The technicals win out in this trade
This is the third part of this week's guest trader series from Bulgaria-based professional trader Martin Nikolov. In the first part, he shared his 8 principles to trade by in part 2, he wrote to watch USD/JPY as it peels back from resistance. Today he sticks with a yen trade.
Again on my watchlist for today in these dramatic times is the Japanese yen. EUR/JPY has played out a double top pattern, but has reached only 50% of the target zone near the 50 Fibonacci level.
As the dust settles and we've reached de-escalation, Euro has advanced against the safe haven currency. My point of interest here is the current RS (red box) zone. This is the point where we've reached the neckline and the break-out point of the double top.
My idea here is to approach this trade with a conservative way. I won't short aggressively if the prices closes inside the zone, but I'll wait for a test on the neckline itself. There were three failed tests before that.
I'll wait for a test on the neckline and if that fails, I'll open a short position on the next daily opening with a stop loss 121.700.
This trade idea is more of a technical one. Fundamentals suggest yen will depreciate more as tensions with Iran have decreased, though my view here is opposite on the common logic. My view on the overall situation is that things aren't yet really settled, and will ever they be after the events earlier? Trump has taken the wise path of the pacifist, but him standing with his generals on the press conference makes quite the impression he has something on his mind.
The geopolitical landscape in the Middle East has been changed forever and unfortunately the scars won't be forgotten and the risk of a full out war have increased.
Check back with you tomorrow.
