So far this week, we have accumulated a number of open trades (as always, you can see an updated list of all trades to watch and open trades here). Due to recent market developments, we are looking to tighten the stop on two of the trades that we placed earlier this week.
On Monday, we outlined an opportunity to buy the GBP/CAD as rates broke out of an inverted Head-and-Shoulders pattern on the 4hr chart. The pair broke above the neckline about 12 hours later, triggering the trade and leaving us long from 1.5870. The unit rallied sharply throughout the middle part of the week , but unfortunately the rally lost steam about 15 pips before reaching the target and has since reversed sharply to the downside.
As of writing, rates have fallen all the way down to the original entry at 1.5870. With rates now below near-term bullish trend line support, more conservative traders may simply look to close the trade at market for a roughly scratch trade. However, there is a decent chance that we will see strong previous resistance at the neck line (1.5860) act as support just below current market rates. Thus, we will look to move the stop up to 1.5853 (just below potential neck line support) and cut out a majority of the risk on the trade.
It’s also a prudent time to adjust the open USD/JPY trade originally featured in Tuesday’s Candlestick Daily report. After triggering the trade later that day, the pair continued lower into the Asian session before jawboning from Bank of Japan officials put a floor under the unit. As I noted yesterday, the risk of substantial intervention is relatively low in the near-term, but the BOJ comments have nonetheless kept the pair trapped in a tight range around 81.00 for the past 36 hours.
With potential event risk coming up this evening from the release of the BOJ minutes at 19:50 Eastern, 23:50 GMT, traders could look to lower the stop and reduce the risk of an adverse move. Specifically, traders could move the stop on the trade to 81.17, just above the highs of today and yesterday, and cut out over half of the risk on the trade.
Potential Strategy: Move stop on GBP/CAD long up to 1.5853. Move stop on USD/JPY short down to 81.17.
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