GBP/USD

There are  times when deciding not to trade is the best trade you can make and right now appears to be one of those times. I know, I know, there are a certain number of you guys out there who claim to be very nimble when the market is moving sideways (as it has been over the past 6 weeks or so) but for the vast majority of traders (me included), sideways movement is just too hard to deal with. The problem is that staying on the sidelines is difficult for many to do because they develop a syndrome I call ‘trader’s finger,’ which means your finger gets itchy to push the buy or sell button.

It’s very important to resist the urge to trade just for trading’s sake or because you feel you have to “do something” like earn a certain amount of pips each week.  I haven’t taken a trade since I saw the markets moving sideways weeks ago and I’m feeling better about my decision every day.

I can’t feel comfortable in a trade if I don’t have a clear idea of where the market will be in a few weeks or months and what’s even more important is that I’ve avoided putting myself through the mental anguish of making bad trading decisions and losing money, which I hate to do and which I know is inevitable when markets get choppy.

Basically, I have the same goal in trading that I have when I get in my car, which is to not get into an accident. The way I look at it, as long as I avoid crashing, the odds are a lot higher that I’ll eventually get to my destination.

What’s interesting is that over the past few weeks I’ve seen so many “professional” opinions on Bloomberg or wherever turn out to be totally wrong. Even good ‘ole Marc Faber, one of my favorite people, appears to have gotten things incorrect when he said 2 weeks again that the dollar was set to gain over the next two months or so. Since then, he might be ahead a little bit but what’s more likely is that all the back and forth movement has caused him a lot of aggravation.

Now, Marc Faber is probably one of the world’s great traders but even he looked to be suffering from trader’s finger during his last Bloomberg interview. Back in March when markets were really crashing, he seemed to go out of his way to say that stocks were set to rally-and that turned out to be one of the year’s great calls. He didn’t have quite the same confidence 2 weeks ago however-in fact, it looked more like he was saying something in order to justify being interviewed. After all, it’s hard to get in front of the cameras and advise people to stay on the sidelines!

But when you think about it, why should that be so? I know that I put just as much effort into making a judgment not to trade as I did when I called a 1000 pip short trade on the pound last summer (my “Four Figure Trade” article), or when I went long on GBP/JPY and AUD/JPY in May (see twitter) and made about 900 pips over 4 days, or when I made about 400% on some A$ options (twitter again) between April and May.

Now, what am I looking for that could start a trend? Simple really if you use some logic. Let me ask you a question.

Is it not true that all of the fiscal and monetary policies have been put in place because the economy is in an emergency situation? Of course it is. So then doesn’t it follow that if and when the signs are given that these extraordinary policies can begin to be withdrawn it indicates that conditions are improving and will continue to do so? I would think so. In fact, I was hoping against hope that the G8 might signal just that last week but unfortunately, they did just the opposite when they said that now is not the time to begin withdrawing liquidity. Apparently, they weren’t in a “green shoots’ mood in Italy (although we did learn that Obama has a preference for satin-clad booty…lol).

Likewise, when economists like Paul Krugman are talking about the need for a second stimulus, that doesn’t exactly instill much confidence in me that the economy is set to improve in a meaningful way any time soon. And when I hear Nouriel Roubini talking about unemployment going to 11%, an anemic recovery and the chance of a double dip recession along with housing prices falling another 20%, somehow it just doesn’t put me in the mood to buy and hold for the long term.

In fact, I think that professor Roubini helped put the kibosh on the spring rally, so what we need to see is some data proving his opinions on the economy are wrong (a tall order, I know). So, it would be great to see new unemployment claims fall below 500K per week and for the number of continuing claims to stop making fresh records with each report. Stabilization of housing prices as measured by the S&P/Case-Schiller Home Price Index would be helpful. The ISM’s above 50 would be very significant.

Obviously it’s going to take some time to see these data points materialize but what I’m also going to be looking for are any surprises like Bernanke announcing the Fed was “electronically” printing dollars. Listening to what’s being said at Jackson Hole next month could prove to be valuable.

