Up coming events this week (18 Jan 2009)

I ended last week positively following a smooth descent of GBP/USD. I must remind myself that not all trades will be as easy as this one.

This week, the events will be less focused on USD or EURO. Instead, there will be a string of events lined up for the Canadian Dollar, also known as the Loonie. On Tuesday, Bank Of Canada (BOC) will announce its rate decision. The popular guess is that the interest rate will be lowered by 50 basis points to 1%. Subsequently, the retail figures and the consumer price index for Canada will also be released later in the week. I have a hunch that both oil prices and gold might trade lower this week and I am not looking favorably on commodity dollars at the moment. Given a good opportunity, I might long the USD/CAD at price of 1.24. This pair has twice tested the resistance at 1.3. Given the weakness of the Loonie, we might see the pair test the resistance at 1.3 yet again.

Another commodity dollar, NZD or the Kiwi, may also see some action as a rate decision by the Reserve Bank of New Zealand will also be released following this week.

US Advance Retail Sales

Yesterday night, the release of US retail sales was much more disappointingly than expected and caused the DJI to drop by 3%. However, US dollar strengthened against most Majors instead of falling. Australian employment numbers are coming in as I blog and ECB will announce its rate decision today. I will stay on the sides for the rest of the week and examine the impact of these events.

GBP/USD (Short)

I had an opportunity to trade yesterday but I did not update the blog because I was not very confident of its success. But it turn out very well today and I shall share how I entered this trade. If you look at the picture below you will find pseudo sort of resistance line I drawn. The left most candle is what is known as the master candle stick. To learn more about master candlesticks, you can refer to this link. I am using an hourly chart in this setup. Mostly, I sense apprehension in the markets and this was used together with the master candle stick method to trade. I entered short at 1.5000 with only half position. I set my stop loss at 1.6000 and initial profit target 1.4800. But the trade soon turns out to be better than I anticipated and I adjusted my target to the recent low of 1.4400. So far I 've got a neat paper profit of 400 pips and I also adjusted my stop loss accordingly to 1.4700 in case things should turn around too fast. Bernanke's speech was an anticlimax. Banks need more bailout??? Good thing I entered this trade early. It is widely anticipated the ECB will cut rates again so I will hold on a little longer to this trade and see if there is any spillover effect to the Cable.








Update 1
The pair went down to a low of 1.4480 early in the morning but soon rallied to 1.4580. I decided to close the trade at this level for a neat profit of 420 pips. I do not usually trade the Cable because it is extremely volatile. This is the first trade I did with Cable on half position and it proves that I can possibly profit from it given the correct situation. Will try to take a break following this small success. I might just get overconfident and enter trades recklessly. I shall update the blog on the finer points of charts and dealing with emotions during trading.

Risk aversion is back....

Markets opened jittery at the start of this week. It seem like the New Year sentiment is fading and investors are coming back to Earth. Overnight Dow Jones lost about 1.5%. Reporting season is kicking in and the numbers ain't gonna look pretty. Tonight Ben Bernanke will give his speech and traders will be watching every movement of his lip. Whenever the FED chairman speaks, markets will display significant movements. If he foresees continued challenging conditions ahead, market will respond quickly on a flight to safety. This means risky assets will be liquidated. In the foreign exchange context, this means that high yielders such as Australian and New Zealand dollars will find difficulty holding on the gains in recent days.

Upcoming events this week (11 Jan 2009)

There are gonna be some exciting events this coming week and the FX market will definitely have some large movements. For starters, Ben Bernanke will be speaking on 13 Jan. The speech will be potentially very market moving given that risk sentiment is the core of almost all trading decision. On 14 Jan, there will be the release of US advanced retail sales though I doubt this particular event will mean much. On 15 Jan, the European Central Bank will make a rate decision and this is the event that will be worth putting my money onto. Before I decide, we shall see what Ben will say on Tuesday.