Forex trade ideas

EUR/USD shorts are staring to work nicely.

Source: Bloomberg

I looked at short EUR/USD yesterday at $1.0971 and after a move above $1.10 the pair has printed a bearish outside day reversal and could be back to the $1.04 area.

My suggested stop loss remains at $1.1070 for now. As detailed yesterday I am keen to add to the position on a break of the 23 March lows.

GBP/JPY chart

Source: IG charts
Source: Bloomberg

GBP/JPY- Entering the key support zone

I also think GBP/JPY looks quite interesting from the short side, although the pair is highly correlated to US equity markets and the S&P 500 seems to be holding the October uptrend. Interestingly, GBP/JPY has not fared so well and has broken below its own uptrend drawn from the October lows at ¥177.75 (as shown on the daily chart). Better buying has been seen in the pair, however if we look at the daily candle, but my key target zone (as measured by the blue coloured area) is widely in play no. How the pair reacts around here could be key, as a break would be outright bearish and signal a deeper correction, perhaps even to the ¥170 area. 

Looking at small positions in USD/JPY

The JPY in general is finding good short-covering of late, but one talking point today has been whether the lows have been seen in USD/JPY. If we look at the daily chart the series of lows in mid-February around ¥118.24 have held and as you can see from yesterday’s candle good buying have come into the pair. This has coincided with a nice move higher in US bond yields, which ultimately is helping the USD valuation.

There is no glaring buy signal from trend or momentum indicators, but I am enthused by the price action and the bullish candle. With this in mind traders could look to buy a small position in USD/JPY at market (¥119.24 at the time of writing), with a view to exit the trade if we see a move through support at ¥118.24.

The 23 December and 23 March high (as shown on the chart) intersects at ¥120.16 and I feel adding to the trade on a closing break above here makes a lot of sense. Subsequently a closing break above the December high of ¥121.85 would be outright bullish and again I feel adding to longs on this development would be wise.

Again, keep position sizing low until trend and momentum conditions are working and then adding to the trade is something I feel could help increased profitability in trading. 

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by analysts

Find out more about