• A Reluctant Dollar Marches Higher
• Yesterday's EUR/JPY Trading Tactics
• EUR/USD's 5-Day Market Rhythm

The Dollar's lack of conviction to either the upside or downside in pairs other than Kiwi and Aussie is making trends hard to come by and ranges well intact. In tight markets such as these, we must adapt our trading styles in two ways. First, we look to deal in the currencies that are moving that might offer us a tradable edge. Second, we adjust our expectations on winning trades in terms of points gained. If in a volatile market, EUR/USD breaks 120 points higher and we capture 40 points, the dollar result of the trade is nice, but in reality we netted only 33% of the move. If that same break in a range-bound market only pushes EUR/USD 50 points and we bag 30 of them, we took home 60% of the move -- a job well done. This market is closer to the latter example.

Yesterday's EUR/JPY trade was a perfect example. I have included the setup chart from yesterday and inlayed the resulting trade from last night.

You can see the trade entry was right on as your 141.30 short trade only saw price move about 8 points against you before heading lower. As the move accelerated in Asia and approached our 140.60 target, a few things might have been running through your mind. First, this is a tight market and I want to ensure that I lock a little something in for my efforts. Your initial risk on the 141.30 entry was 141.55, or 25 points. Once your gain in the open trade is twice that of your initial risk, go ahead and book profits on partials and move your stop loss lower to take risk off the table. So once the EUR/JPY market dealt 140.80 your current gain was twice that of your 25 point risk. Now take half off the table and move the stop to breakeven for a free trade on your remaining position. Had you done so, 70% of the EUR/JPY move was yours on the first half of the position and the second was stopped at breakeven. A job well done as you grabbed a large percentage of the move in a tight market and put yourself in a position to a hit home run with the remaining position. It didn't work this time but next time might be different.

EUR/USD has some interesting daily chart developments indicating the market has fallen into a 5-to-6 day rhythm, while contained in these ranges. Notice the first decline starting on the left side of the chart labeled in red. We saw a 6-day decline from the 55-day SMA before the market failed to put in a lower low. Then the first uptrend begins in green and ends at bar 5 that made the last higher high after failure at the 200-day SMA. This same bar begins the second downtrend because it closed lower on the day after ending the uptrend. This move preceded 5 bars lower. Then, another bottom was put in at 1.1860 as the market made a 6-bar climb to 1.2209 after pausing again at the daily moving averages. Now, here we are on this fourth day of the current decline approaching moving average and 50% Ret support heading into the most volatile day of the week as of late, Friday. Could we see a Friday EURUSD bottom at around 1.2020-30?

Disclaimer
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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