Trade Closed: 2007-08-14 20:50
It looks like risk aversion took over the markets once again as equity markets sell off, carry trades unwind, and traders flock to the Dollar…
After the slight pullback to 1.2085 in our last update, the Greenback rally continued as traders digest the positive US data. Our position stopped out at 1.2120 soon after.
Total: -85 pips
The panic in the markets and risk aversion will likely continue for quite some time to come. Will the Dollar continue to rally? We will see and for now play where the momentum will take us.
Trade Update: 2007-08-14 11:35
US economic data came out positive today this morning with headline PPI at 0.6% vs. 0.1% forecast, Core PPI read at 0.1% vs. 0.2% forecast, and US Trade Balance in at -58.1B vs. -61B forecast.
This was Dollar positive news as it lowers the rate cut expectations many traders are hoping for. The Dollar rallied bringing our position within 5 pips of stopping out before dropping to its current level around 1.2085.
If the USD/CHF can stay above the 240 MA’s we could be seeing a long term trend change taking place and with all of the issues in the financial markets, this may be the case as traders reduce risk and find a safe haven in the Dollar.
For now, the pair is still looking short term overbought, so we will hold onto our trade for now.
Trade Idea: 2007-08-13 23:00
Good Evening! Today’s “Pick” is once again on the USD/CHF. It looks like the pair may resume the longer term down trend, and this week’s inflation data may kick it off!
On the chart, it seems the pair has found resistance at the 240 moving averages and stochastics are showing that the pair may be short term overbought – nice setup for a possible reversal and for the pair to resume the longer term downtrend.
Fundamentally, the Dollar has been rallying as traders flock to the Greenback for a safe haven in the panicked environment sparked by the subprime issues in the US. What’s next for the Greenback? Well, we have US inflation data this week which will be crucial as the next main question on trader’s minds is, “will the Fed lower rates to help avoid financial market meltdown?”
Higher inflation will of course offset any hopes of a rate cuts and with weaker inflation data we may see the Dollar drop. So, this week’s data may be crucial for the Dollar.
For now we will enter USD/CHF short on the basis of an opportunity to jump in the longer term downtrend at a better price. This will hopefully be a longer term trade as we will have a wide stop and a wide profit target. You may have to trade smaller position sizes on this one.
Short USD/CHF at market (1.2035), stop at 1.2120, pt1 1.1950, pt2 at 1.1885
Never risk more than 1% of your account on any single trade. Adjust position sizes accordingly.
Good luck and stay tuned!