Perhaps as early as this week the Commodity Futures Trading Commission will publish new rules regulating Forex trading. The scope of coming proposal is yet unknown, but is expected to effect mostly brokers/dealers with new or additional registration requirements. All sales people who deal with retail Forex will have to be registered with CFTC. It is possible that dealers’ minimum capital requirements could be raised again. If this happens, more consolidation among brokers would follow.

Of more interest to individual traders will be any new rules to margin requirements. Chances are that the agency will try to limit the high leverage available in Forex industry. Speculations abound that the maximum allowable leverage will be 50:1 or maybe even 25:1. This would be relatively big change for some traders, who are attracted to currency trading because of availability of high leverage. Truth be told, though, very few people can successfully trade at 100:1 or higher, as it is possible now. In most instances it simply leads to faster and bigger losses. Once details of new proposed rules are published, it will probably take another 6-12 months before they will be enforced, with more revisions likely.

Since I don’t use leverage nowhere near current maximum, I won’t be loosing sleep over any changes. More interesting to me is the market itself. For example, will the strength in Japanese Yen carry over into this week? It appears that JPY pairs are forming intermediate term tops, trying to reverse. Charts vary from cross to cross, with some of them having already moved to the down side by a significant degree, while others still in a staging process. Like AUD-JPY.

On this 4 hour chart, AUD-JPY is approaching very well defined support at 83.30. As it happens, 100 SMA is also right there. What I would like to see is for the market to find support at this level once again, bounce off of it and then move down. If this happens, it could easily continue to 81.00 or lower in short order. Situation is a little complicated by weekend. Should any gaps develop at the opening, they will have to be dealt with first. It is always possible that price just keeps falling, without forming one more support point. That’s where NZD-JPY comes in.

Chart is almost identical, with support right at 66.75. If it goes, 200+ pips move is very possible. Should the move down happen without a bounce I plan to sell one of these pairs, whichever looks weakest at the time. CAD-JPY has very similar looking chart and is subject to consideration for this trade. I would use another account for that, to avoid too big of a loss in one. Concentration of similar trades is great if everything goes right, but when you are wrong it can really hurt any single account.

Speaking about Canadian Dollar, another cross of this currency comes to mind. EUR-CAD made new lows for the intermediate term move, but started to show signs of reversal late on Friday. Increased volatility, demonstrated by larger and faster swings for this look-back period suggest possible turn around, or at least large vertical consolidation. I’m very tempted to simply buy it at the opening and try to ride it to 1.4950, risking about 90 pips. Here also possible gaps complicate matter. If there is a gap of any magnitude, depending on which way, this might lose some of its profit potential and will have to passed on. Will see.

British Pound was strong last, although it started to show some hesitation in last few hours of trading on Friday. GBP-CHF looks promising at this stage so I’m placing couple of buy orders here. One is at 1.6500, if the price falls to this level. This trade would look for appreciation to 1.6750. Should the advance continue, 1.6795-1.6800 is a buy level, targeting 1.7000. For this one, however, price needs to develop another minor low, between current level and the entry point. Otherwise risks are too big and trade will be cancelled. Should be busy week.

Mike K.