Update on Sterling Position

Sterling continues to weaken this morning and a quick profit has been realised from yesterday's suggestions.



It appears from the above hourly chart that there was a chance to short the sterling before the price drop when it came close to the EMA of 13 (pink line) resistance level. So, I'll be looking to short again at the next resistance level which currently stands at 1.7410.

Watchlist for March 29, 2006

The dollar erases losses to trade higher after Fed raises rates and signals more to come. Some new arising opportunities:

Potential swing trades:

Short

• EUR vs USD (D1 resistance 1.2060; H4 resistance 1.2010) current 1.1998 (New - 2 hours ago!)
  

• GBP vs USD (D1 resistance 1.7450; H4 resistance 1.7445) current 1.7428 (New - 2 hours ago!)

Since the downward trend are confirmed on both H4 and D1 charts, I am looking to add the above mentioned currency pairs at price pullback. I'll be aiming to sell again at the resistance levels.

US Dollar's Destabilising Factors

The housing data released on Friday provides more evidence of a continuing slowdown in the housing market. The 10.5% drop in new-home sales was indeed the biggest since an identical slide in April 1997 and the overall level of demand was the lowest since May 2003. Some currency strategists wondered whether the dollar's negative reaction was one of the harbingers of a turning point lower for the currency, which rallied some 15 percent against the euro and yen in 2005.

In today's article, David J. Jonsson (the author of Clash of Ideologies - The Making of the Christian and Islamic Worlds) provides some further insights into other various ongoing fundamental issues that could structurally threaten the stability of the US dollar. He briefly touches on the following:

• Uniting of Islamic Interests for Economic Gain
• HRH Prince Alwaleed bin Talal on Economic Impact
• Structural Changes
• Factors Destabilizing the Dollar
• The Future of Oil Trading in Euro - Creation of the Iranian Oil Bourse
• Economic Indicators to Consider
• Anxieties on the Dollar - The Growing Burden of U.S. Financing
• The Role of Net Capital Inflows
• Increasing Exports and Reducing Imports The Real Estate Bubble?
• The China Impact
• Potential Conflict With Iran
• The China Issue
• Ideology Trumps Economics and Military Strength

Read the full article Structural Changes - Destruction Of The U.S. Dollar.

A Quick Assessment

Current outlook:

The dollar headed for its biggest weekly gain against the euro since November.

Bernanke signals additional rate hike. The USD has become dependent on a wide interest rate differential to sustain the US current account deficit.

Technical outlook:


Look familiar? Simple Momentum + Moving Average setup on your technical-chart screen will certainly help you to trade on the right side of the market for the current two weeks.

A longer time-frame chart such as 240-minute is always helpful in removing short-term false signals.

If you uncertain about the direction of the market, better wait till the indicators to develop and lead the way.

FX-Momentum Trading System

I have applied the simple Elder's System in 60- and 240-minute charts and put it on trial. The name of the game is to identify trend reversals in the market. Momentum indicator can warn of dormant strength or weakness in the price well ahead of the turning point. Along with the moving average analysis, I attempt to capture sizeable gains in 1 - 4 days, which is ideal for swing positions.

The result so far for this system, which has been named FX-Momentum, is +227 pips after two closed trades. I still have one open short position on EUR vs JPY.


I intend to pay the semi-annual listing fee for this trading system soon in order to enter more trades. I will price the service first at $50 with a free trial period of 30 days. You can cancel the subscription before you are charged if the system does not perform.

This should be a fun project, I hope.

Weekend Regrouping

Good winners:
13-Mar-06 USD vs CHF 14-Mar-06 1.3163 Sell 1.3026 +137
13-Mar-06 GBP vs USD 14-Mar-06 1.7266 Buy 1.7474 +208

Sore loser:
16-Mar-06 EUR vs USD 16-Mar-06 1.2121 Sell 1.2177 -56

Overall, it has been a good trading week. However, I've made a mistake by going against the market trend on Thursday. Given that my last opinion did suggest myself to at least stay neutral or, even better, to capitalise on the current underlying market strength, I chose to act opposite. This has put myself in a pretty downbeat mood for the rest of the week and not wanting to blog until I've cleared my mind of all this.

Now, i think it's time to regroup...

Dollar Slips Again

The main story for today is:

Data from the Treasury Department (TICS) showed capital inflows into the US rose to 66.0 bln usd in January from a downwardly revised 53.8 bln usd. But the increase is just below that needed to cover a trade deficit of 68.5 bln usd over the month.

[Source: ForexTV]

A slight negative news for the dollar. After the news:

• EUR vs USD traded as high as 1.2061
• GBP vs USD traded as high as 1.7494
• USD vs CHF traded as low as 1.2973
• USD vs JPY traded as low as 117.13

Summing up: The dollar has three consecutive poor sessions despite good job reports on Friday. The tide has indeed turned against the dollar and, I think, will remain so for the rest of the week.

