Hello readers! 🙂 Hope you’re all having a great day.
Yesterday, I posted my daily pick which was USD/JPY and I wanted to give you guys an update on what happened with my trade. As mentioned in my previous post, I was -30 pips as I was writing the blog entry. My expectations were that USD/JPY would continue its move to the upside. Japan was due to release some very important data at 4:50pm PST and it was widely expected that the news would be negative therefore, movement in the markets was imminent. Unfortunately, the move we were looking for was short-lived. Immediately after the news was released, there was an increased move upwards and my account did go positive by about 35 pips only to completely retrace within 5 mins. Within an hour’s time, the pair changed sentiment and began to sell-off. It was quite shocking and I wasn’t the only one blindsided by the dramatic change of events. How did USD/JPY go from being a buy to sell within 5 mins when all signs(Japan’s declining manufacturing sector) pointed to a continued move to the upside? Apparently, there were rumors spreading about President Obama allowing Chrysler to go bankrupt(which turned out to be unfounded) and this shook the FX markets to its core, causing USD/JPY to sell off. Look at the chart below:
The arrow points to the 5pm candle, where the sell-off began. After 6pm, the trend turned into one of consolidation and USD/JPY has not recovered since. The change in sentiment was quite unexpected, as I explained before, which was due to the rumor of the folding of one of America’s major car companies. This experience, I hope will serve as a learning lesson not only for myself but any trader out there. Trends can change at the drop of a dime, due to unforseen influences. Fundamental and technical analysis is imperative to trading Forex but neither one is foolproof. Anything can happen in FX but with proper analysis and timing, you will be successful, hopefully, at least 80% of the time. In this case, I did my analysis and with the news coming out that was forecasted as being negative, I was sure that the trade would work out in my favor but out of the blue, speculation came into play and threw the equilibrium of the market off. Nothing is set in stone, we should all remember that. And we will lose sometimes, it’s keeping the losses to a minimum that’s important.
Keep abreast of news from the G20 London Summit which will be in meetings all day tomorrow. It could move the markets, who knows? Also, the ECB President will be speaking tomorrow, EUR interest rate will be determined, and USD unemployment claims data will be released.