Close Trade: 2009-03-27 06:50
Good morning! With the end of the trading week quickly approaching, and a nice little pop in the Greenback, I have decided to close my trade to avoid any event risk.
Close trade at market (1.3390)
Total: +210 pips/ +0.84% gain
Not a bad way to end the week, and it’s always a good idea to avoid closed market risk, especially with how choppy price action is nowadays. Plus you never know when some official will throw out a comment that will scare traders silly. Hehe!
Trade Update: 2009-03-25 21:15
Good evening! So, I guess US Treasury Secretary Geithner is the man as one comment from him about currencies makes traders go wild! Apparently, the news of the day for the Greenback wasn’t an increase in new home sales or durable goods, but comments from Geithner on People’s Bank of China Governor Zhou Xiaochuan’s call for a new international reserve currency. While he did not read the proposal, he still commented, “we’re actually quite open to that.” This sent the US Dollar falling against the majors – EUR/USD rallied 150 pips 10 minutes after his comments. This brought the market up to my entry orders at 1.3600, where I entered my short position.
I’m in my short position and luckily for long US Dollar holders, Geithner back tracked on his statement by saying, “I think the dollar remains the world’s dominant reserve currency.” and that a “strong dollar” is in “America’s interest.” That stabilized the market a bit, but still leaves us all in a bit of uncertainty of where the next focus will be.
So, I will continue to hold for now on my short euro bias and that the US markets are still considered the safest place – for now.
We have got US gross domestic product and personal consumption expenditure data coming up. Of course, we all expect bad data, but any good news may provide a short term boost to the Greenback and risk tolerance. Stay tuned for updates and adjustments!
Trade Idea: 2009-03-24 10:47
Good morning! What a wild ride it has been in the markets the past week as we not only get the Fed to throw billions at the credit crisis, but now the Treasury is getting in on the action too! The US Treasury unveiled their own plan to unload toxic assets and include private investors in the healing process. This has cause a massive outflow out of the US Dollar and back into commodities and equities as traders take on a bit more risk.
Now here are my questions. Will this bring us out of the global recession? Even if credit did become freely available, will US consumers resume their OVER spending habits of before – especially if millions have been laid off? And if the US doesn’t resume its crazy spending, then how will the rest of the world survive without the US’s appetite to consume their exports?
I’m thinking there isn’t a quick fix to any of these questions, and while the moves from the US government is a great confidence boost, this rally we are experiencing may be short lived as the world’s focus on US Dollar weakness returns to global weakness. And as we shift focus away from recent news, I look for focus to shift to the Eurozone. I believe they are in their own deep recession, their own banking instability issues, and that the ECB may be a bit slow to react with their own interest rate cuts. I think they may eventually cut to spark growth and if they do bring rates down to near zero, then that removes their interest rate advantage for their currency. Basically, I think if the Eurozone can’t find solutions soon, the euro may fall against the US Dollar and test the previous bottom.
On the daily chart, we can see the rally sparked by the Fed’s plan to buy US Treasuries and yesterday’s US Treasury plan. It looks like the rally has stalled within the Fibonacci retracement zone and price action is consolidating at the moment. Stochastics are also indicating that buyers have run out of steam and that we may see a return of sellers.
I look to do a simple fibonacci short play, but because this is on a higher time frame my stop will be large (almost 2 time the daily range) and my targets will be huge as well. I expect to be in this one for quite some time. Here’s what I am going to do:
We do have quite a bit of news this week coming from both the Eurozone and the US. Most notably is German IFO business and CPI data from Eurozone, and durable goods, GDP, and consumer confidence data from the US. This means we may see a bit of volatility in the next few days. Be prepared and trade safe. Stay tuned and good luck!