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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 Sunday the 19th to Monday the 20th of September 2010 and the week.
The currency markets may find it hard to break previous session highs and lows ahead of the FOMC U.S. interest rate decision at 14:15 ET on Tuesday. Adding to the potential sideways moves will be the raft of Asian Bank Holiday's this week that will very likely affect Forex order flows between 17:00 and 23:00 ET each day. In addition, most major currency pairs are at price points that will need an infusion of liquidity if they are to break and hold. For now the path of least resistance this week looks to be holding sideways and testing support and resistance levels at the open and close of each regional market. This is an environment to add to the “Monster Trade” given below.
The “Monster Trade” initiations. I recommend Scaling In BUYS (0.1-0.2 contract at a time) on weakness in the EUR/USD in the 1.295 to 1.300 range with an expectation that 1.287 could be reached and an order to buy could be scaled in with looser stops than usual. This trade is with the EUR/USD now around the 1.304 area and so explains the initial small position size. The target areas are first the daily retracements to the 1.333 area with the longer term weekly retracements in the 1.351 and 1.388 areas. 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 81.2 we will look to load up scale in fashion for continuation USDX selling on possible USDX strength up to 82.0 as the neckline is tested from the underside of the break as a possible strategy going forward. However, should a collapse ensue without an underside retest, we must be positioned for that possibility also. The USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD. The EUR pairs are expected to be overall weaker than the corresponding correlated GBP pairs. The topping action in the USD can also be confirmed against the bottoming action in the EUR as mirror images of each other and the EUR is showing a head and shoulder bottom with its neckline in the 1.292-1.300 area. The EUR paused right at this area and a strong break has started as seen in the chart that can be seen here http://www.stockcharts.com/charts/gallery.html?$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?$XJY.
Last week the GBP/USD saw a nice support level formed at the 1.5300 level, and reached a key weekly pivot at 1.572 it makes sense to continue to look long on weakness back in the 1.550 - 1.555 levels for the next expected target of 1.600. The GBP as seen here, http://www.stockcharts.com/charts/gallery.html?$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 (Tuesday, Sept. 21 to Thursday Sept.23) 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. Tues. Sept. 21, 2010 (7:00am EST) CAD CPI and (2:15pm EST) US Fed Funds Rate.
2. Wed. Sept. 22, 2010 (8:30am EST) CAD Retails Sales.
3. Thurs. Sept. 23, 2010 (3:00-4:00am EST) EU Manufacturing and Service PMI Reports.
4. 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 SELL the GBP/USD @ 1.5678 with a STOP @ 1.5707 and a TARGET of 1.5576 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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Risk Warning! Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Past performance is not indicative of future results. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. All information posted on this website is of our opinion and the opinion of our visitors, and may not reflect current situations and occurrences. Please, use your own good judgment and seek advice from a qualified consultant, before believing and accepting and acting upon any information posted here or on this website.
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