Big Pippin's Forex Lab

Trade Alert- EUR/USD

2007-03-23T00:15:00.000-04:00

Sell EUR/USD at 1.2340

Stop Loss= 1.3415

Target= 1.3255

GBP/USD Trade Closed

2007-03-18T23:52:00.000-04:00

Long GBP/USD Trade

Target hit!

Result: +127 pips

Trade Update- GBP/USD, EUR/JPY

2007-03-15T14:44:00.000-04:00

GBP/USD trade is triggered. Hold on to the trade.

EUR/JPY has moved higher without triggering us in. Cancel the entry order.

Trade Update- CHF/JPY, GBP/USD, EUR/JPY

2007-03-15T10:35:00.000-04:00

CHF/JPY came close to getting triggered but has moved up since then. Cancel the entry order.

GBP/USD has triggered.

EUR/JPY has not triggered yet. Keep entry order open.

Trade Alert- CHF/JPY, GBP/USD, EUR/JPY

2007-03-14T17:06:00.000-04:00

Long CHF/JPY at 96.03; Stop Loss= 95.10; Target= 97.37 (Risk= 93; Reward= 134)

Long GBP/USD at 1.9332; Stop Loss= 1.9210; Target= 1.9459 (Risk= 122; Reward= 127)

Long EUR/JPY at 154.45; Stop Loss= 152.64; Target= 157.00 (Risk= 166; Reward= 270)

Long Cable Trade Update

2007-02-28T10:34:00.000-05:00

Long Cable Trade

Target hit!

+98 pips

Long Cable

2007-02-20T10:38:00.001-05:00

Buy GBP/USD at market (9559)

Stop Loss= 9429

Target= 9657

Close Cable trade

2007-02-20T10:30:00.000-05:00

Short Cable Trade

Exit at 9554

Result: -45 pips

Target hit: EUR/USD

2007-02-15T18:23:00.001-05:00

Long Euro Trade

Target hit at 3076.

Result: +61 pips

Short Cable

2007-02-15T18:22:00.001-05:00

Short Cable at market (9509)

Stop Loss= 9682

Target= 9417

Long EUR/USD

2007-02-13T13:45:00.001-05:00

Buy at market (3015)

Stop Loss= 2956

Target= 3076

Close Short Euro Trade

2007-02-13T10:36:00.000-05:00

Short Euro Trade

Close trade at market (3015)

Result: -43 pips

Cable Target hit

2007-02-09T13:59:00.000-05:00

Short Cable Trade

Target hit! Result: +100 pips

Trade updates: EUR/JPY & Cable

2007-02-09T13:56:00.000-05:00

Long Cable Trade

Stopped out. Result: -103 pips

Long EUR/JPY Trade

Target hit. Result: +42 pips

Short Cable

2007-02-08T02:23:00.000-05:00

Short cable at market (9587)

Stop Loss= 9733

Target= 9487

Long EUR/JPY

2007-02-07T02:08:00.001-05:00

Buy EUR/JPY at market (156.28)

Stop Loss= 155.80

Target= 156.70

Long Cable

2007-02-06T09:38:00.000-05:00

Buy Cable at Market (9690)

Stop Loss= 9587

Target= 9781

Cable Target hit

2007-02-05T09:47:00.000-05:00

Short Cable Trade

Target hit at 9546.

Result: +84 Pips

Short Cable

2007-02-05T01:25:00.000-05:00

Short Cable at market (9630)

Stop Loss= 9751

Target= 9546

Short EUR/USD

2007-02-02T11:04:00.000-05:00

Go short on EUR/USD at market (2972)

Stop Loss= 3069

Target= 2880

EUR/USD Target hit

2007-02-01T18:17:00.001-05:00

Long EUR/USD Trade

Target hit at 3007

Result: +55 Pips

Cable trade stopped out

2007-01-31T09:51:00.000-05:00

Long Cable Trade

Stopped out at 9547

Result: -89 pips

Long GBP/USD

2007-01-29T22:57:00.000-05:00

Buy GBP/USD at market (9636)

Stop Loss= 9547

Target= 9733

Long EUR/USD

2007-01-29T14:49:00.000-05:00

Buy EUR/USD at market (2952)

Stop Loss= 2897

Target= 3007

Stopped out: EUR/GBP

2007-01-29T08:48:00.001-05:00

Short EUR/GBP Trade

Stopped out at 6601.

Result: -26 pips

Trade Closed- USD/CHF

2007-01-26T11:20:00.000-05:00

Long Swissy Trade

Target hit at 2550.

Result: +56 Pips

Short EUR/GBP

2007-01-25T22:58:00.000-05:00

Sell EUR/GBP at market (6575)

Stop Loss= 6601

Target= 6551

Close Trade and reverse- USD/CHF

2007-01-25T15:09:00.000-05:00

Short Swissy Trade

I've seen a signal to reverse. Close at market. I'm out at 2493 for a -83 loss.

Go long at market (2494)

Stop Loss= 2422

Target= 2550

Close Trade- GBP/USD

2007-01-24T10:53:00.000-05:00

Cable Trade

I suggest you manually close this trade. The Cable got within 2 pips of our target and I want to exit now.

I'm out at 9664

Result: +69 Pips

R multiple: 0.68

Trade Closed- EUR/GBP

2007-01-24T10:48:00.000-05:00

EUR/GBP Trade

EUR/GBP Target was hit at 6600.

Result: +33 Pips

R Multiple: 1.00

Short GBP/USD

2007-01-24T03:58:00.000-05:00

Short GBP/USD at market (9733)

Stop Loss= 9835

Target= 9645

Long EUR/GBP

2007-01-23T22:40:00.000-05:00

Darn I forgot to post this, but I put this trade in at 3:00 pm ET. Sorry about that. If the market dips back to this level, feel free to buy.

Long EUR/GBP at 6567

Stop Loss at 6534

Target= 6600

Trade Signal- Short Swissy

2007-01-23T07:37:00.000-05:00

Short USD/CHF at market (around 2410)

Stop Loss= 2515

Target= 2300

Trying Something New

2007-01-22T11:19:00.000-05:00

Yes, I'm at it again. I am trying something new with my trading that requires less chart time. What I plan to do is make trade calls based on a system that I am testing out. I've manually backtested it on several pairs and it has an outstanding win % so far. I did different types of backtesting as well. I would backtest a whole year straight, then I would try random months from different years to see if I got the same kind of results. Turns out I did which theoretically means I have a solid system in my hands.

So now I'm going to live test it. I'm going to try posting the trades as soon as I see an entry with the appropriate stops and targets. I'm excited and I hope you'll stay tuned.

Happy trading!

-BP

exit

2006-12-21T17:59:00.000-05:00

exit short trade. Momentum shifting to the upside

Status: Exit at 9599
Result: +82 pips

Holding the Cable Short

2006-12-20T17:22:00.000-05:00

The Cable has moved in our direction. Momentum is still to the downside and trend strength is still good. I will continue to hold.

Status: Hold

Equity up +46 pips

Shorting the Cable

2006-12-19T16:31:00.000-05:00

Ok, momentum is still shifting in favor of the Dollar and even though we had a huge Sterling rally today, I'm getting a short signal.

Status: Short at 1.9681

Momentum in favor of the GBP

2006-12-18T20:01:00.000-05:00

Notice that momentum has been towards the downside of the Cable and that the trend strength is picking up. Today would be a good day to go short but my chart shows that price is resting on support right now. My gut tells me that the pair will still fall, but I want to wait for confirmation. If the momentum continues and the pair breaks its support, I may enter short tomorrow.

Status: Waiting to attack

Big Pippin's Pipnals

2006-12-17T12:09:00.000-05:00

Alright, so I'm going to start something new. I've been backtesting a strategy and so far it seems to be working out pretty well. As a result, I am now at the forward testing stage. I've gone back and tested 6 months of data from February to August 2006 and in 6 months time the system pulled in 516 pips. I tried to pick a choppy time in the market so I could see if the system could withstand the normal range bound environment and at the same I wanted the system to still be profitable in the rare trending environments.

Although I'm not going to reveal the system, I can give you general information on it. The system is a momentum catching system which also attempts to measure the strength of the momentum. When I see a momentum move, I look at the strength and if I see that the strength is building, I enter the market. I exit when I see the momentum strength dip too low because it's basically telling me that the trend may be over.

I tested this system again from September to the current date and the system pulled in 996 pips. There were only 12 trades and the system gave a 58% win ratio. My average win was 194 pips and my average loss was -73 pips. Max drawdown was -192 pips and my max win streak was 593 pips. From September to November we had more of a trending environment which is why the pip gain was higher. So from my testing so far it seems like the system does well in both market environments.

So I will post my momentum charts as well as my trend strength charts. I am only trading the Cable for now and I trade off of a daily chart. You can see from my results that there aren't that many trades but I like that because it keeps me from having to stare at charts all day. Below are what my momentum and trend strength charts look like:

So you can see that I try to enter when I see momentum rising and trend strength gaining. I exit when trend strength drops too low. I will post a chart like this everyday so you can see where momentum and trend strength are at that current time. One rule I have is that I won't enter or hold a trade before the weekend because there is too much risk of something happening and me not being able to do anything until the market re-opens. I usually will have a trade on Monday or Tuesdays and hold it until the end of the week.

Well I think thats pretty much everything I can say about it now. I hope the forward tests work as well as my back tests. I am going to make this a 6 month project. If I'm happy with the results then I'll continue forward. If not, then it's back to the drawing board! Wish me luck!

Blog Has Moved

2006-12-08T09:35:00.000-05:00

Hello everyone. As you know I have moved my posts and am now posting at BabyPips.com. I am very excited because we have just launched our new Version 2 which has many cool new features. Here are just some of the new additions to the site:

- The much anticipated College Lessons
- Interactive quizzes after each lesson
- New Forex Blogs (including mine)
- New Forex Forums
- ForexPedia (a massive Forex encyclopedia)

The site allows for more interactivity between traders and I hope you can be a part of this awesome community. Together we can share ideas and synergize our efforts to become the most bad-azz traders in the Forex :)

Happy trading everyone!

Pippin Aint Easy Is Moving!

2006-12-05T09:28:00.000-05:00

Hello everyone,

Starting December 4, 2006, I will be moving locations. From now on you can find my posts at:

http://www.babypips.com/blogs/pippinainteasy/

Thank you for all your support and I hope to see you at my new home.

Happy trading!

-BP

PS: If you have a trading blog and would like to be added to my linkroll, send me an email at bigpippin (at) babypips (dot) com. I will only link you if you are a legitimate trading blog. No vendors will be allowed.

Thursday, November 30, 2006

2006-11-30T16:17:00.000-05:00

My suspicions were correct about the Dollar not being done taking its beating. After some profit taking yesterday, the Dollar once again resumed its meltdown as it plummeted agains the 4 majors today. The main reason for the drop? More bad economic releases for the US. The job market, which was once strong, is now starting to look like it may have some weakness as unemployment claims unexpectedly rose. To top it off, the Chicago PMI contracted below 50 which is the first time it has done that since April 2003.

In my opinion, a new trend is in place. For a few weeks now my weekly Bias-O-Meter has been screaming signs for a bearish dollar and it is finally starting to happen. I don't even think a positive US news report can save the Dollar anymore. I expect the Dollar to continue this down trend throughout Q1. We may see some profit taking and retracements but the general direction for the dollar for the next few months is DOWN.

I'll go as far to say that even Bernanke himself won't be able to bring the dollar back up. He can scream his inflation talk all he wants but I think the market is smart enough to see that from the economic data, the next move for the Fed is a rate cut. Interesting enough, he is speaking tomorrow so I can test my bold theory out. We could see some profit taking if he really harps on inflation but the overall medium term is going to be dollar bearish.

Coming Up:

Bernanke Speaks
9:00 am ET; 14:00 GMT

ISM Manufacturing Index
10:00 am ET; 15:00 GMT
Previous= 51.2; Forecast= 52

Chart Analysis:

EUR/USD

The technicals were once again overrun by the fundamental reports today. As usual, the technicals are still showing that the EUR/USD is overbought. 4hr stochastics overbought and the daily stochastics is overbought. The thing is, there isn't really a major resistance level until 3400ish. So while we may see some slight retracements, the Euro is showing poise to climb up to 3400 and maybe even 3500. As for the short term? I have no clue. Technicals say the pair will move down, but fundamentally, I don't see anything to stop the dollar from continuing its downfall.

GBP/USD

The Cable is at a ridiculously high level right now hovering around 9660. I scrolled back my chart to see when the last time the Cable was at this level and wow! I had to keep scrolling and scrolling and scrolling until I got to September of 1992! Can you believe that? The Cable has not been this high in 15 years! So what is to keep this pair from stopping? Well nothing that I can see except for the fact that this is a very extreme level and I'm just curious to see if the Cable can hold at such a high rate. Technicals are showing signs for a retracement (figures!) but with all the fundamental rucks the dollar has been facing, who knows how high this pair could go.

USD/CHF

The Swissy is at what I think is good support. It's currently hovering around 1950 which hasn't been reached since May. The pair could bounce up from there especially since the technicals support an upward move but the Euro and Cable don't show signs of slowing down so I'm not 100% confident about this. If it does bounce up, look for a move towards its 50 SMA on the 4hr chart.

USD/JPY

Out of all the majors, the Yen is the only one that moved according to its technicals. Like clockwork, the pair bounced down from its 4hr 50 SMA and moved to 115.50. Unlike the other pairs that saw huge gains against the dollar, the Yen stayed relatively quiet. The pair is showing signs for another move up and a suitable target looks to be the 4 hr 50 SMA again.

Conclusion:

This week has been another can of "whoop ass" for the dollar and with so many negative fundamental reports for the US, I don't see anything to stop the dollar from tumbling. As always, I could be wrong, but from what I see, I think think the dollar is in for some gloom throughout the rest of the year and Q1.

Wednesday, November 29, 2006

2006-11-29T16:42:00.000-05:00

The dollar made a little bit of a comeback but I'm not fully convinced that this is a true reversal.....YET! Sure the GDP came out higher than expected but New Home Sales dropped so the dollar is still not out of the mud. Today's dollar gain looks more like some profit taking by the sellers over the Thanksgiving holiday. We only saw a slight retracement in the majors and I'm not fully convinced the dollar is done dropping.

The Beige Book stated the obvious. There is moderate economic growth and housing sucks. Boring...we know this already. I think this is why the market didn't really react to this. The report did say that the labor market is getting tight in some regions so this could be another potential pitfall for the Dollar once the NFP rolls around. Just something to think about.

One thing I do want to note is that this retracement came in line with my technical analysis I had been doing the past couple of days. I saw bearish divergences on both the Euro and Cable and now those moves have taken place. It's still not clear where the dollar is going to go the rest of this week because the technicals still aren't giving any strong indications on the dollar's next direction. Once again we have a slew of economic reports for both the Euro, Pound, and Dollar so movement will be very dependent on these numbers. If we see good numbers for the Euro and Pound, and weak numbers for the Dollar, expect the dollar to lose big again. However, if the opposite is true, look for the dollar to add on to the ground it made up today.

Coming Up:

EUR CPI
5:00 am ET; 10:00 GMT
Previous= 1.6%; Forecast= 1.9%

EUR Consumer Confidence
5:00 am ET; 10:00 GMT
Previous= -7; Forecast= -8

EUR GDP
5:00 am ET; 10:00 GMT
Previous= 0.9%; Forecast= 0.5%

GBP Consumer Confidence
5:30 am ET; 10:30 GMT
Previous= -5; Forecast= -5

US Personal Spending
8:30 am ET; 13:30 GMT
Previous= 0.1%; Forecast= 0.1%

US Core PCE Index
8:30 am ET; 13:30 GMT
Previous= 0.2%; Forecast= 0.2%

US Chicago PMI
10:00 am ET; 15:00 GMT
Previous= 53.5; Forecast= 55

Chart Analysis:

EUR/USD

The Euro finally found resistance at 3200 but with only a 50 pip retracement I'm not sure if this pair is done moving up. 4hr stochastics shows that there is still room for downward movement and we could see it reach 3100 or possibly even down to its 50 SMA. Tomorrow's move is going to be very data dependent so I'm not placing too much emphasis on the chart at this point. Technicals say the pair is going down but it's not giving me a resounding answer.

GBP/USD

It's the same story with the Cable as the Euro. The pair found resistance at 9550 and retraced slightly to 9450. Yes I know...it's 100 pips, but with the Cable, trust me...that's not that much of a move. 4hr stochastics is showing even more room for selling than the Euro's 4hr stochastics so I could see the pair dropping another 100 pips to 9350 and it could also possibly reach its 50 SMA.

USD/CHF

The Swissy is "chillin out, maxin, relaxin, all cool and all..." at around 2100 right now. (*If you can guess what song that quote came from, you are super cool in my book) The 50 SMA is fast approaching the pair and could be the next resistance level although the 4hr stochastics is already hovering into overbought territory. Technically speaking, 2150 looks like an appropriate target for the Swissy in the near future.

USD/JPY

The Yen is the lone ranger out of the 4 majors today. Unlike the other 3 pairs which show a little more room to continue its current direction, the Yen is already at a solid resistance level. The pair is right at its 50 SMA on the 4hr chart and stochastics is almost in the overbought territory. So I see 2 possible scenarios. The first is that the pair bounces down from where its at right now OR the pair follows the trend of the other 3 pairs and continues to move up to its 100 SMA before bouncing back down.

Conclusion:

It will be another data dependent day tomorrow with the plethora of news reports due out. Today's market actions remind me of how I felt when I was 14 on my first date with a girl....unsure and reluctant! Tomorrow's news should give traders enough indication whether or not they should hold onto their dollars or sell them like hotcakes. Happy trading everyone!

Tuesday, November 28, 2006

2006-11-28T15:37:00.000-05:00

The dollar took another beating today as all the US fundamentals came out negative and confirmed the notion that the dollar's rise is over. Durable goods and Core Durable goods both came out lower than expected and housing prices fell for the 3rd straight month (Interestingly enough, existing home sales went up which means we have some discount buyers out there). Right now everything is looking gloomy for the dollar and there might not be much that can keep it from falling.

It's funny because usually when the Euro appreciates against the dollar very fast, the ECB officials will start to talk the Euro back down. This is not the case this time which can only add more doom and gloom for the mighty Greenback.

Even Triple B himself, (Bernanke for those of you who aren't up on the street jive), couldn't slow down the dollar slump with his statements today. He said in a statement that inflation risks are "primarily to the upside". The market doesn't seem to buy that anymore and even with that, they still don't believe the Fed will have to increase rates to cut down inflation. In fact, traders are placing their bets that the Fed is going to cut their rates in March of 2007. This Thanksgiving move could be the beginning of the dollar's demise. MWUAHAHAHAHA! (Sorry, an evil laugh just sounded good after I used the word "demise")

Kathy Lien over at FXCM said that the majors made a similar rally against the buck last Thanksgiving but that it corrected itself the Monday after the holiday. This time around however, the markets have actually gone with the flow which to me, signals that traders are actually thinking the same way for a change.

Coming Up:

US GDP
8:30 am ET; 13:30 GMT
Previous= 1.6%; Forecast= 1.8%

US New Home Sales
10:00 am ET; 15:00 GMT
Previous= 1.08M; Forecast= 1.02M

US Beige Book
2:00 pm ET; 19:00 GMT
This could be significant because it will give us a look at how the different Fed branches view the US economy right now.

Chart Analysis:

EUR/USD

With another Euro rally today, our regular bearish divergence I saw yesterday has now been voided because stochastics is now higher than it was at the previous swing high. However, the 4hr chart is now forming a regular bearish divergence which still leads me to believe that the pair could head down. This has been the longest Euro rally against the dollar in a long time so I'm thinking this pair is bound to retrace but it will all depend on the economic data coming out tomorrow. What I want to wait for now is the 4hr stochastics to start reversing down. If I see this then I will start to look for a short entry point. Right now however, the direction is still blurry until the fundamentals are released tomorrow.

GBP/USD

There is still a slight hint of a regular bearish divergence on the daily chart of the Cable. The Cable has not reached 9500 since December 15, 2004! This is an extremely high level right now for the pair and I'm not sure if it can sustain it. The technicals are showing signs for a reversal but again, it will depend on the fundamentals tomorrow. It's a very tricky time right now because we need to find out if there is enough fundamental juice to continue to fuel this rally. Tomorrow should give us a better picture.

USD/CHF

The Swissy is still holding support at 2000. Unlike the Euro and Cable, the Swissy didn't gain any new ground against the dollar. The next move will be dependent on tomorrows news reports. Today was pretty much a range day for this pair.

USD/JPY

The Yen is still holding support at its 200 SMA on the daily chart. Today's candle was a spinning top and could be a sign of a reversal. Daily stochastics is reading oversold so there are good technical reasons to believe that this pair will head up in the near future.

Conclusion:

Tomorrow's fundamentals will play an important role in the dollar's fate tomorrow. We've seen the dollar take quite a beating these past few days and now the tricky part is deciding whether not the market will continue the trend or correct itself. Be very careful if you are trading at this point. I know I will be!

Monday, November 27, 2006

2006-11-27T15:40:00.000-05:00

So there I was, stuffing my stomach with deep fried turkey, mac and cheese, succulent ham and all the other fixins and all the while the market was making huge moves. The last thing I said before I left was that I seriously doubted that the markets would move. Boy was I ever wrong! That just goes to show you that you should never completely "listen" to me. I mean sure, I am the best looking member of the FX-Men and many times it seems like I have superhuman abilities to foresee the market, but at the end of the day, I'm just a handsome analyst who makes a best guess decision on market movements based on what I see is going on around me. :)

Ok so what's the deal with the crazy move? Let's see....The French said business confidence was at its strongest levels in 5 years. Being that the French make up the 2nd largest economy for the Euro-Zone, this is pretty big. To add to the Euro fuel, German business confidence surprisingly jumped to a 15 year high! So can someone say interest rate hike? Apparently that's exactly what the few traders that traded over the holidays were saying as they sold off the dollar and drove the Euro and Pound to new highs.

Now before you go and join the crowd, consider this: Volume was very thin over the holidays and as a result there was no one to sell against the rising Euro and Cable. I think we'll see a correction during the course of this week. We are already starting to see some of the retracement and I expect that we'll see more counter movement throughout the week.

On the US front, shopping was crazy throughout this weekend. The word on the street is that consumer shopping has started off on a strong note and could be indicative of a good shopping season. This strong spending will cause a spike in Retail Sales and Consumer Spending especially since salaries have been growing. People have money in their pockets and they're not afraid to use it!

Weekly Bias-O-Meter:

My Bias-O-Meter is still showing a dollar negative trend. It's been like this for 4 straight weeks now.

