Wednesday, September 27, 2006

Don't Discount the Dollar So Soon

Well I took a self proclaimed holiday yesterday (I do it every year). It's a day where I take off and do absolutely nothing. No trading, no kind of work. I simply enjoy the day and do whatever I feel like. I gotta tell you, it feels great! Sure, you can have vacations, but my vacations are usually filled with a packed itinerary and by the time it's done I'm still exhausted. I recommend that everyone take a day off sometime and do absolutely nothing. Sleep all day if thats what you want. Go outside, or have a movie marathon. You won't regret it. I guarantee it!

Ahhh, now back to the Forex. With the dollar up in the air right now, I've been having trouble feeling confident about any longer term trades. After the Philly Fed Index came out, the Fed Funds Futures were showing that there was almost a 30% chance the Fed would cut rates by the end of the year. I mentioned that sentiment sometimes over-reacts to reality. I talked about how while some aspects of the US economy are topping off, the economy as a whole is still not as bad as it seems. Consumer spending is still ok and the job market is still healthy. With oil prices down, gas is cheap, and when gas is cheap, people spend. Then to add to that, the new home sales report came out higher than expected today which tells me that the dollar's future is still up in the air. After today's news, the Fed Funds Futures are now showing a little over 20% chance the Fed will cut rates. Its starting to look like the Fed will most likely hold the rates constant until the end of 2006.

Day trading hasn't really given me many opportunities either. I'm the type of person that likes to be right more than I'm wrong so before entering a trade, I really try to give myself the best chances to win. Some traders don't mind taking many small losses until they finally can win, and when they win, they maximize their profits as much as possible. I like taking many smaller wins and don't mind taking the occassional big loss. So for now, I don't have any short term ideas. Looking back at the charts, I did notice a trade on the GBP/USD which I missed yesterday. I had a short bias on the Cable for this week and saw a good momentum shift on the 4hr chart yesterday. Right now that trade is doing well but it's too late for me to enter.

I also have a short bias on the AUD/USD and I missed a trade on that as well yesterday. However, I see a possible re-entry if things pan out in my favor. This pair made a new 20-day low today and I expect to see some retracement. If the pair can revert back to the short side and break its 20 day low, I think I might enter. This entry (if it happens) won't occur until next week so if my weekend analysis still shows a short bias on this pair, this should be a pretty good trade.

Well that's it for me today. Hopefully something will develop. Until then, I still wait patiently.

Happy trading!


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