It's the end of a nice long holiday weekend, and it's time to start thinking about trading again.  I'm still sitting on a few positions held over from last week, all of which are currently in profit.  I'm short EUR/USD and AUD/USD, and long EUR/AUD.  All of these pairs have retraced a bit in recent days, so we'll see if they resume their trend and I keep riding them, or if they continue to retrace and I get out.

Tonight, I'm eyeing a short setup in GBP/JPY.  The pair has been in a bit of a downtrend in recent months with an area of support around 139.00, and for the past few days it's been hugging a down trendline that has been serving as an area of resistance.  It also happens to be just under a horizontal S/R zone that has been in place since mid-2009.  I think we've got some room to move down between its current price of 146.00 and the aforementioned area of support around 139.00.

I'm going to play this one with a tight initial stoploss - the pair has been consolidating in recent days and a logical place for the initial stoploss would be just above the down trendline.  If we break out to the upside of the falling trendline, I want to get out fast.  So, we'll test the waters with a small position and see where it takes us.  As always, I may be wrong!

Today EUR/JPY hit an area of resistance around 137.45, forming a double top on the daily chart.  We've been predominantly in an uptrend over the last several months, so long term, I'm still bullish.  However, with the formation of the double top, now may be a good time for the pair to take a breather and retrace back to the rising trendline.  Of course, it could go ahead and just break through the resistance, in which case I think we'd see a decent move up.

So, in anticipation of either move, I'm going to straddle today's price action with a buy above today's high and a sell below the low.  Here are my orders.

• Long Entry:  137.506
• Initial Stoploss:  135.722

• Short Entry:  135.722
• Initial Stoploss:  137.506
  

Today many of the pairs I follow saw a strong resumption of the major trend after experiencing a bit of a correction the past week or so.  I'm looking at GBP/JPY in particular, which bounced nicely off of the rising trendline.  The daily chart is shown below.

I'm going to jump into a long position in this pair and see if the prevailing trend continues to carry us up.  There's a bit of overhead resistance where a double top has formed, so I'll be watching carefully around that price level to see how the pair reacts.

• Long Entry:  147.505
• Initial Stoploss:  142.75 

On another note, I closed half of my EUR/AUD short earlier this month at 1R, but the second half is still open.  Today's thrust downward is an encouraging sign that that pair's move down may not be over yet.

I'm still bearish on the JPY, based on the recent daily charts of the various JPY crosses.  Tonight I've entered a long position in EUR/JPY.  Recent price action on the daily chart shows the pair bouncing off of the rising trendline on the daily chart at a level that has served as an area of support and resistance in the past.

Take a look at the daily chart below.  The red circles indicate some times in the past when this price level has been tested, both from above and from below.  The past couple of days seem to indicate that this area will hold as support and the pair will continue higher. 

EUR/USD is consolidating with resistance above and support below.  The prevailing trend on the daily chart is up, but the medium term trend on the 4 hour chart is down, so I'm looking for a breakout in either direction and am straddling the pair with a buy order above the current price and a sell order below.

Check out the daily and 4 hour charts below...

Daily Chart:

4 Hour Chart:

Breakout Possibilities

We've got a down trendline on the 4 hour chart that has been tested several times in the past few days and held.  A break above this line would mean a resumption of the prevailing trend on the daily chart.

However, we've also got an area of support around 1.3830 that has been tested several times in the past.  Note that this is more of an area of support, rather than a specific level, as we've seen the pair react multiple times to each of the three horizontal dotted lines.  A break below this area would mean a continuation of the medium term trend.

I think a move that breaks in either direction could have some legs.

• Long Entry:  1.3996
• Initial Stoploss:  1.3799

• Short Entry:  1.3799
• Initial Stoploss:  1.3938

Update 1/5/09 6:33 AM:  The Euro broke down strongly through support overnight, so I'm currently short.  Since it's moved 1R in my direction, I've closed half of my position and move my stop on the other half to breakeven.  It's nice to start of the New Year with a win!