Yen Dollar - 19th February 2009 Daily Candle Chart

Yen Dollar - 19th February 2009 Daily Candle Chart

Yesterday saw a wide spread up bar, which was as expected, so I hope you managed to take some pips from the market. What is more encouraging is that this move has now broken above the strong resistance at 93.00 which has now become support to any short term reversal. This move now seems to have some momentum behind it, and my suggestion for today would be to continue holding your long trade, and move any stop loss up below the open of yesterday, or alternatively if you are trading intra day, so attempt small long positions with a tight stop loss below. The reason for the tight stop loss is simply that after such a strong move, there is always the danger of profit taking the following day, and for a short term reversal, which we may see today, before a move higher. One can of course use this as an opportunity for an entry point to the market for your longer term positions – in other words look for any down day, as an opportunity to open your long position. Trading is all about reverse psychology, and buying on down days, and selling on up days is one of these!!

On the fundamental news front, the Bank of Japan released it’s overnight call rate this morning which came out at 0.1% as expected and in line with the forecast, so had little effect on the Japanese yen. This is the rate at which the BOJ rediscounts bills and extends loans to financial institutions. This is an important number for currency traders as short term rates are key in the valuation of the currency, whereas most other indicators merely predict how rates will change in the future. The news for the US dollar is due out shortly and I have explained all these on the euro to dollar site.