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Trade Closed: 2010-01-07 21:03

PoD Chart

Ouch! No thanks to the stellar Australian retail sales result that was just released and yesterday’s Fed’s meeting minutes, I’ll start 2010 with a small hit on my account.

Like Pip Diddy said in his roundup, the meeting minutes showed that the Fed heads were still unsure when they would hike rates and begin to withdraw economic stimulus. This was certainly a far cry from last month, when people were speculating that the Fed could hike rates earlier than expected.

Meanwhile, the Australian retail sales report, which was expected to show only a 0.4% gain, came out with a 1.4% increase instead! Needless to say, both reports caused the falling trend line resistance to break, hitting my stop in the process.

1st half: -121 pips
2nd half: -121 pips
Total: -1.00% loss

Trade Idea: 2010-01-05 22:09:58

PoD Chart

The last couple of weeks, we’ve seen commodities go on a mad run against the dollar. The rally was fueled by a return of risk appetite in higher yielding assets, with the Aussie dollar benefiting from a sharp rise in gold trading. Yesterday, the pair seemed poised to make new highs, but gave up its gains during the latter part of the US session. Could this be a sign that buyers are exhausted? After all, the pair has moved more than its weekly ATR already. Could we be in line for a mid-week reversal?

On the economic front, we’ve got employment data coming out from the US, starting with the ADP report tonight. Early estimations indicate that job losses will dip from 169,000 to 74,000 for the month of December. In addition, the ISM non-manufacturing PMI report will also be released. The index is expected to surpass the 50.0 mark, indicating that the services industry is expanding. Given how the markets reacted to the positive news releases the past couple of weeks, this could provide the support the dollar needs to regain its recent losses.

From a technical perspective, I also have a downside bias on the pair. After weeks and weeks of waiting, the AUDUSD has finally risen up to retest the falling trend line all the way from November. Remember, tomorrow is a Wednesday and a mid-week reversal might be in the cards. Also, with stochastics at overbought territory, I believe there is a high chance that the pair could swing lower to my profit targets.

So, based on my fundamental and technical view, I’ll be shorting the AUDUSD. I placed my stop 120 pips away, roughly equal to the pair’s daily ATR, above the falling trend line and previous high. My first target is set at 0.9000 since this level served as the broken neckline of the recent head and shoulders formation. My second target is set at 0.8750.

Short AUDUSD at market (0.9134), stop at 0.9255, pt1 at 0.9000, pt2 at 0.8750.

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

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