EUR/USD; GBP/USD= Bullish
USD/CHF; USD/JPY= Bearish

Coming Up:

US Durable Goods
8:30 am ET; 13:30 GMT
Previous= .5%; Forecast= .4%

Consumer Confidence
10:00 am ET; 15:00 GMT
Previous= 105.4; Forecast= 106.4

Existing Home Sales
10:00 am ET; 15:00 GMT
Previous= 6.18M; Forecast= 6.20M

Chart Analysis:

EUR/USD

Whatever the Euro has been doing over the holidays has caused my oscillator to show extreme levels. As a result, I see REVERSAL opportunities. The 4hr stochastics has shown overbought since last Tuesday and the daily stochastics is also in overbought territory. I'm starting to see the formation of a regular bearish divergence on the daily chart so there's a good chance the next move is down. The trick now is to find a suitable entry point. I'm going to hold off until the fast stochastic line actually crosses down below the slow stochastic line.

GBP/USD

Like the Euro, the Cable is telling a similar story. 4 hr stochastics has been showing overbought since Monday of last week and we're now starting to see the formation of a regular hidden divergence on the daily chart. Again, the trick is finding a good entry point and I will also hold off on this one until the fast stochastic line crosses below the slower stochastic line.

USD/CHF

The Swissy has found support at 2000. The pair has been in oversold territory on the 4hr chart since last Tuesday and it looks like a reversal is a good possibility. Unlike the Euro and Cable which are showing divergences, the Swissy is not showing any kind of divergence but its daily stochastics is in oversold territory and looks to be heading back up.

USD/JPY

The Yen got as low as 115.50 and looks to have found support there. Currently it's right at 116.00 and seems to have found new support at the 200 SMA on the daily chart. The 4 hr stochastics has been moving up so it's hard to say whether or not the pair will continue to move up or if it will reverse back down. Things are kind of tricky right now since the holiday trading kind of made the market movements a little weird.

Conclusion:

Thanksgiving trading really threw a bone at the market as the low volume of traders forced the market in a lopsided direction. Now that the rest of the world is back in the market, it will be interesting to see what happens. My personal opinion is that last week's move will be corrected this week but if US data continues to show negative reports coupled with stronger Euro and GBP reports then the trend could continue.

Tuesday, November 21, 2006

2006-11-21T16:08:00.000-05:00

Thanksgiving is fast approaching and while I'm excited about stuffing my face with an endless supply of delicious home cooked food, there is something even more exciting that is putting a twitch in my trading finger. It's called "Black Friday" and it refers to the one day a year when stores have ridiculous discounts so that the US consumer can start their annual Christmas shopping. This means waking up early, standing outside stores in huge lines, and fighting the mob for all the cool new gadgets stores have to offer. The day after Thanksgiving sparks the start of Christmas which to me could spark a short term growth in consumer spending.

I talked about this a couple months ago but consumer spending has been one of the few areas that are keeping the US economy afloat. We all know housing is dead, but with the shopping season starting, we could see a short term uptrend for the dollar. I expect consumer spending to be big. Gas prices are still relatively cheap and employees are making more, giving them more cash to spend on little Tommy and Katie. I just thought I'd throw out that little point.

In other news, the BOJ minutes were released early this morning and the consensus is that they will not be raising rates until sometime next year. The tone was that the their economy is growing moderately which basically means they are in no hurry to raise their rates. Enough said.

Coming Up:

Again nothing major is coming out, but the BOE minutes will be released and you should definitely give it a read. Also, consumer confidence is coming out at 10 am ET, but I don't think it will cause any movement unless the number is very extreme.

Chart Analysis:

EUR/USD

Ok so the Euro didn't fall as much as I thought it would, but it did make another bounce like I expected. At this point it's hard to say where the Euro will go tomorrow because the 4hr stochastics turned upwards before hitting the oversold region. Daily stochastics is still headed down but I don't see any major resistance levels nearby to justify a move down. The pair has bounced off of 2850 a few times so it could hold once again. It's hard to say at this point. I'm going to hold off on this.

GBP/USD

Like I said yesterday, the Cable moved up to where the 100 SMA is and I think the next move is a bounce down. 4hr stochastics moved briefly out of overbought territory but it headed back up there towards the end of the day today. Since the 9000 level is also where the 100 SMA is on the 4hr chart I think this resistance will hold because of the lack of fundamentals and slow trading week this week. Look for the pair to move back down to 8950.

USD/CHF

So the resistance I mentioned yesterday at the 50 and 100 SMA held its ground and the Swissy made another move back down to 2400. The million dollar question now is whether or not 2400 will hold. Stochastics on both the 4hr and daily chart are both showing more room for selling power but like I said, trading will be kind of dead this week because of the holiday and lack of fundamental reports. My guess is that this pair will hold at 2400 and may range to 2450.

USD/JPY

The Yen did even more consolidating today and I am expecting a breakout at some point in this pair. I think a good play would be to straddle it by looking to buy past 118.50 or sell below 117.50. If the pair breaks one of those levels I think the logical targets would be 119.00 and 117.00 respectively. I think we'll see more tight range trading the rest of the week so this probably won't happen until sometime next week.

Conclusion:

With tomorrow being the day before Thanksgiving, many people will be traveling and trading volume should be pretty low tomorrow. Times like these can be dangerous so be careful if you do trade tomorrow. This will be my last post until next Monday as I will be out of town for the holidays. Have a happy Thanksgiving everyone!

Monday, November 20, 2006

2006-11-20T17:01:00.000-05:00

This week is going to be dull. Personally, I am already thinking about the gorgeous turkey that I will be devouring on Thanksgiving. With hardly any economic reports due out this week and the fact that Thanksgiving is on Thursday, I don't expect too many things to happen in the Forex world. Last year I ended up losing 3 straight trades on the 3 days right before Thanksgiving so I will only be taking a trade if I see a really good setup.

I will not be posting on Wednesday-Friday since I will be out of town, and seeing how this is the most traveled holiday (yes even more than Christmas), I am expecting a rather low volume of traders during these days. I highly advise that you take a vacation from trading and enjoy the time off. If you're outside of the US, use this time to maybe re-focus. Review your past trades. Review your current trading systems. Just take a few days to analyze yourself as a trader. This is the perfect time to do so!

My Bias-O-Meter is once again telling me that the dollar is poised for a sell-off. I've been seeing a downtrend for the dollar across the majors for about 3 weeks now. This doesn't necessarily mean that the dollar will be bearish from now on, but it does give me some indication as to where the dollar may be headed in the medium term.

Weekly Bias-O-Meter:

EUR/USD; GBP/USD= Bullish
USD/CHF; USD/JPY= Bearish

Coming Up:

Absolutely nothing! Well not really, but there isn't anything major coming out. The BOJ minutes will be released so you might want to go over that but I don't see anything major coming out tomorrow.

Chart Analysis:

EUR/USD

Am I good or am I great? I said on Thursday that I felt 2800 was a good support and that if the price dipped it would find support at around 2770 which was where the 100 SMA was approaching. I also said that I felt the price would move back to 2850. Like magic, the pair did exactly that and I once again have a big head. I apologize and hope you can bare with me! Deep breath......ok back to reality. After all the bouncing the 2800 is giving us, I think we're going to see a stronger push down this time. With the lack of fundamental reports this week mixed with the Thanksgiving holidays I'm not sure if we'll see that push this week. However, my next target for the Euro is 2750. Stochastics on the 4hr has plenty of room to fall but depending on the movement the pair may just bounce off of 2770 again. We'll have to wait and see.

GBP/USD

Well my trade never got triggered but my thinking was correct. There were a lot of signs pointing towards a reversal to the upside and 8850 looked to be the bottom of before the reversal. The pair has moved nicely and is currently around 8970. My next guess would be for the Cable to retrace down to around 8900 as the 4hr stochastics is showing an extended overbought signal. The 50 SMA on the daily chart is also approaching 8900 so that should be a good support area. Look for a move towards 8900 before another bounce back up.

USD/CHF

I said on Thursday that I felt that 2500 would hold as a good resistance level and after a brief spike, the pair ended up closing back below 2500 on Friday. I targeted 2400 and the pair hit that level today. From the 4hr stochastics point of view it looks like a move up is the next play. However the pair faces resistance at the 50 and 100 SMA on the 4 hr chart which is hovering right above the price at around 2460. Not really sure where this is going.

USD/JPY

Woooweee the Yen is trading tighter than the Ohio State vs. Michigan game was! From my vantage point I'm seeing an ascending triangle on the daily chart. I think a breakout is going to happen soon but it may not happen until after this week. 118.50 will be the level to break. If we see this broken, look for a move to at least 119.00 and maybe even 119.50.

Conclusion:

It's a short week with very few fundamental reports. Look for a lot of spikes and range trading. Be very careful if you trade this week.

Thursday, November 16, 2006

2006-11-16T16:28:00.000-05:00

The dollar rose slightly due to the higher than expected TIC data and Philly Fed Index. However, the gain was held back by a lower CPI (which we already knew was going to happen because of the low PPI number on Tuesday). The GBP retail sales also rose higher than expected. All these factors led to a lackluster day in the majors as the pairs pretty much stayed put.

My Cable trade did not trigger because the pair did not drop low enough. I still think the trade looks good so I will keep it in play. However, the pair bounced off of its 200 SMA on the 4hr chart and I'm not sure if we'll see another drop. Regardless, I will keep the entry the same as stochastics on the daily chart still show a little more room for some selling power and with the 100 SMA also lining up at our entry level of 8800, I think this is the safest place to put a buy order at.

Coming Up:

US Housing Starts
8:30 am ET; 1:30 GMT
Previous= 1.77M; Forecast= 1.68M
Housing has been weak lately and the debate now is whether or not the slump is over. Economists are forecasting another drop so if we happen to see a rise in housing starts (especially a number higher than last month's number) then we should see the dollar rally tomorrow.

Chart Analysis:

EUR/USD

The EUR/USD didn't quite get to 2850 but it did get pretty close. Now the pair has once again dropped back down to 2800 which is also where the 50 SMA is lurking. This pair has tested 2800 several times the last few days and has bounced up each time so this is turning out to be a pretty decent support level. Stochastics on the 4hr chart has reversed and is showing signs for short term selling with the daily stochastics also showing signs for selling. The next support level will be at the 100 SMA on the 4hr which is currently around 2770. At this point I'm not sure where the pair is headed as 2800 has been providing good support while stochastics on both the 4hr and daily charts are showing selling signals. With 2800 being a good support and the 100 SMA not too far below it, my best guess is that this pair will bounce again towards 2850. Since stochastics is showing selling power if the pair drops, it shouldn't drop too much lower than the 100 SMA.

GBP/USD

I'm going to keep my trade idea active but I'm having doubts as to whether the trade will trigger. The Cable has found support at 8850 (the 200 SMA on the 4hr chart) and the 4hr stochastics is showing an upward trend. Not to mention the fact that the today's daily chart candle was a spinning top which gives strong indication of a reversal. I may have missed the boat on this one but I don't want to play it too aggressive. The entry level for my trade is a very safe level and if it does happen to trigger, there is a VERY good chance my trade will win. I'll just have to suck it up if the price just continues to bounce up without taking me along for the ride. If you're feeling aggressive you could buy the pair now (around 8890) and target 8950 and put your stop at 8850.

Trade Idea:

Buy at 1.8800; Stop Loss= 1.8720; Target= 1.8900

USD/CHF

The Swissy has been real quiet lately and is starting to look really ugly. Right now the pair is testing resistance at the 100 SMA on the 4 hr chart and we have another good resistance level at 2500 which is where the 50 and 200 SMA are at on the daily chart. Stochastics on the 4hr chart still show signs for more selling although the slope is moving ever so slowly. I expect to see a drop tomorrow as 2500 is looking to be a very strong resistance point since 2 moving averages are converging at that same level. Unless we see drastic US news tomorrow, I don't expect 2500 to be broken. Look for the pair to drop to 2400.

USD/JPY

The Yen is also looking really ugly as all 3 moving averages on the 4hr chart are looking like multicolored spaghetti strands right now. The pair has found resistance at 118.30 (200 SMA on the 4hr chart) but stochastics is wiring together and isn't giving me a good directional bias. I'll refrain from making any guesses on this one.

Conclusion:

There isn't much going on tomorrow except for the New Housing Starts report. Look for the market to follow the technicals unless the numbers for the new housing report are extreme.

Wednesday, November 15, 2006

2006-11-15T16:40:00.000-05:00

The dollar made pretty decent moves verses the Swissy and Yen but ended up pretty much in place against the Euro. The biggest loser however was the Cable in which the dollar made a very nice rally against it. The GBP showed weak reports during their session and added to the fact that a higher than expected number came out for the US Empire Manufacturing Index, traders placed their bets that the dollar is still the stronger currency.

The FOMC minutes showed that the Fed is still worried about inflation and the slowing economy but the overall sentiment is that the Fed will still keep rates steady for the remainder of 2007.

After a few days of back and forth dollar movement, stochastics on the daily charts have been wishy washy. Now the stochastics seems to be resuming its trend for a dollar rally. I expect the trend to continue until the daily stochastics on the majors reach extreme levels again so unless we see devastating news for the dollar, watch for the Greenback rally to continue for a few more days.

Coming Up:

GBP Retail Sales
4:30 am ET; 9:30 GMT
Previous= -0.4%; Forecast= 0.2%
The forecast shows a possible increase in retail sales. With the weak GBP data out today, this number will be important for the Cable. If the retail sales happens to come out lower than the previous number of -0.4%, watch for a big drop in the Cable.

US Core CPI
8:30 am ET; 13:30 GMT
Previous= 0.2%; Forecast= 0.2%
PPI came out lower than forecast which means that we should also be seeing a lower CPI number. If for some reason CPI comes out higher than expected, I think the dollar will rally. This number will have to be fairly big as traders will also probably want to wait for the TIC data and Industrial Production report due out later in the day.

US TIC Data
9:00 am ET; 14:00 GMT
Previous= 116.8B; Forecast= 63.0B
Anything lower than 63.0B will cause the dollar to drop like a rock. TIC data is important because it basically funds our deficit so a lower than expected number will crush the dollar.

US Industrial Production
9:15 am ET; 14:15 GMT
Previous= -0.6%; Forecast= 0.2%

Chart Analysis:

EUR/USD

Yesterday I said that we would see another bounce to 2850 and I hold firm to that claim. The Euro once again bounced off of 2800 and is currently at 2824. Stochastics on the 4hr chart is headed up with plenty of room for buying power so I expect the pair to reach 2850 and maybe even 2870. On the daily chart, stochastics is once again sloping down so we still have plenty of long term selling power. After the pair moves up to 2850-2870, we could see some of this selling power tomorrow.

GBP/USD

Yesterday I said the Cable was showing an extended period of oversold in the 4hr stochastics and with another big drop today, that period has been extended even longer. To top it off, the pair has found support at the 200 SMA on the 4hr and the 50 SMA on the daily chart. I am seeing strong technical signs that this pair will rally tomorrow. Stochastics on the daily chart is also beginning to enter the oversold category which is also another sign that this pair will move up.

Trade Idea:

Buy at 1.8800; Stop Loss= 1.8720; Target= 1.8900

USD/CHF

I said that the Swissy would reach 2500 if it could break 2450 and that's exactly what it did. Now the pair has bounced back down and is currently resting on its 50 SMA on the 4hr chart. I'm not clear on the direction for this pair tomorrow but if I play the correlation rule, I would expect this pair to go down since I believe that the Euro will rally tomorrow. My best guess is that the pair will move down near 2400.

USD/JPY

Unlike the Swissy, the Yen shows a clearer sign that it will drop. The 4hr stochastics is reading overbought and I think the pair can go down to 117.50. However it faces some resistance along the way as the 50 and 100 SMA stand in between the current price and the 117.50 level.

Conclusion:

The market is full of economic reports tomorrow so we should see a pretty exciting day once again. Since we have 3 major US reports, we will see the most movement if they all line up, whether they are all positive or negative.

Tuesday, November 14, 2006

2006-11-14T16:25:00.000-05:00

Let me first warn you that I will once again be holding my shoulders high because for the 2nd day in a row, every single one of my chart analysis predictions came true! Cmon, you gotta admit that you feel the same way whenever you make correct market predictions! It's perfectly natural, and if you were correct in your market analysis' then I commend you and pat you on the back.

Before I delve into the fundamentals, let me first recap the Yen trade from yesterday. I had 2 options. One was to short at market (which was at 118.12) or at 118.00. The target was 117.50 and the stop was 118.50. The trade ended up hitting my target early last night and netted 62 pips if you shorted at market, and 50 pips if you shorted at 118.00.

Now for the fundamentals. US PPI was weaker than expected coming in at -1.6% compared to the -0.3% forecast. This means that inflation experienced by wholesalers is relatively low. As a result we should also see a lower CPI report on Thursday since wholesalers won't have to pass on any of their expenses onto the consumer. This weak PPI report caused an initial drop for the dollar but the move was quickly countered by the Retail Sales report. The Retail Sales report also came in lower than expected but this was due to 2 things that traders already have factored in their minds. The first is the lower gas prices. Because gas prices have been so cheap, sales have dropped like a rock, falling 6%. The 2nd is the fall in furniture sales. Well we all know that housing has been crappy lately so it's no big surprise that if housing sales have been slumping, so should furniture sales. Because these 2 things are already assumed, the actual number doesn't seem that bad. When you take away those 2 groups, retail sales actually rose 0.4%. This gave some support for the Greenback and kept it from falling too much.

Coming Up:

US Empire Manufacturing Index
8:30 am ET; 1:30 GMT
Previous= 22.9; Forecast= 15.0

US FOMC Minutes
2:00 am ET; 19:00 GMT
Pay close attention to statements regarding inflation and the slowing economy. More importantly, pay attention to what Fed says they will do regarding these issues.

Chart Analysis:

EUR/USD

Although we had some volatile moves in the EUR/USD today, there hasn't been a clear direction. As a result, stochastics on the 4hr chart isn't really giving me a clear signal. The pair has found support at 2800 again and with the 50 SMA also hovering around that level it should make decent support. My best guess is that the pair will once again bounce off of 2800 and make another run towards 2850 but I'm not entirely confident about it. Stochastics is still heading up on the 4hr chart but it's moving slow so I'm not sure if that trend will continue. We'll have to wait and see.

GBP/USD

The Cable has been under a lot of selling pressure lately and I think we'll see a retracement soon. Look for the pair to rise to 9030-9050 (around the 50 SMA on the 4hr chart) in the short term. On a longer term outlook, I think the pair will eventually drop to 8900. Stochastics on the daily chart has a nice downtrend and there is still plenty of room for the pair to fall.

USD/CHF

The Swissy is once again testing resistance at 2450 (50 SMA) and 4hr stochastics is making its way down. I think the pair will go to at least 2400 but after that I'm not sure if the pair will have enough juice to keep pushing forward. If the pair reverses and breaks 2450, look for the Swissy to go to 2500 which is where the 100 SMA is at.

USD/JPY

I think the Yen will make a run towards 117.00. I'm not sure if it will actually hit or not but it should get close. After that look for the pair to bounce back up to 117.50 again. Stochastics on the 4hr chart shows a little more room for selling but not much so I don't expect it to drop much further.

Conclusion:

There are less economic reports tomorrow but still be on the lookout for some nice movement, especially after the FOMC minutes. Tomorrow should be another exciting day so be ready!

Monday, November 13, 2006

2006-11-13T16:54:00.000-05:00

The dollar made a short term rally today and my chart analysis was dead on target. Am I a genius or a magical psychic? Hmmm...I barely broke 1000 on my SATs and I picked the Tigers to win the World Series so that's a definite NO. With a slow economic day today, the markets pretty much just followed the charts to a tee. This usually happens when there aren't too many important economic reports out. However, I do believe this dollar rally we saw today was partly caused by traders correcting their knee-jerk reaction to China's statements regarding diversifying their reserves.

Last week when Zhou announced that they had a clear plan to diversify their reserves, traders rushed out to sell their dollars as they figured this would be the catalyst for a big dollar sell-off. However, I think traders felt some regret about their decisions when they calmed down and went back to Zhou's statement on Friday in which he stated that he was not planning to sell US dollars in order to diversify. Ooops!

On the technical front, all 4 majors hit my projected targets (I know I know, I keep tooting my own horn). With the nice dollar rally today, we'll have to see if the dollar can maintain it's speed or if it will fizzle out once again and cause yet another retracement.

Weekly Bias-O-Meter:

For the 2nd week in a row now I am getting dollar-negative indications. This could be the start of a longer term dollar sell-off. Be ready for it!

EUR/USD; GBP/USD= Bullish
USD/CHF; USD/JPY= Bearish

Coming Up:

UK CPI
4:30 am ET; 9:30 GMT
Previous= .1%; Forecast= .2%

German ZEW Sentiment
5:00 am ET; 10:00 GMT
Previous= -27.4; Forecast= -30.0
The Zew has been a big mover the last couple of months so look for this one to move the market if there are any surprises.

US PPI
8:30 am ET; 13:30 GMT
Previous= -1.3%; Forecast= -0.3%
This report will be important because it measures inflation pressures felt by manufacturers. Inflation has been the bigger worry for the Fed (as opposed to the slower US economy) so this report will be watched closely.

US Retail Sales (all & excluding autos)
8:30 am ET; 13:30 GMT
Previous= -.4%; Forecast= -.4%
Excl. Autos Previous= -.5%; Forecast= -.1%

Chart Analysis:

EUR/USD

The 50 SMA on the 4hr chart is approaching 2800 which makes it a decent support level. With stochastics also reading oversold, a short term move to 2850 is possible although the stochastics on the daily chart still shows plenty of selling power. If the Euro breaks 2780, look for it to head towards its 100 SMA at around 2750ish.

GBP/USD

The Cable once again spiked above 9100 and got as high as 9150, but again it failed to stay above there. 9100 has proven to be a very good resistance area up to this point. The Cable has dropped like a rock to 9000 and the 4hr stochastics is reading oversold. I think there is a good chance the pair will get to at least 9050 but it may spike below 9000 at around 8970 (100 SMA) before bouncing up. The daily stochastics still shows plenty of selling power.

USD/CHF

The Swissy is currently testing resistance at 2450 (50 SMA) and 4hr stochastics is reading overbought. I think there is a very good chance that 2400 is the Swissy's next move.

USD/JPY

I'm seeing a small bearish hidden divergence on the 4hr chart. Notice how the pair has made lower highs while stochastics has made higher highs. With the pair bouncing off of its 200 SMA and stochastics reading overbought, I think there's a good chance this pair will hit 117.50.

Trade Idea:

Sell at market (118.12) OR at 118.00. Stop loss= 118.50; Target= 117.50

Conclusion:

There are plenty of economic reports to keep the markets busy tomorrow. I'm expecting a volatile day after having been without a solid fundamental catalyst for some time now. I think the markets are poised to move so be prepared for lots of thrills and excitements tomorrow!

