2010-01- 04/05 Morning session commentary

4.01
I started with failed trade on EU, as it broken initially a bit lower with nice confirmation on GU. This trade was worth -10 pips.

Soon after SL on my EU position was hited price on both EU and GU retraced to previos levels from before 8:00am. I read it as a clear bounce of GU from daily low and decided to trade long in spite of lack of clear setup [as you can read I was expecting long trade off red support on GU that day, that's why I decided to enter early]. GU rallied initial 20 pips very quickly, and charged higher hitting my planned target for second half at daily high [+ 60 pips for second half].




5.01
This was very moody day.
My first trade was based on my market overview for EU and confirmation on EJ [-9 pips]. Unfortunately it was a looser, second was another approach to trade my prognosis, this time I bought GU [-13 pips].

2010-01-05 Morning session preparation

EU: there is channel broken up on 30M chart, great for long, especially above 1.4450. important resistance [bottom of Asian channel] @1.44 if price retrace to this area, I would wait and eventually trade short below this level.[If traded long - there is plenty of room up on daily chart]

EJ: yesterday struggled with new highs, however not potential seller yet. Strong resistance above 133.50, so beware if you trade long. Whatever direction of trade you should be careful. Reversal on daily [middle of leg up in flat channel] is possible.

GU: This pair is on a nice buy setup but 1.6240 may be limit for what it may do today, however above that level there is plenty of room to rise.

GJ: has good potential to fall 300 pips within two days and even more within two weeks. for buy signals stick with either GU or EJ.

2010-01-04 Morning session preparation

EU: Currently on it's leg down on daily, with important 1.4220 support [recent low] and in my opinion very important 1.4115 - 61% fib level, so yet I would be glad to catch short trade on it, especially below 1.4280 - this is very important line on 30M for me.

EJ - significant uptrend on this pair [on daily there is leg up on rangy pattern]. On a daily I see 9 consecutive rising candles what makes me think that retracement is possible, however I'm not convinced about entering short on short signs on EU

GU: Is very near to important support, and gives some suggestions of reversal on daily. I would be strongly short below 1.6050, and moderate long above 1.6100 [based on 30M chart]

GJ: Strong uptrend on 30 [149 is important resistance, suspend trading below this level] Daily chart looks promising as well, as there is plenty of room up to 163 level.

I don't expect German ZEW to move the market. What can possibly happen here is that this data would trigger a bigger move [but obviously no price action will be caused by data, it's rather traders waiting for data to do whatever they wanted to anyway]. Additionally I do believe that big move can happen only in trend direction, so worse than expected data will keep me away from market. If data was better than expected I will wait for some small retracement on 1M chart [even if initial move will be down].

If EU price break below current 30M range low 1.4950 I would cancel all actions planed.

All FX services I use [dailyFX, forexpeacearmy, blackswantrading, fxbootcamp] yeld USD turnaround.
I can't agree or disagree with any of their statements, what I'm focused on is when to say "stop, we're wrong".
Another USD plunge today didn't prove anything, just brought a bit of confusion.

I will be definitely focused on Aussie interest rate tonight, before just in half an hour there is UK Services PMI released.
For this news I'm in general biased short, so worse than expected data would be much more promising for me.
Best point for entering short would be 1.5975 - it's 50% fib level for last hour plunge [between 8:00 and 9:30 GMT+1], this might be important resistance in case of better than expected data.

Whatever initial spike will be, it's very likely that it will turn back to 50% between top or bottom of spike and pre-release price, and that's the level where I'm keen to enter [either short if initial spike was down or long if it was both up AND data was better than expected].

It may happen especially if data was better, that spike will go up, but price will back to pre-release and go lower [pre-release will be my SL] in this case I would re-enter on 50% fib between highest price of the spike and lowest after break below pre-release price.

Today news was not exactly what I expected. There was spike on GU and EU against data released, however it took quite a long time in terms of news trading to retreace to pre-release levels.
There was anyway nice trade on UJ, it was 50% retrace between news spike and pre-news level [around 89.16] from there price went around 50 pips down.

My general bias was for long UJ and short GU and EU, but news was rather against that, but that was the reason why I did not expected much of a plunge on UJ.

A big surprise was massive 120 pips rally in UJ 1,5h after the news, what I can't explain however treat it as a confirmation of trend reversal on this pair. [and possibly confirmation of short term decrease on EU]

For today Non-Farm Payroll I have mixed feelings about UJ, It's on definite trend down, however It's on bottom of a channel, near January low and there was very clear pin-bar on Monday that may indicate some trend reversal.
Very important is a fact that today data may establish significant high or low for nearest future, so if I opened correct position on it, I would let half of it run for bigger profit [92.53 up or 87.12 down]. If there was strong rally in first five minutes or so I will try to enter on 50% retracement [calculated from pre-release price].

