In terms of trading, 2012 was a rough year for me. The year started out well enough, but I eventually crumbled under pressure and ended the year in the red. After a bit of retrospection, I realized that the reason I didn’t do very well was that I didn’t put enough effort in understanding the market. I just kept on jumping into trades too hastily.
So for 2013, I plan to make a “pre-week market analysis” in hopes of making sounder trading decisions. This pre-week market analysis will involve three steps. First, I will look at the fundamental background. Then I will choose two pairs that I could possibly trade. The third step is to analyze the two pairs technically using the trading framework that I use.
My philosophy for 2013 is to trade with the trend. In order to , I’ll be using two Moving Averages–the 200-SMA (Blue) and the 100-SMA (Maroon)–on the one-hour chart. These two moving averages will tell me where the market is generally headed.
Last week, we saw the dollar rally across due to a combination of “good” news from the U.S. First, the U.S. congress was able to agree on a deal to avert the so-called fiscal cliff.
Second, the minutes from the December FOMC meeting showed that committee members were slightly more hawkish than what the market had initially thought. It was revealed that there were actually some members objected to the length of the Fed’s bond-buying program and they wanted it to end before 2014.
Third was the positive U.S. employment report. The NFP report showed that payrolls rose 155,000 in December, which was slightly above the forecast of 150,000. In addition, November’s NFP was upwardly revised.
These three new developments seem to suggest going long on the U.S. dollar could be the market’s choice this week.
Technically, we can see that the pair is below both the 100 and 200 SMAs. This, to me, suggests that the trend is down and the bears are in full control. I’m not sure how low price will go, but with the pair very far from the SMAs, I think we may see a pullback soon. I’m going to keep a close eye on this pair for a potential short on a retracement.
On the other hand, if we look at USD/JPY on the hourly timeframe, we see that the pair is above the SMAs. Using the Fibonacci tool, we see that the pair could soon pullback and test support around the 61.8% Fibonacci retracement level, 100 SMA, and its previous resistance. The setup actually looks pretty similar to the one I spotted last week! I missed the rally on that one, but I’m still not gonna rush and jump in at market.
There ya go folks! What are your thoughts and trade ideas for this week? Share them with me!