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Currently up +177 pips on a trade off the 4 hour charts on the GBP-JPY pair as Yen pairs have pretty much moved sideways today after all the dynamic appreciation brought upon this entire week. On the GBP front, all Pound crosses where taken a nosedive across the board which made this trade pretty easy as retails sales fell dramatically.
I went aggressive on this trade and entered right after the pullback knowing there was lots of momentum pushing the Sterling down.
Profit target hasn’t been reached yet as I am looking at the 207.00 region to exit which was Wednesday’s low and if hit, total potential profit would be in the vicinity of +300 points.
Attached are the 4 hour charts and 1 hour setup chart.
What a few odd day of trading especially with the US Dollar gaining strength as indicated by the US Dollar Index Fund (DX-Y). Luckily my other position was a Yen cross which appreciated rapidly due to the subprime mess that is going on.
AUD/USD:
After reaching the vital 0.9000 region, the Aussie crashed back 200 pips to the 0.8800 region due to the short-term strength by the USD.
Previous position was placed at 0.9012 and was stopped out at 0.8980 for a total loss of -32 pips.
CAD/JPY:
Similarly with other Yen crosses, the Yen appreciated 200 pips as traders unwinded their carry trade positions to buy back the Yen due to risk aversion.
Previous position was entered at 105.94 and reached the profit target of 104.05 for a total gain of +189 pips for this trade.
Total result equates to 157 pips which isn’t too shabby.
Rational is that there will be more subprime write offs within the next couple of days as earnings reports are out as reported yesterday that Citigroup could write down as much as 24 billion US dollars in losses on subprime mortgage-backed investments and eliminated up to 24,000 jobs.
Speculation that the Fed could implement an emergency 50 basis points inter-meeting interest rate cut and Goldman Sachs said the economy may already be in a recession.
With all these worries and fear occurring on the macro level, this will only improve the status of the Yen as this pair overall has been pointing downwards ever since early November when the first news of the subprime shenanigans occurred. The pair has broken out of its bottom support level as per the Demark Trendlines and see looks bluesky until the 103.00-104.00 region.
AUD/USD
The Australian currency gained yesterday after it was announced that average weekly job ads in Australia reached a record high last month and that the TD Securities-Melbourne Institute monthly inflation gauge accelerated, providing further evidence that the economy is growing at a fast clip. This may prompt the central bank to raise rates next month which will make the Aussie pairs more favourable due to yield differences.
In conjunction with the weakness in the US Dollar, this seems like a no brainer pair for he time being.
The only risk I see pertains to that gap that occurred in early November wherein a gap existed .9085-.9100 regions which can act as heavy resistance. The pair has broken out of its 1HR and Daily Demark Trendlines are heading towards that 0.9400 region provided that there isn’t much resistance at the gap area.
According to PFXGlobal’s Total Fundamental Strength Analysis chart, the pair today would Aussie and Kiwi pairs especially against the Yen, Swiss and Euro.
The COT reports also confirms bullishness amongst the commodity currencies especially favouring the Aussie. The sentiment for the Aussie longs are crossing across in favour of the longs as displayed by the below chart.
Thursday-Friday trading started out with a bang in a favourable position on my favourite currency pair, EUR-GBP. Why is it my favourite? lack of volatility as its daily trading range is relatively small which helps you easily determine the direction of the trend and each pip is worth double as in on a standard lot, a pip would be $20 and on a mini, it would be $2. The clear trend for tonight was against the GBP pairs and I love these pairs as you can make tons of points within a minimum time frame.
Here my EUR-GBP position which netted me a total of +40 pips:
Traders who listened to the Trichet statement heard his ultra Hawkish words, as he sees the Euro Zone economy in strong shape, and affected by sub-prime issues a lot less than may have been anticipated.
Traders should maybe listen well to this line; “The growth of bank loans to the domestic private sector has remained robust in recent months, which may suggest that the supply of credit has not been impacted so farâ€
The Markets are divided into two camps; one which believes sub-prime is spreading through Euro-land, and the other which say that Europe will flourish despite US speeding toward recession.
Since Trichet spoke only about Rate Hikes, Spiral Inflation, act pre-emptively (this was the most used phrase), Inflationist pressures and most importantly Euro-zone reaching its potential GDP rate in Q4, a lot of Traders switched camp.
This big shift was easily seen in charts moving higher, and what is as important is Institutional Trade Desk may be realigning their overall positions to Dollar short; the Aussie broke, and the Swissy broke on big volume.
Don’t get this wrong, there isn’t a big Party going on in Europe that the rest of the Globe wasn’t invited to; downside risks still exist, especially when someone as influential as Mr. Trichet says that uncertainly in the Markets are high, and the impact of financial turnover in the real economy is not fully known.
Traders should note that all except one EU Members that has a Free Currency Float increased rates in the last period and still, Trichet warns them about Inflation a couple of times.
Poland, Sweden, Czech Republic and Romania hiked, whilst Hungary cut Interest Rates. All these countries showed in the last months, increasing HICP numbers.
Does this look like a measure to reduce some Inflationist pressures? To us it does, but it’s probably a temporally method only. None the less, we have been Euro Bulls through all of 2007, set our stall out that we are not selling Euros to buy Dollars, and now await the test of 1.5000 and maybe a kiss of the 1.6000 if the Dollar Index breaks 75.00.
What turned out to be a great intraday setup at the start on the AUD-CAD 30 min chart, bombed and trigger my stop loss then continued to its meteoric rise to my projection target. What should have been a 100 pip profit turned out to be a -23 pip loss although the blame can be placed on myself for not following strict in-trade management (due to sleepiness) as price broke the 50-day moving average in which I could have also played the re-trace up given the strength of the Aussie dollar. But hey, you live, you learn. The two horizontal blue trendlines were my profit targets #1 and #2.
In other news, turns out the much anticipated rate cut from the Bank of England turned out to be a non-event with the consensus of leaving the rates unchanged despite looming growth in the housing and financial sector and concentrating on inflation.
On the ECB side and as predicted, no changes to the rates and remains the steady currency it is for the time being.
Everyone has a different situation and must decide for themselves what makes the most financial sense 401k or IRA .BT offers top-of-the-line trading tools
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