EU seems to be nice plunger on this release, best strategy would be to trade breakout below prerelease price if initial spike was up, very big plunge potential is in this pair if it worked out.

For GU I have no specifisc strategy, it is possible it will go along euro, however GU plunged strongly already, so there is much less potential in it than in euro so if anything I would just copy my EU trade.

As usual - nice recovery thumping data brought some random price action, this time EJ and UJ price shadowed its morning slump.

In terms of predictions I would see quite a bit of room for EJ to go much higher recent high @ 134.40 is crucial for this pair to unveil.

As for GU and EU I hold general belief that they will move more or less together, but what make it really interesting is absolutely different situation.

As for EU I see one of two scenarios possible:
- traders totally convicted that Euro is best place to hold the money [recession is gone] so this pair will rally as long as it won't hit it's levels from July last year [1.60] slightly retracing on the way.
or
- Euro runs out of steam and sooner or later it will retrace at least to 1.44 or maybe even lower, and 1.4720 resistance is a perfect level to start such move back.

GU also stands in a middle of action, and whatever it would decide to do there is reason for that.

-Due to a hints from BoE about rate cut GU fell a bit, however today was definitely consolidation day.
What BoE said was exactly information that in spite of biggest efforts, there are not enough money in the market as retail bankers are not that keen to lend it to a public. It's a big issue - if big dogs don't feel like lending, why we should believe in recession happy end.

In other hand it's obvious there was no a single trader to buy a penny on BoE announcement, GU collapsed, but every move [especially big sudden moves] is shadowed back by opposite price action. So this is another thing that may happen to GU. It may retrace all yesterdays loses and go back to it's track way above 1,70.

My general conclusion is that GU is better to go long in case of EU and GU rallies [as GU already retrace a bit what possibly is ahead of EU]. EU is better for short in case of credit crunch part two as it has much much more to loose.

Personally I expect bullish option to unfold.

JPY weakened a bit, GBP slumped on hints from BoE that interest rate should be reduced, however it looks that there was no significant news that would change anything. EU rises too fast, however I would hesitate with buying as retracement may show up. GU fell but it's far from bottom of channel @ 1.6050.
Weakening of JPY gave some rises even on UJ, but there is nothing certain here either.
I have no clue what to do in terms of trading. There is possible regain on GU as there is no big deal in terms of international currency trading about this interest hints. Just traders earning their money.

In general I think it's better to believe in recovery, but the only reason for that is the brighter future if this plan will work. If I was wrong on that - everything would plunge. Maybe it's just a kindness of those who believe in second slump of economy that they dont sell like crazy, just stay aside, but whatever reason it causes economy to be alive at least.

As for EU news, not only GU broken lower before news but also post release price astion on M1 chart was far from what I expected therefore I prevented myself from trading today. Later during a day Morning EU low turned out to be today low, but staing aside is also a position.

For today I'm comfortable with taking long on either EU or GU after European Industrial Production release. What I'm looking for exactly is if price will not break lower [current low is EU@1.4515 and GU@1.6550] around news and what's more 1M chart after news will show some higher lows higher highs. I would treat it then as good SL level and would bet for 100 pips gain within coup[le of hours no matter what news will be.
Otherwise, ifprice will continue falling I would stay away for today.

On a morning UK news I have managed to gain some pips, which I managed to waste on attempts to reenter market. Pound did not break it's highs @ 1,6741 and ranged for the rest of the day.

Situation was quite different on USDJPY past Prelim UoM Consumer Sentiment. I was not sure what will be exact direction after release, I was expecting either risk appetite driven depreciation of the pair or significant up [both if news were better than expected]. Finally I decided to trade daily options betting on both directions, and that was just perfect [I assume that it was luck based gains as driven by JPY appreciation what I did not predicted].

To sum things up, DOW didn't managed to break last week high, gold finished week above a 1000 with new high @ 1011 JPY skyrockets, dollar's flat. However it's not even correction, It's just a flat friday. If monday will bring new highs on dollar crosses I will think of buying like crazy.

China expanded its export, USD decreaset overnight, GU broke 1,67.
For PPI i see strong buing oportunity as long as GU will manage to retrace below 1,67. 1,6686 is nice las day high to bounce from. Otherwise if GU left on its current level I would buy breakout of today high at 1,6733 with some tight stop loss.
If GU rised all morning, I would rather stay away. [this pair in my opinion badly needs some pullback].

Everything seems to be right. Treade balance felt more than expected, dow goes up, USD goes down, and what's more gold went a bit down. Did not break recent highs [what S&P did and DOW is quite close to it].
Tommorow GU deserved some proper retracement after todays gains hopefully before PPI input what would give nice signal to buy more and what's more important that would give nice stop area for trading.
For tommorow i hope to see some more movement for my USDJPY pair as I partially hedget my put option by spot order [so it's just my wish, nothing tradable ;)].

That's all for today :)

There is nothing new I can write.
USD falls, Dow rises, GU still below 1,67, EU breaks up a bit, gold touched 1000.
Recession have ended or not, no one knows, however everyone behave as it's done. In my opinion too many people is interested in gold, and it should be priced around 997. However gold skyrocketing indicate inflation fear. I think unemployment is very important indication of is recession over.
In fact there is not much to do in terms of trading, maybe daily options trading during GB interest rate decision and BoE statement. Nothing is for sure, I wouldn't even recomend buing gold, as recession is not that certain, if only US start to buy chinese things, there will be no more need for gold, and we will see 960 or so. [as I'm writing it gold is priced 985].

What I can say for sure is that there is a lot of werid price action that doesn't hold the water and sooner or later something must change. Unemployment must fall, inflation must skyrocket or stock must fall [recession part two version].

For trading tips I have one: go take vacation ;)

There was nice piece in "Rminiscences of a Stock Operator" by Edvin LeFevre. About breaking out of range:

"I recall how I missed a big play just by trying to anticipate the starting
signal. I felt so sure of conditions that I thought it was not necessary to wait for the line
of least resistance to define itself. I even thought I might help it arrive, because it looked
as if it merely needed a little assistance.
I was very bullish on cotton. It was hanging around twelve cents, running up and down
within a moderate range. It was in one of those in-between places and I could see it. I
knew I really ought to wait. But I got to thinking that if I gave it a little push it would go
beyond the upper resistance point.
I bought fifty thousand bales. Sure enough, it moved up. And sure enough, as soon as I
stopped buying it stopped going up. Then it began to settle back to where it was when I
began buying it. I got out and it stopped going down. I thought I was now much nearer
the starting signal, and presently I thought I'd start it myself again. I did. The same thing
happened. I bid it up, only to see it go down when I stopped. I did this four or five times
until I finally quit in disgust."


So here's my GU story :)
In addition to no one want to break up 1.67, i suppose that in spite of rising risk appetite there is still no enough volatility in emerging market, therefore even if investors wish to go back there, they have no one to buy from, so they still have to keep their USD, and that's why it doesn't fall yet.

At the time of yesterdays UK MPC Meeting Minutes GU was below mentioned by me level, what prevent me from any trade. From that news however price started climbing, and today skyrocketing Dow Jones may trigger weakening of USD. Therefore I wouldn't be suprised if GU will head to new high on 1,80. I wouldn't bet on that now, however I will follow closely price action near 1.6660 and 1.6743. Especially if the second one will be breaken firmly on tommorow news, I would see new high around 1,80 within one or two months. In other hand tommorow news may return price to 1,60 if it will struggle with mentioned levels.

The point is that under current market circumstances thtere is possible strong breakout either up or down, and it's most likely to happen during news release. However in other hand there is much more likely that neither approaching UK MPC Meeting Minutes nor any other tommorow or day after tommorow data will trigger such break out. Personally I do expect breakout to occure and I do expect not to get into bigest move of all. However awarnes of inevitability of such move I am alredy prepared to know what will happen just after. And that's the point of trading.

So nearest data releases should rather bring another bounc trade oportunities and eventually one that establish new direction for USD pairs. It's important to keep significant levels in mind to not get sweaped by such move.

MPC Meeting Minutes for the first time from two months will be published with no any other significant data released at the same time. There should be no big surprise on it. That is possible that black swan hunters will buy some pounds before the news, what may cause spike just after release [no matter what exact data will be]. My idea is to trade highly doyable trendline based on lower lows on recent 30M chart. It would be the best to keep some tiny Take Profit @ 1.6385 to cover possible losses. If price will manage to break lower, there is nice another 100 pips to cash in. However if suprise have happen, bounce down is still highly probable, but it's hard to say how high.

If price will break 1.6380 before the news and won't bounce back, I would stay away of the market during release.

On Bernake Testimony I will comment later today.

Friday news was not much better than expected, so I decided to trade my 94.0 idea and have lost around 20 pips.

My general thought on that is all in all it's better to get lost with a map in your hand. My map says there is stagnation time for USD and it won't break 1.67 level on GU until DOW will advance 1500 more, what should not happen soon. In other hand there is some room for USD to gain a bit, however now the best idea is to trade bounces. Even on this trade here I done pretty well as I have saved about 20 pips by not entering on a market level just when Building Permits was released. [I must confess here that I have opened half position just before news to not miss a spike down if one happen, but I managed to close it soon after release to with about 0.1 pip loss].

So the map is the very first thing you need. Even if your map mislead you, you can still use it to get out of trouble by following way back.