Trade Ideas

I don’t currently have a trade idea for Currency Cross-Eyed at the moment, but here is a great looking chart for all of you range players out there. Check out the chart and you can see AUD/JPY at the top of the channel drawn on the daily. Usually, I only go long on pairs that have a positive carry, but with the pair at top of the channel and Stochastics in overbought territory, we may have a great short opportunity on our hands.

I was expecting a higher number than expected, but today’s headline US Retail sales number for November came out at a whopping 1.0% higher, and the core number came out at 1.1% (For a more indepth analysis of today’s reports check out ). Pretty crazy!!!

Today’s trade will focus on US retail sales at 8:30 am EST, but before that we will take a look on how yesterday’s reports may affect today’s trade.

First, we saw a surprise as the US Trade Balance number was reported at -58.87 bln versus the consensus of -63.0 bln. We haven’t seen a figure that low since August 2005, and it is consistent with the uptrend in the past few reports.

We have so many different themes in the market – from the US economy, US pressure on China’s currency, rising commodity prices, etc – that many possible trade opportunities exist out there. But we do have the FOMC rate decision tomorrow at 2:15 pm EST, and we should see a muted trading environment as the market waits for the Fed’s outlook on inflation, the economy and future interest rate moves.

Today was a wild ride wasn’t it?? It was like those old FX days of crazy volatility that we haven’t seen much of lately. NFP came out pretty much in line with consensus, but there was a downward revision of Oct number to 79K from 92K. So, we saw some volatility after the NFP reports, but the mother of all moves came after US Treasury Secretary Paulson commented on how a “strong dollar” is in the best interest of the US, and how today’s reports was good news for the US economy.

Update: 10:37 am EST

Our short trade was triggered at 1.3350 and we hit pt1 for +40 pips….Holla! I closed out my position because this retracement may not move much further, but for those of you still in the trade I would adjust your stops to breakeven or close your position at your discretion.

We’ve had a good run with this position, but it has been stagnant for the past few days and we have potential market market volatility with the NFP report coming ahead. It’s time to take profits and look towards the next trade opportunity. At the current market price of 1.5895, we will close remaining lots for a 30 pip profit.

We have the monster of all reports tomorrow in the US Non-Farm Payrolls! For this report, I usually wait until the number is released and guage the market reaction looking to fade the move, so that’s what we will do tomorrow.

No surprise today as the European Central Bank followed market expectations by raising interest rates from 3.25% to 3.50%. We saw minor volatility afterwards as the pair moved in between a 40 pip range even. With the Eurozone’s strong economy and analysts expectations of a strong US jobs number tomorrow, EUR/USD will probably stay range bound for the rest of day as traders are uncertain of direction. So, no trade for today and we will get ready and focus for the US Non-Farm Payrolls report tomorrow at 8:30 am EST.

Just a quick update on our Cross-Eyed trade. At the moment we are currently 35 to 40 pips positive and the market is consolidating as traders are patiently waiting for the ECB interest rate statement set to be released at 7:45 am EST. We will keep our stop at 1.5925, but remove the new order to add another lot short at 1.5910. We have event risk and I do not want to take on unnecessary risk by adding another lot.

No “Pick of the Day” for the Euro trading session tonight as traders wait in anticipation for the Bank of England and European Central Bank interest rate decisions tomorrow.

We will focus mainly on the ECB’s decision and Trichet’s statement tomorrow morning, after which we will trade based on the market reaction of the widely expected raise from 3.25% to 3.5%. The key to tomorrow’s movement is whether or not Trichet will use a less hawkish tone, and the future projections of Eurozone growth and inflation will be closely watched as well.

The UK Industrial and manufacturing sector numbers came out worse that expected, after which Cable dropped as the manufacturing sector may have a negative impact on fourth quarter GDP. Our trade was triggered and we had hoped to play a range strategy. Unfortunately, the market dipped low enough to trigger our stop loss right before the pair shot back up, which eventually shot back up to hit pt1

It looks like our trade went further into profitability before reversing near the previoius low at 1.5860. We took profit on one lot for +30 pips, and we are still in the trade with one more lot. I think we will continue to see a move higher the closer we get to the ECB interest rate statement, which may be a good opportunity to add another lot short and adjust our stop loss as we may see a “buy the rumor, sell the fact” trade scenario.

In the next couple of trading sessions, traders are expecting a range bound market as there aren’t any significant economic reports to be released until the interest rate statements from the BOE and ECB, and the US Non-Farm Payroll release on Friday. We do have a couple of reports out of the UK that may be significant – Industrial Production and Manufacturing Production – both of which are released at 4:30 am EST.

I guess because of the new site and my ability to post trade updates on the site, I got a little crazy with today’s “Pick of the Day.” My analysis of the current market environment led me to believe that we would see a further drop as I expected a drop in the ISM service sector number.

I was away from my computer at the release of the ISM Non-Manufacturing Index number, which happened to come out better than expected at 58.9. 58.9!!! Great for Dollar bulls, but unfortunately not so good for my pick of the day. So, I wasn’t able to close the trade out right after the release and it looks like we took the full loss when the pair stopped out.

Good job for those of you who got in the new trade, or added on to the original as the market price made a move lower after hitting the weekly trend line once again. The pair is currently finding support at the 38% fib retracement line, so I think it’s time we take some profit off of the table.

After reaching our profit target area, EUR/CHF shot back up and found resistance at the weekly trendline and 61% Fibonacci retracement line. I like another short trade in this area, especially after the overextend rally in the Euro against the Dollar and Yen. A retracement against these currencies may also translate to a retracement against the Swissy.

It looks like we got off to a good start for the month of December as we won our first trade. We used a different position management technique on this trade. We shorted one lot instead of the usual two and incorporated a wider stop loss level. This new trade style helped us weather a correction in USD/JPY before it dropped again after the weak ISM Manufacturing Index number at 10:00 am EST on Friday, and we managed to hit pt2 for +60 pips!

Update 11/30/2006 11:35pm EST

Our trade idea from below has triggered at 1.5900 and pt1 was almost cleared at 1.5860. We may be helped with German and Eurozone Manufacturing PMI at 3:55 am EST and Eurozone Unemplyment rate at 5:00 am EST. Keep an eye out for those reports for any weakness should help push our trade on to further profitability.