Wednesday, October 11, 2006

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

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

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!

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

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

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

"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

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?

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

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

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

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

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

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

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

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?

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

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!!!

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

Related charts:

Daytrading Can Come in Handy

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

Related charts:

Just waiting...

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

Related charts:

Running in place

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

Related charts:

Silence is Golden

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

Related charts:

Yen me!

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

Related charts:

Euro VS Dollar- Place your bets!

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

Related charts:

Greenback making a Comeback?

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

Related charts:

It's a ZEW out there!

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

Related charts:

Rules are made to be broken

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!

Related charts:

Start your weekend early with "Boring Friday"

This entry will be shorter than normal. Why? Well today was about as boring as having to actually do "real" work.

Let's see, the University of Michigan's Consumer Confidence report came out today at a lower than expected number at 78.7. Even with the low number, the Euro failed to make any new gains against the dollar. My theme is still the same as it was yesterday. From what I've read, it seems that the Euro will have a hard time gaining more ground on the dollar because of all the existing long positions in the market. 2700-2900 seems to be the buy/take profit levels. My gut tells me that the dollar won't be able to make it lower than 2700 and if it does, I seriously doubt it will go any lower than 2500. With the dollar sentiment getting weaker, I think that when these levels are hit, traders will add or go long to get in at a good price. I read that less than 20% of traders believe the Fed will raise interest rates so I don't see how the dollar will make any strong improvements.

On the other hand, the Euro-zone data isn't looking so hot either so an interest rate increase is still up in the air. This, coupled with the high number of existing long positions leads me to believe that the Euro will have a hard time getting past the 2900 level at this point.

As far as the other pairs I am watching, I don't see any good setups yet. Everything seems to be in range which makes sense to me as there are no clear fundamental trends yet. All my technical analysis shows consolidations at this point. I will not force anything and will wait until I see something worthwhile.

Trading for me today was pretty boring as I stared at my charts waiting for something to happen, but nothing ever did. Not everyday can be exciting and sometimes, boredom is just part of the game. The key is to take it in stride and not to get frustrated when you can't find a trade. Don't ever feel like you "have" to make pips everyday. This will most certainly get you into trouble. I used to struggle with this for a long time even though I heard the warnings of other traders. Sometimes you just have to learn it on your own but if you can learn to be patient now, you'll have a jump start to a successful trading career.

Alba was also uneventful today. You can see from the chart that the Euro stayed within the EU session range and I didn't see any breakouts. According to my rules, there was an Alba signal at the 9:40 candle but if you read my post yesterday I was watching out for the Consumer Confidence report at 9:45 so I did not take the trade. Other than that, there was really nothing too exciting.

Results: +0 pips

Well that's my ramble for today. Hope you all have a great weekend!

-BP


Related Charts: