Trade Closed: 2009-02-25 09:41

Good morning! Looks like the choppy markets got me today as my trade was stopped out at .6550. There was no follow through on the downside as buyers and sellers battled it out in between for the past week in between .6400 and .6550. Buyers were in control of the Aussie as risk tolerance grew as equities rallied yesterday. Also, there is speculation that Australia may have had growth in the fourth quarter which is another bonus for the Aussie in the short term.

Total: -100 pips/ -1.0%

So, I took a small hit to my account this morning. I probably should have taken this trade off the table a bit earlier, but I'm the strong US Dollar sentiment had me hold onto this one on hope the fundies will kick in on my trade.

One more thing to point out before I end today's post is that I am starting to notice a possible change in correlations across the major currency pairs. During the initial stages of the financial crisis, and even before that, we saw currency pairs rise and fall in tandem in what to is referred as "risk tolerance" and "risk aversion" moves. If market players felt like taking on risk, they would buy high-yielding currencies and sell low-yielding currencies, and vice versa. Today, interest rate differentials are different than just a few months ago, plus it seems like we may have gotten past most of the deleveraging. The environment is different, correlations may be changing, and it may be time shift strategies for this new environment. Will the choppiness continue? When and if confidence returns, will we see a flood of money into riskier assets? Who knows. All I can say is that in this, and every environment, be focused and be flexible. :)

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Trade Update: 2009-02-23 07:55

Good Morning and welcome to a new week of Forex trading! My short position in AUD/USD was triggered last week and it's been a pretty wild ride since then as the pair dropped to within 10 pips of my first profit target before rallying higher.

The rally came after expectations of the US government possibly taking significant holdings of major banks boosted confidence and risk taking. Along with strength in gold, Aussie found support, but luckily sellers took control just a few pips below my stop out level at .6550. Whew!!

I will continue to hold my position as the long term term continues to point downward, and I feel the Greenback now seems to have the bias as the "safe haven" currency status, especially as the Japanese Yen continues to weaken across the board. Stay tuned!\\

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Trade Idea: 2009-02-18 23:46

Hello Forex Friends! There's a nice Fibonacci setup forming on the one hour chart for AUD/USD. Time to short again?

It's the usual setup as we see a retracement during a downward move on the one hour chart. I used the Fibonacci tool to find potential reversal points, where sellers may jump back into the trend lower. Stochastics are indicating the pair may be overbought in the short term and that bulls may be running out of steam.

Fundamentally, we are past the anticipation of the new stimulus package in the US, and the details, or lack there of, were a disappointment to traders last week and possibly in the near future as we probably will not see any positive affects from it for quite some time. There is still sentiment that things will continue to get worse as housing and jobs data continue to disappoint. This may prove profitable to 'risk aversion' type trades.

Later, we may see some volatility in the US session as Producer Price Index (PPI), unemployment claims, and Philly Fed data will be released. This volatility may give me a better price to jump in short, and I look to do that at the 38% Fibonacci are on the chart. Here's what I'm going to do:

Short AUD/USD at .6450, stop at .6550, pt1 at .6350, pt2 at .6250 (previous swing lows)

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly.

Stay tuned my friends! :)