Friday, November 10, 2006

2006-11-10T15:56:00.000-05:00

Happy Friday to everyone. It's been a pretty dull week in the currency market due to the lack of economic reports and most of the movement has been based on various statements from head honchos of different countries. It's true we've seen plenty of spikes but a clear directional trend is still up in the air. I'm going to keep this update short because it's Friday and I want to start my weekend already!

The lingering story is still the statements made by Zhuo regarding China's plans to diversify their reserves. This diversification plan means that other currencies and even commodoties may rally. As a result, the dollar once again lost ground to the majors today. Enough said!

Coming Up:

Next week we have interest statement announcements from both the ECB and BOJ. Both of those head honchos have been suggesting that they may be raising rates. This will add further selling pressure to the dollar against the Euro and Yen so it should be an exciting week.

Chart Analysis:

EUR/USD

The Euro rallied all the way up to 2900 before closing around 2850. On Monday we may see the pair retrace down to 2800 as that's where the 50 SMA seems to be headed on the 4hr. chart, making it a decent short term support. Stochastics on the 4hr. chart is now heading down after being in overbought territory, so a short term drop is possible.

GBP/USD

Remember how 9100 is the 3 month resistance for the Cable? Today the pair spiked up to almost 9200 before coming right back down to around 9100. So does this mean that today's high is the new resistance? I doubt it. What we saw today seems just like a knee jerk reaction and with the price closing back down at 9106, this still seems to be the level to break. Now if we see another move to higher and a close around 9150 then I would consider 9100 to be broken. We'll have to wait and see. According to the stochastics on both the 4hr. and daily chart, the pair shows signs for a drop on Monday and the pair could head towards its 50 SMA on the 4hr chart which is around 9050.

USD/CHF

I'm still getting confusing signs on the Swissy. The 4hr stochastics shows signs for a rally while the daily stochastics seems to be showing signs for a drop. After a spike to 2350, the price closed slightly above 2400. I'm still not sure on this but going by correlation with the EUR/USD (remember, I expect a short term drop), I'd expect this pair to rally up to 2450.

USD/JPY

The Yen looks poised for a short term rally to 118.00. Stochastics on both the 4hr and daily chart are headed up but we do face some resistance at 117.80 because that is where the 50 SMA is on both charts.

Conclusion:

I'm glad this week is over. It's too hard to trade when the market moves based on nothing but statements. I want to see hard facts and I need economic reports to do that. I think next week will be a lot more exciting with the ECB and BOJ interest rate statements coming out so be prepared. Have a restful weekend because next week should be one heck of a trading week!

Thursday, November 9, 2006

2006-11-09T15:36:00.000-05:00

The BOE raised rates to 5.00% and yet the Cable drops. Although this was probably already priced in the market I would've expected the Cable to rally on this announcement. That wasn't the case. In fact, the Cable dropped after the interest rate announcement. An hour and half later, the US trade balance comes up narrower than expected (bullish for the dollar) and the Cable dropped some more, which seems logical. However, the crazy thing is that an hour after that, the Cable then proceeded to rally higher and ended up spiking to almost 9100 again. Talk about a roller coaster day for the dollar!

Explanation? I wish I had one. One of the things I've learned in this market is that a lot of times it is very difficult to understand the exact reasons why the market moves the way it does. However, I do have some theories:

Regarding the dollar rally after the BOE's interest rate statement-- This was probably just one of those cases where the market already priced in the rate hike and the news announcement sparked traders to take some profits. This may have been the cause for the initial drop in the Cable.

An hour and a half later, the US trade balance comes in at -$64.3 billion compared to the forecast of -$66.0 billion. This narrower balance was primarily caused by lower oil prices, but US exports have also been rising and helped the deficit. This surprise is what caused the 2nd wave of the dollar rally.

So why did the dollar end up losing after another hour and half? I think it has something to do with what China said regarding their reserves.

The Bank of China Governor, Zhou Xiaochuan, said he has a clear plan to diversify their foreign exchange reserves. China's reserves have exceeded $1 trillion which is the most ever held by one country. Most of those reserves are US dollars. While it's a smart move to have their reserves in the dollar, too much of a good thing is not always "good". The fact that they are saying they have plans to diversify may have played a part in why the dollar dropped against all 4 majors at the end of the day.

Coming Up:

Nothing dramatic is happening tomorrow. However, Big Ben Bernanke and Trichet are speaking at 8:45 ET tomorrow. These could be potential market movers if they say anything out of the ordinary.

Chart Analysis:

EUR/USD

The Euro halted it's drop and didn't quite make it down to 2730ish like I thought it would. Instead it only went back down to 2750 before rallying as high as 2847. At this point it's hard to pick a direction for the pair because the rally has caused the daily stochastics to cross back up. The 4hr stochastics is also heading up and is not overbought yet. I honestly have no idea where this pair is headed tomorrow.

GBP/USD

This is the 2nd day in a row that the Cable is showing indecision. If you take a look at the daily chart you'll notice that the past 2 candles have told almost identical stories. The market pushes in each direction but at the end of the day, it ends up right back where it started. Stochastics on both the daily and 4hr chart aren't helping me either because both of them aren't moving in a clear direction. Right now it's a coinflip but tomorrow might be another range bound day for the Cable. Watch for it to move in between 9000 and 9100 tomorrow.

USD/CHF

The past few days I've been saying that the Swissy is stuck in a range. The daily chart still shows the price bouncing in between 100 and 200 SMA. I expect for it to move in between these 2 moving averages tomorrow.

USD/JPY

The Yen is doing the exact same thing as the Swissy except it's bouncing between the 50 and 200 SMA on the 4hr chart. Look for the Yen to trade between 117.80-118.50 tomorrow.

Conclusion:

Tomorrow looks to be a dangerous day to trade as none of the pairs are showing any clear directions. It's not that suprising to me as there haven't been any major economic catalysts to propel the market to move this week. I will most likely stay on the sidelines tomorrow and hopefully I'll be able to find some direction after tomorrow's trading ends.

Happy trading!

BP

Wednesday, November 8, 2006

2006-11-08T16:39:00.000-05:00

It was a pretty dull day in the markets regarding fundamentals. Nothing too extreme has happened in the past 24 hours. However, the Democratic party did take control of the House of Representatives. Now this gives them the power to block government spending and reverse tax cuts. Like I talked about yesterday, this will create a power gridlock since one political party no longer controls both the House and Senate. When this happens, it becomes negative for the dollar because policies become harder to pass.

The Democrats have taken 5 of the 6 six seats that they needed in order to take control of the Senate, and the 6th seat is coming down to the Virginia results. Democrat Jim Webb leads current Senator George Allen by 1 percentage point. The recount will determine whether or not the Democrats will actually win the Senate. However, even if the Democrats do take the Senate, you still have a Republican president and a power gridlock will still be in effect.

In the technical analysis world --- After some retracements took place (mentioned in my chart analysis yesterday), the dollar moved right back around to where it was yesterday. My Euro, Cable, and Yen targets were all hit but after that, the pairs moved back to their original levels.

Coming Up:

BOE Interest Rate Statement
7:00 am ET; 12:00 GMT
Previous= 4.75%; Forecast= 5.00%
The BOE is expected to raise rates a quarter percentage point to 5.00%. This is bullish for the Cable and perhaps it may even give it the juice it needs to finally break 9100 after 3 months. Also look for statements for future rate hikes.

US Trade Balance
8:30 am ET; 1:30 GMT
Previous= -69.9; Forecast= -66.0
The trade balance is expected to narrow which could mean good news for the dollar. A number lower than -70 would be a big surprise and if that happens, expect the dollar to drop like a rock.

Chart Analysis:

EUR/USD

I said yesterday that my primary target for the Euro was 2750 and my secondary target was around 2725-2730. I'm going to stick with my secondary target because I still see a little more selling power. The 4hr stochastics isn't oversold yet and is still headed down. The daily stochastics shows plenty of selling room and I don't see any major support areas until 2730ish because that is where the 50 SMA is on the 4hr. chart.

GBP/USD

The Cable didn't quite get to 9000 but it did get as low as 9006 which is pretty darn close. After bouncing back up to 9050ish, I still see this pair heading back down toward 9000 as there is still signs of a little more selling power shown by the 4hr stochastics. 9000 looks like a good target because that is where the 50 SMA is on the 4hr chart.

USD/CHF

This pair is looking really ugly right now. On both the 4hr and daily chart, all 3 moving averages are consolidating and it really gives me no clues as to where this price is headed. I can see from the 4hr. Stochastics that an upward move looks possible. If the pair can break through its 50 SMA at around 2512, then I can see the Swissy getting to 2550 which is where the 100 and 200 SMA are on the 4hr chart.

USD/JPY

Well the Yen did reach 118.00 like I thought it would and since then it has bounced down slightly and is hovering around 117.83. I think the pair will move back up to 118.00 again and at best, I think it could go as high as 118.20 which is where both the 100 and 200 SMA are on the 4hr. chart.

Conclusion:
After a week of dull fundamental activity, tomorrow's BOE statement and US trade balance report should cause the market to stir. Look for a decent move tomorrow.

Happy trading!

BP

Tuesday, November 7, 2006

2006-11-07T15:20:00.000-05:00

Bank of Japan governor Fukui said that they will adopt a forward-looking approach, and take action (against rising prices) in advance, moderately. Or, in layman's terms, the BOJ is probably going to raise rates again. And when a big bank leader says something like this, it usually means good things for their currency. This statement sent the Yen in a frenzy and as a result, it kicked the dollar's ahem..."rear end" today.

Janet Fellen, the San Fran Fed Pres., said in a speech today that countries may decide to channel less of their reserves into dollar assets. Apparently she is not the only one saying this. It seems that even Mr. Greenspan is also paying attention to this very point. Foreign investors have been pouring money into dollar assets and according to these 2 financial gurus, this trend may not continue for long. If they are right, this could spell trouble for the Greenback.

Speaking of the Greenback, mid-term elections were held today. I came across a really cool article that talked about the market's reactions to past elections. It basically says that when one party controls both the House and the Senate, it means good news for the dollar. On the other hand, when there is gridlock (each party controls either the House or Senate), it's usually dollar negative.

"Looking back at the last six mid-term elections, the US dollar has rallied in all but one (2002) and in each of these cases, there was a one party majority win. This suggests that the currency market actually likes political harmony and dislikes political gridlock. Therefore, should the Democrats win either the House or Senate, the dollar could resume last month’s weakness. If Republicans retain control on the other hand, November could prove to be a dollar bullish month."

Read the full article here

Coming Up:

Again, there aren't any news reports that I think will cause any chaos tomorrow but Chicago Fed Prez, Moskow, speaks tomorrow so pay close attention to what he says. The market is looking for reasons to either buy or sell the dollar so what he says could make an impact on tomorrow's dollar movement.

Chart Analysis:

EUR/USD

I talked about retracements and how we were likely to see them because of the strong dollar rally on Friday. I just didn't think they would be this extreme of a retracement. The Euro retraced as high as 2820 which was a complete reversal from Friday's downward move. Now that we've seen a good retracement, both the 4hr chart and the daily chart are showing signs of another downward move in the EUR/USD as both stochastics have touched overbought levels and are heading back down. I expect this pair to get down to 2750 as a primary target and maybe even as low as 2725-2730 (the 50 SMA).

GBP/USD

Well my trade idea didn't work out as I planned. While I did expect the Cable to rally to 9050, I didn't think it would go as high as 9123 today. Now that the pair has hit 9100 (which by the way is that strong 3 month resistance level I've been talking about), and stochastics on both the 4hr and daily chart have been overbought and heading down, there's a good chance we'll see the Cable fall to 9000. Coincidentally enough, that is where the 50 SMA seems to be headed.

USD/CHF

All I can say about the Swissy is that it looks like it will head back up. I can't find any good technical targets but both stochastics on the 4hr and daily chart show signs for an upward move. On the daily chart, the all 3 moving averages (50,100,200) are converging together which means we are seeing some rangebound movement. Since the pair dropped today, I expect to see a rally tomorrow.

USD/JPY

Like the Swissy, I don't see any good technical entries or targets. However, I do see signs that the pair will head back up after today's strong downward movement. Look for the Yen to move back up to 118.00

Conclusion:

Be on the lookout for any comments made by any Fed Presidents or Bank Governors and whether they speak hawkish or dovish. Their statements will play important roles in this week's market movements since there aren't too many important fundamental reports coming out.

Happy trading!

BP

Monday, November 6, 2006

2006-11-06T18:07:00.000-05:00

Don't say it's a conspiracy! Can someone please tell me how September jobs went from 51,000 to a "revised" 148,000? That is complete malarky! With elections coming up, it's no wonder why the numbers are "misleading"...(get it?) For cryin out loud, can someone just please tell us the truth?

Yes I know I'm ranting and raving again, but I'm not the only one. This seems to be a big topic right now especially since all these crazy revisions are occuring right around election time. Surely, a politics doesn't play a role in the toying with the numbers just to make their party look better to the oblivious general public! (note the sarcasm) Either way, this gives us more evidence that the job market is still hot on its toes. This maybe the last hope the dollar will have and once it's gone, look for the dollar to sell off...big time!

Weekly Bias-O-Meter

My Bias-O-Meter has finally changed. Now I'm seeing signs of a momentum shift and it looks like the market is poised for a longer term dollar sell-off.

EUR/USD; GBP/USD= Bullish

USD/CHF; USD/JPY= Bearish

Coming Up:

There are no major news reports tomorrow. The US will be having their mid-term elections where they will select 1/3 of the Senate and members of the House of Representatives.

Chart Analysis:

EUR/USD

I said on Friday that the Euro would retrace back up to around 2730 and then drop back down. Well with the slow day today, only the first part of that statement came true. The Euro headed to around 2730 earlier today but has stalled since then. The daily stochastics is showing signs for more selling as it is now heading down from the overbought territory. Notice how the 38% Fib line matches with the 50 SMA. Currently the price is at 2720 and I can see the price going to around 2670 or 2650. However, the stochastics on the 4 hr chart is moving upwards and is still not overbought so we might see a little more movement to the upside before the fall.

GBP/USD

The Cable did manage to go to 8950 like I said it would on Friday but now the pair looks like it could use some retracement. On the daily chart I still see plenty of room for selling but in the immediate short term, it looks like the market will retrace upwards. I can see this pair going as low as 8900 which is where the 38% Fib level is.

Trade Idea:

Sell at 1.9050; Stop= 1.9100; Target= 1.8900; (If price gets to 1.9000, I will move my stop to breakeven and trail my stop every 20 pips)

USD/CHF

Friday I said that if the Swissy could break 2550, it would go up to 2600. Well since then it has broken 2550 but has not quite gotten to 2600 yet. It got as high as 2578 before moving back down towards 2550. I still think this pair will hit 2600 but we may see some downward retracement in the short term as the 4hr. stochastics is showing overbought.

USD/JPY

I see alot of spaghetti on the 4hr. chart right now and I don't like to mess with the market when it gets like that. By spaghetti I mean that all my moving averages (50,100,200 SMA) are all bunched up together and it's hard to get any kind of direction. Stochastics on the daily shows plenty of room for more buying but short term stochastics shows signs for an immediate retracement. I can see the price going back down to 118.00 before bouncing back up.

Conclusion:

With not too many major fundamental reports out this week. I think the market will move more in line with the technicals. Pay close attention to support and resistance levels as they will probably hold strong this week.

Happy trading!

BP

Friday, November 3, 2006

2006-11-03T18:45:00.000-05:00

The Now:

The technicals had been showing signs for it, and today the fundamentals finally allowed the dollar reversal that I've been talking about for a week now to take place. On all 4 majors I have been ranting on and on about how there would be a dollar reversal because everything was either showing oversold or overbought along with divergences, hidden divergences, and strong support/resistance levels. In a market where things rarely happen the way you'd expect them to, this is kind of a nice moment for me. So I'd like to take a second and take a deep breath.....ahhhh! Man it feels good to be right! Sigh, ok back to reality...

Yesterday I said that if the NFP came in at 90k or lower we would see a dollar sell-off. Fortunately, the NFP came in at 92k which is still an increase from the pathetic 51k that was posted last month. As close as the NFP was watched today, the bigger story was the unemployment report. Unemployment fell to a 5 year low which means that the job market is still sizzling. This is the breath of fresh air the dollar has been waiting for, and it was just enough for traders to bring the dollar back up.

Remember, the housing market sucks right now. Consumer confidence is dwindling, even with lower energy prices, which leads to lower consumer spending, and consumer spending is what was keeping the economy afloat for the past few months now. The lower consumer spending means lower GDP which is what economists use as a benchmark for measuring the strength of an economy. With all of those factors, its no wonder why the dollar has been getting beat to a pulp. Today's reports showed that there is still one hope for the US economy, and that's the job market. If the labor market also begins to cool off, prepare for a longer term dollar sell-off. For now, I'm happy that both of my trades came up as winners.

My Swissy trade got all the way to my 2nd target at 1.2550 and I was able to grab 100 pips of profit per lot. My Cable trade reached my target at 1.9000 and I closed all my lots for a 70 pip profit per lot. It was a great way to end the trading week! Now it's back to the drawing board...

Chart Analysis:

EUR/USD

After today's retracement, it's hard for me to determine a direction for the Euro at this point. Yes, our bearish hidden divergence is still in tact but now we are hovering around what could be good support levels. Price is right at 2700 which is also where the 100 SMA is on the daily chart and also where the 50 SMA is on the 4 hr chart. Stochastics on the daily still shows that the Euro is overbought so we could see more movement to the downside. The 4 hr. stochastics also shows some room for more selling as it is headed down but is not yet in oversold territory. Since we saw such a large drop in the Euro, my first instict tells me that the Euro will retrace back up slightly to 2730-2750. However, I think we will see a little more selling after that and I think the pair will go to at least 2680 or even 2650.

GBP/USD

It looks like that 3 month resistance level at 9100 is still in tact as the Cable FINALLY bounced back down. Like the Euro, I think the Cable will retrace back up slightly and then head back down. I could see this pair getting to 8970 and even 8950. Stochastics on the daily chart still shows overbought and there is still some selling power on the stochastics on the 4hr chart. I chose 8970 as the initial target because that is where the 50 SMA is on the 4hr. chart.

USD/CHF

Right now the Swissy is testing a good looking resistance level. Currently at 2533, the Swissy stopped at 2550 which was where the 200 SMA on the 4hr chart is, and is currently hovering just below the 200 SMA on the daily chart. However, our bullish hidden divergence is still in tact and if the Swissy can break 2550, then I have a good feeling it will go all the way up to 2600 or at least very close to it.

USD/JPY

I see all sorts of resistance levels the Yen is facing right now. It's right around 118.00 + 200 SMA(4hr) + 50 SMA (daily) and right above it is the 100 SMA (4hr). Stochastics on the daily still shows plenty of room for more buying power, but the stochastics on the 4hr chart is starting to move into overbought territory. I'm all sorts of confused on this pair and won't even try to guess where this one is going. On second thought, I'll flip for it......just kidding!

Conclusion:

It's been a great ending to a crazy trading week. Now it's back to the drawing board. After the nice dollar rally today, it will be interesting on how it will continue to move throughout next week. Can you feel the excitement?! Have a great weekend everyone.

Happy trading!

BP

Thursday, November 2, 2006

2006-11-02T17:34:00.000-05:00

The Now:

Oh how the markets like to tease me! The Swissy trade I am in moved in our favor again and got as high as 2476 (my target is 2500) before moving back down to around 2450 again. I still like this trade because the technicals still work in our favor but tomorrow’s Non Farm Payroll (NFP) report could stop me out if we see a weak number.

I’m also in a short Cable trade right now. I got really excited as the pair got down to around 9033 but unfortunately the feeling didn’t last as the Cable proceeded to bounce right back up and is currently hovering around 9086. Once again, it will be up to the NFP report to decide whether or not I win on this trade. I could cut my losses now or try to wait and get out at breakeven, but up to now I still think 9100 is a strong resistance, so I will hold in hopes that this resistance level will stay in tact.

On the Euro front, Mr. Trichet used his famous 2 words again in his speech—“strong vigilance”. I could almost guarantee that whenever he uses those 2 words, the Euro will rally. In his statement today, Trichet was very hawkish and confirms the belief that the ECB will raise rates again. However, he is still holding back on what they will do with rates in 2007. This is still keeping traders in the dark on the longer term future of the Euro which is why we didn’t see a bigger rally today.

Other than Jean-Claude’s statements today, there wasn’t really too much else going on. Remember, traders are waiting in anticipation for tomorrow’s NFP report so expect some good movements in the markets.

Coming Up:

US Non Farm Payroll
8:30 am ET; 13:30 GMT
Previous= 51k Forecast= 125k
The last NFP report came out very weak, so this one will be watched like a hawk. The US fundamentals have been showing increased weakness in the US economy so if this NFP report comes out weak (90k or lower) then expect some major dollar sell-offs. If the NFP comes out around the forecast then I think we’ll see the short term dollar reversal that the technicals have been showing for quite some time now.

Chart Analysis:

EUR/USD

We still have a slight bearish hidden divergence on the daily chart but the future direction of this pair will depend on the NFP report tomorrow. Technicals are (and have been) showing signs for a reversal so my gut instinct is telling me that we’ll still see a move back down to 2750 and maybe even 2700.

GBP/USD

I’ve been saying that this uptrend we’ve been seeing in the Cable is getting exhausted and if you look at today’s daily chart, we’ll see even more evidence of that. Notice how today’s candle is a doji. These types of candlesticks are usually good signs of a reversal. Stochastics has also been showing that the pair has been overbought for the past 6 days now. If you are a pure technical trader, we are seeing very strong indications that the Cable will drop very soon. I still think 9000 will be where the pair will move, but again, it will all depend on the outcome of the NFP report tomorrow.

USD/CHF

I still like the trade I am in because we have a very sexy looking bullish hidden divergence still in tact on the daily chart. That and the fact that we are resting on the support of the 100 SMA gives me comfort that my target at 2500 still has a good chance of being hit.

USD/JPY

Our bullish hidden divergence on the daily chart is still looking good. The 100 SMA support is also still holding its ground so I have a good feeling that this pair will move to at least 117.50 and maybe even 117.70 (which is where the 50 SMA is on the 4hr chart).

Conclusion:

Hold onto your chairs and grab some snacks because tomorrow should be quite a show. With US fundamentals showing a weakening trend, tomorrows NFP report will be critical for the dollar and will be watched VERY closely.

Cheers,

-BP

Wednesday, November 1, 2006

2006-11-01T18:12:00.000-05:00

The Now:

After a little spike following the weak ISM report, the dollar has pretty much stayed put today. The ISM came in lower than expected at 51.2 compared to the forecast of 53. On our Swissy trade, the pair came within 3 pips of stopping us out but has now settled back to where we were yesterday.

