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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 26th to Monday the 27th of September 2010 and the week.
ALERT!!! “Monster Trade” With the EUR/USD now at 1.3495 I recommended ALL BUYS ON HOLD...RING THE CASH REGISTER AND/OR TIGHTEN UP STOPS. Scaling In BUYS (0.1-0.2 contract at a time) on weakness in the EUR/USD in the 1.315 to 1.333 range as now a deeper pullback is expected with the first “Monster Trade” targets of 1.333 and 1.351 (close enough at 1.3498) HIT. Some PIPS could be taken off the table here or moving up stops Longer term weekly retracements in the 1.388 and now 1.442 areas can be aimed for when adding or positioning on weakness. 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!!! A DOLLAR COLLAPSE IS NOW EXPECTED OVER THE NEXT 2-3 MONTHS...ULTIMATE USDX TARGET IS 71 BY NOVEMBER. Position yourself accordingly, although a deeper retracement is expected soon given that this week is month-end. The currency markets have broken hard with serious continued 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” (what a joke!) 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. It's been my position for a while that the U.S. government monetary policy would eventually create a currency crisis in the world’s reserve currency. There were three conditions that had to be met before I was willing to call the beginning of the end. The first condition was for the dollar (USDX) to move below 81.5. That was the warning shot that problems were developing and confirmed by a head and shoulder top on the daily charts. The second and third conditions were a move below long term support (80) and a failed intermediate cycle and accelerating into a 4 year cycle low due in the October - November time frame (Note: there is another multi-year cycle low due in the spring of next year...but that is another story). The drop below 80 last week has now completed the final two conditions.
The sinking Dollar is even negating the massive intervention efforts of the Bank of Japan to curtail its rise. Last Friday there was a bizarre event with the Yen which suffered a massive drop in price in less than 3 minutes, leading to rumors that the BOJ had come back into the Forex markets and sold yen. When “word on the street” was not confirmed by the finance ministers, the JPY wasted no time and was bid right back up again completely erasing the losses and even adding more on to it just to add insult the BOJ efforts.
The confirmed trend of the market for USD is down. With the USD’s closed under our another key pivot of 80.0 and now chopping at 79.4 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 is now underway 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?$USD. The EUR pairs were expected to be overall weaker than the corresponding correlated GBP pairs however there appears to be rotation of relative strength between the two currencies from day to day. The EUR is now at key weekly and monthly pivot resistance and further longs are cautioned at this point, as gravitation back to the declining 50-day moving average is expected before the advance is expected to resume, as seen in the chart that can be seen here http://www.stockcharts.com/charts/gallery.html?$XEU. In summary, the weekly chart gave a strong retracement to 1.300, 1.333 and 1.351. Now 1.388 and 1.442 are expected after some pullback 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.
The yen is becoming a serious political issue in Japan with politicians facing increasing pressure from their constituent businesses for the government to take action to force a drop in the currency. As it now stands, the rising yen is crushing what little is left of the Japanese economy and is eliciting howls of protest from leading Japanese exporters who are furious over what is happening to their market share. The comments are all almost unanimous from the heads of business: “We are mired in a deflation and our economy is stagnant and there is no reason for the Yen to be rising so sharply. Speculators are leading the nation to ruin and the Bank of Japan must act now”. I expect we are going to see them do just that as soon as this week. If they do not, the market has called their bluff and their reputation will be ruined seeing that they have made repeated statements that they intend to hold the line on the yen. Quite frankly, I am amazed at the boldness of the hedge fund crowd which continues to defy their intentions. Then again, maybe Chinese buying of Japanese bonds is too large for the Bank of Japan to deal with. I am not sure but after watching these Forex markets for years, I will be shocked if the BOJ does not foray forth and give the new JPY longs a severe butt whipping. If they do not, and the JPY takes out its recent high, the BOJ will be finished as an intervening market force.
The problem that they face is that the Fed is attempting to outdo them in ruining currencies and has printed trillions into existence. That is a lot of Dollar supply. The BOJ will simply have to print more than the Fed. 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. 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?$XJY.
The GBP/USD saw a nice support level formed at the 1.5300 level, and reached a key weekly pivot at 1.572, retraced somewhat and continued to 1.584. A more significant retrace is expected and longer term; it makes sense to continue to look long on weakness back in the 1.557 - 1.562 levels for the next expected targets of 1.600, 1.622 and 1.642. The GBP as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP, has broken up near the 50 and 200-day moving averages and a longer term PPO buy signal has been triggered.
Most of this week’s key reports are towards the end of the week. They are:
1. Tues. Sept. 28, 2010 (4:30am EST) UK Current Account and (10:00am EST) US Consumer Confidence.
2. Wed. Sept. 29, 2010 (5:30am EST) CHF KOF Economic Barometer.
3. Thurs. Sept. 30, 2010 (2:00am EST) UK HPI and (8:30am EST) CAD GDP; US Unemployment Claims and GDP.
4. Fri. Oct. 1, 2010 (3:15am EST) CHF Retail Sales and (4:30am EST) UK Manufacturing PMI and (10:00am) US ISM Manufacturing PMI.
There is no swing trade for today’s Asian-London-U.S. session.
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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