment, but that is another post altogether.

Looking at this hourly chart for AUDJPY, I am looking at the area below current prices as a possible buying point. If I were more aggressive, I would buy now and say the hell with it, but that latest hourly candle is looking like a hammer, which means down further possibly. The 92.60-90 area could be a great buying opportunity as a potential demand zone, if it holds and moves back up into the next supply area at 0.9350ish. I have a pending order at this point in that area and I am watching closely the data coming up in the next few hours.

Moving Done, Unpacking Started, Trading Slowly at First ~ NZDCHF Looking good as a small carry to join my USDCHF

Moving done, unpacking started, and the trades are starting. I am kicking myself a bit for jumping the gun on my EUR/USD short today ~ taking a measly 15 pips before the real move started, same with EUR/JPY, but that one did not travel as far down. Still, a few pips added to the account is better than a kick in the butt...as I have learned to tell myself when this sort of thing happens. Another way of putting this into perspective is that my life just changed drastically and my trading was only off-line for about 3 days ~ a bad three days to be out being month end an all, but C'est la vie!

I have not traded this pair at all, and NZDUSD is still a bit expensive for my liking, I would love to buy that in the high 70s and hold it, so I will do this instead as it has come down quite a clip in the last quarter and looks to be basing around the 0.74 handle.

I am only playing on contract, and as such it gives me almost nothing to play with in terms of multiple scenarios. I would love it to bounce back above 75, but I think that may provide some near-term resistance. RBNZ rhetoric should also provide some talking against this position, but I think a trip to 0.7470-90 could happen relatively quickly, say a couple of days. I will be watching for that level and would probably get out on a significant retrace if it goes up and turns back down below 75; in the meantime, it is a relatively stable carry trade. First hurdle would be 0.7030-45 on this one.
 

EURUSD Selling Opportunity Weekly Bollinger Band Touch

I am a breakout trader and I am a range trader, which strategy I use depends on the situation. With the way I have my Bollinger Bands set up, I rarely see a touch on these, and when I do, I take the opportunity. I do have a stop here on this sell, but it is well above 1.38 which I think would be the next resistance area on EURUSD as the currency has now made a new high for 2013. I am selling at 1.3760, with the objective to be decided over the next day or so, should my stop hold. Should price reverse in the next day and start heading lower this makes for a decent swing trade setup. As a supporting factor, the RSI on EURUSD is not matching the recent strength of price action, therefore, this could be the start of a bearish divergence signal.

Trading On The Go ~ I Move In Four Days

I had the intention of not trading during the last week and this week as I find myself in transition, but then, I make the mistake of opening my charts and seeing opportunities at every turn. I had read somewhere that you should not trade when things are unstable in your emotional realm ~ but that is how life is and if I were to only trade when things were stable, I would have too much time off. I found a good compromise in that I open smaller positions than I can when my life is in extreme flux to compensate the stress load and the results are good! In fact, by playing smaller positions, I've learned to do more with less, as the saying goes. Over the last couple of days, I had a tiny position in EURUSD -ve which I cashed in this morning for +8 pips, USDJPY +ve which I cashed in for +41 pips, and a USDCHF +ve which I cashed in for +2 pips. 50 pips is not bad considering I did not plan on trading at all. Since that, I've re-opened a long USDCHF at a better price and I am sitting in a coffee shop right now, planning the rest of the packing I have to do and the move I have scheduled for this Friday.

The Value of Mobility

Just recently, I found myself away from home (and therefore my desktop) for about three weeks out of the last seven. I did have prior knowledge so I have a laptop. This is about the first time in ten years since I have owned a laptop and I must say that considering what it has done for me, along with the proliferation of Starbucks locations (and their free WiFi service). I am not yet the type of trader that can leave my positions running for days without checking and managing them, so the ability to operate when I am not at a desktop computer is invaluable for me. I know, I could still check my phone and call in (I won't talk about the lousy phone app that my broker provides), so instead I'll just say that I am happy with my new mobile solution. There is nothing worse than a missed opportunity, and this should cut down on those.

USD/CHF Ichimoku Kinkō Hyō Asian Session

I am only beginning to start using Ichimoku in my analysis, certainly not yet for entries, but I think I'm going to start using it more. USD/CHF is now challenging 1st level of resistance in my view. After going below 0.9100 a few times in the last several days, the pair has managed to carve out a temporary base at 0.9090-0.9110 and is advancing on 0.9130-40:

Slightly bullish, but cautiously considering the recent drop. In my view, if it goes higher, the next test would be 0.9170-80, above here, gains can accelerate. Aside from the move up in price, on this chart with Ichimoku cloud, the Tenkansen line (blue) has just crossed the Kijunsen line (green) in the last 4-hour candle; a sign of an impending move up if things hold up.

USD/CHF Update

Last few hours look semi-constructive USD/CHF to go higher:

More USD data in the next hour could change this very quickly, but an attempt to break 0.9130-40 resistance may occur in the next few hours.

16:09 Update...up to 0.9129/27 near end of day.

USD/CHF Attempting Retrace above 0.9100

EUR/USD has fallen from the highs this morning on worse than expected IFO data, and is now below 1.3500 again, as this pair is inversely correlated to USD/CHF, the latter is moving up off of it's lows of .9080 from two days ago. 60 Minute chart:

Any long positions would probably want to keep a relatively tight stop below 0.9180-70, but an earnest breach of the 0.9100 handle would probably invite more sellers and stop-loss selling for a target of 0.90 or lower. On the other hand, a move above 0.9120 would target the 0.9130-35 highs of September 23, 2013, beyond which we have 0.9175 or the 0.250 %  Fibonacci retracement of the post FOMC drop from September 18, 2013 after the lack of Fed Tapering in September was announced. Going long here makes sense if 0.9130 is taken out convincingly for a move back above 0.92 in the next day or two. I am long from 0.9110 with a small position.

USD/JPY set to try for the 99 handle once more?

Taking a view of the hourly, and in regard to last night's Nikkei sell-off, should the mood continue, 0.99 could be venerable for another challenge in the next few hours:

If I were to sell, I would be watching the Nikkei for validity for a further move down, and keep a tight stop just shy of 100.00

AUD/JPY Looks Like a Triangle in the Play

Earned money on this last night, while I was asleep, buying in again, this time lighter contract, because I'm relaxing, and I've hit my monthly goal.

Went long at 82.10, hoping to catch 60 - 65 Pips, risking about 20 pips. Japan's Aug. Imports fall 5.4% from a year earlier, not sure if this is bad for risk or bad for the YEN, or one might cancel the other out. I'll see in the next few minutes on the reaction.