I believe the reason why the dollar didn’t drop further is because of the anticipation of this Friday’s Non Farm Payroll (NFP) report. This is usually a big mover and comes out the first Friday of every month so the lack of movement today indicates that this is probably what traders are waiting for.

US data has been coming in very weak now. The combination of the real estate downfall, weak GDP, weaker business and manufacturing activity, lower consumer confidence, and now the stabilization of oil prices, we are seeing a pretty good set of ingredients that could make for a longer term dollar sell off.

It’s pretty apparent now that the Fed will hold rates steady for the rest of this year, and the possibility of them cutting rates in Q1 of next year is increasing. I still don’t really know if the Fed will cut rates in Q1 but I do know for sure that they will not be increasing them anytime soon. That seems to be the sentiment among traders now and I think it’s what will be keeping the dollar from making any strong gains.

I’d like to note that on the Cable, the pair is hovering around a 3 month high at 9100. The pair has tested this level 3 times in these past few months and each time it has failed to break through it. With speculation that the BOE will raise rates to stop inflation and the mixture of weak US reports, this might be the time that the Cable finally pushes past 9100. I will be keeping a close eye on this pair to see what happens.

Coming Up:

ECB Interest Rate Statement
7:45 am ET; 12:45 GMT
Previous= 3.25%; Forecast= 3.25%
Interest rates are expected to stay the same, but regardless, you should keep an eye on this.

Trichet Speaks
8:30 am ET; 13:30 GMT
The most important thing to watch for during this statement is for any indication that the ECB will raise rates. If Trichet doesn’t say anything about raising rates, this should weaken the Euro at least for the day. However if he is hawkish then watch for dollar to continue drop against it.

Chart Analysis:

EUR/USD

The Euro didn’t quite reach 2800 which is where I said would be a good place to short, and it’s a shame because the price has retraced back down to around 2750 since getting as high as 2797. The bearish hidden divergence I’ve been talking about is still in place so a move to the downside is still a good possibility. 2700 looks to be the next near term support.

GBP/USD

This Cable spiked briefly above 9100 and got as high as 9134 before moving back below 9100. This level is a good “make or break” level for the pair and I’ll be watching it closely to get an indication of future direction. On the 4 hr chart we are seeing another sign of a reversal as we can see a regular bearish divergence. Notice how the Cable has been making higher highs while stochastics has been making lower highs. That and the fact that the Cable has just been skyrocketing lately leads me to believe that we will see a short term reversal in the near future. I think we’ll see a short term move to 9000.

Trade Idea:

Short at Market Price (around 9077); Stop Loss: 9135; Target= 9000

USD/CHF

After coming within 3 pips of getting stopped out, the Swissy has bounced back up and is now hovering around our entry. The bullish hidden divergence is still in tact and there is also a bullish regular divergence on the 4 hour chart. This is giving me strong indication that a short term dollar rally to at least 2500 is a strong possibility. I still like this trade and will continue to hold.

USD/JPY

We are now seeing a bullish hidden divergence on the Yen as well as another test of support of the 100 SMA on the daily chart. Look for this pair to bounce up to at least 117.50 and maybe 117.80.

Conclusion:

With traders anticipating Friday’s NFP report, I think the markets will follow the technicals tomorrow and we’ll see a short term dollar rally. The 4 majors look poised for a reversal and unless something drastic happens tomorrow I think we’ll see that reversal tomorrow.

Cheers,

-BP

Tuesday, October 31, 2006

2006-10-31T18:18:00.000-05:00

The Now:

Trick or Treat! The dollar’s getting weak!

Yesterday I said that if we saw an agreement of the US reports, whether it be positive or negative, we would see a good move for the dollar. Today both the Chicago PMI and Consumer Confidence report came in negative and as a result, the dollar took a tumble.

Chicago PMI came in at 53.5 which was much lower than the forecasted 58.0. This means that the slowdown of the US economy is trickling down to the businesses and as a result we are seeing less business activity.

The big story of the day was the weaker than expected Consumer Confidence report which came in at 105.4 compared to the forecasted 108.0. Even with lower energy prices, it seems that consumers are starting to get weary of the US economy. Remember, this report affects consumer spending and consumer spending makes up 2/3 of the US GDP (the measure of the overall economy). You can see how this weak number has put traders in a frenzy as now it seems that not only the housing market is slowing down, but consumer spending (which has been holding the economy up) might also be losing its steam. This is very bad for the dollar.

As a result of the news, my Euro trade has now been stopped out at breakeven, but we still may have another opportunity as our charts still show signs of a dollar reversal.

Because of the big negative dollar move, my Swissy trade idea has been triggered. This trade still looks good so I will continue to hold. I’ll explain more in the chart analysis below.

Coming Up:

ISM Manufacturing Index
11:00 am ET; 15:00 GMT
Previous= 52.9; Forecast= 53
With the weak Chicago PMI numbers that came out today, this report will be watched closely. If the report comes out around 50 or lower, then look for another day of dollar dropping.

Also watch out for what Mr. Bernanke has to say. He is due to speak at 2:00 pm ET, 18:00 GMT.

Chart Analysis:

EUR/USD

After moving down as low as 2677, the Euro has shot back up and is currently around 2762. The bearish hidden divergence is still in tact on the daily chart and we may have another opportunity to short this pair around 2800 and target 2750 and 2700.

GBP/USD

This pair also followed the technicals up until the negative US news reports came out. Now the Cable is hovering around 9100. The last time the Cable was this high was on August 8th so this is a pretty key level right now. We’ve seen the pair go around this level 4 times and each time, the price has backed down so this will be an important level to watch. Unless there is another big negative surprise in the US news reports the rest of this week, look for this pair to bounce back down again.

USD/CHF

So our trade is now active from yesterday’s post. The Swissy broke through the 61% Fib line on the daily chart after the news reports and got down as low as 2412. You can still clearly see the bullish hidden divergence so this trade still looks like it can work in our favor provided that we don’t see any drastic US news reports tomorrow.

USD/JPY

Like I stated yesterday, the Yen had been showing oversold for quite some time on the 4hr chart and made its way back up to 118.00 overnight. However, because of the news, the pair dropped back down and is now hovering around 117.00 again. In fact it got as low as 116.60 earlier today. The pair bounced off of 100 SMA on the daily chart and stochastics is currently showing oversold. However, by looking at the stochastics on both the 4hr and daily chart, I think we will see a move down to 116.50 before we see the pair reverse back up.

Conclusion:

I stated yesterday that fundamentals would ultimately decide the markets’ direction and now you see why. Even though the technicals did predict the near term movement, nothing is stronger than the power of the news! If nothing drastic happens tomorrow (i.e. ISM comes out around forecast & Bernanke doesn’t say anything too crazy), I think we’ll see some reversals from today’s movement.

Cheers,

-BP

Monday, October 30, 2006

2006-10-30T18:17:00.000-05:00

The Now:

The dollar made up some ground after last week’s losses, but it wasn’t anything significant. Although personal spending came out lower than forecasted, personal income increased. Some economists are saying the reason that personal spending still decreased even with the increase in personal income is because of lower energy prices.

Personal spending accounts for 2/3 of the GDP which last week showed disappointing numbers.
Richmond Fed President, Jeff Lacker also said that inflation outlook is “discomforting” which means that he is still supporting a rate increase. Keep in mind that Mr. Lacker has been preaching higher rates for a while now so although he speaks very hawkishly, it will take more than just him to cause any significant gains for the dollar.

Weekly Bias-O-Meter

Right now my Bias-O-Meter still shows favor towards the dollar and if momentum shifts in it’s favor, we could see some good trades this week.

EUR/USD; GBP/USD

USD/CHF; USD/JPY

Coming Up:

Japan Interest Rate Statement
1:00 am ET; 5:00 GMT
Previous= .25%; Forecast= .25%
The consensus is that Japan will keep rates the same but look for statements that show any signs of inflation worries.

US Employment Costs
9:30 am ET; 13:30 GMT
Previous= 0.9%; Forecast= 0.9%
This is the broadest measure of labor costs. I don’t think this will move the market too much especially with the other US news coming out today.

US Consumer Confidence
11:00 am ET; 15:00 GMT
Previous= 104.5; Forecast= 108.0
With the weak personal spending report, this report will be important to gauge how consumers feel about the economy. Remember, consumer spending has been keeping the economy floating so a weak number will be bad for the dollar.

Chicago PMI
11:00 am ET; 15:00 GMT
Previous= 62.1; Forecast= 58
Once again, look for any major surprises (negative or positive) in order for there to be an effect on the dollar.

*Overall, what we want to look for is if there is an agreement with the US reports, whether it’s positive or negative. If all 3 reports line up, then we could see a nice move in all the dollar paired currencies.

Chart Analysis:

EUR/USD

Our trade has now hit our initial target of 2700. If you are still in you might want to move your stop to breakeven. 2650 looks like it will be a good 2nd target because the 50 and 100 SMA are both in that area so it should make a decent support level. Our hidden bearish divergence is now fully formed so it looks like we’ll see another drop in the Euro.

GBP/USD

We’re seeing a small regular bearish divergence on the 4hr. chart. This isn’t a strong divergence, but it does give indications that the trend is getting weak. Notice how the price made higher highs while the stochastics made lower highs. This upward trend looks exhausted and since 9050 is a long term resistance level look for this pair to drop. The question is where will it drop to? I don’t see any strong support levels so my only guess is that the pair will drop to 9000 and possibly down to 8950.

USD/CHF

On the Swissy I see a bullish hidden divergence on the daily chart. This makes sense because the Swissy is highly correlated to the EUR/USD. Notice that the pair made higher lows but on the stochastics it made lower lows. With the price currently hovering around the 61% Fib level, this gives me good indication that this pair will be headed up soon.

Trade Idea:

Buy at 2450. Stop Loss= 2400; 1st Target= 2500; 2nd target= 2550

USD/JPY

I’m still not sure about the Yen right now as the technicals aren’t really giving me much to work with. My first guess is that the pair will bounce up given the extended period of oversold indications on the Stochastics of the 4hr chart. The daily chart stochastics is also in oversold territory now so a move back up to 118.00 looks like a good possibility.

Conclusion:

Technicals are showing a short term reversal dollar rally. However, once again it will be the fundamentals that will ultimately dictate where the market is headed. Have a great trading week everyone!

Cheers,

-BP

Friday, October 27, 2006

2006-10-27T16:44:00.000-04:00

The Now:

So I opened up my internet browser and what headline do I see flashing across my page?

“Economy weakest in three years”

If that doesn’t spell bad news for the dollar, then I don’t know what does. Basically, it was another day of the dollar getting pummeled. GDP grew at 1.6% in the third quarter which was down from 2.6% the previous quarter. This is the weakest growth pace for the US in 3 years and since the GDP is basically the main tool for measuring the economy’s strength, the weak number had a huge impact on the dollar.

With the balanced Fed statement that was given on Wednesday, traders have been looking for a catalyst to help them to decide whether not they should hold onto their dollars. These past few negative reports have been giving them ammo to shoot the dollar down. Even with the positive Consumer Confidence report, the GDP’s weaker than expected numbers already gave traders enough reason for them to make up their minds to sell the buck.

However, all is not lost. Yesterday, I mentioned that I saw a bearish hidden divergence on the EUR/USD daily. I recommended a short at 2750 with a target an initial target at 2700. Right now the trade is active and it still looks like it has a good chance of winning.

Chart Analysis:

EUR/USD

The trade recommendation from yesterday is currently active and still looks like it will head down so I would hold for now. Stochastics on the 4hr chart has been in the overbought territory for quite some time now so I think the dollar will make small rally on Monday.

GBP/USD

Just like the EUR/USD, the Cable has been showing overbought on the 4hr. chart’s stochastics. The pair may rally back up to 9050 before moving back down, or the pair could just move down from where it’s at right now which is currently around 8965.

USD/CHF

The Swissy has broken through a major support area and is now hovering around its 61% Fib level on the daily chart. Stochastics on the 4hr chart have been showing oversold for a while now so I expect a bounce to around 2530 sometime on Monday.

USD/JPY

The Yen went a little crazy today as it spiked all the way down to 117.00. For now it looks like 117.00 will be its new support but with the price being around 117.50 right now it’s hard to pick a direction. But since all the majors show signs for a short term dollar rally, my gut tells me the pair will move back up to 118.00.

Conclusion:

It’s been a tough week for the dollar with all the negative fundamentals that came out this week. Early next week should give us a slight retracement, but after that, fundamentals will once again dictate the direction of the Greenback. Have a great weekend everyone!

Cheers,

-BP

Thursday, October 26, 2006

2006-10-26T21:43:00.000-04:00

The Now:

The big story for today was of course….yup you guessed it--- New Home Sales. With all the attention the housing market has been getting, it’s no wonder that the New Home Sales report stole the show today.

Open up a dollar paired chart and the first thing you’ll see is the dollar getting creamed just like the Cardinals creamed the Tigers in game 3 of the World Series. Now find a news source and look at the numbers for the New Home Sales report. You’ll notice that new home sales actually surged to 5.3%, higher than what was forecasted. Now why on Earth would the dollar fall when new home sales actually went up?

Well let’s pause for a moment and think of why new home sales went up. By searching for the cause of the new home sales increase we can get the bigger picture on what’s actually going on.

New homes are a bargain! The main reason new home sales went up is because of the drop in new home prices. The oversupply of new homes is causing house prices to drop, thus people are buying these houses at a discount. When I say that house prices dropped, I don’t just mean they fell a little bit. No my friend, I’m talking about a big drop. In fact, new home prices haven’t dropped this big since 1970. September new home prices dropped 9.7% from a year ago! Talk about a bargain!

What this tells us is that the housing market is continuing to weaken, which adds to the fact that the US economy is slowing. And when the US economy is slowing, the dollar begins to fall. Voila! Mystery solved---ahem…at least for today!

Coming Up:

US GDP & US GDP Deflator (Core)
8:30 am ET; 12:30 GMT
Previous= 2.6% Forecast= 2.1%
Deflator (Core) Previous= 2.7%; Forecast=2.5%
This will be the big news event for the day. Markets will be watching these two reports very closely so be on your toes and watch for any surprises.

US Consumer Confidence
10:00 am EST; 14:00 GMT
Previous= 92.3 Forecast 92.4
This will most likely be overshadowed by the GDP report but you should still keep an eye on it.

Chart Analysis:

EUR/USD

With the weak US fundamentals today, the Euro has broken through all of its moving average resistance levels on the 4hr chart. With the strong movement, the technicals are now indicating a reversal. Notice on the daily chart that we have reached the 100 SMA. This also happens to line up with 2700 so this should make a pretty good resistance level. Stochastics on both the 4hr. and daily chart are now in overbought territory (although the daily stochastics still shows a little more room for buying power) and we can see the makings of bearish hidden divergence. As far as technicals go, I see a good probability that the Euro will move back down to around 2650 (where the 200 SMA is on the 4hr chart).

Trade Idea:

Sell at 2750; Stop Loss= 2800; 1st Target= 2700; 2nd Target=2750

GBP/USD

The Cable made a nice rally today and is currently at around 8900. Stochastics on the 4hr. and daily chart are both in and around the overbought territory so it looks like we may see a drop in the near future. I just don’t have enough technical information to come up with a specific trade.

USD/CHF

The Swissy is testing support right now on the 50% Fib level on the daily chart. It has pierced through the 200 SMA and is now resting right above the 50 SMA. Stochastics on the daily still shows a little more room for some selling power, but a reversal could be coming shortly.

USD/JPY

Well 119.00 was broken through and now it looks like there’s a good chance the Yen will hit 118.00. I’m not sure how far the Yen will fall before moving back up because Stochastics on the daily chart still shows a good amount of room before becoming oversold. 118.00 should be a good support level because it’s also where the 200 SMA is.

Wednesday, October 25, 2006

2006-10-25T18:26:00.000-04:00

The Now:

So the Fed kept interest rates unchanged which was pretty much expected. However, their tone was relatively flat. It seems like most traders were expecting them to sound a little more hawkish but instead, the Fed was pretty moderate in their statements. Basically they still mentioned their inflation worries but they said it with a cool and calm voice.

“Inflation pressures seem likely to moderate over time.”

“Going forward, the economy seems likely to expand at a moderate pace.''

“Some inflation risks remain.”

So the vibe that people are getting is that the Fed is going to keep rates unchanged. What is getting under everyones skin however is that the Fed isn’t really giving any strong clues as to what they are going to do after this pause.

Existing Home Sales fell to 6.18M which was lower than the forecasted 6.25M. This just adds confirmation that the housing market is really cooling off. The median house prices fell from $225,000 to $220,000 in September. This was stated as the biggest year-over-year drop since 1968. While month-over-month declines aren’t uncommon, year-over-year drops are more serious. The housing market has been a big factor for the slowing economy and today’s report just adds confirmation that the economy will still continue to be sluggish.

On the other side of things, the German IFO index came in at 105.3 which is higher than the previous number at 104.9. This provided support for the Euro and is the cause for some of that Euro rally we saw today. I realized I made a mistake in my post yesterday because I said if the number was lower than 103 it would cause a Euro rally. I meant to say that it would cause a dollar rally. It doesn’t matter now anyways since the number came out higher than the forecast but I just wanted to clarify so that no one gets confused.

Coming Up:

US Durable Goods Orders
8:30 am ET; 12:30 GMT
Previous= -0.5%; Forecast= 2.0%
With the balanced Fed statement today, pay close attention for any surprises because traders will be looking for some sort of direction.

US Jobless Claims
8:30 am ET; 12:30 GMT
Previous= 199k; Forecast= 305k
I don’t think this will have much effect on the market unless there is a huge surprise.

US New Home Sales
10:00 am EST; 14:00 GMT
Previous= 4.1% Forecast -0.1%
I think this will be the most closely watched report because of all the press the housing market is getting. Once again, look for any surprises because it would put the market in a frenzy.

Chart Analysis:

EUR/USD

All technical indicators are showing signs for a short term dollar rally. Currently the Euro is right around 2600 with stochastics showing overbought on the 4hr. chart. An aggressive play would be to short now and target 2550 with a stop at around 2650. However, a good conservative play would be to short at 2650 because that is where the 200 SMA is on the 4hr chart is as well as the 50 SMA on the daily chart. What this means is that this is a good resistance point so if price gets up that high, we’ll probably see a drop in the Euro. Daily stochastics is still headed up and is not overbought yet so this trade looks like it could happen. However it’s still not 100% certain that the price will get that high before dropping because the 4hr stochastics is already showing overbought and looks to be heading down now. Either way, the conservative play looks to be the safest option if the trade actually triggers.

GBP/USD

The Cable is looking pretty bland as there really hasn’t been a clear direction the past few days. Only trade idea I see is to short at 8800 and target somewhere between 8730-8740. The reason is that stochastics is showing overbought on the 4hr. chart and 00 levels always make for a good support/resistance level. The reason I target 8730-8740 is because that is where the 50 SMA on the 4hr. chart will probably be if this trade triggers.

USD/CHF

I really don’t have a clue where this pair is going right now. The Swissy is currently at 2649 and my gut is saying that in the short term the pair will reach 2700 because the 100 SMA on the 4hr. chart is at 2631 which makes for an ok support area and stochastics on the 4hr. chart is showing oversold. However on the daily chart, stochastics looks like it is moving down and there are no support or resistance levels nearby. I’m not 100% confident in this pair as of now but a short term rally to 2700 seems like the most probable scenario.

USD/JPY

I said yesterday that 119.00 would provide good support and so far it has been holding up. Now that stochastics on the 4hr. chart is showing oversold, a long trade seems like the best bet. A low risk trade would be to go long now and target 119.50 with a stop at 118.80 (which is right below the 100 SMA). On the flip side, if price moves below 118.80, look for a drop to around 118.20 which is where the 200 SMA is on the 4hr chart. Stochastics on the daily chart looks like it could be headed down so this short trade might be another possibility.

Conclusion:

With the balanced statement from the Fed, it seems like traders are once again playing a guessing game with the dollar. Look for any extreme surprises on any US economic reports coming out soon because they will probably cause any dollar related pair to move quite nicely.

Happy trading everyone!

-BP

Tuesday, October 24, 2006

2006-10-24T18:15:00.000-04:00

The Now:

The markets moved in accordance with the technicals today since there were no major economic catalaysts. The best movement was in the Swissy where I said yesterday in the chart analysis that there was a nice hidden divergence. Like magic, after hitting 2700, the Swissy dropped back down to as low as 2641. Now would be a good time to lock in some profit since it has bounced off its 50 SMA on the 4hr. chart.

There isn’t much to talk about since the real action probably won’t begin until tomorrow. However, I did read something pretty interesting that I’d like to share:

“One of the key reasons for Fed’s recent hawkishness has been record level of Dow Jones Industrial Average which reached a high of 12,116 yesterday. Typically the Fed will not loosen monetary policy until US equity markets begin to show weakness. Yet the rise in US stock market has been driven more by prospects of a benign interest rate environment rather than underlying fundamental growth. (Note the latest warning from CAT and Ford’s massive Q3 losses.) Therefore, any strong indication by the Fed that it may resume rate hikes is likely to trigger a sell off in equities which ironically enough may force the Fed to ease off. Thus trapped between a rock and hard place we doubt the US monetary officials will do anything but remain still for the time being. “

Read the full article:

Coming Up:

Germany IFO Index
4:00 am ET; 8:00 GMT
Previous= 104.9; Forecast= 104.5
I don’t think this will be a big mover but any number lower than 103 could cause a short term Euro rally.

US Existing Home Sales
10:00 am ET; 14:00 GMT
Previous= 6.30M; Forecast= 6.25M
This report will be watched closely since real estate has been declining lately. A strong number (7.5-8.0M) should cause the dollar to soar. A weak number like 5M will most likely cause a dollar sell off, especially if the Germany IFO Index was strong.

US Interest Rate Statement
2:15 pm EST; 18:15 GMT
Previous= 5.25%; Forecast 5.25%
The overwhelming consensus is that the Fed is going to keep interest rates the same so if for some reason the Fed changes rates, expect a huge move in the dollar. The statement will also be watched closely for inflation and the pace of growth for the US economy.

Chart Analysis:

With the interest rate statement coming out tomorrow, I’m not too sure how well these prices will follow the technical indicators. Be cautious when trading tomorrow

EUR/USD

The Euro is right around 2550 and technically this pair looks like it will get to 2600 sometime tomorrow. Remember, 2500 is a key support so a break of that level will probably cause a move to at least 2450. If US fundamentals are strong tomorrow we might see a spike below 2500.

GBP/USD

I said yesterday that the technicals showed signs for a Cable rally today, and that’s exactly what happened. My safe target was the 200 SMA on the 4 hr. chart and that’s about as far as the Cable got. If you took that trade, it’s probably best to exit now. 8700-8760 will most likely be the range until the news comes out tomorrow.

