One has to love trading world. It is full of news, tips, rumors, threats and innuendos. Just keeping track of this could be a full time job, while trying to make sense of it by research would demand one or two of full time assistants. Or more. Last couple of days were dominated by news that OPEC countries, Russia, China, Japan and France were in “secret” talks aiming at putting an end to USD role in crude oil pricing. According to confidential reports, Dollar was to be replaced with a basket of other currencies. Few hours after that rumor had spread, all of the fore mentioned countries denied, one by one, that any such talks took place.

Not that it would be a bad idea for producers. A “basket” of currencies, no matter its composition would most likely be more stable than any one currency. This is beneficial to any country, making it easier to plan future budgets and other financial matters. Of course, there is a lot of politics behind move of this magnitude, so it will not happen easily, even if everybody recognizes that it should take place. Squabbling over composition of the “basket” would be next and last who knows how long. Maybe even longer than introduction of joint currency for Persian Gulf States, dubbed by some as the new oil currency. After many setbacks and delayes, it is scheduled to see the light of day in 2010, although nobody believes it any more.

Iran chose timing of these reports as an opportunity to gloat over their own way of selling oil. For about two years now the Islamic state has been pricing its crude exports in some undisclosed formula of currencies. Country’s central bank official said they had made huge additional profit of its policy. Once again no details were given, other than somebody quoting the president of Iran calling US Dollar a “worthless piece of paper”. While many people share this belief, his is based of politics.

Yesterday I went long EUR-AUD at 1.6531. Price bounced a little bit, than created new minor low at about 1.6510, marked as “A”. This was used as a stop point, which happened few hours later, for a loss of 22 pips. Laughable number when trading this cross. Later on very nice MACD divergence formed on hourly chart and I took that trade. Price made new low, while MACD didn’t. Went long on first sign of reversal at 1.6463. As a reminder, I don’t use these set ups as trend reversals, but rather corrections of existing ones. This makes for fairly small objectives, 60 pips in this example. Trade is over now.

The beast made new low for current trend on intermediate term chart. A welcome development in my preparation for a long trade based on price action. This allowed me to lower intended entry to 144.65, much better than the 150+. Risks are much better, and, with any luck, they will get even smaller as time goes on.

Speaking of divergences- here is another example that just formed. AUD-CHF intermediate chart just made a new high. O.K., on this platform it is equal high of 1.6200, while MACD is clearly lagging behind. Reversal formation is not very strong, dark cloud cover is not as dominant as, say, engulfing line of hanging man, but I’m giving it a shot here. Entry was at 0.9187, targeting 0.9050-40. Stop is a little trickier. With reversal pattern being what it is, I have to give it a little more room. This means, if price gets higher, next minor high on 1H chart will become a stop. Similar to the trade in EUR-AUD, only inverted.

Mike K.