Markets have been exposed to some important fundamental developments of late. Many of them have been contradicting, even if coming from sources that should be deemed “reliable”. Just yesterday and today we had a rush of just such news. Biggest one must have been statement by Ben Bernanke, claiming that “recession is probably over”. If it is so, then where is the recovery? Today, Organization for Economic Cooperation and Development, reported that by its estimates, unemployment will continue to get worse for at least another year, putting big question mark on FED Chairman declaration. In fact, the industrialized world, will collectively experience the highest unemployment rate since WW2, surpassing even the highs of economic miasma of the 1970′s.

The issue of China and US debt is also subject of almost daily commentaries, articles, statements and breaking news. On one hand we learn how China diversifies its holdings by dumping dollars for seemingly anything else. Next day we hear that they increase their holdings of US Treasuries. That is the case today. Treasury Department made public auction numbers for July. Turns out that while foreign purchases of our debt have dropped comparing to June, China has actually increased her holdings by about $25 Billion. So, which is it- are they buying treasuries or selling them? Diversifying or consolidating?

And then, of course, is everything regarding the Yen. Since new coalition won the election, upsetting existing balance of power, JPY has been enjoying steady increase in value. Incoming finance minister, Hirohisa Fujii, claims he is not in support of weak Yen. Earlier today he stated that his team was opposed to interventions as long as currencies were not moving too much. Current market flactuations are not swift enough to warrant BoJ involvement. So, Yen gets a blessing to move higher, and responds by… falling. JPY slid over 100 pips against USD, 200 pips against GBP and so on. Ah, the beauty of fundamental trading.

Trading charts, or technical analysis, is not always that much clearer. Different charts, time frames, of the same instrument often give contradicting signals also. And as price develops with time, charts often change within few bars from bullish to bearish, or the other way around. Bottom line is, trading an art, to a degree, and one has to able to adopt to changing conditions. This can be done by adjusting parameters of a trade, closing it or walking away from it. Market is dynamic and our thinking should be as well.

My NZD-CAD trade from yesterday didn’t happen. Price came within a pip to my entry, but didn’t get filled. Lucky for once. Cross moved higher, almost touching previous high. I sold it at 0.7620. At this point trade has very small risk, about 35 pips and my target is 60. If this happens, the second sell order from before is still valid and waiting for the break down. One could easily make the risk on the upside even smaller 20-25 pips, by I prefer to give it a little more “breathing room”.

Euro-Swiss Franc appreciated sizably today. This move stayed within fairly wide congestion zone and is approaching upper resistance at 1.5200 level. I’d like to buy it on a move above 1.5200, looking for 80 pips or so. Downside risks are great, but the probability of price pulling back into this area is high. This means, that if trade happens, it can take a while to come to conclusion. I’d really like to see a price pull back first, to about 1.5150 or so, where I have one more buy order waiting. With 4H chart, this can easily take few days.

Mike K.