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.

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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]