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November 9th, 2009 at 10:26 am

Kiwi on steroids.

Currencies had an interesting opening to trading week. Kiwi moved sharply against all major currencies. It seems to be a beneficiary of the latest G-20 meeting, which covered more of in The Tobin tax post. While the representatives of participating governments were discussing “exit strategy” for emergency measures implemented by their respective central banks, they also agreed to keep most of it in place for now. Objective is to not harm fragile recovery prematurely. Whatever. Outcome is more bearish pressure on the US Dollar, which is expected to keep flooding markets. That’s the story today. For we know by tomorrow investors will be running to “safety of USD”. Such is trading life.

New Zealand Dollar, Kiwi, became favored currency of the day. NZD opened very strongly. In fact it left large gaps in most crosses which are visible on many trading platform. Even AUD-NZD pair had large jump, or rather drop, something that doesn’t happen very often. For the record, Canadian Dollar, was also very active and strong. This increased interest in Kiwi coincided strangely with my own trade in EUR-NZD, which I started to follow some time ago, to illustrate principles of trading Forex using only price action. Yesterday I adjusted stop on the long trade. Turned out to be just in time for NZD move, which took this pair down, putting an end to my trade.

eur-nzd-11-09-e.jpg

Right after trading started price moved through my new stop at 2.0320 and I was out of position. This trade produced 290 pips. Both situations from original post have now played out, the other one was GBP-JPY. That post was to show that trading doesn’t have to be complicated. I’m leaving it alone right now, but will probably return to it in the future, using another cross and maybe different time frame. The concept is applicable to charts of all magnitudes.

gbp-nzd-11-09.jpg

Kiwi created gaps, something that I always see as trading opportunity on Sunday. Unfortunately for me, very few of NZD pairs made the counter moves to close the gaps. GBP-NZD was one of them, it did exactly what my strategy expects when gap is being closed. But I wasn’t in on it, following 4 other crosses and passing on these one. By this time of the day, I don’t expect gaps to be filled very soon. It can easily take a week for that to happen now. Good news is, that we have good, solid objectives for any trades betting on weakness of NZD. We just don’t know when. I’ll be tracking hourly charts of NZD-JPY, EUR-NZD, NZD-USD…..

gbp-aud-11-09-e.jpg

Yesterday I covered GBP-AUD, looking at a potential short trade on 4H chart. I had no standing order, but was watching 1.8000 level. Earlier in the day price undercut it slightly, creating additional support point at that level. Just now price fell to about 1.7975. Problem is, since I used 4H chart for my analysis, 100 SMA on this chart is expected to be an obstacle and a bounce is very likely. With this in mind, I placed a sell order at 1.8070. If this happens, I’ll want to take some pips before current support and then establish another position below it. Of course there is always a chance that the price just keeps falling here, in which case I’d miss a trade.

Mike K.

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