Also, check the Fed’s H.4.1 report each week, specifically the line regarding the amount of deposits commercial banks are holding at the Fed banks under liabilities. In normal times there’s about $14B or so on deposit being kept there because of reserve requirements but at the height of the crisis banks were hoarding nearly $1T .

All that money sitting at the Fed means  the banks aren’t lending (or doing very little lending). We need to see that trend towards normalization because as the amount on deposit decreases, the velocity of money increases as banks make more and more loans.  The amount kept on deposit decreased to about $625B just before stocks took in March but increased to about $900B during the stress tests, so I would like to see it get at least to that level (and decrease further) again.

Sat, 07th of March, 2009
By Setyo Wibowo (analyst@fxinstructor.com)

GBPUSD Weekly Summary

Compared to last week, we have more significant market movement this week. Here are the facts we had this week:

Opened on Monday (March 02) at 1.4268, the pair only reach high at 1.4303 and closed at 1.4070 on Friday (March 06). The February  “forbidden area” below 1.4050 has been break to the downside, bottomed at 1.3956. Weekly CCI just cross the -100 line down suggesting a potential bearish outlook. On 4h chart we have triangle formation indicating a consolidation, but the bearish scenario in bigger picture should remains intact and the pair is now should be ready to make further downside pressure breaking the triangle to the downside. On fundamental point of view, the global financial crisis show no sign of recovery yet . US stocks market keep falling, sending the Dow Jones Industrial Average to the lowest since 1997 as the recession has deepened and jobless rate hits 25 years high. We know that the Greenback benefits from the risk aversion during the crisis and I see no reason that can change that. Given those facts, I think the Sterling should remains under pressure testing 1.3500 area next week. Short on rallies is still the best strategy. However the market has been volatile enough so be very very patient before jump into the market. That’s all for now, see you guys next week.

Have a great weekend!

Carry Trade Back in Play?
With JPY weakening since the past 2 weeks, Fear of US Recession does not seem to dampened the appetite for Carry Trade.
With AUD/JPY Leading the race.Our Favorite Comm dollar has been on a rampage the past month, This is mainly attributed to the High risk of Inflation The Australian Economy is facing. (more…)

Well, From the Previous Market outlook, everything seems to go as predicted in that outlook.

No Major News Coming out on the 8th of January 2008.

Market went Out “GUNS BLAZING” yesterday after the interest rates statements from ECB and BOE, US Data came out lower but still better than previous month’s drop. All This Weighing down on Cable and EUR/USD.

The Previous Charts i posted is still Valid for Friday, so a move to the downside for Both Cable and Euro is still probable. I’m Leaving that aside for now, and I’m Going to have a look at AUD/USD today. (more…)

Awaiting Interest Rate Decisions

Hi everyone! As the market is awaiting the interest rate decisions on GBP and EUR, we focused during our London session on GBP-based pairs and EURUSD, trying to get a technical direction BEFORE the news announcement.

The picture does not really leave room for many options, apparently. Several indicators and wave formations point towards a possible support in GBPUSD and EURUSD, as well as GBPJPY, support levels that would stand at 1.9473, 1.4580 and 207.21 respectively. A clear break and close below these levels would indicate further down moves in these pairs, as new bearish formations would get confirmed.

To the upside, the EURUSD seems capable of retracing up to 1.47, 1.4750 and 1.4810 during the next sessions, a move confirmed by a close above 1.4670. Personally I lean towards this bullish possibility, as even further dollar gains would have to be sustained by an appropriate pullback before a possible rally down.

Also, on GBPUSD a move above 1.9605 would clearly tip the scales in favor of the bulls in short term, with a possible 1-2-3 formation triggering a long trade.

Looking forward for the interest rate decisions to see which of these scenarios will unfold.

We also examined the USDJPY charts, looking quite bullish on major timeframes – I am planning to take a long starting 106.85. Once this level is reached I would be using any pretext on a small timeframe to go long for a target of 108.20. Stop should be somewhere in the 106.30-106.40 area. Will keep you posted about the progress of this trade, if the entry gets triggered.

Happy trading today, and see you all tomorrow!

