Trade Closed: 2009-04-13 15:05
Boo Hoo! My trade was stopped out at the open of trading this week as risk taking sentiment takes center stage once again. My short AUD/USD was stopped out as .7200 was unable to hold and I took the full 1% loss on my trade.
Total: -200 pips/ -1.0% loss
So, I took a small hit this time and new questions to answer…Is the worst of the credit crisis and recession behind us? If so, are traders and institutions ready to pour money back into the markets? Will Australia be ahead of the pack in the recovery or is the US going to get out of trouble first?
Whatever the answers may be, AUD/USD looks to be ahead of the US as AUD/USD is breaking above .7270, we may see further gains from here. Let’s see if resistance turns into support and the market in AUD/USD rallies from here. Stay tuned for new ideas!
Trade Update: 2009-04-08 18:00
Good afternoon! My trade was triggered as the RBA cut rates by 25 basis points and volatility took AUD/USD lower to the .7050. That level has held so far and the market has kept the pair rangebound between .7050 – .7150 this whole week.
There is a mixed sentiment out there when it comes to the comdolls as many believe going long the AUD, NZD, and commodities will be the smart trade when the globe gets out of the recession. That’s probably the correct thesis, but the question is, “when will we get out of the recession and back to growth and demand for commodities?” With job losses continuing across the globe and no slowdown in site for job losses, it may be quite sometime before consumers start consuming again. If we continue to see economic weakness, with all of it’s issues the US markets and the US Dollar may still be the safe haven of choice. Also, we may see further rate cuts, possibly down another 100 basis points, from the RBA. So, no certainty in sight still, but the markets wouldn’t be as interesting if everything was certain and straightforward…right?
So, I will continue to hold and we may see some volatility once again tomorrow as it is the last day before the holiday weekend and we do get employment data from Australia. Forecasts are that the employment rate will move to a five year high of 5.4%. We’ll have to wait and see. If we do see surprise numbers showing that figure or worse, we may see the break out needed for my trade. If better than expected, that consolidation may turn into a breakout to the upside. I’ll just wait and see. Stay tuned!
Trade Idea: 2009-04-06 12:39
It looks like this week is starting off with a return to a reduction of risk as equities fall on concerns that banking losses will exceed those during the Great Depression. This has sparked off a reduction in risk in the currency markets as well as money flows back into the Greenback. We may see further flows to the Greenback from the Aussie as we get into the Reserve Bank of Australia rate decision tomorrow (4/7 4:30 am GMT). Economists are expecting no change, but there is a possibility of a rate cut as Governor Steven’s comments have left the door open. Also, forecasts for global growth in 2009 have left most traders feeling that demand for raw materials and exports will be in less demand from Australia. Short term support may be limited for the Aussie.
I have the daily chart posted above and we have a few technical signals to consider. First, we have a doji candlestick near previous resistance, indicating indecision in the markets as neither buyers nor sellers won the day. Today, we do see a bearish candle, so AUD/USD maybe poised for a reversal. Stochastics are in overbought conditions, indicating that the market may have run out of buyers. It is a bit too early to tell, but stochastics may be turning lower as well. If so, and if stochastics made a lower high as price action made a higher high, then that creates a divergence signaling a reversal as well.
So, I am going to sell if there is a break lower beyond yesterday’s low around .7060. My stop will be a large 200 pips – just a bit more than the daily average true range of around 160 pips. That should be enough breathing room for this longer term trade. Here’s what I’m going to do:
If my trade is triggered and my first profit target is hit, I will close out my trade, adjust stop to break even on the remaining position, and trail my stop by 200 pips.
Stay tuned my friends!