Trade Ideas

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.

Can USD take anymore punishment? Well, in the long term it may have to. As the major central banks look to raise rates in the upcoming year, the Fed is expected to cut rates sometime in 2007, which makes buying into other major currencies much more attractive. In the short term, USD has just taken a nose-dive after Chicago PMI dropped to 49.9 from the previous 53.5. So we may see a range bound day tomorrow up until the US ISM Manufacturing Index number at 10:00 am EST.

Sorry if I seem cynical about last night’s trade in my chart review, but that’s how most of November felt for me. As mentioned in last night’s Pick, I said if the pair can sustain a move above 1.9545 it will move to the R2 at 1.9632. So, the pair shot up

Cable has risen for the ninth day in row against the Greenback, and with the pair touching a monthly high at 1.9549, there may be a great opportunity to short the overbought pair and get into a possible USD correction. If the pair breaks and sustains above the previous monthly high, then we may see the pair rally to the R2 pivot point line.

It looks like I underestimated the correction as the pair rose up to our short entry, but kept on going! The pair finally found resistance around the 116.40 area before dropping as the pair sold off after the quarterly GDP report was released at 2.2%. Looks like a “buy the rumor, sell the fact” trade scenario would explain that event and how the pair rose after a weaker New Home Sales number came out weaker than expected at 1.0M new homes.

Greetings and welcome to my first ever “Currency ‘Cross-Eyed'” post! This post will focus on the lesser know currency crosses, but just because they’re not as widely followed doesn’t mean that there aren’t any opportunities to keep an EYE out for! =)

The theme in recent weeks has been a declining US economy and all of the weak US data have been supporting that. Today was no different in that we saw terrible US Durable Goods and US Consumer numbers come out lower than expected, but we got a mixed from the USD markets. Is it possible that the USD sell off is overextended? I would say maybe so – in the short term. This mixed reaction maybe a signal of a correction before more USD selling continues. With more potentially negative data coming out tomorrow, mainly in the form of US New Home sales, we may see the pair drift higher before taking a dive. So, we will look to short USD/JPY at 115.95 to hopefully catch a continued down move.

It was another “make-no-sense” day in the market as the US Durable Goods number came out WAY worse than expected. Couple weak US data with oil trading above $60 per barrel (stronger commodities usually correlate to a stronger Canadian Dollar) we should have seen this pair drop! But we didn’t and we watched our short trade trigger and reverse within the matter of minutes.