Riding the “Post-Interest Rate Decision” Rollercoasters

Hey guys, choppy market action today after yesterday’s interest rate decision – 0.5% cut and more cuts expected, so the headlines read: broad bearishness for the dollar. Which is why we focused on some short-term SHORT setups on EURUSD, GBPUSD At times like this when the market actors agree on a certain scenario (in our case the dollar falling), I’m thinking they will probably be right, but NOT RIGHT AWAY. Remember – the fundamentals are not what they appear…

EURCHF displayed an excellent shorting opportunity (a perfect wave formation backed up by divergences and trendline break) – we went in 1.6103 and closed the position during US session for 71 pips (the trade of the day).

We also took a short GBPJPY – low risk position for a large target – our 30 pips stop got hit by 2 pips and price rallied to our target just after that – better luck next time!

Also, took a short EURUSD on a retracement however the pair went up again in a 3rd test up and we got stopped out for -35.

Overall a positive day, however the effects of rollercoaster rides in the main currency pairs obviously didn’t help our technicals.

We also observed bullish scenarios in EURCAD and bearish on all yen pairs – it was only during US session that the yen started to gain some ground (after the US jobless claims report) .

Let’s see what tomorrow brings – I’m still bearish on EURUSD and GBPUSD, for as long as they don’t break the triple tops on the large charts, in which case I’m expecting a sharp rally up that would put an end to the current correction.

Ahead of the Fed Interest Rate Statement

Today our main point of focus is the Fed interest rate statement, a decision that is far from being clear at this point. The market is getting ready for some action tonight, and breakouts are highly possible in almost all currency pairs.

EURUSD and GBPUSD might get ready to take off on a nice rally (EURUSD heading up to 1.4820 at the time of this writing), however I’m still expecting the moves to cool off starting with the US session open and prices getting back in range. Technicals are pointing towards a possible retracement on the higher timeframes, however any down leg needs to be confirmed by the fundamentals, otherwise we are looking at a continuation up.

In the (for me unlikely) situation that the interest rate favors the dollar short-term, the move down in EURUSD and GBPUSD just after the news could be a good opportunity to re-enter long on the larger bullish trend on these pairs.

Hello everybody!

We started today’s London session with an careful look at GBPUSD and GBPJPY, where the overall sentiment seemed bullish at the time. With the EW picture suggesting both pairs possibly getting out of the minor correction down started on Friday and short-term technicals also confirming reversal (including 200MA signal on 15m) we went LONG on cable @1.9808 on a trendline break confirming a 1-2-3 setup. Stop was placed below the trednline @1.9758. Our target is the possible top of a 5 waves formation up at 1.9915 (where another pullback can be expected).

Also, GBPJPY seemed to continue the large retracement move started last week and so far we have a good support @209.61, a previous resistance and supp. As long as the pair is holding above this level, we are still on a bullish retracement scenario, with initial target @212.10, followed by 214.00 and 217.50.

EURUSD looked like trading in range, and we expect it to continue some range trading until the interest rate decision on Wednesday. No trades on this pair today.

USDCAD has confirmed already a bearish move on Friday, and we are looking for possible entries short.

See you tomorrow!

We started the London session today with a look at GBPUSD and AUDUSD, both pairs were displaying bullish formations (EW / 1-2-3 on several timeframes), with other technicals on 4h and 1D giving further hints of a possible rally up. We were able to identify 2 trading setups for GBPUSD, one of which confirmed later before the cable rally. Also, we identified a bullish setup in GBPJPY just before the breakout, however got stopped out for a few pips (5m and 1m entry, with low risk). EURUSD was perfectly flat at the time. We also analyzed a possible bearish setup on USDCAD based on range breakout and 200MA resistance on 15m (target 1.0140 already hit), but we did not take the position.

Wednesday’s Jan 14th midday analysis -13.00 GMT

EurUsd retraced in the Asian session to the 50% Fibonacci line of yesterday’s down move and finding resistance at the 1.4850 area resumed the move down breaking below 1.4800. Without any surprises as we’ve had recently the pair should continue toward the 1.4700 target zone.

GbpUsd covered over 120 points so far today but failed to move decisively under yesterday’s low at 1.9550; until we see this happening the pair will maintain trading inside the current range between the 1.9550 support and below 1.9670 resistance.