USD/CHF

The hidden divergence once again proved to be an exceptional trading tool as my trade followed my analysis perfectly. Yesterday I said to short at 2700 and target 2600. Well even though the Swissy didn’t get down that low it got as low as 2641. If you are in this trade it’s best to lock in some profit, close your trade, or move your stop to breakeven as the price is now resting on the support of the 50 SMA on the 4hr. chart.

USD/JPY

The Yen looks like it will have good support at 119.00 since it’s a 00 level and it’s also where the 50 SMA on the 4hr chart is lining up at. Stochastics on the 4hr shows that the Yen will probably continue to drop for a little while longer. The news will once again be the deciding factor on where this pair goes tomorrow. Technically I can’t really find a clear direction.

Conclusion:

The dollar lost some of its gains today but tomorrow’s news should cause some big movements. Be very careful if you trade tomorrow as we’ll probably be seeing plenty of spikes. I should have a clearer technical picture after the interest rate statement.

Happy trading everyone!

-BP

Monday, October 23, 2006

2006-10-23T18:54:00.000-04:00

The Now:

Well Friday was a pretty dull day in the markets since there were no major economic reports out. However, my chart analysis did follow through after today’s action because of the speculation that the Fed will raise rates, not cut them, sooner rather than later.

The big “I” word, inflation, has been the topic of discussion lately and it seems the Fed, along with a bunch of economists are still worried about it. In other words, while many traders were expecting the rates to decrease after this pause, the focus has shifted to the possibility that the Fed will actually raise rates due to inflationary worries.

So what does this mean for the dollar? Simple—Open up your charts for today and notice the dollar rally that occurred. Higher rates= dollar strength. The rates will hold steady for now, but what traders are trying to find out is the Fed’s next step. If it appears that inflation is high and rates need to increase, then so will the dollar.

Weekly Bias:

My bias is still the same as the past 2 weeks even though the dollar lost some ground last week. One thing I am noticing though is that the dollar rally is getting very weak. In fact on some of my other pairs that I watch, my Bias-O-Meter is giving me a dollar negative bias for the week. This leads me to believe that we might start seeing dollar negative weeks soon unless economic factors (US reports, Fed, etc.) can provide enough support for the dollar.

GBP/USD; EUR/USD

USD/CHF; USD/JPY

Coming Up:

Big Pippin’s Dentist Appointment
8:30 am ET; 12:30 GMT
Previous= $$$; Forecast= $$$$$$
I have to go in to my dentist dude and get some new grills for my choppers. I’m going platinum this time because gold is out. The previous number was $bling, and the forecast for tomorrow’s appointment is $ a lot more bling. Afterwards I might swing by my auto shop and get some new rims for my ride.

Seriously, there’s not really any note-worthy news reports coming out. I think trading will be dead tomorrow as traders will most likely be waiting for the interest rate statement on Wednesday.

Chart Analysis:

EUR/USD

After today’s dollar rally, I see 2 possibilities. The price is currently at 2550. On the 4 hr. chart stochastics is showing oversold conditions and the daily chart stochastics is heading up and is not showing overbought yet. This pair could bounce off of 2550 and head back up to 2600 or we might see it test that strong support at 2500 before bouncing back up. Unless of course the Fed makes some crazy statement that they will definitely raise rates which would probably put the market in a frenzy and push the dollar below 2500. But that’s just my imagination running wild again.

GBP/USD

After breaking through it’s 200 SMA on the 4hr. chart, the Cable has moved back down and is once again testing support at around 8700 which is where both the 50 and 100 SMA on the 4hr. chart are. Stochastics on both the 4hr. and daily chart show that the Pound will make a rally and I think the safest target is around 8770, which is where the 200 SMA is currently at on the 4hr. chart. The more aggressive target would be at 8800.

USD/CHF

Ahhh a good ol’ hidden divergence on the 4hr chart. Notice that as the Swissy made lower highs, the stochastics made higher highs. This is a good technical indication that the price will move back down. My dilemma here is that on the daily chart, today’s candle formed a huge green blob. Usually whenever I see a huge green or red candle, it’s usually followed by a continuation of that trend. So you can see that I’m torn right now. The safest and least risky play on this pair would be to short the pair at 2700 with a stop at 2750 and a target at 2600.

USD/JPY

I have no clue what the Yen is going to do right now. The one thing I do know is that between the 50 and 00 levels, the price is drawn to them like magnets. Right now the pair is hanging around 119.29. The only safe trade idea that I see is if the price breaks 119.50. You could go long somewhere around 119.60 and target 120.00. Just keep a tight stop since your potential profit is only 40 pips.

Conclusion:

Fundamentally, the dollar looks poised for another rally now that inflation has everyone shakin in their pants. Wednesday is the big interest rate statement and it’s most likely that rates will be held the same. On that same day, Existing Home Sales comes out so that could cause a dollar sell off if the real estate woes continue. Overall, it should be an exciting week so be ready!

Happy trading everyone!

-BP

Thursday, October 19, 2006

2006-10-19T17:24:00.000-04:00

The Now:

It’s funny how when I say that it’s unlikely we’ll see a big move in the Forex, it just seems to soar like a rocket! I should’ve known that the Philly Fed Index was going to put the market in a frenzy again. Last month the index came in at -0.4 which was a big negative surprise and it caused the dollar to tumble. Well with the forecast for this months report at 7 and the release of the actual number at -0.7, the market pulled a de ja vu and sold off the dollar.

Not only did the index come at a much lower number than expected, it actually decreased from last month’s number. But really, this report is only solidifying what I’ve been saying for a while now. The US economy is not growing at its fast pace anymore. It’s still growing in certain areas such as consumer spending and at the same time it’s declining in other areas, such as the real estate market. And I don’t know how many times traders need to be reminded that the Fed is not going to increase rates NOR will they decrease them. For the next few months, the interest rates will hold steady.

The Leading Indicators Index came in at 0.1%. Although that was slightly lower than the forecasted 0.3% it still was an increase from the previous month which was set at -0.2%. What this is telling me is that the US economy is growing—but at a slow pace and that it will probably continue to move at this pace for the next few months. I still expect consumer spending to rise, especially with the holidays coming up so I think the dollar will still be able to hold some ground against the majors.

For the Alba lovers, there was an Alba breakout today at 9:40 am ET. Entry was at the close of the candle at 2588. The stop was at 2562 and the target was at 2604. The target was hit at 10:40 and I closed 2 lots and moved the last lot’s stop to the low of that candle which is where I eventually got stopped out at 2597.

Result: +32 +9 -9(spread)= +32 pips

Coming Up:

UK GDP
4:30 am ET; 8:30 GMT
Forecast= 0.6%; Previous= 0.7%
A growing GDP will help support the idea that the BOE will raise rates in November. A strong number should continue the Cable’s rally against the dollar.

Chart Analysis:

EUR/USD

Yesterday I said that a break of 2560 would lead to a move to 2600. Today’s poor Philly Fed Index report made that prediction come true. So now the Euro is past 2600 and has pierced through its upper trend channel line. 2670 is the next resistance level because it is where the 50 SMA is on the daily chart and also where the 100 SMA is on the 4hr chart. Stochastics on the 4hr chart is showing overbought right now but on the daily chart it is sloping upwards and still in middle ground. This leads me to believe that we’ll see a short term retracement, followed by another Euro rally to around 2670.

GBP/USD

The Cable made a nice rally today. Right now it’s testing resistance at around 8780. I think it will make another short term rally to 8800 overnight, but will fall back down to 8750. Stochastics is almost showing overbought on the 4hr. chart and with the 200 SMA at around 8780, the technicals are indicating another short term dollar rally.

USD/CHF

The Swissy made a huge gain against the dollar. Right now the pair is at a good support level. On the daily chart it is hovering right around its 38% retracement level as well as the 200 SMA. However, stochastics is still heading down and is not in oversold territory yet. I see 2 possibilities. The pair can continue its downtrend and if it breaks 2500, I can see it getting to at least 2470 and maybe even 2450. Or the pair can bounce off of support and rally to 2650.

USD/JPY

All signs on the Yen are showing that a dollar retracement is going to happen soon. Right now the pair has bounced off of 118.00. On the daily chart, notice how the lower trend channel line matches the 50 SMA, I think this will provide good support. On the 4hr. chart, the 200 SMA is hovering right around 117.80.

Trade Idea:

Aggressive: Buy at 117.80; Stop Loss= 117.20; Target= 118.50

OR

Conservative: Buy at 117.50; Stop Loss= 117.20; 1st Target= 118.00, 2nd Target= 118.50

Conclusion:

The dollar took a beating today. I’d like to say that dollar will make a strong rebound tomorrow but there aren’t any US reports that can give it some juice to move. But then again, I said this yesterday and look what happened, so just remember that anything’s possible.

Happy trading everyone!

-BP

Wednesday, October 18, 2006

2006-10-18T18:56:00.000-04:00

The Now:

The story for today was the Housing Starts report. Yesterday I talked about how the market showed signs of a short term dollar rally. Given the surprising increase in Housing Starts, the dollar was given some fundamental juice to spark some gains across the 4 majors.

The previous Housing Starts number was $1.67M. I noted yesterday that if today’s report came in at a higher number, we would see the dollar rally. Given that the forecast was at $1.64M and the actual number was $1.77M, the market reacted and pulled the dollar higher.

The CPI came in lower than expected at -0.5%. This shows the effect of the falling oil prices. Core CPI which excludes Food and Energy came in right at its forecast at 0.2%.

The BOE minutes sounded very hawkish. With all the positive UK data that has been coming out lately, I think there is a good chance we will see a rate hike in November.

Coming Up:

UK Retail Sales
4:30 am ET; 8:30 GMT
Forecast= 0.3%; Previous= 0.3%
A higher number than 0.3% should cause a short term rally for the Cable. It’s looking more like the BOE will raise rates in November so a good number would provide support for the Pound.

Jobless Claims
8:30 am ET; 12:30 GMT
Forecast= 310,000; Previous= 308,000
I don’t think this report will do too much to the market. Just watch for any major surprises.

Philly Fed Index
12:00 pm ET; 16:00 GMT
Forecast= 7.0; Previous= -0.4
This was a real market mover last time when the Index came in much lower than expected. Anything greater than 7.0 should cause a nice short term dollar surge.

Chart Analysis:

EUR/USD

Wow, I usually have a pretty good sense of the market, but I was spot on my analysis yesterday (not to toot my own horn!). We did end up seeing a dollar rally all the way down to 2500 followed by another bounce back up. 2500 has proven to be a very strong support level. At this point I don’t know where this pair is going. I see the short term range as 2500-2560 (2560 being where the 50 SMA is on the 4hr. chart). If there is a break of the 2560 level, there’s a good chance the Euro will get to 2600, and if the 2500 level gets broken (not just a spike), look for the Euro to drop to at least 2450 if not lower. However, with no major economic catalysts tomorrow, I doubt we’ll see any move that big.

GBP/USD

The Cable also appears to be stuck in a range. In this case it’s between 8650-8720 (the 100 and 50 SMA on the 4hr. chart). Currently, stochastics is heading down and isn’t in the oversold territory yet. If the Cable can break 8650 (it’s 50 SMA) then I think it will get down to 8600.

USD/CHF

I have no idea where this pair is going. After bouncing off of its 50 SMA on the 4hr. chart, the price has stalled right around 2700. Stochastics is heading up but it’s still not in overbought territory. I think this pair will hit 2750 but I’m not sure if it will bounce down to it’s 50 SMA again before moving up.

USD/JPY

Like the Cable, the Yen is stuck in a range between its 50 and 100 SMA on the 4hr. chart. If the Yen can break 119.00 (its 50 SMA) we may see a move to 119.50. On the other hand, if the Yen breaks below 118.50 (its 100 SMA) then we’ll probably see a move down to 118.00.

After 2 days of the dollar getting hammered, followed today’s mini dollar surge/rebound, the market seems to be at a standstill. Everything looks neutral right now and it’s hard to see where the majors will go next. With no extremely major economic events tomorrow, I don’t think we’ll see heavy movements to decide a direction. For now I’m waiting for a clearer picture.

Happy trading everyone!

-BP

Tuesday, October 17, 2006

2006-10-17T18:14:00.000-04:00

The Now:

Well it was an exciting day today in the Forex as it was full of economic activity. The dollar lost some ground in the 4 majors and we saw some support and resistance levels broken. Quite a few news reports came out with surprises but it didn’t really seem to play too much of a role in today’s movement.

The Yen saw a nice gain after Omi, the Japanese Finance Minister said that he would welcome Russia’s decision to increase Yen exposure in their reserves. This fueled a Yen surge and it broke through its support at 119.00 and went as low as 118.50.

The TIC data came in at a whopping $116 bn compared to July’s $33 bn. While you would think this would cause the dollar to surge again, you have to question the discrepancy between the two months. Roughly $72 bn is needed per month to finance the US trade deficit and if you take the average between July and August’s numbers, you would get $74 bn which is just barely enough to cover our debt. This was just another one of those “dig a little deeper” reports where you had to analyze more than just the report number to get the big picture. Needless to say, this did not cause the dollar to make a rally.

Other causes for the dollar’s inability to regain strength?— PPI came in at -1.3% compared to the forecasted 0.1% and the Industrial Production report came out at a surprising -0.6% compared forecast of 0.0%.

Technically speaking, the dollar showed all signs of weakening. The charts yesterday showed that a reversal was likely to happen soon. With today’s weak US reports, there was nothing to stop the dollar’s tumble and now it’s time to look at whether or not another dollar rally is in the forecast.

Coming Up:

BOE Minutes
4:30 am ET; 8:30 GMT
Watch for any MPC votes for higher interest rates. The way UK data has been coming out lately it seems like a rate hike for November could be a good possibility.

US Consumer Prices- CPI (Headline/Core)
8:30 am ET; 12:30 GMT
Headline Forecast= -0.3%; Previous= 0.2%
Core Forecast= 0.2%; Previous= 0.2%
This CPI report will factor in the effect of falling oil prices. Be sure to watch for any surprises, especially in the Core CPI.

US Housing Starts
8:30 am ET; 12:30 GMT
Forecast= $1.64M; Previous= $1.67M
Real estate has been cooling off, so a further drop in housing starts will hurt the dollar. If the figure happens to come in higher than the previous number at $1.67, then watch for a good dollar surge, especially if the Core CPI is on target or slightly higher than forecasted.

Chart Analysis:

EUR/USD

Yesterday I said that the Euro would rally to around 2580 because that’s where the 50 SMA on the 4hr chart was around. Since then, the action brought the 50 SMA lower and the price stalled out around 2560. If you made a play on this, you might want to consider exiting since it failed to break this resistance. From here, it looks like the Euro will make a short term drop back down to around 2500. After that, we should see another bounce up. However, if US news comes out strong tomorrow and the market breaks 2500, look for this pair to drop to at least 2450. I think this is highly unlikely since 2500 is a strong support level but in case it does, just be ready.

GBP/USD

This pair finally made a clean break out of the 8500-8600 range. Yesterday I said that if the Cable broke 8650 that it would make a move to 8700. Well the Cable did break 8650 and surged as high as 8734. At this point it has stalled at the 100 SMA on the 4 hr. chart and is showing overbought. The pair is currently at 8700 and looks to be headed towards 8650.

USD/CHF

The Swissy simultaneously broke through its lower trend channel line and 2700. Right now it’s testing support at 2650. It looks like a short term bounce could happen. I see this pair going back to 2700.

USD/JPY

The Yen is in a sticky situation right now. After breaking through 119.00 and its 50 SMA it’s stuck between 118.50 and 119.00. I’m not sure what this pair is going to do so I’m not even going to try to guess. At this point I could flip a coin and just pick a side because technically speaking, this pair looks like it could go either way right now.

By looking at the charts, it looks as if the dollar is poised for a short term rally tomorrow. If the US reports are positive then this will solidify my thinking and may even cause the dollar to push further. However, regardless of the news I still think we will see at least a little dollar rush as there will probably be some profit taking. What happens after that is still a mystery to me.

Happy trading everyone!

-BP

Monday, October 16, 2006

2006-10-16T18:41:00.000-04:00

The Now:

Well I hope you all had a great weekend and are recharged for another week of exciting trading in the Forex. Last week was definitely an exciting time for the dollar and this week will be either the continuation or rejection of that greenback rally.

First thing to talk about today is the Russian Central Bank. Word on the street is that they will be adding the Yen to their foreign exchange reserves. As a result, the USD/JPY dropped back down to 119.00. It did not reach 120.00 like I thought it would before dropping back down. 119.00-120.00 will most likely be the range for this pair in the short term unless a major economic event occurs or a news report comes out with an unexpected surprise. I’ll talk more about it in the chart analysis.

The next thing to discuss is the issue of the UK house prices. The Rightmove house price index showed that UK house prices rose 2% in September which led to a short term rally for the Cable. There are more UK economic reports coming out later this week which are forecasted to be weak so I don’t expect this rally to last very long unless:

a) The dollar comes out with negative economic reports this week.

OR

b) The UK comes up with surprisingly positive reports.

Weekly Bias-O-Meter:

The bias-o-meter is pretty much the same as it was last week. Unless there is a major shift in momentum, I expect these biases to remain in tact throughout the week.

EUR/USD; GBP/USD

USD/CHF; USD/JPY

How did I come up with my weekly bias?

Coming Up:

There is a basket full of news reports coming out tomorrow. It will be very difficult to try and trade based on one report. Wait until after 9:15 am ET (1:15 GMT) before trying to pick a directional bias.

UK CPI
4:30am ET; 8:30 GMT
The consensus is 0.2% from the previous 0.4%. A higher number than expected could cause a short term rally for the Cable but the market will still be anticipating the US reports set to come out later in the day.

Germany ZEW Index
5:00 am ET; 9:00 GMT
This was a big mover last time so be prepared to see the Euro rally/decline if there is a big surprise from the forecast of -22.2. The previous number was -20

EU CPI
9:00 am ET; 9:00 GMT
The forecast for the Euro-zone CPI is 0.1% from the previous -0.1%. Use the data from this news report along with the ZEW index to gauge a directional bias for the Euro but remember that US data is still set to come up out later in the day.

US PPI (Headline)
8:30 am ET; 12:30 GMT
The previous number was -0.6% while the forecasted number is 0.1%. I’m sure this forecast takes into account the falling oil prices. Anything less than the forecast could cause a short term sell off for the dollar. If all the other reports came out around it’s forecast, look for this report to be the catalyst for the rest of the day’s movement.

TIC Data
9:00 am ET; 1:00 GMT
Previous number= $32.9bn; Forecast= $55bn
I don’t see this having too much of an effect on the dollar unless it comes in at a very low number. If for some reason the TIC data comes out at around $33bn (the previous number) or lower, then the dollar will lose some ground. However, I think this is highly unlikely and we’ll probably see a number around the forecast.

US Industrial Production
9:15 am ET; 1:15 GMT
Previous number= -0.1%; Forecast= 0.0%
Again, I don’t think this will have too much of an effect on the market unless there is a big surprise from the forecast.

US Capacity Use
9:15 am ET; 1:15 GMT
Previous number= 82.4%; Forecast= 82.3%
Like the US Industrial Production report and the TIC data, I don’t see this report doing too much to the dollar unless we see a significant surprise from the forecast.

Chart Analysis:

EUR/USD

I keep showing this daily chart because it highlights the significance of the 2500 level. You can see that the Euro is really testing this level right now. Stochastics is, and has been, showing oversold conditions for some time now. I think a rally to 2580 is likely to occur if the US news isn’t extremely positive. Why 2580? This is the average between 50 SMA on the 4hr chart and the 100 SMA on the 1hr chart so it looks like a good place for resistance.

GBP/USD

I still don’t know exactly what this pair is going to do. It’s been spiking past 8600 the past few days but always seems to close right back near 8600 or slightly lower. 8500-8600 still seems to be the range for this pair. If I see a break past 8650, I’m pretty confident it will go to 8700. You can see that the Cable bounced off of the 50 SMA right at 8650 so if the pair can break that, I think we’ll see a rally to 8700. Vice versa, if the pair breaks below 8550, I think we’ll see the pair move down to 8500 or close to it.

USD/CHF

There’s not really a clear picture on the Swissy right now. Sure we see it testing the support right at 2700 which also happens to be it’s lower trend channel line on the 4 hr. chart. However, stochastics on the daily chart are showing extreme overbought conditions with a cross down which looks like a sign that we are going to see more retracement. Right now it’s a toss up. The support could hold where it is at and bounce back up to around 2750, or the pair could continue retracing to 2650 where the 50 SMA is at on the 4hr. chart.

USD/JPY

Just like the Swissy, the Yen is in the same predicament. On the daily chart, it is showing extreme overbought conditions and appears to be headed down. However, it is testing the 119.00 level which also happens to be where the 50 SMA is on the 4hr. chart as well as where the 100 SMA is on the 1hr. chart. In addition, the stochastics on the 4 hr. chart is showing oversold. Through technical analysis alone, this pair really looks like it will bounce to 119.50. Fundamentally however, if the US reports tomorrow don’t come in so hot, we might see the support broken. To add to the fundamental dilemma, last Friday, BOJ governor Fukui said that the bank will consider a rate hike by the end of the year. If US reports don’t come in with good numbers, the Yen might recover some ground.

The story is in motion. How will it unfold? Will the Greenback continue to rise in glory or was it just a fluke? Can you feel the excitement? Stay tuned because you don’t want to miss any of this nail-biting action! Have a great trading week everyone!

-BP

Friday, October 13, 2006

2006-10-13T16:27:00.000-04:00

Uh oh! Friday the 13th! Is it a nightmare on Forex Street? Not really, but it was pretty hectic.

The Now:

I mentioned yesterday that consumer spending has been the backbone for the dollar support and today’s positive reports in both Retail Sales and Consumer Confidence caused huge gains for the dollar, particularly against the Euro and Yen. The actual retail sales report came in a -0.4%. On the surface that looks like a bad figure, but you have to dig a little deeper to get the real story. Gas prices have been dropping like a rock lately and because of this, gasoline sales have been dropping. This is factored into the entire retail sales report. When gas prices drop, US consumers tend to spend more on other things. So if you take away the gas sales, retail sales actually went up 0.6%. Now the true story is revealed and we can see that consumers are spending more money on other things now since they don’t have to fill up their SUV’s with $70 worth of gas every week!

The other big story was the Michigan Consumer Confidence report. Yesterday I mentioned that this would be an important report to watch because if this number came out positive along with a good retail sales report, we would see a big move for the dollar. Well my friends, the consumer confidence report came out very positive. In fact, it came out higher than forecasted. The forecast was at 86.3 and the actual number was 92.3. Basically this means that consumers are confident in our economy (lower gas prices tend to be their measuring stick) which means higher consumer spending which translates into higher retail sales and a stronger economy.

