Trade Closed: 2008-10-01 08:11
Yesterday was a wacky day in the markets with normal correlations thrown out the window as equities and commodities rallied, but the US Dollar rallied as well against most of the other majors, too. The Greenback actually spike up pretty high, mostly on light holiday volume and as it appears the credit crisis has spread overseas. Traders shifted out of the higher yielding currencies into the US Dollar.
Total: -100 pips/ -1.0% loss
It was a bit frustrating to see the pair turn back lower as soon as it hit my stop, but you just have to shake off those situations and move on to greener pastures, right?
Trade Idea: 2008-09-29 20:44
On the 4 hour chart, we have a nice and simple Fibonacci play in the works as the pair retraces higher. Stochastics are in overbought territory indicating that the short term rally may run out of steam soon. Time to swing lower? Maybe, but let’s look at the fundies first…
As we all probably know, it seems the only fundies that matter lately is the credit crisis and whether or not the US (and possibly the globe) will escape a financial meltdown. Today, the US failed to pass the $700B plan, extending the uncertainty. Traders reacted by selling off carry trades – risk appetites fell through the floor. What now? Back to the drawing board for US officials and we just continue to wait to see if politicians will continue to pander to the uninformed voters who think this is all about just saving Wall Streets’ behind. Also, oil has taken a big hit as it falls $10 today back below $100/barrel – adding to Loonie woes today.
So, why do I like a short play? Do I think we’ll see a stop in de-leveraging, a rise in oil demand, or a flock of buyers back to the housing market? No, I like it because I think that governments and central banks will do what it has to do to restart the credit freeze and save the financial markets. If I’m wrong, then there’s we’ve got a lot more to worry about than a single trade on USD/CAD. Let’s hope the bill passes and works…as well as my trade…
Here’s what I’m going to do: