I feel like I just went 12 rounds with Godzilla in Tokyo trying to get short these yen products. My regular readers know that we have been leaning against this 158.00 EUR/JPY level for almost two weeks now. We missed getting short on the first move into this zone by 2 pips before it collapsed 100 points. Then, we got stopped out last night by a healthy margin just before the 80 point drop following Consumer Confidence.

The good news is we did manage to hang onto the USD/JPY short for the move into 117.80 trendline support. I covered the position at around 117.85 for 35 points into the London close. I still very much believe the trendline will be defeated opening the door for a move down to 116.75. But, first there could be further profit taking from shorts pushing USD/JPY back above 118.00. If so, we can use this to our advantage. I have orders on the book to sell 118.02, 118.12, and 118.22 with 118.35 stops for another shot at this critical level.

There's something important to keep in mind when it comes to trend reversals. The markets have changed in the last few years encouraging short-term traders like us to step in front of trends and play the reversal, rather than buying pullbacks for the trend continuation. This is common knowledge in the market place by now, and is neither a good thing nor a bad thing. It's just the reality of the marketplace. And with so many aggressive traders like us positioning contra-trend, whipsaws and repeated head fakes at the actual reversal levels on our trading time frames is to be expected. That's how you know you're dealing at a highly critical level. To play a reversal as significant as this EUR/JPY back to the 151 area lows, it's unlikely we're not going to nail it down on the first, second, or even third try. But when we do put the right trade, we should know it right away and be rewarded handsomely.

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

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.