With the holidays coming up, I expect to see consumer spending continue its growth. It will continue to be the catalyst for the dollar bulls until the end of the year. Regardless of whether or not gas prices go up, I still think consumer spending will rise. Wage growth has been growing faster than retail sales for the past 5 months so even if gas prices do rise, I think the higher salaries will compensate and we’ll see the stores filled with crazy parents rushing to get the last “Tickle Me Elmo” doll for their precious babies. You gotta love the holidays!

For all you Alba enthusiasts, there was finally an Alba trade today. I didn’t take the Retail Sales breakout because it was a news candle, but I did take the breakout at 10:10 (the close of the 10:00 am candle) which closed at 2505. My stop loss was at 2525 and my target was at 2495. My target was hit at 10:30 am and I closed 2 lots and moved my last lot’s stop to breakeven. I trailed my last lot to the high of the next candle which made a new low where I was eventually stopped out at 2492.

Result: +20 +13 -9(spread)= +24 pips

Chart Analysis:

EUR/USD

Despite the positive US news, the dollar will have a tough time breaking 2500. You can see that it’s been a strong support level and it also happens to be where the 200 SMA is on the daily chart. I think we’ll see another test of the 2500 level and then a retracement to around 2550-60. I say 2550-60 because that is where the 50 SMA on the 4hr. chart is headed, making it a short term resistance level.

GBP/USD

I’m still not sure where this pair is going. Daily stochastics is showing oversold but on the 4 hr chart, stochastics is still heading down. My gut is telling me that we’ll see the Cable make a move towards 8500 before bouncing back up. 8500-8600 still seems to be the range for this pair as it can’t seem to move past those levels.

USD/CHF

I drew a new channel on the 4 hr. chart to better fit the new price action that’s been going on. I’m not sure if this pair will hit 2800 because the stochastics on the daily chart is showing extremely overbought and seems to be peaking. I think we will see another push to 2750 before this pair heads down.

USD/JPY

As I said yesterday, 119.00 would be the make or break level for the Yen. It seems that the pair has bounced off of 119.00 and will probably hit 120.00 on Monday before bouncing down. I’m prepared to fade the 120.00 level as this level hasn’t been reached since November 30, 2005. This will be a low risk trade and will play off the fact that people will do some profit taking at this level.

Trade Idea:

Sell at 120.00; Stop Loss=120.15; Initial Target= 119.70

Try to ride this trade out. If it does get down to 119.70 move your stop and go for 119.50. The Yen has a knack for going from 00s to 50s and vice versa.

It’s been an exciting week and I hope you all have had great trading days. Have a great weekend everyone!

-BP

Thursday, October 12, 2006

2006-10-12T18:05:00.000-04:00

The Now:

After a pretty good dollar run, I think we are finally seeing the retracement we were all waiting for. The trade deficit widened to -69.9bn which is a record for the second month in a row. The consensus was about -66.5bn so this number was wider than expected. The word on the street is that although the trade balance has widened, the US is having no problems attracting foreign investors to fund this deficit. This means that this probably won’t have a long term affect on the dollar.

The Beige Book showed mixed results. Some regions said they experienced growth while others said that their growth had cooled. More specifically, many districts claimed that housing sales have cooled down shown by decreasing prices, rising inventories, and slower sales. On the other hand, consumer spending has been rising (with the exception of houses) in many districts.

The bottom line is that the US data right now is pretty much telling us that although the economy is not booming like it used to, it’s holding steady which indicates that rates will most likely stay put from now until early next year. Traders were placing bets that the Fed would cut rates in the near future but the recent reports and hawkish statements from the Fed have pretty much put that rumor to rest.

Start paying closer attention to the currencies paired against the dollar. Watch the ECB, BOE, and BOJ and see what they are doing and saying about their economy. I think this will be particularly important to pay attention to, especially now that the dollar picture is becoming a little clearer.

Coming Up:

BOJ Interest Rate Decision
1:00 am ET; 5:00 GMT
BOJ is expected to keep their rates the same. Of course if they don’t, the market will go crazy. Don’t bet on that happening though!

US Retail Sales (excluding Autos)
8:30 am ET; 12:30 GMT
Consumer spending has been growing lately and has been the backbone for the dollar support so I’m looking for a good Retail Sales number. The consensus is 0.0% from the previous 0.2% last month. Anything higher than the 0.0% would support the dollar and a number of 0.2% should cause a nice move.

Michigan Consumer Confidence
9:45 am ET; 13:45 GMT
This will be a good report to watch because it gauges the consumers’ confidence on our economy. The consensus is around 86.3 from the previous number of 85.4. If retail sales come out good and consumer confidence shows a high number, I think we’ll see another good day for the dollar since consumer confidence translates into more consumer spending and better retail sales numbers. Remember, consumer spending right now is one of the upsides to the US economy right now so this report will be pretty important

Chart Analysis:

EUR/USD

As I suspected, the pair has bounced up to 2550. I think it will get up to 2600 and then bounce back down. Notice how the 50 SMA also lines up with 2600. This should make it a pretty nice resistance level. Look for this pair to bounce back down to 2570 or even 2750.

GBP/USD

There was more range trading between the 8500-8600 levels. I still don’t have a clear direction for this, but signs are showing that this pair will probably head to 8650 before bouncing back down. Once again, the 50 SMA is in line with 8650 which makes it a good resistance point. The daily stochastics is in the oversold area and is showing a cross up which could be signs of a retracement. The 4hr. stochastics is still in neutral territory right now but its slope is moving upwards toward the oversold area. It looks like if the Cable does get to 8650, the stochastics will also show oversold which looks to be a good level to go short, since this will also be when the price hits the 50 SMA as resistance.

USD/CHF

We are finally seeing this pair settle down after the dollar took this pair for a joyride! The same story goes for this pair as the Cable and Euro. The Swissy has broken out of its upward channel and I think it will head down to its 50 SMA which will probably be around the 2620-30 level.

USD/JPY

1900 will be the next “make or break” level for the Yen. It’s a level that everyone will watch because it was a strong resistance level. It just so happens that the 50 SMA also is headed towards that level. I think the break or bounce at this level will determine the direction for at least the next day or so. Watch this level closely.

Wednesday, October 11, 2006

2006-10-11T18:07:00.000-04:00

The Now:

After having some nice volatile days in the market, things seemed to quiet down today. There were no major economic reports to push the market except for the release of the FOMC minutes.

The minutes basically confirmed the fact that the Fed is still paying close attention to inflation and that interest rates will probably remain high for a while.

The dollar did make a small push after the minutes were released. The move probably could’ve been bigger but it seems that a small aircraft crashed into a building in New York City. The fears of another terrorist attack (even though the crash was ruled to be completely accidental) may have stunted the dollars push after the minutes.

A couple days ago I mentioned that the Euro would hit 2500. That prediction came true today after the minutes were released. I don’t see the dollar making another push right away unless something drastic happens. For now, I think the dollar bulls have taken their foot off of the gas pedal and are in neutral right now. I think we could see a slight retracement in all the dollar pairs.

Coming Up:

US Trade Balance
8:30 am ET; 12:30 GMT
Traders are expecting the trade balance to improve, especially with the drop in oil prices. The consensus for tomorrow’s report is -66.5bn compared to the previous -68.0bn. If the trade balance report shows a lower number than this, watch for the dollar to make another push.

US Jobless Claims
8:30 am ET; 12:30 GMT
This will most likely be overshadowed by the Trade Balance, but any positive US data right now will just add fuel to the dollar’s hot run. The consensus is 310,000 and the previous number was 302,000.

US Beige Book
2:00 pm ET; 18:00 GMT
Watch for continued statements regarding high inflation or anything to suggest that rates will have to remain steady. This should be more kindling to the Dollar flame if the report shows inflation worries.

Chart Analysis:

EUR/USD

2500 is going to be a strong support. You can see that it lines up with the 200 SMA. The Euro got down to 2500 on June 22 and July 18 and both times, price bounced back up. I expect the same to happen again. Even if this does happen to be a new bullish dollar trend, I think we will at least see a retracement as the Euro is showing oversold conditions in both the daily and the 4 hr. chart.

GBP/USD

The Cable is taking a pause right now as you can see from the range bound movement between 8500-8600. It’s still near the oversold conditions but we’ll have to wait and see what happens with this pair.

USD/CHF

Nothing seems to stop the Swissy right now. It just keeps pushing higher and higher, breaking through resistance like nothing. Both the 4hr and daily charts are showing extreme overbought conditions, and with the huge run it’s been making, I’m thinking about shorting this pair soon. The Swissy hasn’t been past the 2700 level since way back in April. Expect to see a retracement very soon.

USD/JPY

There wasn’t much changed in the Yen. I still think this pair will spike to 120.00 before heading back down. Yesterday I mentioned a trade idea to go long at 119.50 and target 120.00. This trade is still in play at the moment. Coincidentally this leads me to another trade idea, which is to fade the 120.00 level.

Trade Idea:

Enter short at 120.00; Stop Loss=120.45; Target=119.50

Tuesday, October 10, 2006

2006-10-10T18:25:00.000-04:00

The Now:

Ok, so I was pretty much wrong on my chart analysis yesterday. My weekly bias is right on track as the both the Euro and Pound are dropping while the Swissy and Yen have been skyrocketing. I just thought we would see a little retracement before seeing the dollar continue its run, but it looks like the move is still going.

Why is the dollar gaining ground? I’ve been reading around and found 2 driving factors that seem to be the reason for the dollar surge.

The first is that traders are pulling back their expectations that the Fed will cut rates in the next couple of months. The Fed has been surprisingly hawkish recently and its becoming more apparent that rates will be held constant in the near future. Instead, traders are looking to see the Fed cut rates sometime near the end of Q2. This means that the US economy is not slowing down as fast as people thought.

This leads to the 2nd point—a stronger US economy than what traders expected. The Bureau of Labor Statistics released a report showing that there were more jobs created than what the original reports were showing. This means that the job market is still going pretty strong.

“The Bureau of Labor Statistics (BLS) estimated that businesses created 128,000 new jobs in August, a relatively weak figure. Now, with more information, it estimates that employers added 188,000 new jobs that month—a fifty percent upwards revision. BLS also undercounted the number of new jobs created between March 2005 and 2006 by 810,000.”

Read the full article at: http://www.heritage.org/Research/Economy/wm1233.cfm

In addition, the housing market drop is expected to slow down since the drop in construction in prices. Since the housing slump has been the driving force in the dollar sell off, this should give the dollar some support.

Coming Up:

FOMC Minutes
2:00 pm EST; 18:00 GMT
The important thing to look for here are statements indicating that inflation is still a concern. Anything that suggesting that rates will be held steady will give good support for the dollar.

Chart Analysis:

EUR/USD

Yesterday I said I could see the Euro get to 2500. After yesterday’s dollar surge, it looks like that may happen. 2500 looks like a good place to buy because it’s where the 200 SMA is, which makes it a viable support area. There’s been a lot of selling pressure on the Euro so I think we’ll see a retracement soon.

Trade Idea:
Buy at 2500; Stop Loss= 2455; Target= 2550

GBP/USD

Right now it looks like nothing could stop the Cable from falling, except for the fact that it has been showing oversold conditions on a 4 hr. chart for 2 days now. Other than that, I don’t see too many barriers to stop it from falling. I’m going to hold on this pair for now.

USD/CHF

Woowee this pair is soaring! After cutting through its daily 200 SMA, this pair has kept going all the way up to 2700. Now it’s stalling. Retrace or keep moving higher? That is the question.

USD/JPY

Just like the Swissy, the Yen has broken through it’s major resistance level at 119.00 like it was little twig and looks like it is on it’s way to 120.00. This pair seems to have a knack for 50’s and 00’s so I’m going to make a low risk play on buying it and targeting 120.00.

Trade Idea:
AGGRESSIVE- Buy at market; Stop Loss= 119.20; Target=120.00

OR

CONSERVATIVE- Buy at 119.50; Stop Loss= 119.20; Target= 120.00

Monday, October 9, 2006

2006-10-09T18:58:00.000-04:00

The Now:

The USD/JPY has been the spotlight pair in the Forex at the moment because of all the nuclear testing going on in North Korea. They sure do have a thing for nukes don’t they? The talk of the town is that traders will most likely sell off some Yen and buy up some Dollars but long term effects are still uncertain.

But what does North Korea have to do with Japan?

It’s true that Japan is a totally different country, but geographically they are close by. Just imagine your next door neighbor training his pit bull to attack humans in his back yard so that he can use Fido as his personal weapon. Now even though it really has nothing to do with you, I’m sure your friends might be a little more hesitant to bring their young kids (or even themselves!) over to your house the next time you have a cookout. The point is that there is an added risk. Traders see this nuke testing in North Korea as a possible risk to holding Japanese Yen in case something were to happen to Japan so the result is that the Yen will lose ground to a more stable currency like the Dollar.

Coming Up:

GBP Trade Balance
4:30 am ET; 8:30 am GMT
Forecast: -6.2 b
I don’t think this will move the market unless there is a much higher or lower number than the -6.2 b forecasted.

ECB Comments
11:00 am ET; 3:00 pm GMT
Trichet is expected to speak at this one. Watch for him to confirm the ECB’s plan of raising rates. Although he was hawkish the last time he spoke, a confirmation will support the Euro. I don’t think he used the words “strong vigilance” in his last speech and that is trademark phrase, so if he says it tomorrow, not only should it help the Euro, but it will also be entertaining :)

Weekly Bias- This is how I feel about the 4 majors for the week:

EUR/USD; GBP/USD

USD/JPY; USD/CHF

How did I come up with my weekly bias?

Chart Analysis:

EUR/USD

I can see this chart possibly getting down to 2500. It’s been a freefall since the Euro dropped past its 50 and 100 SMA and 2500 is where the 200 SMA is currently at. This looks to be the next big support area. Stochastics also shows that the price is not completely oversold yet so I wouldn’t be surprised to see a little more selling power.

There’s a nice downward channel on the 4hr. chart. You can see that the price is right at 2600. Stochastics shows oversold, so we might see a slight retracement to around 2650 or so, but I think this pair will at least hit 2550 and possibly go down as low as 2500. If the price doesn’t retrace yet, the Euro might go down to 2550 before bouncing up.

Trade Idea:

Sell at 2620; Stop Loss= 2660; Target= 2550

OR

Buy at 2550; Stop Loss= 2520; Target= 2600

GBP/USD

The Cable is stalling at 8650 which is a key support area. Stochastics is showing oversold on both the daily and the 4hr. chart.

Trade Idea:

CONSERVATIVE:
Buy at 8650; Stop Loss= 8630; Target= 8700

OR

AGGRESSIVE:
Buy at market price; Stop Loss= 8630; Target=8700

USD/CHF

Not really sure about this one. You can see that the Swissy broke through its 200 SMA which tells me the price could continue to go up at least to 2650. However, both the daily and 4hr. chart are showing overbought so I’m not really sure what to do here. I’ll hold on this pair for now.

USD/JPY

The Yen is at very strong resistance right now. Stochastics is also showing extreme overbought conditions on both the 4hr. and daily chart.

Trade Idea:

Sell at 119.00; Stop Loss= 119.30; Target= 118.50

I’m a little uneasy about going short on this pair because of all the Nuke testing in North Korea but I still think this trade is viable because if anything, this will be the retracement if the dollar does shoot back up.

Resurrection!

2006-10-06T18:12:00.000-04:00

Just when you thought I disappeared, I have come back with a fresh approach to my trading routine. While it might’ve looked like I had given up on the Forex, I was actually taking my time to re-evaluate my trading approach. After thinking long and hard about how I should proceed, I have decided to make the following changes to my posts:

Each week I am going to determine a “bias” for select pairs that I am following. This will give me a general overview of the overall trend. To do this I am going to be using a method that I pulled from the Vegas Tunnel Method. I stumbled onto his system not too long ago, and I really love the way he uses momentum to get a directional bias.

Basically, I will be looking at a weekly chart plotted with a 5 SMA and a 21 EMA.

I calculate the difference between these 2 moving averages and plot this value into a spreadsheet. I do this for several candles (weeks) and basically look to see if this value is growing or shrinking.

If the value is growing, then I know that momentum is bullish.

If the value is shrinking, then I know the momentum is bearish.

Keep in mind, as with every moving average, this is still delayed. An optimal reading would be to see a pair have 2 consecutive weeks of either bullish momentum or bearish momentum.

I’ve been plotting this data for a while now and have come up with a few graphs. Here are the weekly momentum trends for the 4 majors (the last point marks the week of October 1, 2006):

By looking at these line graphs I can get a basic momentum trend for each pair. For a full reading on Vegas’ Tunnel Method, check out his website at www.tunneltrading.com

I will give each pair a rating on my Bias-O-Meter based on this momentum and other factors I find.

These will be posted once a week on Mondays.

In the next section I will go into a little detail on the upcoming economic events. I’ll briefly describe (in order of occurrence) what the economic report is, what the consensus is, and what it might possibly do to the market. I’m not a deep analysis kind of person but it will help outline my thoughts on these events.

The following section will list any current trades I’m in and any trades I have recently closed. This is mainly for track record keeping purposes so that I can actually see if what I am doing is working.

The last section will be a chart analysis on the 4 majors. I’ll basically give a snapshot of where the pairs are trading and list any trade ideas I see. Basically it will be a like a picture book of how I come up with trades and why I think they will work.

I will still be mentioning the Alba system because it’s such a simple, yet profitable system. However, because it doesn’t give us as many trading opportunities (it only works on the EUR/USD), this section will be brief and I’ll simply give an update if anything has happened regarding Alba trades.

Overall, I think this outline will not only benefit me, but will hopefully help anyone who reads the posts. I named my blog “Pippin Ain’t Easy” because staying focused and disciplined is a lot harder than it sounds. This blog will keep me on track and hopefully will encourage you all to do the same. So with that said, lets bag us some pips!

Happy trading!

-BP

Pippin Ain't Easy

2006-10-02T16:34:00.000-04:00

Like the title of my blog states, making pips and trading on a regular basis isn't easy. I'm not referring to actually analyzing the market and finding good probability trades. That is actually fairly simple. No no my friend, I'm talking about the monotony of trading. Like with anything that you do over and over, even if it's something you enjoy, there will be times when that "thing" won't seem as exciting and you won't be as into it as you normally are.

With the dollar still in question, I haven't really been able to find a solid fundamental footing, which has been resulting in a lack of trades. I can see technical trades, but to me, I love trades that both fundamentally and technically line up. The pattern right now seems to be that we'll get a negative dollar report and you'll see the dollar lose ground. Then we'll see a report that shows that the dollar might still have some juice left in it, which sparks a rally. Then the cycle repeats all over again.

Today the ISM came out and showed a lower number. The lowest number in over a year. So once again we are seeing the dollar decline across the board. I see a new 20 day low on the AUS/USD and now some retracement. A break of this low after the retracement look would look good technically, but fundamentally that would mean the dollar would have to make another fundamental gain. Medium-longer term I am bearish on the dollar. I am pretty convinced that the rate increase cycle is over. What I'm looking for now is a series of consecutive economic reports to support my bias. This would make it alot easier for me to take technically based trades.

There was an Alba trade today but because it occurred right around the ISM report, I did not take it. The move actually happened right before the report and continued to make another push after the report was out.

So right now I'm still at a standstill. I'm still waiting for the best time to plan an attack. For now, I am keeping my eyes open and staying tuned to what is going on throughout the globe.

For those of you who feel the same as me right now, just know that you are not alone. You don't have to force anything. If you are uncomfortable about taking a position right now, that's ok! Trust your gut. There will always be a better opportunity out there.

Happy trading to everyone!

-BP

Don't Discount the Dollar So Soon

2006-09-27T16:39:00.000-04:00

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!

-BP

Case of the Mondays

2006-09-25T15:57:00.000-04:00

"Sounds like someones got a case of the Mondays!". Over the weekend I watched one of my favorite movies of all time, "Office Space", and that was a line that was used on a guy that just seemed out of it. It seems appropriate to use it now as thats what the Forex seemed to have--- a case of the Mondays. Specifically, the EUR/USD, which once again showed about as much excitement as a kid having to go to the dentist. I did read that Germany's inflation rate dropped to the lowest level in two years due to the drop in oil prices. Once again, this adds to the constant tug of war between the Euro and Dollar. The dollar sentiment looks weak, but now inflation is dropping off in the Euro-zone as well. It's just another day of questions, and once again we're right back in a range.

The only thing I'm kind of excited about is my USD/CAD trade. Friday I mentioned that I exited a third of my position with a 90 pip profit and was holding the rest of my position until I saw a momentum change. Well today I did see a momentum change as evident by a couple of spinning tops on the 4 hour chart as well as a changing slope in the 8 EMA. I exited the rest of my position with a 64 pip profit per lot. Booyah!

Setups? None at the moment. I'm sure there is a setup somewhere and if I really wanted to, I could find a trade, but I'm sticking to what I like to call "setups" and with my definition of setups, I see nothing.

Tomorrow looks to be another boring day. Consumer confidence comes out at 10:00 am EST. This may or may not move the market depending on what happens. I'll have to keep an eye on it. Other than that I don't really see anything to exciting. It's just another day in the Forex and once again I am waiting for my opportunity to attack!

Have a great week everyone!

-BP

Expectation vs. Reality

2006-09-22T15:32:00.000-04:00

Before I get into the "meat" of this post, let me "appetize" you (get it?) by re-capping the trades I've been talking about. First the bad news. My AUD/CAD trade went to crap and instead of going the way I wanted it to, I ended up getting stopped out at breakeven. I still ended up losing a little on this trade because if you remember, I was initially short when the price nipped my entry before reversing to the long side. So in total, I lost about 70 pips on this one. Bummer!

The good news is that my USD/CAD trade is doing well now. I exited a third of my position today at 8:00 am EST when I woke up to find a 90 pip profit per lot on this pair. I still have 2/3 of my position still open with my stop now at breakeven. Price has retraced a little but it could just be some profit taking and I still see momentum favoring the short side. I'm going to continue to hold my remaining lots until I see a momentum shift. Besides, I can't lose on this trade so I'll rest easy this weekend :)

EUR/USD trading was pretty dead today (no Alba trades) seeing as there were no economic reports out but I'd still like to talk about this pair. Yesterday I talked about how we could be seeing a fundamental shift now swinging towards the Euro's favor, and although I still think the Euro will gain against the dollar, it's important to still remain cautious. I think a reason for the big move yesterday is that the market sentiment is ready to see the dollar weaken. Interest rates were already being held steady before this last meeting, but economic reports were still not giving enough reason for traders to give up their dollars. With the big drop in the Philly Index yesterday, traders finally got the catalyst they needed to finally pull the trigger and go short on the greenback. The thing is, yes it was a weak US economic report and dollar negative, but the job market is still relatively strong and with oil prices remaining low, it seems like the US consumers are still doing ok. I'm not saying this is a cause for the Fed to raise rates, but the movement we saw yesterday is an example of how the market's sentiment over-reacts to what is actually happening in reality. Traders were just looking for a reason to sell the dollar and yesterday, they got that reason.

