Few days ago I wrote about new rules regarding Forex trading to be announced this week. Yesterday the U.S. Commodity Futures Trading Commission released its proposal, which is a subject to 60 days comment period. One could say that the cat is out of the bag and it is a mean looking cat. For starters, it sets minimum capital requirements for entities serving as counterparties to such transactions (read brokers). Nothing new here, brokers already operate under these rules, only it is official now. Or it will be in 60 days. Also, everybody engaged in selling and managing Forex for retail investors has to be registered. The language didn’t mention any new licensing requirements, only registration. Fine, too, considering that half or more of those who operate Forex pools really have no business doing it.

But the biggest surprise came in regard to trading on margin. Expectations were for currency crosses to be limited to 25:1 leverage, while the majors, US Dollar pairs, would be left alone. CFTC proposal calls for limiting all Forex trades to 10:1 leverage. Rather shocking. While I’m not a big fan of using high margin, I’m even lesser fan of these kind of restrictions. I think that current margin levels should be left alone, and traders could decide on their own how much leverage they want to use. All this would accomplish is to drive business off shore where regulators are more open minded. For the next 60 days CFTC is collecting comments regarding this proposal. If you want to express your thoughts on the subject, here is how:

How to submit comments:
DATES: Comments must be received on or before [insert date 60 days from publication in FR].
ADDRESSES: You may submit comments, identified by RIN 3038-AC61, by any of the following methods:
• Federal eRulemaking Portal:
http://www.regulations.gov/search/index.jsp. Follow the instructions for submitting comments.
• E-mail: secretary@cftc.gov. Include “Regulation of Retail Forex” in the subject line of the message.
• Fax: (202) 418-5521.
• Mail: Send to David Stawick, Secretary, Commodity Futures Trading
Commission, 1155 21st Street, N.W., Washington, DC 20581.

Back to trading. Move in Japanese Yen, the one I have been waiting for, finally came. Actually, it was a combination of JPY strength and weakness of other currencies, namely “the other Dollars”.  I discussed short set ups in AUD-JPY and NZD-JPY and mentioned CAD-JPY. Today’s action didn’t effect those pairs equally, some reacted more than others, but the supports were broken in all of them. Now, how far will they go and how long will it take them?

Kiwi-Yen sold off the most in a very nice, directional move. Entry was at 66.45. I took partial profits 65.55, for +90 pips. Right now my objective for the balance is 64.60. I had to take some profit, having had so many of this trades going at the same time, don’t want get caught on the wrong side of the market, should it decide to turn. So far this trade is going good.

Aussie -Yen also moved through my sell point of 83.19. But this turned out to be a slow go, relative to NZD-JPY. I shouldn’t be surprised. After all 4H charts were used for analysis, so even if the price reaches my target of 81.00, it can easily take few days/couple of weeks and still be within general pre-trade expectations. I”m staying with this trade.

I took one more trade in EUR-GBP, when price made new low. Entry was at 0.8707 and trade netted 40 pips. At this point I want to see some correction, before any more selling. Short term down trend seems overextended, so I’m giving it a rest. Plenty of other action all over the place.
No more trades in GBP-CHF. Both of these crosses make me a little uncomfortable now. Any correction right now can easily outweigh potential gains.

Euro-Canadian Dollar has been under consideration for a few days. Earlier I used 4H chart, now I’m zooming hourly. Since my last notes price made new low and it appears to be reversing now. Recent price build up changed the look of a chart, so I have to adjust my intended buy. Distance from the low to the my entry become to big to simply buy it there. Now I want to see if this resistance at around 1.4810-15 becomes stronger. Price is pulling back right now, which is what I’d like to see. My new buy order is at 1.4824. Target is still 1.4950.

It has been a very busy day, with more trades in CAD pairs. It will probably be a focus of next update, because I think Canadian Dollar has more room to fall. I’ll go over GBP-CAD and CAD-JPY and perhaps there will be something new to report about EUR-CAD.

Mike K.