HLHB Weekly Update – February 19, 2010

PoD Chart

Yipee! I caught a winning signal on my mechanical system this week! In fact, there were a couple of crossovers but the first one was invalidated because the succeeding candle didn’t meet the 30-pip filter. Notice how the EMAs made an upward crossover but the next candle came up short? Thanks to that 30-pip filter, I was shielded from suffering a fake-out. Whew!

When the EMAs made the next crossover, stochastics was heading lower and the succeeding candle now met the 30-pip filter. A trade signal! At this point, I’m up by more than a hundred pips and moving closer to locking in 150 pips on my first profit target. I’m crossing my fingers that this downward movement carries on so that I could keep part of my position open for more pips! Of course, I’ll have to put a trailing stop on my remaining position if that happens.

Speaking of the EURUSD, it seems that the euro zone’s problems are under the spotlight again this week. This time, it’s Italy who has been taking a lot of fire. I read that Italy’s debt problem could be the biggest threat to the economy’s health and of course the euro itself. One of my mentors, Forex Gump, mentioned to me that the nation’s debt currently takes up a quarter of the entire euro zone’s debt! I’m no genius but how the heck will Italy be able to pay a loan as big as that?!? Heck, I’m already having a hard time paying my own credit card dues!

And then, just a several hours ago, we got a big surprise from the Fed when they decided to raise their discount rate to 0.75%. The unexpected move by the Fed gave rise to the speculation that they could hike the federal funds rate earlier than expected. Needless to say, this caused the dollar to rally across the board.

With the euro zone’s current state and the dollar’s recent strength from all the rate hike talk, it looks like the EURUSD is poised for more losses… A chance to short the pair? I’ll just have to see what the market tells me next week!