In this e-mail I am going to give you my review for the month past and view on the market for Wednesday the 29th to Thursday the 30th of December.
An update on the Monster Trade.
The “Monster” Trade.NOTE:The AUD keeps grinding higher and with the added firepower of U.S. Dollar weakness could accelerate its climb in the coming weeks while not giving pullbacks to enter our BUY.As given yesterday, an initial entry can be placed at 1.015 and buy points can be added later and can be moved up to now 1.015 and I still recommend scaled in BUYS (0.2 contract at a time) on weakness in the AUD/USD now in the 0.985 to 1.015 range or better with looser stops than usual, around 0.9800 (so explains the very small position size) with expectation to BUY more in scaled-in fashion should the price drop further down to as much as 0.985 you should still be BUYING as it is expected to yield 1000 to 1500 PIPS over the next 2-3 months, maybe even sooner.Again, 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.
Why the “Monster Trade”?Little has changed since the last updates were posted on the 5th December, but what change there has been has increased immediate upside potential in all U.S. Dollar denominated pairs, in particular as the AUD/USD with the notable exception possibly being the GBP/USD as explained below.In the AUD/USD sideways action of recent weeks has served to further unwind the earlier overbought condition.The interpretation of the pattern in the AUD/USD presented in the last update, which was that it is marking out an upwardly skewed bullish "running correction" remains unchanged. All that has happened in the past few weeks is that it has reacted back across the upsloping channel to arrive at support near its rising 50-day moving average. As we can see on the chart this reaction has resulted in a further easing of the medium-term overbought condition as shown by the PPO indicator, which is now neutral on the daily moving up while the weekly is moving towards a BUY signal. The noted convergence of the short-term downtrend channel this month is an indication that the AUD/USD will soon break out of it upside to resume its advance and make new highs. The AUD is seen here,http://www.stockcharts.com/charts/gallery.html?$XAD.
The AUD/USD has started its rise, as the U.S. dollar has started its drop. Our 6-month chart for the USDX shows that this is indeed the case, as the rally of recent days appears to be spluttering beneath the falling 200-day moving average, and with the dollar still overbought on most indicators there is certainly scope for renewed decline. In the absence of more unrest in Europe the QE campaign should work its magic and drive the dollar lower again, reducing the real debt burden of the US - provided that it falls far enough and fast enough of course. The dollar was given a stay of execution last month due to the chaos in Europe, but with the us intent on eroding its value via more rounds of money printing, the outlook is not exactly bright for next year and with the USDX clearly overbought in a downtrend the downside potential is huge....thus the given monster trade.
The USDX is now at the line in the sand with any sustained move above 80.5 that could possibly lead to further strength to the 82 area.The 80.5 area is the key area to watch this week for any signs of a continuation move and further weakness in US Dollar denominated pairs or a reversal that takes hold and will lead to breakouts of many currency pairs after some period of consolidations.We are now in the crux of the holiday season and several fake-out moves can be expected this week and next so position size and stop placement can become an art-form in this environment so caution should you decide to trade this week is advised.That being said, let’s look at the charts.The USDX has carved out a very range bound by the 200-day moving average (DMA) and now 50-day M.A. andlooking for the next major direction for the dollar as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD.
The EUR moved higher into stiff resistance at the 1.3500 level but look for a test of the underside of the 50-day moving average at 1.37 now that another pullback to the 1.31 area has happened.The key 1.442, 1.495 and 1.600 areas are expected to be seen longer term (should Ireland, Portugal and Spain hold it together) but we are neutral in the EUR as seen in the chart here,http://www.stockcharts.com/charts/gallery.html?$XEU.Place your trades accordingly.All charts courtesy of www.stockcharts.com.
On to the Sterling, I had always thought that the US dollar would hyperinflate and collapse before any other major currency. Lately, I am not so sure. Government spending and borrowing in the UK look even worse than the dire levels being reached in the US. Therefore, the dubious distinction of being the first currency to hyperinflate in the months ahead may end up going to the British pound.Recent sterling strength has given way to weakness on Dollar strength.The GBP is now looks to breach the 200-day moving average after maybe a small bounceand PPO daily and weekly SELL signals portend further weakness, as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP.
Traders should continue to use caution should the JPY pairs being neutral also bound by the 50 and 200-day moving averagesand a PPO daily BUY signal against a weekly SELL but moving up still creating a wash and rinse scenario with a slight bullish bias for the time being as seen on the chart given herehttp://www.stockcharts.com/charts/gallery.html?$XJY.
This week is very light on data reports and policy/rate decisions so expect thin trade. They are:
1.Thurs. Dec. 30, 2010 - (8:30am EST) US Unemployment Claims and US; and (10:00am EST) US Pending Home Sales.
2.Fri. Dec. 31, 2010 - Bank Holiday.
The swing trade for today’s Asian-London-U.S. session is to SELL the EUR/USD @ 1.3250 with a STOP @ 1.3280 and a TARGET of 1.3193 for 60 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!
Trade with Mr. GREEN for $49$ for a 1 week trial.Don’t miss out on more PIPS!!!
For those who join with this special, the service costs only $179$/month after the trial expires, unless you cancel the membership.Trades are issued in real time, including exact entries, exits and detailed explanations. The service costs $179 per month. So go to GreenForexTrading.com now and take advantage of this offer.
Mr. Green
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.
In this e-mail I am going to give you my review for the month past and view on the market for Tuesday the 28th to Wednesday the 29th of December.
We have a new Monster Trade.
The “Monster” Trade.NOTE:The AUD keeps grinding higher avoiding our buy points before exploding higher now over 150 PIPS to now 1.015 and I still recommend scaled in BUYS (0.2 contract at a time) on weakness in the AUD/USD now in the 0.985 to 1.015 range or better with looser stops than usual, around 0.9800 (so explains the very small position size) with expectation to BUY more in scaled-in fashion should the price drop further down to as much as 0.985 you should still be BUYING as it is expected to yield 1000 to 1500 PIPS over the next 2-3 months, maybe even sooner.Again, 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.
Why the “Monster Trade”?Little has changed since the last updates were posted on the 5th December, but what change there has been has increased immediate upside potential in all U.S. Dollar denominated pairs, in particular as the AUD/USD with the notable exception possibly being the GBP/USD as explained below.In the AUD/USD sideways action of recent weeks has served to further unwind the earlier overbought condition.The interpretation of the pattern in the AUD/USD presented in the last update, which was that it is marking out an upwardly skewed bullish "running correction" remains unchanged. All that has happened in the past few weeks is that it has reacted back across the upsloping channel to arrive at support near its rising 50-day moving average. As we can see on the chart this reaction has resulted in a further easing of the medium-term overbought condition as shown by the PPO indicator, which is now neutral on the daily moving up while the weekly is moving towards a BUY signal. The noted convergence of the short-term downtrend channel this month is an indication that the AUD/USD will soon break out of it upside to resume its advance and make new highs. The AUD is seen here,http://www.stockcharts.com/charts/gallery.html?$XAD.
If the AUD/USD is set to rise in the near future, it follows that the dollar is probably, although not necessarily, set to drop, so far this has been the case. Our 6-month chart for the USDX shows that this is indeed the case, as the rally of recent days appears to be spluttering beneath the falling 200-day moving average, and with the dollar still overbought on most indicators there is certainly scope for renewed decline. In the absence of more unrest in Europe the QE campaign should work its magic and drive the dollar lower again, reducing the real debt burden of the US - provided that it falls far enough and fast enough of course. The dollar was given a stay of execution last month due to the chaos in Europe, but with the us intent on eroding its value via more rounds of money printing, the outlook is not exactly bright for next year and with the USDX clearly overbought in a downtrend the downside potential is huge....thus the given monster trade.
The USDX is now at the line in the sand with any sustained move above 80.5 that could possibly lead to further strength to the 82 area.The 80.5 area is the key area to watch this week for any signs of a continuation move and further weakness in US Dollar denominated pairs or a reversal that takes hold and will lead to breakouts of many currency pairs after some period of consolidations.We are now in the crux of the holiday season and several fake-out moves can be expected this week and next so position size and stop placement can become an art-form in this environment so caution should you decide to trade this week is advised.That being said, let’s look at the charts.The USDX has carved out a very range bound by the 200-day moving average (DMA) and now 50-day M.A. andlooking for the next major direction for the dollar as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD.
The EUR moved higher into stiff resistance at the 1.3500 level but look for a test of the underside of the 50-day moving average at 1.37 now that another pullback to the 1.31 area has happened.The key 1.442, 1.495 and 1.600 areas are expected to be seen longer term (should Ireland, Portugal and Spain hold it together) but we are neutral with a slight bearish bias in the EUR as seen in the chart here,http://www.stockcharts.com/charts/gallery.html?$XEU.Place your trades accordingly.All charts courtesy of www.stockcharts.com.
On to the Sterling, as last week cable fell modestly against the U.S. Dollar. Was it because of UK bank exposure to Spain, which Moody’s warned could be downgraded or the UK’s close economic link and heavy debt exposure to Ireland, which Moody’s did actually downgrade last week by 5-levels to Baa1, barely above junk status.Does it matter?These downgrades in different corners of Europe have no doubt some impact on Sterling’s weakness, but there is more I believe. It is the growing awareness of the runaway spending and borrowing by the British government. Despite all the rhetoric and promised cuts in spending by the newly elected coalition, the hard fact is that government spending and borrowing continue to soar – and look as if they are spiraling out of control.Convenient accounting that makes deficits appear smaller cannot possibly instill confidence in UK government bondholders.The bottom line is that the UK’s huge deficit is not sustainable. It will lead to ever greater amounts of so-called “quantitative easing” by the Bank of England, and inevitably this money printing – the turning of UK government debt into British pound currency – will sooner or later lead to hyperinflation.
I had always thought that the US dollar would hyperinflate and collapse before any other major currency. Lately, I am not so sure. Government spending and borrowing in the UK look even worse than the dire levels being reached in the US. Therefore, the dubious distinction of being the first currency to hyperinflate in the months ahead may end up going to the British pound.Recent sterling strength has given way to weakness on Dollar strength.The GBP has now breached the 200-day moving average without even a small bounceand PPO daily and weekly SELL signals portend further weakness, as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP.
Traders should continue to use caution should the JPY pairs being neutral also bound by the 50 and 200-day moving averagesand a PPO daily BUY signal against a weekly SELL but moving up still creating a wash and rinse scenario with a slight bullish bias for the time being as seen on the chart given herehttp://www.stockcharts.com/charts/gallery.html?$XJY.
This week is very light on data reports and policy/rate decisions so expect thin trade. They are:
2.Thurs. Dec. 30, 2010 - (8:30am EST) US Unemployment Claims and US; and (10:00am EST) US Pending Home Sales.
3.Fri. Dec. 31, 2010 - Bank Holiday.
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!
Trade with Mr. GREEN for $49$ for a 1 week trial.Don’t miss out on more PIPS!!!
For those who join with this special, the service costs only $179$/month after the trial expires, unless you cancel the membership.Trades are issued in real time, including exact entries, exits and detailed explanations. The service costs $179 per month. So go to GreenForexTrading.com now and take advantage of this offer.
Mr. Green
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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