Closed Open Orders: 2009-12-22 21:30

Oh shucks! As some of my beloved readers pointed out, the bears came out strong and continued to beat down price action. There was no way that price action would retrace back to the .500 Fibonacci retracement level. While it sucks that I missed out on the sharp drop, I'm not too disappointed. There will always be more opportunities to trade in the future. Who knows, maybe I'll be able to jump in next month!

The US dollar continued to reign supreme for the first half of this week as a combination of strong US fundamentals and weak economic reports from other major economies pumped up the greenback's appeal. Just recently, I heard that the UK is still stuck in a recession and New Zealand posted weaker-than-expected economic growth (GDP). The US, on the other hand, has been enjoying upbeat economic reports, particularly its latest existing home sales report. More and more evidence are starting to come out that currency traders are returning to the "traditional" fundamental way of looking at the markets, breaking the tight inverse correlation between equities and the dollar's value seen throughout the majority of 2009. It seems like nobody can do it better than Uncle Sam... for now. The start of the new year could be a different story altogether as the holiday shopping frenzy dies down and trading liquidity returns to the markets.

In the meantime, the holidays are just starting to weigh on me, both literally and figuratively. After a bunch of early Christmas get-togethers, I realized that 'tis the season for weight gain. Yikes! Ironically, I feel that I've been stretching myself too thin with preparing this lavish Christmas feast for my relatives. Speaking of which, I gotta hit the grocery soon! It's true what they say... Christmas becomes a responsibility when you grow older. I don't want to bore you with the details but I'm planning to cook up "Paella" for my relatives. It's a rice dish that originated in Spain, cooked in saffron, various meats and vegetables. Just the sound of it makes me want to cook it now for myself!

Anyway. Toodles! Enjoy the holidays you guys!

Trade Idea: 2009-12-21 21:20

Inspired by Forex Gump's thoughts on the Aussie possibly sinking lower, I'm looking to jump in on an AUDUSD short. Even though the pair has been on a steady rise throughout the year, we've been seeing a lot of USD strength as of late.

These strong USD moves led to last week's break of a neckline of a head and shoulders formation. This rising support line could now act as a resistance point. I'm looking to enter on a retest of the former neckline at around 0.8990. There could also be a lot of selling pressure at this area, as it lines up nicely with the .500 Fibonacci retracement level, as well as a former area of interest. With stochastics showing some upward momentum, there could still be room for price to rise up and hit my desired entry point.

The US dollar has been routing the Aussie for the past couple of weeks. Although the Aussie could possibly stage some rally today since US's economic calendar is report-free, without any economic report due in Australia for the rest of the week, dollar dominance could persist. Position investors would probably continue covering their short dollar positions that they had for the last several months until the year ends.

With that said... G-O D-O-L-L-A-R! Go dollar!

Whew! So here's what I'm going to do:

Short at 0.8990, stop loss at 0.9100, take profit at 0.8820 and 0.8600.