March 14, 2006 Forex Market Recap

Dollar retreats broadly against all other currencies. We actually have good fundamental and technical reasons for the dollar's decline. On the fundamental side, the US current account deficit has widened to a new record. The price action was further fueled by good technical indications on the longer time-frame charts such as the 60-minute and 240-minute.

Below is a technical chart I used to enter my short USD vs CHF trades, which is based on the momentum indicator example given earlier.

Explore Mother Earth First

You will find amazingly wild and beautiful footages of the most extreme and unexplored corners of the world on BBC site.


Play Planet Earth Explorer

A Simple Trading System by Alexander Elder

I always prefer a simple system. And I like to use moving averages. Here's a simple trading system devised by Alexander Elder:

Getting into the market, long or short is based on a combination of Momentum of 14 sessions, and a MA of 13 or 20 sessions.

1. When Momentum crosses the 100 line, is an alert
2. The price, must close below or above the selected MA (this requirement is called first momentum condition filter)
3. When conditions, 1 and 2 are accomplished, we get into the market, long or short.
4. This strategy has been submitted to a big number of test, and it gives very good results, in EUR and GBP charts, in 30 minutes and 1 hour, with a 25 pips for trade.
5. Stops must be placed whenever a condition disappears.

[Source: FXstreet]

Watchlist for March 13, 2006

This week, the dollar's fate will be decided on Tuesday and Wednesday. On Tuesday, the February retail sales report will be released. On Wednesday, the US Treasury's report on portfolio flows (net foreign security purchases) for January. Hence, the dollar could be under pressure. Last Friday, the euro managed to recover from a recent low 1.1860 to close higher at 1.1912 and the euro bull is giving another try this morning too.

Potential swing trades :
Longs:

• EUR vs USD (support 1.1905) current 1.1928 (New - 8 hours ago!)

Shorts

• USD vs CHF (resistance 1.3157) current 1.3150 (New - 4 hours ago!)
• USD vs CAD (support 1.1619) current 1.1600 (New - 8 hours ago!) See chart below.
• GBP vs CHF (support 2.2773) current 2.2726 (20 hours ago)
  

Current Trendwatch :
Ups

• EUR vs GBP (1 day ago)
• EUR vs CHF (2 days ago)
  
• USD vs JPY (2 days ago)
• EUR vs JPY (2 days ago)
• GBP vs JPY (2 days ago)

Downs

• AUS vs USD ( 1 day ago)
• GBP vs USD (5 day ago)

View last watchlist

Be Yourself

The following "Be Yourself" advice was given by Sam Shenker (technical current analyst from FXCM) in the latest trader's corner section which forms part of his routine daily commentary column:

As a trader I have learned never to envy anyone's profits and never to brag about my own. Most common mistake made by novice traders is to pay attention to someone else's profits instead of his or her own P/L and by doing so a trader becomes a danger to him or herself, because if another trader is doing better, that where greed takes over the trader and he or she feels compelled to catch up. As trader tries to match someone else's profits, he or she will start taking unnecessary risks with trades, too much size and overtrading as the most common one's and as number of mistakes mount due to the loss of self-control and trader simply "blows up" the account due to greed and completion. In order to become successful a trader must understand that the only profit and loss he or she must be concerned with are the one in his or her account, not someone else. Someone else's profits should not be a source of envy, because that leads to greed and competition, and that in turn leads to ruin, instead pay attention to your own account and P/L and you will be successful.

REMEMBER A TRADER WHO PAYS ATTENTION TO SOMEONE ELSE'S PROFITS WILL NEVER RECOVER FROM HIS OR HER OWN LOSSES.

A piece of advice which I couldn't agree more. View more of his latest daily FX column. You can follow up his previous postings by using the previous link at the bottom of the page.

BHF Bank End of Week Briefing

Here are good quality reports (by economist Jorg Isselmann, BHF Bank, Germany) which sum up the forex market movements and headlines on a weekly basis.

