Last Thursday I wrote about a long signal in the CADCHF, at that time, it was trading in a very clear bullish condition.
When I looked at the short term charts it was trading in a clear range: which means clear S&R levels and clear swings.
So I thought it was a good idea to trade a breakout of the short term range… usually setups like this one work pretty well…
When my trade got triggered, everything was fine… it traded for a while in a very tight range pretty close to my entry level.
Then something happened…
Hey trader, hope you are cashing in pips so far this week…
I’ve got a signal to go long on the EURGBP, but before I get into the details, let me talk to you a little bit about a post I did last week.
Last week I wrote about the EURUSD, I thought it was in a bullish condition and it seemed like a good idea to go long.
Just after I published my analysis I received a few emails telling me: if I wasn’t aware of “things” in Europe, how could I recommend going long, it is going to fall like a rock, etc.
You see, I don’t trade the “why”, in fact, for me, I believe that the fundamentals are not important (for trading). Of course I keep track of them, but I never use them to take trading decisions.
There is one principle in Technical Analysis, which is: all information available in the market is reflected in price (included information about fundamentals). Ok?
By the way… the EURUSD did go up:
I have a trade open, and will definitely think it twice before opening a new one. Why?
Take a look at some of the announcements left for the rest of the week:
NZD Interest rate
AUD Employment change
GBP Interest rate
CAD interest rate
USD Non-farm payrolls report
CAD Employment change
So be careful alright… you never know what could happen and how the market will react.
Have in mind what happened last week with Bernanke’s speech, it change the market sentiment in more than one currency pair.
I don’t know about you, but I don’t see many pairs trading in a clear market condition, for instance, today I only trading about 3 or 4 today, on the others, I have no clue of what the market is likely to do.
Might be that this week we have a zillion important fundamental announcements, amongst the most important are:
- AUD: Trade balance and interest rate announcement
- GBP: Construction PMI
- EUR: Trichet speaks
- USD: Bernanke speaks
- GBP: Current account and PMI Services
- USD: ADP Non-farm employment change
- GBP: Interest rate
- EUR: Interest rate
- JPY: Interest rate
- CAD: Ivey PMI
- JPY: BOJ press conference
- CAD: Employment change
- USD: Non-farm payrolls
So be careful this week, will you?
This week isn’t full of fundamental announcements, but we got the most important of them all: US interest rate announcement. Last time it was announced, the market went wild, not because there was any change on the interest rates, but because the statement that comes along with it. Traders and investors have been focusing on this statement in the last months, so you need to be careful.
- EUR – German ZEW Index
- NZD – Current account
- GBP – Meeting minutes
- CAD – Core CPI
- USD – Interest rate and FOMC Statement
- NZD – GDP
Hope you all had a nice and relaxing weekend!
These are the most important fundamental announcements of the week:
- GBP – Claimant Count Change (similar to unemployment claims)
- USD – Core retail sales
- NZD – Interest rate
- CHF – Interest rate and SNB Press Conference
- GBP – Retail sales
- USD – core CPI
Be aware of them alright?
This is the list of what I think are the most important announcements this week. Remember every fundamental announcement (even the ones not included on this list) have the potential to have great impact in the market!
- US and CAN banks are closed, so don’t expect much movement today, not enough liquidity!
- The most important announcement today is the AUD interest rate announcement (no change expected).
- US Non-Manufacturing PMI
- JPY interest rate announcement (no change expected)
- GBP Manufacturing production
- CAD interest rate announcement (no change expected)
- AUD Employment change
- EUR and GBP interest rate announcements (no change expected)
- US Trade Balance
Remember CAD and GBP are the currencies that react the most to their fundamental announcements.
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As a result of the US debt rating downgrade from AAA to AA+ (last Friday), we started the week with a gap. By the way, we saw exactly the opposite of what should have happened. On Monday, investors instead of getting rid of US bonds, etc (selling them) they ended up buying more, as if the US debt rating went from AAA to AAAA (there is no AAAA debt rating though). This is the probe sometimes fundamentals are not in line with market movements, I’ve seen this over and over again in the last year or so… So if you are still trading on fundamentals, give it some thought, alright?
Anyway, Monday and early Tuesday was perfect for Forex traders, the market swings were smooth and clear, and what’s better, I was able to profit from them. I took two trades, I got stopped out on one of them around the breakeven level (if I didn’t move my SL level it would had hit my take profit order) and the other one hit my TP order. So I’m up about 3% for the week.
Then on Tuesday, everything changed… the US interest rate was released (there was no change, still at 0.25%). But what was important about the announcement was what they mentioned about the interest rates for the coming years: they will hold interest rates this low for at least 2 more years. What they are really trying to say is this:
Hey, we (the FED) expect the economy to remain sluggish at least for the next two years. Don’t be surprised if you see continued high unemployment, low domestic economy growth (or even stall), etc.
And how did the Forex market react to this? Large and undefined (and difficult to trade) swings on most currency pairs and crosses. From Tuesday to Friday most currencies traded on a undefined range, being very difficult to trade them (at least with consistent results), so guess what, I stayed away from the market since then.
But I think things will clear up next week, the market cant trade on undefined ranges for ever, sooner or later we are going to see breakouts of these ranges, and we need to be there, we need to be able to profit from them, and this could happen the week ahead.
Let me know what you think!
Have a good weekend!
Today I’ve read two articles about the Swiss National Bank concerns about the CHF appreciation:
First one: “Switzerland’s central bank said yesterday it will increase the supply of francs to fight the currency’s massive overvaluation.”
So they are using the exact same strategy the Bank of Japan does, the question here is, will it be as unsuccessful as the one used by the BOJ? I think it will. A currency pair goes up or down based on the supply/demand for it, if it is going up these days its probably because traders and investors see the CHF as a safe haven, as a reserve currency, and whatever the monetary instrument they use to stop the overvaluation, sooner or later the market will correct and continue in the direction of its sentiment (which right now is CHF bullish), that’s exactly the market job.
The second one: “some economists have said the franc’s surge toward euro parity is adding pressure on the SNB to consider a peg for the first time since the Bretton Woods currency system was abandoned in 1973.”
Now, this one could stop the massive overvaluation (still they will need to intervene), but it would be very drastic measure. With this announcement, they are following again the BOJ steps, I think they were just trying to “influence” investors, and see if they could stop them from getting CHF instruments.
This is just my opinion, only time will tell what destiny has for the CHF.
The decision of holding your trades during important fundamentals releases its always tough, you never know what could happen. I definitely feel more comfortable once the market has already moved on my favor and in order to hold my trade, I need to have nothing at risk on such trade, for instance moving your stop loss to the breakeven level. But you need to remember that you still need to give the market some room so you don’t get stopped out during normal market swings.
So if it is too close to my entry SL level I just close it. However, if the market has moved on my favor, my SL is at least at the breakeven level and has enough room from my SL to the current market action, I hold my trade.
This was the case of the GBPCAD trade I took yesterday, I moved my SL since yesterday and had enough room to hold my trade during the non-farm payrolls report. It came out a little better than expected and the market didn’t take a big hit, which was good for my trade (finally hit my TP order).
Now, about the non-farm payrolls report, have you noticed that the market has not been getting a lot of impact from this announcement lately? I have… And its good! What do you think?
Have a great weekend!