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"What the caterpillar calls the end, the rest of the world calls a butterfly."


FX Trading – Close but no cigar
The US$ Index tested its old high yesterday.  The heightened bad news concerning the Eurozone banking system had dollar bulls (like us) looking for a breakout in Mr. Greenie.  But, as they say, close but no cigar! 

Traders have poured back into the euro today on news that Germany will spend more of its Treasury to support a union to which it is anchored.  A couple of questions: 1) Does Germany have enough money to really make a difference given the huge EM banking and southern member fiscal exposure?  2) Will this make any taxpaying citizen of Germany happy? 

Today, the market seems to be very happy with the plan….no news yet from German taxpayers. 

EURUSD 240-min: Euro up sharply!

Surprising the faith in more of the same fiscal stimulus these big announcements generate, here and abroad.  The amount of bad debt in the system overwhelms government coffers.  The cold dark reality of debt repudiation is the light at the end of the tunnel in which we stare into, not traction from fiscal and monetary stimulus; we think. 

But the reality is bouts of risk appetite can last as long as believers throw money—multi-day, multi-week, multi-month—who knows.  We don’t! 

One pair that I forgot to mention yesterday is the AUD/CAD. I am actually in this trade right now and have been for a couple days. A few days ago I talked about consolidation in this pair and that I would make a breakout play. My short trade was triggered but we have yet to see any movement. The pair is still range trading but I’m ok because I expect a breakout move sometime soon. I don’t really care if the trade goes against me because I put a stop and reverse on my long entry order so if the pair does decide to sky rocket, I will be stopped out of my short trade and automatically entered long. Let’s just hope the breakout move is a nice one 🙂

As for the USD/CHF and AUD/USD–

The USD/CHF made yet another 20 day high today. I am not going to enter a pair until I see some profit taking and then a continuation of this trend. I am still waiting on this.

The AUD USD did retrace but still has yet to take out its 20 day low. If it does, I will go short on this pair.

There was an Alba breakout but it was in the midst of all the news events. I said yesterday that I would only start looking for trades after 10:00 am EST. Since the breakout occurred during news, I wanted to see if price could break that candle’s (the 9:30 candle) low before entering. This did not end up happening so I stayed out. 2650 seems to be the new support as this is the 2nd time (I think) that the EUR/USD has tested this level after breaking 2700 without going any further.

All in all I’m excited that we saw some movement today and now that I’m on the brink of getting my feet wet I can’t wait to see what happens. Next week should be a good one and I hope you all are getting your trading trigger fingers ready! Have a great weekend everyone!