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GreenForexTrading.com
ForeX forX-tra Gr€€n
Hi everyone,
In this e-mail I am going to give you my review for the month past and view on the market for the month of October, the week ahead and today, Monday the 4th of October 2010.
The swing trade for today’s Asian-London-U.S. session is to SELL the AUD/USD @ 0.9730 with a STOP @ 0.9755 and a TARGET of 0.9650 for 80 PIPS.
UPDATE ALERT!!! “Monster Trade” The EUR/USD is now expected to make a deeper pullback and all long positions should be CLOSED. Scaling in recommendations will be given in another “Monster Trade” for targets of in the 1.388 and 1.442 areas. Look for more “Monster Trades” soon. The “Monster Trade” is closed. See below:
SEPTEMBER REVIEW: We highlight the “Monster Trade” for September.
Sent in the Daily Trade Newsletter on September 15
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 1.2925 to 1.2975 range with an expectation that 1.283 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 1.296 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…”
Sent in the Weekly Outlook Newsletter on September 27-28
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...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 for longer term weekly retracements in the 1.388 and now 1.442 areas…”
Note: the EUR/USD hit 1.3498 on September 24, 2010; and if traded from the original entry, giving 500 PIPS in two weeks!!! The EUR/USD then went on to hit 1.3640 by the end of September, half the way to the third target.
September was another month of sustained U.S. Dollar selling. If it is unclear in anyone’s mind that the US Fed is in the process of killing the Dollar in order to keep investors from falling into a funk then watch the USDX crash through another support level. That was the summary for the month of September. First it was critical support near 80, and that gave way easily. Then it appeared it might hold 79 for at least a little while after it popped on the approach towards that level, only to give way like a rotten wooden plank taking it down to present levels near 78.
MONTH OF OCTOBER: As we all know the market has a way of making sure the majority of traders miss major turning points. The saying is, "If the market doesn't shake you out, it will wear you out" and it seems we are getting the later...That being said, there is more at work here than just regular market movements. With the light volume in the market we know there is price manipulation and QE (quantitative Easing) which is helping to boost prices and exaggerate market movements. Early last week’s short term break in most currency pairs was most likely triggered by long position squaring caused by better-than-expected U.S. economic reports prior to month-end only to be met by continued Dollar selling. While a bounce in dollar strength is long overdue ominously, there does not appear to be much if anything standing in the way for a fall to 75, where if it takes that out as easily as it has previous “floors”; and if it is heading to 72 then we can expect to be heading for a currency crisis. A bounce is expected though before such a collapse is expected this month. However, ‘overbought’ and ‘oversold’ are relative terms and are meaningless when there is a fundamental driver behind a market’s rise or fall. In the case of the Dollar, once FED governor Dudley signaled last week of his intent to see the Fed engage in another round of QE, the “oversold” status of the Dollar was rendered moot in last Friday’s session. The reason: traders and investors world wide understand that the supply of dollars is going to be increasing at a faster rate than the demand for those dollars. The result is basic economics – a drop in price. As long as the market is convinced that the Fed is going to be engaging in another round of QE, the Dollar is going to fall, not only against the other currencies of the globe, but against the metals, which is why gold and silver prices are rising.
Despite possible occasional positive reports other fundamental indicators, the overall economic situation in US and corresponding US Fed’s policy will hold the USD under pressure. At the same time, the EU problems did not disappear and an argument can be made that the EUR is a bit overvalued and think that GBP is more attractive currency. Nevertheless, if negative data continues to come from US, EUR/USD can run further. I contend that in time the ECB will start talking EUR down.
The U.S. Dollar weakness looks overdone after touching a five-month low against the Euro which looks tired at current price levels, but is not likely to turn bearish longer term until support at 1.3510 is violated. The primary trend is still down for the U.S. Dollar as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD. The all sell the USD signal is back in force with new daily and weekly retrace levels that could be used for points of entry. Longer term a real collapse is expected, but this first week should confirm a bounce with a continuation into a 2-year cycle low by the end of the month. At the moment as stocks are being bid up as bonds and the Dollar are sold off. While I expect this to continue longer term we are ripe for a countertrend bounce in bonds and possibly the dollar and will look at retrace levels to scale in positions. Overall, economic data continues to be abysmal from a strong dollar currency standpoint.
For the EUR, in summary, the weekly chart is set up for a strong retracement to 1.333 expected. The Euro held a test of a minor interim retracement levels so far. The EUR pairs are expected to be overall weaker than the corresponding correlated GBP pairs. The topping action in the USD can also be confirmed against the bottoming action in the EUR as mirror images of each other and the EUR chart can be seen here http://www.stockcharts.com/charts/gallery.html?$XEU. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
The GBP as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP, is hanged up near the 50 and 200-day moving averages and will take a wait and see approach although a bounce is expected it could be fast and be ready to jump on if it moves.
We did not see the Bank of Japan in the Forex markets last week but it might have been a case that traders are still hesitant to take them on at current levels. The Yen backed away from the intervention ceiling on its own last week although it has not moved significantly lower either. It appears stuck in a rut, with Dollar weakness propping it up but intervention fears capping its rise. Interestingly enough, the Yen is FALLING against the Euro which will help with Japanese exports into the euro zone perhaps alleviating somewhat the concerns of the Japanese business community, which were not especially helped after Japan zone data last evening confirms just how fragile the state of the Japanese economy remains. For the JPY while a long bias exists as the 50-day/200-day M.A. are now aligned and are now confirming an uptrend, a break of the daily rising trend-line could lead to a fast down move. Traders should still use caution should the JPY pairs be traded for the time being as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XJY.
On a new currency front, the Aussie made yet another new high and looks like it wants to make a run towards parity with the US dollar. It is rapidly approaching levels last seen prior to the onset of the credit crisis back in 2008. Unlike the Euro, the AUD/USD was able to post a daily closing price reversal top. The sell-off in the U.S. equity markets helped to lead the charge lower. Technically, the Aussie Dollar is trading inside a small range of .9462 to .9733. This makes .9598 to .9566 a retracement zone target. This is really nothing compared to the bigger picture. The longer rally from .8770 to .9733 makes .9251 a potential downside target once the reversal top is confirmed. An up-trending Gann angle at .9290 could slow down the pace of the expected decline. The AUD as seen here, http://www.stockcharts.com/charts/gallery.html?$XAD, is hanged up at recent highs.
WEEK AHEAD: In addition, more US data in the form of 2Q GDP, Weekly Initial Claims, and Chicago PMI that all came out better than their estimates, encouraging long traders to adjust their positions, many traders had been buying the Euro and the Aussie at will in expectation of a new round of quantitative easing by the U.S. Federal Reserve. But based on last week’s data, the Fed may not have to print money as aggressively as previously thought or so the logic goes and the Dollar might soon see some initial buying which could feed into some intense short covering...be advised if heavily long in dollar denominated pairs.
There are many activities and reports that I note this week that will factor in some trading sessions going forward. This week is data heavy and policy heavy so sentiment is key going forward.
Most of this week’s key reports are towards the end of the week. They are:
1. Mon. Oct. 4, 2010 (11:30pm EST) AUD Cash Rate Decision.
2. Tues. Oct. 5, 2010 (4:30am EST) UK Services PMI.
3. Wed. Oct. 6, 2010 (8:15am EST) US ADP Non-farm Employment Change.
4. Thurs. Oct. 7, 2010 (4:30am EST) UK Manufacturing Production and (7:00am EST) UK Official Bank Rate and (8:30am) US Unemployment Claims.
5. Fri. Oct. 8, 2010 (4:30am EST) UK PPI and (7:00am) CAD Employment Change and Unemployment Rate and (8:30am) Non-Farm Employment Change and Unemployment Rate.
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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