View Reports

List of Trades (6 Mar - 10 Mar)

10-Mar-06	EUR vs USD	10-Mar-06	11910	buy	11915	5
10-Mar-06	USD vs CHF	10-Mar-06	13138	sell	13168	-30
10-Mar-06	USD vs CHF	10-Mar-06	13226	sell	13168	58
10-Mar-06	USD vs CHF	10-Mar-06	13138	sell	13168	-30
09-Mar-06	EUR vs USD	09-Mar-06	11918	buy	11908	-10
09-Mar-06	USD vs CHF	09-Mar-06	13138	sell	13140	-2
09-Mar-06	USD vs CHF	09-Mar-06	13083	sell	13140	-57
08-Mar-06	GBP vs USD	08-Mar-06	17363	buy	17373	10
08-Mar-06	GBP vs USD	08-Mar-06	17363	buy	17373	10
08-Mar-06	GBP vs USD	08-Mar-06	17363	buy	17373	10
08-Mar-06	EUR vs USD	08-Mar-06	11888	buy	11917	29
08-Mar-06	USD vs CHF	08-Mar-06	13130	sell	13086	44
08-Mar-06	GBP vs USD	08-Mar-06	17363	buy	17363	0
08-Mar-06	EUR vs USD	08-Mar-06	11888	buy	11921	33
07-Mar-06	EUR vs USD	07-Mar-06	11920	buy	11886	-33
07-Mar-06	EUR vs USD	07-Mar-06	11872	buy	11886	15
07-Mar-06	GBP vs USD	07-Mar-06	17375	buy	17362	-13
07-Mar-06	GBP vs USD	07-Mar-06	17400	buy	17362	-38
07-Mar-06	GBP vs USD	07-Mar-06	17440	buy	17362	-78
07-Mar-06	GBP vs USD	07-Mar-06	17491	buy	17362	-129
07-Mar-06	USD vs CHF	07-Mar-06	13140	sell	13132	8
07-Mar-06	EUR vs JPY	07-Mar-06	14129	sell	14076	53
06-Mar-06	GBP vs USD	06-Mar-06	17479	buy	17490	11
06-Mar-06	USD vs CHF	06-Mar-06	12981	buy	13001	20
06-Mar-06	GBP vs USD	06-Mar-06	17541	sell	17490	51
06-Mar-06	USD vs CHF	06-Mar-06	12912	buy	12964	52
06-Mar-06	GBP vs USD	06-Mar-06	17619	sell	17568	51
						39

An interesting week with lots of fundamental developments (see here and here) going on. Just able to scrap for a small profit.

Scanning for Clues

Latest: Dollar Heads for Biggest Weekly Gain Since November on Job Reports!

Last hour preparation prior to the big report, I am just reading the short term techincals on H1 charts.

Simply looking at the price movement for the last 6 hours - the overall picture hasn't really changed much since yesterday as there are only small fluctuations in price term.

However, here is the moving trend for the four majors during past hours:

• EUR vs USD: Edging higher and holding above MA support 1.1900

• GBP vs USD: Edging higher and holding above MA support 1.7355

• USD vs CHF: Unchanged but below MA resistance 1.3150

• USD vs JPY: Edging lower and below MA resistance 1.1840

Is the market poising for a dollar retreat? I can only guess...

Watchlist for March 9, 2006

Swing trading: My trading strategy. As the name implied, I attempt to predict the short term swings in price and am willing to hold positions for more than one day if necessary to allow the price to gather enough momentum in favour of my picked directions.

Watchlist: Starting from today, I intend to startup a simple watchlist (as inspired by Trader Mike) of potential swing candidates for each trading day, simply to perform the task of scanning the market to avoid missing trading opportunities, as well as to act as a reminder not to trade against the prevailing trend.

Potential swing trades :
Longs:

• AUS vs USD (support 0.7334) now at 0.7359 (New - 8 hours ago!)
• EUR vs USD (support 1.1910) now at 1.1921 (New - 12 hours ago!)
  
• USD vs CAD (support 1.1534) now at 1.1565 (3 days ago)
  

Shorts:

• GBP vs JPY (resistance 204.75) now at 204.40 (2 days ago)

Fundamentals Rule

It was a tricky day - to deal or not to deal situation. And I've just decided to close one of my two long euro positions at 1.1920 which I picked up at 1.1872 - near the low of Tuesday.

This allows me to feel more comfortable holding a smaller position overnight when the big news are due out.

First up, it's a decision to be announced by BOJ, will it be a policy shift or no shift? I have to resist the temptation to second-guess the outcome... as I have no confidence holding any of the yen positions.

Then, it's the employment report on Friday... bring it on!

Deal or No Deal

It's a fine line between success and failure. You need to do every move correctly in order to reap the reward at the end of the game.

Watch a suspense video clip of the currently famous game show Deal or No Deal.

An Instinctive Bet?

It was obviously another negative start for the euro this morning fueled by the recent renewed US interest rate forecasts.

The support level of 1.1900 was briefly breached and it is critical to close above this level for a good chance of price rebounding.

So, I will make my long position any minute...now waiting to get a good entry price.

Euro Loses Steam

Here's a H4 chart for tracking the Euro vs Dollar price movement using just moving averages. The market should be in consolidation mode this week, waiting for the release of employment reports on Friday.