The point is, market sentiment is a strong trading tool. Even if the US economy may doing better than traders' think, the dollar will still plummet if the expectation of the dollar is for it to weaken. This is a quote I pulled from Jack Crook's Black Swan Currency Currents: (This is a great daily read by the way)

"And presently, it seems, the crowd expects the dollar to crumble; on the view of slowing US
growth (yesterday’s manufacturing data and continued housing fears), a Fed that is done (with a subtle but growing chorus of “next move a cut” on R-word fears), a European Central Bank that will hike (on inflation fears as evidenced by ECB banking hawks) and the European economy is gaining momentum (as evidenced by French consumer spending today)."

So the moral of the story is don't try to fight the masses. If the expectation is for the dollar to get weaker, then don't try to fight it. Instead look at how you can make money from it. Another day, another lesson learned. Happy trading and have a great weekend!

-BP

Reason To Get Excited?

2006-09-21T15:31:00.000-04:00

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!

-BP

Dollar paired currencies are weird

2006-09-19T15:52:00.000-04:00

Unfortunately my USD/JPY trade did not pan out and I was stopped out with a big spike today for a 90 pip loss per lot. I'm not too upset but it never feels good when you lose on a trade :) I think this pair could still go up but it was just unfortunate that there was such a huge spike today to stop me out.

USD/CHF is developing a similar type of trade as the USD/JPY. There was a 20 day high on the 14th of this month and now we've seen a couple days of retracement with a new 2 day low. Once again, if I can see the dollar break its 20 day high I will go long on this pair. However with the weak US economic data coming out, I'm not sure if there will be enough juice to push the dollar too much higher so it does have me somewhat skeptical. Technically it looks good but fundamentally I'm still not 100% confident in the dollar.

My AUD/CAD trade is finally moving. I originally got triggered (barely) on the short order and the price has reversed and is rallying right now. I got stopped out of my short trade and entered into my long trade. I am currently down 53 pips on the trade which includes the loss I took from the short trade. Like I said, I wasn't really worried if it went up just as long as it keeps going. This was a breakout trade after 7 days of tight consolidation so I'm hoping the market continues to rally. My target now is at 8600 and my stop is at 8387.

Once again we saw little movement in the EUR/USD but what else is new? After gaining some strength with the weak ZEW numbers, the dollar returned back to its EU session high only to finish out the day right near the middle of the EU range. So once again, there were no Alba trades and I have a feeling Alba trades will be scarce until some solid fundamentals come in from either currency.

Interest rate statements come out from the Fed tomorrow. We may see a spike during this candle but unless there is a surprise, I think the market has already priced in the fact that the Fed is going to hold rates the same again. So I'm not expecting much, but it's still an important thing to watch for in the Forex.

So I'm slightly down right now but I'm feeling ok because I'm putting myself in situations where the probabilities are in my favor. As long as I continue to play my cards right I know I'll be ok. It's just like poker. Play your game because even if you have a bad beat, you did all you could to give yourself to best chances to win. That's really the best you can do!

Happy trading everyone!

-BP

In with the Yen, out with the Euro

2006-09-18T15:50:00.000-04:00

Last Friday I talked about all the pairs I was close to trading. Well today, I finally entered one of my trades. I've been yapping about the USD/JPY and how it had recently made a 20 day high which was expectedly followed by a retracement. Well after 4 days since that 20 high, I am finally in trade after the USD/JPY broke through this level. Apparently during the G7 meeting, no one mentioned the need to raise the value of Asian currencies. My entry was at 118.20 which was 6 pips higher than the 20 day high at 118.14. I've placed my stop loss at the low of the 2 day swing at 117.30. I know today's low was lower but I'm guessing that was just noise so I'm not going to count it as the most recent swing low. My initial target is at 120.00. I will continue to monitor this trade and how the market moves to decide whether or not that target needs to change. For now, this trade looks good to me and I'm comfortable being in right now. (See chart below)

I am still looking to short the GBP/USD but I don't see any entries yet. All I'm waiting for is to see some convincing momentum that this pair will head down and I will catch and ride the wave. If this doesn't happen that's ok too. Right now I just have a short bias on this pair so that is what I'm looking for.

My AUD/CAD trade is still going. This pair is still staying in a range and a breakout hasn't happened yet. I really don't care which way this pair goes. I just want to see it move when it does finally break out. Hopefully I'll see some action soon on this one.

And what a surprise....the EUR/USD was umm...yup...rangebound again! As a result, there were no Alba trades and it was another manic Monday for the pair. At this point, I have no directional bias on this pair and am being very cautious right now because of that. Even though this is the pair I like trading the most, I have to realize that right now I can't find any reasons to trade it and shouldn't force anything. I'll continue to watch it of course, but I don't feel strongly about any trades in this pair as of this moment. (See chart below)

I'm still excited about this week, especially since I'm actually in a trade now, and I'll keep posting anything I see that catches my eye. Hope you all have a great trading week!

Cheers!

-BP

Related charts:

Close but no cigar

2006-09-15T15:37:00.000-04:00

There was an "ok" amount of movement in the markets today, none of which really gave any time for me to find a plausible entry, but at least there was something. I came very close to entering 2 trades.

The first one was the GBP/USD. Yesterday I mentioned that I was looking to short the pair after seeing a nice retracement from a prolonged downtrend in the 4 hour chart. The pair also skimmed the 1900 level so a short trade was my plan of attack. I was waiting for signs that momentum would pick up in the dollars favor and at 8am I had my opportunity of attacking. But I was faced with a dilemma. Yes the technicals were giving me signs of an entry but with the plethora of US economic reports still yet to come out, I could be getting into a sticky situation. I decided that even though technical signs led to a short trade, the fundamental mysteries would still lead to a chaotic day. And that is exactly what happened. Although at the end of the next 4 hour candle, price did end up closing much lower than what would've been my entry, the high of that candle proved that my "chaotic day" news assumption was correct. Had I entered, I would've lost because the next candle spiked up high enough to where I would've placed my stop loss. I would've gotten stopped out and then to add to the pain, the price would've dropped and I would be kicking myself for getting spiked out. I was very happy with my decision to stay out of this one today. However, I am still not giving up on this pair. At the beginning of next week I will look for another opportunity to short this pair as all my technicals point to a drop in the Cable.

The other pair I almost entered was the USD/JPY. I've been talking about its recent 20 day high and how there would be a retracement. The retracement came as I expected, producing a 2 day low and now my only action was to wait and see if the pair could break its 20 day high which was at 118.14. Today, the pair got as high as 118.11 but unfortunately it wasn't enough to put me in a trade. I am still set to go long on this pair if the price breaks 118.14. We will have to see what happens next week. For now I put my trading gun back into my holster.

One pair that I forgot to mention yesterday is the AUD/CAD. I am actually in this trade right now and have been for a couple days. A few days ago I talked about consolidation in this pair and that I would make a breakout play. My short trade was triggered but we have yet to see any movement. The pair is still range trading but I'm ok because I expect a breakout move sometime soon. I don't really care if the trade goes against me because I put a stop and reverse on my long entry order so if the pair does decide to sky rocket, I will be stopped out of my short trade and automatically entered long. Let's just hope the breakout move is a nice one :)

As for the USD/CHF and AUD/USD--

The USD/CHF made yet another 20 day high today. I am not going to enter a pair until I see some profit taking and then a continuation of this trend. I am still waiting on this.

The AUD USD did retrace but still has yet to take out its 20 day low. If it does, I will go short on this pair.

There was an Alba breakout but it was in the midst of all the news events. I said yesterday that I would only start looking for trades after 10:00 am EST. Since the breakout occurred during news, I wanted to see if price could break that candle's (the 9:30 candle) low before entering. This did not end up happening so I stayed out. 2650 seems to be the new support as this is the 2nd time (I think) that the EUR/USD has tested this level after breaking 2700 without going any further.

All in all I'm excited that we saw some movement today and now that I'm on the brink of getting my feet wet I can't wait to see what happens. Next week should be a good one and I hope you all are getting your trading trigger fingers ready! Have a great weekend everyone!

-BP

Another insignificant day

2006-09-14T16:54:00.000-04:00

Once again, nothing really major happened today except for the fact that it's more evident now that the ECB will raise rates again due to inflationary risks. Trichet used his popular statement of applying "strong vigilance" on inflation. That's such a cool term. I'm going to start saying that whenever I need to make a point. "The Los Angeles Lakers and Kobe Bryant are going to apply strong vigilance to the Boston Celtics and Paul Pierce." (Inside joke between me and one of my buddies)

So the Euro made it's way up to 2750 today at around 11:00 am which simultaneously resulted in an Alba breakout. However, with the lack of "juice" that was all she wrote. At around 12:20 pm EST I decided to recoup some of my losses and ended up closing my position at 2743. My entry was at the close of the 10:50 am candle at 2749. Result: -18 -9(spread)= -27 pips

The USD/JPY looks like it could develop into a good trade but it will depend on the US fundamental data coming out tomorrow. We've seen some retracement since it made its 20 day high and now we have a new 2 day low. If I see a strong move towards the upside and a break of the 20 day high I will enter long on that trade. Again, the economic reports will play a big role in this trade on whether or not the price moves in that direction.

The USD/CHF and AUD/USD have also made retracements so I am still watching those charts for an entry but again, this will depend on what the economic reports say.

Adding to the mix, I am also looking at the GBP/USD. It's had a very nice retracement since Monday from a long drop and it recently touched 8900. I will look to short this pair if I see some momentum in the Dollar's favor. As you can see all my trades right now depend on whether the US reports come out positive for the dollar. If they don't then I'm sure most of these potential trades will go away and I'll be stuck again. We'll just wait and see.

We do have quite a bit of news coming out tomorrow. Euro-zone CPI and trade balance come out at 5:00 am EST. US CPI and Empire Manufacturing index come out at 8:30 am EST while Industrial Production and Capacity Utilization Rate come out at 9:15 am EST. Consumer Sentiment comes out at 9:45 am EST. It's quite a bit of news so I probably won't be looking for a trade until at least 10"ish".

Well it's a short post today since I didn't have any note worthy things to talk about, but as always, stay tuned because the Forex never stays dull for too long. Happy trading everyone!

-BP

Don't Overtrade

2006-09-13T16:46:00.000-04:00

Here is a little excerpt from a Pipsychology article posted some time ago:

"Don’t overtrade. Focus on the quality of each trade, not on the quantity. One of the hardest lessons for a trader to learn is not to overtrade. You will lose BIG if you continue to overtrade. Every time you enter the market, you expose your capital to the market. The more you expose your money to the market, the better chances your money will part with you. Also, the more you trade, the more execution costs you pay, mainly the spread.
The most common misconception among new traders is that they have to constantly be in the market. Wrong."

You can read the rest of that article here.

This used to be one of my major problems when I first started trading, especially because I was mainly an intra-day trader. I constantly felt like if I wasn't in the market, then I wasn't able to make money. In actuality, I would've SAVED myself a ton of cash if I had focused more on the quality of my trades, rather than the quantity.

The reason I bring up overtrading is because, yes, I've learned to control my emotions and not trade on impulse. But the question that you will eventually ask yourself is, "Am I being so cautious about overtrading that now I'm actually "under" trading?" There is that fine line between waiting for a good trade and not knowing when to pull the trigger. Often times you can have a feeling like you are missing many trades because of your fear. The reality is that you cannot control the market. You will never be 100% correct. The key is to find a trading environment where you give yourself a good probability of a winning trade so that once you are actually in a trade, the rest is smooth sailing.

I haven't spotted a good medium-longer term trade in quite some time now and even I have asked myself if I am "under"trading. Am I so scared of what is going on in the markets right now that it prevents me from pulling the trigger and missing out on some trades? The answer is, absolutely! I am scared! But with good reason. The EUR/USD, which is the pair I trade the most has been in the most unbelievable slump I've seen in a while. In this fundamental tug of war between the Fed and ECB, I AM scared to get caught in the middle. A majority of my trades come from this pair and right now the market is just flat, which leaves me on the sidelines. So am I really missing much? Sure I might miss a few trades, but I'm also giving myself a peace of mind knowing that now is not the best time to attack. Waiting is the name of the game right now and I must adapt to what the market is doing.

Even when I posted yesterday that the USD/JPY was showing a better fundamental trend in favor of the US, I was corrected by today's report that the Bank of Japan actually might raise rates again before the year is over. Fundamentally, I am in gridlock again, but with the technicals, I still see some potential trades.

Because of today's statements by the BOJ, the Yen gained ground against the Dollar and now we have a slight retracement from the 20 day high. This is what I was looking for. I'd like to see one more day of retracement and then see whether or not the USD can resume its trend. If the Dollar can break the 20 day high it made a couple days ago, then I will enter long.

Conversely with the USD/CHF, the dollar took out the 20 day high and made a new 20 day high in today's session. Once again, I want to see some retracement first before thinking about going long. The AUD/USD also made a new 20 day low today so again I am waiting for some retracement. Now I could be wrong on both pairs and they could just keep moving in the directions they are currently going but thats ok. I can accept that. I'm more comfortable waiting for a retracement before jumping right in.

Tomorrow looks to be another boring day with the EUR/USD as there aren't many important economic reports coming out. The only thing that I think might potentially move the market is the Retail Sales report at 8:30 am EST. Be prepared for more range bound movement.

So in conclusion (I used that phrase all the time when I wrote essays), I come back to the first point I mentioned earlier. How do you classify whether or not you are overtrading or undertrading? The answer is that it depends on the market. The market may be so chaotic that you stay out for a month. Is that undertrading? Not necessarily. In fact you probably just saved yourself a boatload of money. Then again, there might be a strong fundamental trend and you can find trades every day. Is that overtrading? Not if there is an overwhelming bias towards one currency against another. Know what type of environment you are in and roll with the punches. Trust your gut and don't worry about it too much. Pick your spots and always make sure that you put yourself in a place where you have a good PROBABILITY of taking in a nice profit. Then, relax and let the market do the rest.

Happy trading everyone!

-BP

The Yen Again

2006-09-12T17:29:00.000-04:00

Once again the story for today deals with the Yen. Everything I read talks about how the Yen is under pressure now that there are strong signs they will not raise rates again. There was a brief advancement for the Yen against the USD after the trade balance showed a widening deficit. This move was brief and once again the dollar picked up where it left off.

Forget the EUR/USD right now. This pair has been extremely boring for quite some time. So boring in fact that I haven't even been seeing any reports on that pair lately. Until we can get a clearer fundamental picture between the Euro-zone and the US, expect to see more boring range trading.

Alba produced nothing again today, even with the widening trade deficit. We did see some spikes but the price settled back to it's range with a slight edge going to the dollar (at the time of this writing).

There are 4 charts I'm looking at right now. The USD/JPY has made a new 20 day high today and looks like it is going strong. Simultaneously, the USD/CHF has made a new 20 day high and the AUD/USD has made a new 20 day low. I am waiting to see if there will be some profit taking and then a re-test of these levels before deciding to enter. However, those 3 pairs are on my radar now. Another pair that I am close to trading is the AUD/CAD. There were 2 days of nice consolidation on 9/07 and 9/10 and I now am looking to play a breakout. I have set entry orders at .8460 and .8387 and will put stop and reverse orders on one of those levels when/if they trigger.

Nothing great is happening tomorrow for the EUR/USD so I would expect to see some more crappiness. If I didn't love that pair so much I'd punch it! Sigh :) Can't live with it, can't make money without it--Forex!

Happy trading everyone!

-BP

Related Charts:

Yen is clear, Euro is foggy

2006-09-11T15:49:00.000-04:00

What I mean to say is that with today's big drop in Japan's machinery orders, it's becoming more and more clear that Japan's rates will stay put. Japanese machinery orders came it at a shocking -16.7% while the forecast was around-7.5%. With such a negative number, the Yen dropped like a rock against both the USD and the EUR. But I didn't need to tell you that. All you have to do is open up a chart and you can see it for yourself.

With a clearer direction of the Japanese economy, traders were selling the Yen up the wazoo and buying currencies with potentially stronger economic futures. The USD and the EUR were the 2 that stuck out the most. Although the common consensus is that the Fed is pausing their ferocious rate hikes, it is not a complete understatement to say that the Fed could still raise rates as shown by the past few economic reports which showed dollar positive numbers. The ECB is also expected to raise rates 2 more times this year which made the Euro another good currency to purchase against the Yen.

However, if you take a look back at the EUR/USD, the most liquid currency pair in the Forex, you'll notice that the Euro made a jump back above 2700 which means that the uncertainty battle between the Fed and ECB is still not over. On Friday, we saw a drop down to 2650 in this pair which was something we haven't seen in a long time. Well now we are back at the 2700 level and once again we'll have to wait for a clearer fundamental picture.

Alba saw no action today as there was a wide EU range which meant that there was little chance there would be a breakout. That was exactly the case today as the pair simply traded within the EU range.

Longer term I am waiting for some retracements before looking at possible entries. Many currencies have been making 20 day highs and lows such as the Yen, Euro, and Pound. I like to wait and see if there will be any profit taking and once the retracement occurs, I want to see if that 20 day high/low can be broken. This would give me a good confirmation that the trend is actually a trend and not just a short term fluctuation. So no specific entries yet but I'll know in a couple days whether or not anything pops up.

On a final note, although Roger Federer (a Swiss) defeated Andy Roddick (an American) in the US open it still looks like our currency is still beating them.. YEA! Go dollar! Sigh...first we lose in the FIBA World Basketball championships and now the US Open. What's going on?!

Hope you all had a great weekend and let's get ready to rock this week!

-BP

Breakout?

2006-09-08T14:34:00.000-04:00

If you did any trading today, then you know that I'm referring to the dollar rally that occurred. In fact this whole week, the dollar has been making gains across the board. Today was pretty interesting though because the dollar actually broke the 2700 level against the Euro. If you've been watching that pair, you know that it has been trading between 2700 and 2900 for some time now. That's why this break of 2700 is pretty significant. It looks like with the stronger than expected US data such as the labor costs and ISM, traders are speculating the Fed may still raise rates one more time before the year end.

Looking at the Fed funds futures rates, it still looks like only 20% of traders think the Fed is going to raise rates in October, but you never know what could happen in December.

I'm thinking with all the existing long Euro/Dollar short positions, many traders are covering their positions. This is probably what caused the big drop today. Now we are in sort of a "no mans" land. Yes we've broken the range, but will the market continue to rally towards the dollar or is this just a false break? Could this be a true comeback for the Dollar or is it just a failed comeback attempt like the way James Blake failed on his comeback attempt against Roger Federer in the US Open? The answer? Thats right....we need more data. There wasn't much to go on this week so we'll have to wait for more significant reports to show dollar positive results to see a further push in the EUR/USD.

With the AUD/USD, there has been a strong dip which is what I expected. Now I am waiting to see if it can break the 20 day high that it made 2 days ago. However, if the US keeps churning out positive reports, we might just see this pair continue to drop.

I had an Alba loss yesterday but recovered most of loss with a win today. The sharp drop in the EUR/USD helped me grab a good amount of pips and I'm at about breakeven for the week with Alba. With the EUR/USD finally making some movement, we'll see if Alba can produce more trades and break out of this dry spell.

Well thats it for this funktifiably fresh pippin magnet. I hope you all have a groovy weekend!

-Big Pippin

The Dollar Won't Die

2006-09-06T18:23:00.000-04:00

From Non Farm Productivity to Unit Labor Costs to the ISM Non Manufacturing Index--we are still seeing economic indicators that hint at another possible rate hike by the Fed. All 3 reports came out higher than expected causing the dollar to rally yet again. Are you getting familiar with this scenario yet? The dollar drops and then positive economic reports come out causing it to rally again. This is why we are seeing so much range bound movement. And even though we are seeing good intraday movement, we are still not getting any clear longer term trends.

Could the Fed raise rates yet again before the year end?

I doubt they will, but I wouldn't count it out entirely. Interest rate futures show that 19% of traders think the Fed will raise the rates again before the end of the year which is up from 16%. However in a larger perspective, this is down from 71% in July so the expectation of another rate hike is still slim.

The only pair I'm really looking at right now is the AUD/USD. Like I said yesterday, it made a new 20 day high and I said that I would wait for a dip to buy. I'm expecting the dollar to gain a little more ground in against the Aussie over the next day or two and if the price goes back up and breaks the 7720 area, I will enter long.

Other than that I don't see anything to compelling to risk my money on.

Alba had a close call trade today. There was a break of the EU low at 9:40 but I always avoid trading around news events....at least the ones I think are important. I'm glad I stayed out because the price retraced back up and it would've ended up a bad trade. So it's been a pretty dry couple of weeks as far as number of Alba trades but with the EUR/USD being flat as a pancake, I don't mind staying out.

So what's happening tomorrow? Hmmmm...absolutely nothing!

Yea, this is a short entry because I don't really have anything else to talk about. I will still watch the markets (of course!) but my expectations of seeing alot of action aren't that high. I'll definitely be multi-tasking as I trade!

Happy trading everyone.

-BP

Someone Give Me Some Caffeine!!!

2006-09-05T18:40:00.000-04:00

So tropical storm Ernesto took his sweet time over us and flooded our whole area. But the flood wasn't what bothered me. The fact that we lost power did! Consequently I couldn't get into the market on Friday and so I took a nice 4 day weekend with Labor Day on Monday.

So what's going on with the EUR/USD right now? The same thing that's been going on for the past 2 weeks.....nothing! And this week looks like it's going to continue that trend. With no big economic catalysts this week, I think we will see another week of tight range trading. If you notice on my chart below, the daily Bollinger Band is contracting showing just how little this pair has moved over the last few weeks.

Tomorrow we have the Non Manufacturing ISM and Beige Book. I don't think these will move the market but they are worth getting some airplay.

I actually think the EUR/USD will make one more push up to 1.3000 and maybe even as high as 1.3100 but 4 things concern me once the pair hits that level.

The first is the overwhelming number of existing long positions in the Euro. Once the Euro gets that high I think we will see alot of profit taking.

The second thing that concerns me is that the European officials will not be happy if the Euro gets that high. The reason is that Europe is highly dependent on their exports and when their currency goes up, it will be more expensive for other countries to buy their Mercedes Benz's, resulting in an economic slowdown. If the Euro gets this high, watch for these officials to start talking down the Euro to push it down.

The third reason is that the Fed does not want the dollar to fall too much. The reason is that if the dollar goes down, other countries won't want to invest in us as much which will hurt our deficit financing... remember the TIC has to AT LEAST equal our trade deficit because it is what's covering our trade deficit. If the dollar goes down too much, confidence will shrink and foreign investors will be more hesitant to put their money in our economy.

