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GreenForexTrading.com
ForeX-tra Gr€€n
Hello Everyone,
In this email I am going to give you my view on the market for the Asian/London sessions in the market for today, spanning Tuesday the 21st to Wednesday the 22nd of September 2010 and the week.
The currency markets have no broken hard with serious USDX selling in response to the FOMC announcing no change to their interest rate policy as expected. They expect inflation to remain subdued for some time and pledged to keep rates low for an extended period. While they didn’t quite announce a new round of quantitative easing (flagrant money printing), they hinted at it pretty strongly and will likely announce a clear program at their next meeting. Adding to the potential volatile moves is the continuing of Asian Bank Holiday's this week that will very likely affect Forex order flows between 17:00 and 23:00 ET each day. The path of least resistance this week no looks to be down for the USDX with support and resistance levels at the open and close of each regional market providing entry/exit points. This is an environment to add to the “Monster Trade” given below.
The “Monster Trade” initiations. I recommended Scaling In BUYS (0.1-0.2 contract at a time) on weakness in the EUR/USD in the 1.310 to 1.320 range but now a deeper pullback is no longer expected with the first “Monster Trade” target of 1.333 close at hand. Some PIPS could be taken off the table here or moving up stops so that the longer term weekly retracements in the 1.351 and 1.388 areas can be aimed for. Expect increased volatility, but positions can still be added at this point all the way down to 1.3040. NOTE: All position trade stops are HARD stops, NOT mental stops. Remember, hard stops for overnight positions, mental stops for day trades.
About Scaling In
“Scaling In” simply means breaking up the initial entry position into multiple parts and deploying them at selected intervals, instead of firing the entire trade magazine all at once. The only reason we might resort to scaling is if we have good reason to believe our expected support zone may have become obsolete.
We usually take an initial position in our expected support zone with a fairly tight stop. Obviously if we get stopped, we were early to the trade. Early is just another word for “wrong.” If stopped, we reassess and adapt to the new market reality. If we were not early, and our position shows us that we are right, then we add to that position once the trade has managed to “prove” itself by advancing out of the support zone box, raising our trailing/trading stop in the process. The two or more portions make up a full position. When we speak of scaling, it means we have become willing to break up the trade entry into two or more parts, with the first part at the very top of the expected support box and the second part within it. Rarely will we ever take a new position outside our expected support box.
ALERT!!! The market became clearer last week. We have a head and shoulder top in the USDX with the neckline being broken earlier in the week and is hanging just under this level now. The confirmed trend of the market for USD is down. With the USD’s closed under our key pivot of 81.5 and now chopping at 80.4 we will look to load up scale in fashion for continuation USDX selling on any possible USDX strength although the strength should be marginal and short lived at this point in time and for the next couple of weeks going forward. We expected more of a Head and Shoulder neckline underside retest, however, a collapse could now ensue without an underside retest, and we must be positioned for that possibility. The USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD. The EUR pairs were expected to be overall weaker than the corresponding correlated GBP pairs however there appears to be rotation of relative strength between the two currencies from day to day. The EUR looks to have stalled right at its declining 50-day moving average. The EUR paused right at this area and a strong break should lead to an accelerated move to a “Monster Trade” target area, as seen in the chart that can be seen here http://www.stockcharts.com/charts/gallery.html?$XEU. In summary, the weekly chart gave a strong retracement to 1.300 with 1.333, 1.351 and 1.388 expected in short order and loading up is recommended as given in the “Monster Trade”. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
While a long bias still exists for the JPY, with intervention in the cards and a break of the daily rising trend-line, be wary of the wash and rinse instead of a fast move in either direction that would normally be expected before the turn. Given that this week is also an Asian Bank holiday week (more on that below). Traders should heed my recommendation to avoid the JPY pairs for the time being. This is seen on the chart given here at http://www.stockcharts.com/charts/gallery.html?$XJY.
Last week the GBP/USD saw a nice support level formed at the 1.5300 level, and reached a key weekly pivot at 1.572 it makes sense to continue to look long on weakness back in the 1.555 - 1.560 levels for the next expected target of 1.600. The GBP as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP, has broken up near the 50 and 200-day moving averages and a longer term PPO buy signal has been triggered.
NOTE: There are few key reports this week and combined with Japanese and Chinese Autumn Festival Bank Holidays for most of the week to Thursday Sept. 23 and so expect low liquidity and irregular volatility. Banks facilitate the majority of foreign exchange volume. When they are closed the market is less liquid and speculators become a more dominant market influence. This can lead to both abnormally low and abnormally high volatility; so if any trades are taken, position size should be lighter than usual. Also note below this week the reports that could factor in some trading sessions going forward. They are:
1. Wed. Sept. 22, 2010 (8:30am EST) CAD Retails Sales.
2. Thurs. Sept. 23, 2010 (3:00-4:00am EST) EU Manufacturing and Service PMI Reports.
3. Fri. Sept. 24, 2010 (8:30am EST) US Core Durable Goods Orders.
The swing trade for today’s Asian-London-U.S. session is to BUY the GBP/USD @ 1.5620 with a STOP @ 1.5485 and a TARGET of 1.5725 for 100 PIPS.
That's it for today. Remember that I trade in the Live Forex Trading Room between 1am-6am Eastern Time. I will be hosting my regular 3-4 hour session and assessing and exploiting PIP opportunities as they arise.
Enjoy trading and good luck everyone!
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