Market News
Forced EUR/JPY Short Indicates Trading Fatigue
By Todd Gordon
Jan 11, 2007, 17:15

The U.S. dollar has broken out to the key technical levels mentioned yesterday. USD/CHF is showing better price dynamics than EUR/USD because the EUR/CHF cross has failed at the 1.6150 top. So if the dollar pulls back, USD/CHF will probably see a better move lower than EURUSD's move bounce higher when you factor the cross into the equation. I am working USD/CHF shorts against 1.2500 with 30 point stops.

Cable made a nice wave-3 push up for us yesterday, but missed our entry zone by about 20 points before making that 200 point move higher. EUR/JPY, on the other hand, did not miss our entry, and unfortunately we took in the teeth on that one. Looking at the chart this morning, it's blatantly clear that I forced that entry. I have noticed with myself over the years that when I become impatient and prematurely force entries, it's a clear sign that I am tired and need to step back from the market to regroup.  Another clue is if you are typically analyzing a 15-, 30- ,60-min charts to base your trade ideas, and you suddenly find yourself doing most of your analysis on 5- or 10-min charts, it's a sign that you are impatiently formulating trade ideas away from your normal style. What you're doing is subconsciously dropping your time frame to reduce your risk exposure in efforts to catch the next micro “sure thing” move. What you're really doing is suffocating the market by imposing your will on it, and not allowing it to breathe. That's not our style. Those of you who have read this column for a while know that our style would have been a EUR/JPY short at 1.0 projection at 156.25. That is not hindsight analysis, that short was a lay up that we have bagged 100 times in the past.

Trading fatigue is only normal, especially in such an intense, 24 hour markets like FOREX. November and December were very strong months for us and January has gotten off to a slow start. The good news is, however, I recognized that I was not seeing the market clearly, cut my trade size, and scheduled a vacation starting next Thursday.

I am short a light USD/CHF position from the figure with 30 pt stops and will be watching to see how we finish up the day in New York.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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