Now that all the holiday seasons are over, we can get back to normal. For a while we are done with dead days in the middle of the week, unpredictable spreads, lousy fills and even lousier service from brokers. We can start loosing money on our own accord, without having an excuse “broker screwed me”. But more seriously, January has a tendency to be a busy month, with large moves and wide daily ranges. Following dreadful 2008, banks, hedge funds and other big money managers will be starting to implement their investment and trading strategies for the year. This means that large pools of money will probably be positioned in assets of choice, maybe planting seeds for bigger, longer trends. What is important about this large market participants is not only that they have buying power but also STAYING power. Once money is committed to a financial instrument or asset class, it might very easily remain there for months and years. Individual traders tend to underestimate the implications of staying power of big players, but this is one of the forces behind massive, long term moves.
This January will have additional event with a potential to influence financial markets- the transition of power in White House. Great degree of unknown about how new president will influence both markets and other policies. Israel for one understands this concept well and is trying to kill as many Arabs as possible now, because after the 20th they might not get a pat on the back any more for doing so, but maybe a kick in the ass. Who knows? At any rate, I expect this month to be volatile.
I’m watching EUR-GBP, with intention of shorting it again.
Two sell orders here, one at 0.9650 targeting 0.9500. One more at 0.9445 with an objective of 0.9310. It is entirely possible for the price to stall within this wide range, in which case I might look for trades with smaller gain potential, but for now I operate on the premise that swings remain large.
Yesterday I wrote about EUR-CAD using daily chart. For my own trading I want to use 4H charts.
Once again, couple of sell orders here, with one presenting special challenges. Currently price is almost at the level where I would like to sell, BUT I really want to see little bounce in price first. If it goes through my sell level right after the open, I will most likely pass on it and wait for the run up in price. Chances are I could miss the boat. Something I’m willing to risk.
AUD-JPY trade outlined in Opportunities is almost 200 pips in the black, and I might close it before it reaches the target. Yen crosses are pausing to some degree, and I simply don’t want to sit on this position if JPY decides to get a little stronger. The way markets open will make me make up my mind. If I’m wrong and exit this trade prematurely, the trade outlined in Scandal is spreading, NZD-JPY should pick up the slack. It is just now reaching entry level. Yes, it very often takes this long when one is using 4H charts. Besides, there is always GBP-JPY where I continue taking long trades on 5M or 15M charts.
So, opening will be important and decide fate of few trades. Plus I’m on a lookout for gap trading opportunities.
It is good to see you are still trading short EUR/GBP. How much farther down can this go, in your opinion?
Andy, for now we still don’t know if we have seen the top. So far there was a small retracement on intermediate term chart. Just because I trade short side doesn’t mean the uptrend is broken. But, for the sake of conversation, let’s just say that downtrend has begun. In this case I’d expect it to go to about 0.87 level for this price swing.
This fighting in Gaza is pushing oil pries higher. Should we expect dollar to get weaker?
Not unless oil goes on a real price run. Conflict is very localized and unless it spreads the impact should be small. While I pay attention to fundamentals, I don’t trade on them. At any given time, who knows which one is the most important?
Mike, do you trade currencies like PLN or HUF? Do you have any opinion about them?
No, I don’t trade them the way I do other crosses. They are too thin to trade on any smaller charts than 4H and then costs of trading are high (spreads). I may take an occasional trade, but those are rare.
[...] Back to normal. | fxmadness.com fxmadness.com/2009/01/04/general/back-to-normal – view page – cached This blog goes where few traders dare – the exciting world of Forex outside the [...]
[...] early 2009 one of the first trades I posted here was a sell in EUR-GBP. Some things just don’t change that much. This time around, though, larger magnitude time [...]