The fourth reason deals with oil prices. At the moment, oil prices are getting cheaper which is making gas prices cheaper. I think with gas prices dropping, we could see an increase in consumer spending as well as an increase in consumer confidence.

If the EUR/USD gets up to 1.3000 I'd be on the lookout for the dollar to rally!

There were no Alba trades today. As you can tell by my rant, the Euro has been boring and today it pretty much stayed within it's range (see chart below).

I still don't see any good looking charts right now, but I am looking at the AUD/USD again (see chart below). It's made a new 20 day high and it's moving averages are creating another perfect order. I'd like to go long, but I am going to wait for a dip and then a re-test of this new high which is around 7720. I'll keep you posted on this.

That's it for me today. It looks to be another boring week but don't worry...the Forex never stays dull for long :) Cheers!

-BP

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Daytrading Can Come in Handy

2006-08-31T14:46:00.000-04:00

For the last week or so I've been griping about how I haven't been able to find any good setups. Today is no exception. Every chart I look at is either showing a range or if a pair does happen to be moving, I can't find a good entry point. That's what comes with the territory when you're trading but it doesn't mean you're completely out of luck. This is where day trading can become useful. For example, in the EUR/USD, the dollar rallied 100 pips but on a longer term chart, it still just looks like it's ranging (which is what it really is doing). However, zoom in to a 10 minute chart and it looks like a pretty nice trend! Having a day trading system as part of your arsenal comes in handy during times like these. I'm not saying you should overtrade, because that is the common problem with day traders. I'm saying that it's good to have a system for every kind of market environment. The Forex is a very dynamic market so it's important to adapt to it's conditions. With the Alba system, I was able to grab a few pips from that movement. Granted, it wasn't my big pay day but at the end of the day, positive pips = positive pips = a happy trader!

At 10:20 there was an Alba breakout and I entered 3 lots short at 2802 with a stop at 2825 and a target at 2791. My target was hit on the next candle and I closed 2 lots and moved my last lot's stop to breakeven. Unfortunately I was stopped out on my last lot at that very same candle. So you can see that although the trade is very small, it's still positive. (See chart below)

Result: +22 +3 -9(spread)= +16 pips

So what caused this dollar surge? Well all 3 US reports today came out better than expected. Personal Spending came out at .8% compared to the .2% forecast. Chicago PMI came at 57.1 compared to the 56.1 forecast and Factory Orders came in at -.6% compared to the forecast of -1%. So while the Fed may be pausing rates, the US economy is not entirely flat. In fact, the median forecast for tomorrows NFP report is 125,000 according to Bloomberg and if this number is correct, it will be the highest number of new jobs in 5 months.

I'm kicking myself for getting out of the USD/JPY trade. It looks like the dollar will hit my original target of 117.71. If you've been following, you know that I got out of the trade because of my fundamental analysis. My technical analysis was still showing buying power and that's what it is currently doing. Arghh! I still profited off of the trade but I hate it when that happens :)

NFP, Unemployment Rate, and ISM will be key reports tomorrow so I would be on the lookout for those. I don't think any long term trade ideas will pop up by tomorrow but we'll see if Alba can grab me some pips! Have a great day everyone.

-BP

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Just waiting...

2006-08-30T15:50:00.000-04:00

Ok, so there's not much to say about the EUR/USD today. Don't believe me? Open up a chart and you'll notice that the pair had a narrow trading range today. As you can guess, Alba didn't produce any trades because of the lack of movement so I eased my finger off the trigger and will wait for a better time to attack! (See chart below) I believe this range bound movement will continue until the NFP report on Friday unless there is a surprise in one of the other economic reports coming out before then.

The ECB is expected to keep their rates the same in tomorrow's statement and futures traders are betting that they will increase their rates at least 2 more times before the year end with the next increase coming next month.

After reading more about the FOMC minutes yesterday it looks like the Fed is definitely going to pause their rate hikes and may be holding them steady for a while. Some analysts are even saying that not only are the rate hikes done but that the next move will be to decrease rates. I never take analysts too seriously but it is interesting to see other people's opinions. However, looking at the federal funds futures it looks like there is an 80% chance the Fed will keep rates the same in September and about a 78% chance they will keep rates the same in October.

So why keep rates the same? Well, it finally looks like inflation might be contained. Weaker housing data, lower consumer confidence, higher energy prices all have had some part to do with that. Consumer spending has finally slowed with the rising fuel costs and the end of the housing boom. The Personal Spending report comes out tomorrow so that will be interesting to see. Other reports I will be looking out for will be the Chicago PMI and the speech by Bernanke.

As you know I exited my USD/JPY trade yesterday with about 50 pips profit on each lot. I also mentioned that technicals still showed upward movement on the pair but my fundamental thinking was that the USD would show weaker reports which would keep it from hitting my target at 117.71. Right now it looks like the USD is being defiant again as it is once again heading up towards my original target. I know I'm already out of the trade but I still like to see how things pan out.

All the other charts are garbage right now. Actually I take that back. The GBP/USD and AUD/USD both showed good buying momentum and I would've entered. Unfortunately both entries came at around 4am EST which is when I am in dreamland. You can't have them all!

So still no clear setups for me. I'll let you know if I see anything worth mentioning.

On a side note, I recorded the US vs. Germany basketball game but I haven't seen it yet. If I had to bet based on interest rate differentials I'm thinking we beat Germany :) I'll let you know if my calculations were correct tomorrow! That's it for me. Have a good day everyone.

-BP

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Running in place

2006-08-29T15:49:00.000-04:00

Lock and load! Finally some action! The dollar had one heck of a roller coaster ride today. Surprisingly enough, even after a much lower than expected Consumer Confidence number, the dollar made a quick surge. Why did this happen? If this was such a bad number for the dollar why did it still continue to rise? From what I've read, it seemed like traders still speculated on high inflation talk in the FOMC minutes which came out later in the day. There could be a bunch of things that caused the dollar to make a quick surge, but what I was most concerned about was hanging on for the ride. I was pretty convinced this dollar surge was just "noise" and that unless the FOMC minutes showed alot of inflation concerns, the dollar would still sink.

However, I could not deny such a strong move and with the help of the Alba system I took a breakout 20 minutes after the Consumer Confidence report. I went short 3 lots at 2779 with a stop at 2810 and a target at 2762. The 2750 mark was my real concern because I know that 50's are a key level in the Euro and I figured that might be the reversal point where the market would correct itself and actually do what the data suggests. Since my target was at 2762 I still felt that the Alba trade was still good. My target was hit on the next candle and I closed 2 lots and moved my last lot's stop to breakeven. I continued to trail my last lot to the high of the candle marked on the chart where I was eventually got stopped out at 2757. (See chart below)

Result: +34 +22 -9(spread)= +47 pips

Interest rate futures contracts are now showing about a 17% chance that the Fed will increase rates in September which means that it's probably not going to happen. However, contracts are still showing about a 43% chance that the Fed may raise rates one more time before the end of 2006. So again, although the dollar gained alot and then lost alot today, it is still right back where it was against the Euro. Don't completely count the dollar out yet. On the Euro side, futures traders are expecting the ECB to raise rates 2 more times by the end of the year.

There is a bunch of US data coming out throughout this week including, GDP, Personal Spending, a Bernanke speech, and Non Farm Payroll. If these reports all show dollar weakness, then I can see the dollar losing alot of ground. Some analysts are even saying that the Euro will get to 1.3200 by the end of the year.

Regarding my USD/JPY trade-- I finally exited my trade seeing how I can sense the dollar getting weaker. I was still able to manage a small profit and ended up getting about 50 pips per lot. My technicals are still showing a possibility that my target may get hit but fundamentally, I think the dollar has finally cooled a bit and will stay that way unless these upcoming news reports show some miracles.

Short term I'm feeling bearish on the dollar. Medium-Long term I am still undecided. I need more data to make a better decision.

For a complete reading of the FOMC minutes you can go to:
http://www.federalreserve.gov/fomc/minutes/20060808.htm

Happy trading everyone!

-BP

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Silence is Golden

2006-08-28T15:47:00.000-04:00

It was another boring day today with the lack of economic reports to really fuel any movements. Browsing around it looks like the Euro made new highs against the Yen but since I don't trade that pair I really didn't look too much into it. The EUR/USD did absolutely nothing which wasn't a surprise since there was really no reason for it to move. Consequently, the Alba system did not produce any trades (see below).

I am still long on the USD/JPY from last week. The Yen did gain a little ground on the dollar but since it's still above 117.00 I'm still convinced that my target will get hit at 117.71. I am still holding until I see anything fishy. Speaking of Japan, it looks like the US National Basketball team is causing havoc over there as they smothered Australia in the semifinals two nights ago. Finally! A US Basketball team that wins!

And I know you're probably tired of hearing this but I still don't see any convincing setups on my charts. Frankly, it's boring right now. Everything I see is still in the gray zone and until I get a convincing signal, I am not going to force anything.

As far as tomorrow goes, we could see some movement with both the German Consumer Confidence coming out at 2:00 am EST and the US Consumer Confidence coming out at 10:00 am EST. Remember, we're looking for signs that the ECB will tighten rates and/or the Fed will pause their rate hikes. It's all about the rate differentials so we want to see a convincing fundamental sign that will hint at a widening rate between the EUR/USD. Until then I think we will still see the 2700-2900 range movement. Yawn... FOMC minutes also come out tomorrow at 2:00 pm EST so watch out for that. I usually don't trade after 12 noon anyways, so I probably won't even be looking at my charts. Hopefully tomorrow I will have something more exciting to write about.

Happy trading everyone!

-BP

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Yen me!

2006-08-25T16:39:00.000-04:00

There's not much to update about the EUR/USD since nothing has really happened today. Expect to see more range bound movement until there is a major fundamental shift in the Euro or Dollar. Bernanke kept his lips sealed as there were not any hints whether or not rates will increase. We'll have to wait and make our own judgments when more economic reports come out.

Today's excitement comes from the Yen. I've been long the USD/JPY for a few days now from when I first noticed tight consolidation. After another couple of days of consolidation, the dollar gained more ground against the Yen today with a nice breakout. My original target was set at 117.71 (see my post a few days ago), and it looks as though my target may get hit. See the chart below. I marked the consolidation points followed by breakouts. When there is tight consolidation like that you can expect to see a breakout of some sorts, these are some of my favorite trades as usually the movements are swift and can earn you a decent amount of pips in a short amount of time. Currently I am up +111 pips per lot so I'm hoping nothing drastic happens over the weekend to hurt my trade.

Because of the lack of movement in the Euro, Alba didn't produce any trades. We did have a slight breakout of the EU session low but it was due to the Bernanke speech candle so I didn't trade it (I treat those like news reports). Following the speech, the Euro bounced up to the EU session high and settled back down leaving us with no trades. Alba for the week only made a slight profit with +32 pips from yesterday. I'm pretty happy with it since this week has been pretty uneventful.

I'm still pretty dry on trade ideas since all my charts still show consolidation but I will keep my eye out for anything that seems interesting. Hope you all have a great weekend!

-BP

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Euro VS Dollar- Place your bets!

2006-08-24T16:22:00.000-04:00

The battle rages on. Who will give the knock out punch that will send the opponent flat on its back? Who really knows? Apparently no one does right now. Todays market was a classic battle between the Euro and Dollar as neither one could be pushed towards a limit. During the EU session, the German Ifo came in at a slightly higher number than forecasted at 105 even though it was still a decline from the previous 105.6 from the last report. Because of such a low ZEW number that came out earlier, this tiny surprise seemed to be enough for some traders to place their bets on the Euro, shown by the jump in the EUR/USD. However, the Dollar fought back and even with the weak Durable goods and Housing data, it still managed to gain back its ground and settling to about the same level that it closed yesterday. The dollar finished around 1.2760 leaving traders right back where they started. So why is there such a struggle between these 2 currencies?

Again, the theme is still the same. It is still a toss up as to whether or not the Fed will raise rates again. It's also a toss up as to whether or not the ECB will raise rates again. No wonder everyone is confused! Right now, the interest rate futures show about a 47% chance that the Fed will raise their rates. We have some Fed governors saying that interest rate hikes might still be needed while others are saying that rates are good right now.

On the Euro side, traders were expecting 2 more rate hikes by the end of the year to 3.5% but with all the weak data coming out, this sentiment might be changing.

So where are you going to place your bets? I still expect to see range bound movement in this pair but I think the dollar will gain a little more ground before shooting up again. I still see 2700-2900 as being the range until we see a major fundamental change. This is confirmed by my Bollinger Bands (See chart below).

Recapping my current trade- I am still long the USD/JPY from 2 days ago and I will still hold onto it as I feel that the dollar still has some kick in it. Interesting enough, I entered this trade because it showed a lot of consolidation. After a brief breakout which put me in the trade we have seen another 2 days of tight consolidation. I am expecting another breakout soon. Hopefully it will be in my direction! :)

Alba had a nice little win today due to the fact that the dollar gained back all of the ground it loss during the EU session. At 11:00 am EST I saw one of my Alba signals and I entered 3 lots short at 2785 with a stop at 2803 and a target at 2774. My target was hit at 11:40 am and I closed 2 lots and moved my last lot's stop to breakeven. I trailed my stop to the high of the candle shown on the chart where I was eventually stopped out at 2766. It wasn't a big win but I pretty happy with any pips I can pull in this weird market right now.

Result: +22 +19 -9(spread)= +32 pips

Two things I will be watching tomorrow are the German CPI at 2am EST and Bernanke's speech at 10am EST. Traders are watching very closely for ANY sign of fundamental strength or weekness in either currency so be on the lookout for any extremes. Also pay close attention as to what Bernanke says in his speech. Everyone will be digging for clues on whether or not the Fed is going to raise rates so pay close attention.

Well that's it for me today. Hope you all had a great trading day and I'll see you tomorrow.

-BP

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Greenback making a Comeback?

2006-08-23T15:24:00.000-04:00

Pretty boring day in the Forex if you ask me, but the dollar did manage to gain a little more ground on the Euro today. The Existing Home Sales report came out at 6.3 million which was slightly less than forecasted but it was pretty much expected that the housing market has cooled off. This is why the dollar wasn't really affected. When expectations are met, the market tends to keep its cool. It's the surprises that really makes the market wiggle. It's being said that dollar expectations are in place and there are no major catalysts to cause it to drop in the next week or so. So what could this mean? The dollar on the rise? For the short term the answer is probably yes. Like I've been saying, I think it could go to 2700 and in an extreme case as low as 2500 before the Euro bounces back up. On the EUR/USD daily chart (see below), notice how the upper and lower Bollinger band levels just so happen to be at around 2900 and 2700. This reinforces my belief that the price will most likely range between these levels until a major news event comes out to shake things up.

As it stands, interest rate futures are showing a 47% chance that the Fed will raise rates again so the speculation is still there. Things are not definite yet. In fact in the testimonies yesterday, Chicago Fed Bank Pres, Michael Moskow said that further interest rate increases may be needed if inflation remains stubbornly high. On the other hand, Atlanta Fed Bank Pres, Jack Guynn said that monetary policy was "properly calibrated". So you can see that there is still some speculation as to what the Fed is going to do. I think until there is a major news report that shows a clear sign that rate hikes are no longer needed, I think we will continue to see range bound movements.

My USD/JPY trade is still going on as my target is still set at 117.71. I know it's still far off but I think the dollar can get that high since I don't really see anything stopping the dollar in the near term (unless of course a major surprise somewhere). I will continue to hold my position until I see something important enough to re-consider my decision.

There were no Alba trades today as the Euro once again stayed within the EU session range. You can see from the chart below that the price pretty much bounced between the high and low and made no clean breaks from the range. I'll have to wait for a better time although I'm not sure if this week will give me any opportunities.

Tomorrow might be an interesting day as far as economic reports are concerned. We have German Ifo as well as US Durable Goods and US New Home Sales. Because of the low German ZEW number, I would expect to see a lower German Ifo number as well. Durable goods and New Home Sales are both expected to have lower numbers so I wouldn't expect much movement if they come in at the expected forecasts. If we see a low German Ifo number with a higher than expected number for Durable goods and/or New Home Sales, I think we'll see the dollar gain more ground on the Euro. I'll just have to wait and see.

Once again trading has been minimal but I'm starting to look real close for a good price to buy the Euro because I think it will eventually bounce back up again. I'll keep you posted.

Happy trading!

-BP

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It's a ZEW out there!

2006-08-22T14:59:00.000-04:00

You wanted excitement? Well today was full of it :) Of course, every day is exciting in the Forex for me but today makes things interesting especially for the EUR/USD. The story of the day was the ZEW. The ZEW (an economic research center) report came out with much lower numbers than expected causing the Euro to lose ground against the Dollar today. In fact, the German ZEW came in at -5.6 which is the lowest since June 2001. The EU ZEW came in at 1.3 which was a much lower number than the forecast of 15. So what do these numbers mean? Well the fact that these numbers came in much lower than expected means that a majority of investors are pessimistic about their economy. Germany is the Euro-zone's biggest economy so with a weak number like todays, the possibility of the ECB raising their rates to 3.5% is looking less likely. Remember, interest rates play a big part in the direction of a country's currency. With the Fed most likely pausing their rate hikes, there is a good probability it will weaken the dollar. However, in the case of the EUR/USD, things aren't looking good for either currency right now. I've been talking about how the Euro would have to have a stronger sentiment in order for it to get past the 2900 level but right now it doesn't look like that will happen. So my theme is still the same. I expect to see more range bound movements between the 2900-2700 level, at least until the end of this week.

There were no Alba trades today as most of the movement occurred during the EU session. During my 8am-12pm EST timeframe, the market pretty much just hovered around the EU session low and then eventually nudged a little lower after 12pm. On a slightly longer time frame I am looking to buy the EUR/USD since I feel this is a dip and that the Euro will eventually head back up to 2900. I will probably scale in my entry since I don't know exactly where the bottom of the dip will be.

I was able to make some pips on the USD/JPY today. Remember, yesterday I talked about how there was major consolidation on the pair for the past 2 days and that I was expecting a breakout. I made a play on this and set a straddle order (an entry to buy and an entry to sell) above yesterday's high and low. Which ever one triggered, I would use my other entry order as my stop and reverse level. With these type of consolidation/breakout trades, I like to play both sides since usually it will move nicely in one direction or the other. I'm currently long with about a 40 pip profit right now but my target is at 117.71 so I have a long way to go. My target is basically double whatever my risk was on the trade. As I write this, the yen is currently at 116.58.

As for the other pairs, I still don't see any sexy setups. Everything looks flat right now and I'm not sure if anything will develop this week, but as always, we'll have to wait and see.

Tomorrow, we have Existing Home Sales and I think the market will make a play on this. It's expected that existing home sales has cooled down so unless there is a surprise, I think the Euro will gain a little strength tomorrow, but again, I don't think it will be anything drastic.

Another day, another dollar...or euro..or pound, yen, frank.... you get the idea!

-BP

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Rules are made to be broken

2006-08-21T15:05:00.000-04:00

This week looks to be a quiet one as far as economic reports is concerned but that doesn't mean there won't be any excitement. The Euro has already made some moves today as it made a new 20 day high against the dollar. Today's move was probably caused by 2 things: the first is that traders' expectations for the Fed to increase interest rates is reducing, and the second is the better than expected trade balance for the Euro-zone. But even with the new high, notice how 2900 still seems to be the level to break. As I write this, the Euro is slightly under 2900 which confirms my speculation that the Euro will have a tough time making any more gains. I mean, sure, the Euro got as high as 2938 today but what exactly constitutes a clean break? You often hear about people talking about how they will go long or short when a price can break a certain level but how do you define a break? To me, a break cannot have a clear definition. You cannot put a set number of pips and use that as your definition of a breakout. It's possible to use a set number of pips as filters for your trades, but a breakout is very tough to pinpoint. In today's example we see that 2900 was broken by 38 pips and yet at the end of the day, the price has settled back to just under 2900. It's obvious this level still is creating strong resistence. So how will I define a break? To me, the real story lies at the end of the day. What does the market close at? If by the end of the day, the Euro makes a clear break of the 2900 level, then I might consider the pair to have broken that level.

What's causing this resistance? From what I keep reading, it seems like the biggest underlying factor as to why the Euro can't make any new ground is because of the overwhelming amount of existing long positions. This is also serving as a take profit level for traders who are currently long. Another reason is still because of the speculation as to what the ECB will do. There is not a strong enough sentiment for the Euro yet as the data hasn't really given a clear fundamental trend although today's strong trade balance does provide a start. In order for the Euro to make a strong move I would look for 2 things: A sharp decline in fundamental US data or consistently strong fundamental EU data. Either of those should give traders enough confidence to take a position.

Across the board, I still don't see any good trade set ups. Everything I look at seems to be in consolidation mode, especially the USD/JPY. Open up a daily chart of the USD/JPY and you'll notice some tight consolidation. I would expect some sort of breakout in that pair soon. Other than that, there are no pairs that I'm excited about and unless something drastic happens, I'm not sure if anything will develop this week.

For tomorrow, the ZEW economic sentiment at 5 am EST will be the report I look out for. If for some reason the number is above 15.1 (which was the previous number) I would expect to see a sharp spike in the Euro. I will also see if any of the Fed presidents say anything that might cause the dollar to drop. The Atlanta and Chicago Fed presidents are set to speak at 1 pm EST.

Now- regarding the title of my post. Many of you know that I am a stickler when it comes to my trading rules. Well today I must confess that I broke my rules. But before you gasp in disbelief, I must tell you that I did it with very good reasons. Today there was an Alba breakout on the long side but the breakout occurred above the 2900 level. If you've been reading my posts recently, you've seen me rant about how I don't see the Euro making any strong moves above 2900. With the lack of strong Euro sentiment and the large amount of existing long positions, my gut was telling me that the Euro was going to drift back down below 2900. Although the price got as high as 2938, there was still a strong resistance all the way up to 2950 (see the daily chart below). With all of these factors, I broke my Alba rules and decided not to take the long trade that was presented to me on the chart. Now if the Euro went to 3000 I would kick myself in the face but I still would've stayed out. I just don't feel right going long right now on the Euro unless it's on a dip (like around 2700-2800). This is why I put the safety on and kept my trigger finger from pulling. This market is so dynamic that SOMETIMES you must bend your rules no matter how accurate your system is. A system is only as good as the trader behind it and that is something I've learned with time. No longer do I blindly follow systems just because of their sexy track records. Everything must be done with good timing and today, the Alba system did not match up with the market. Sure, I wish I could get in a trade and make some pips, but at the same time I know I have to attack at the best possible time. Right now is NOT that time.

Results: +0 pips

That's it for me today. Hope you all had a great day!

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