I am not in hurry to long the market again although the interest rate outlook has generally improved. For the moment, I think 1.1950 will be a good price to recall my bullish stance.

Koizumi vs. BOJ

Japanese Yen (USD vs JPY) manages to break above 1.1700 level this morning amid ongoing policy-shift debates.

More headlines and quotes:


BOJ governor Fukui:" We are entering an important phase as the situation surrounding the economy and prices is heading toward a favorable direction."

Prime Minister Koizumi:" We can't have a situation where they shift policy, and then have to reverse course should things go wrong.''..."Since the Bank of Japan governor is a wise person, I think he will make a wise decision."

Personally, I think the policy will be adjusted at a meeting on March 9 and not April. Since there is still a lot of uncertainties out there, I will be extra cautious. My strategy will be staying with the current trend and will only enter/buy the market at price support levels .

Stick to Your Trading Plan

American trader and hypnotherapist Robert Krausz argues that 75% of trading depends on your psychology and claims that hypnosis can be used to control your emotional state to maximise your trading performance.

However, he stresses on the importance of having a trading plan at the first place!

Here are the 5 basic tasks necessary to become a winning trader and my personal takes:

1. Develop an analytical methodology
-- For myself, I read fundamental news and run technical analysis

2. Extract a trading plan from this methodology
-- I set up short-term swing trades (1-3 days), always try to pick good entry and exit prices

3. Formulate rules for this plan including money management
-- Take profits while ahead, find the best place to get out on bad trades, not relying on stop loss

4. Back-test the plan over a long period
-- Start trading small positions and allow mistakes

5. Finally, stick to the plan
-- Having confidence and keep practicing till perfect

List of Trades (27 Feb- 3 Mar)

03-Mar-06	USD vs JPY	03-Mar-06	11582	buy	11645	63
02-Mar-06	USD vs JPY	02-Mar-06	11610	buy	11583	-27
02-Mar-06	GBP vs USD	02-Mar-06	17502	buy	17540	39
02-Mar-06	GBP vs USD	02-Mar-06	17441	buy	17505	64
02-Mar-06	EUR vs JPY	02-Mar-06	13842	buy	13894	52
01-Mar-06	GBP vs USD	01-Mar-06	17468	buy	17501	33
01-Mar-06	EUR vs JPY	01-Mar-06	13824	buy	13842	18
01-Mar-06	USD vs JPY	01-Mar-06	11592	buy	11622	30
01-Mar-06	EUR vs JPY	01-Mar-06	13805	buy	13875	70
28-Feb-06	GBP vs USD	28-Feb-06	17401	buy	17542	142
28-Feb-06	USD vs CHF	28-Feb-06	13218	sell	13116	103
28-Feb-06	USD vs CHF	28-Feb-06	13218	sell	13115	104
28-Feb-06	GBP vs USD	28-Feb-06	17401	buy	17545	145
28-Feb-06	GBP vs USD	28-Feb-06	17401	buy	17544	144
27-Feb-06	GBP vs USD	27-Feb-06	17454	buy	17400	-55
27-Feb-06	GBP vs USD	27-Feb-06	17403	buy	17400	-4
27-Feb-06	GBP vs USD	27-Feb-06	17454	buy	17400	-55
27-Feb-06	USD vs CHF	27-Feb-06	13167	sell	13221	-53
27-Feb-06	USD vs CHF	27-Feb-06	13167	sell	13221	-53
						760

Poor start Monday, but eventually ended higher...an extraordinary week perhaps!

Observing Yen

Here are the must-know stories which are going to decide the fate of Yen in the coming days.

Story 1 [via FT]
Story 2 [via Bloomberg]
It appears that BOJ is fairly committed in curbing short-term speculative yen buying. Hence, I will be looking to enter long usd/yen marker if the closing price is continued to be held above 115.80 level.

Euro To Swing Higher? (2)

Alert: Euro traded at 1.2000

Today story belongs to Euro after European Central Bank lifted its forecasts for growth and inflation, indicating a further interest rates hike this year.

I didn't expect the profit to realise so soon as I have just laid down my strategy yesterday. My another eur/jpy trade was also benefited from the gains in euro.

Euro To Swing Higher?

Can you foresee the Euro to trade at 1.23 level in the coming months?


[Read the comment]

Personally, I believe that today market will at least start flirting with the 1.1950 level which I think it's important. And I wish to confirm a breakout on the daily chart which was resulted by yesterday's committed market reaction. The support of this new breakout should be in the 1.1880-1.1900 region. As a short-term trader, I am willing to buy into any weakness in the price action in the next few days, hoping to cash in on the upswing movements.

Strategy: Long entry at 1.1900 - 1.1910 level