Thursday, September 21, 2006

Reason To Get Excited?

My computer was in the process of getting healed after I had to re-format my hard drive. I run spyware and virus scans daily and defrag my computer about once a month and yet my computer still found some way to run unbelievably slow. So now with a fresh computer, I'm finally getting things back to where they were.

Ok, so the story of the day was the huge and unexpected drop in the Philly Fed Index. The median forecast was around 14.5 and the number came out at -0.4! This big discrepancy caused the dollar to lose ground across the board. Because of this, my USD/CHF trade idea has been tossed out, along with all the other pairs I was watching that also depended on the dollar.

However, I did see one trade that lined up and I entered way before the Philly Index even came out. Had the index come up suprisingly strong, I probably would've gotten stopped out, but this time, the news played in my favor. At the beginning of each week I take a look at several pairs and determine whether or not they are in "buy" or "sell" mode. Once I determine what mode they are in, I look more intently for trades in that direction on the smaller time frame charts. This is not a new idea by any means, but it is a great way to trade. The USD/CAD is one of the pairs I look at and for this week it was in "sell" mode. Early this morning I saw a momentum shift towards the short side and I entered short at 8:00 am EST at 1.1226. I was actually late on the entry because the true entry would've been at 4:00 am, but since I can't trade in my sleep (I'm working on a way to do that :) ) I had to make a decision on whether or not I would still enter. The entry price between 4:00am and 8:00am weren't too far apart so I decided to go ahead and enter. Since the dollar dropped like a rock today, I am up about 50 pips and will hold until I see a momentum change in the opposite direction. My stop is at 1.1300.

I am still in the AUD/CAD trade and it reached up to 8532 today which was about 70 pips from my target at 8600. Unfortunately it has retraced since then and is back below 8500. I'm still holding and am hoping the trade will resume in the direction it was going.

Since the Philly Index didn't come until 12:00 pm EST, I was already done trading the Alba system. I trade Alba from 8am-12pm EST so unfortunately I missed this trade.

So things are starting to get interesting between the EUR/USD now. The Fed kept their rates the same and with this weak Philly Index report, it looks as if the Fed will either stay put. In fact, look at this quote I read on Bloomberg:

"The yield on the December Fed funds futures dropped to 5.23 percent following the Philly Fed report, the lowest since June and below the Fed's benchmark, which indicates people are starting to price in a possible rate cut in that month."

And with traders firmly believing that the ECB is going to raise rates, we might actually see the Euro push higher. I don't want to jump the gun, but we might actually be seeing the fundamental shift we've been waiting for.

Happy trading everyone!


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