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Archive for January, 2008

bernanke-helicopter.jpg The scoop on the Fed is that they lowered rates 0.50% and said more were to come. Obviously that is bearish for the dollar and can be bullish for carry trades too since it is a balm for economic pain. Were it so simple to “fix” economies. Yesterday afternoon U.S. stocks sunk as bad news came out about some bond insurers – more weakness in the financial sector.

So now the big “event” (Fed) is out of the way and what are we left with? Carry pairs and others which benefit from growth are at resistance. You’d think the Fed could have obliged by being more hawkish to help a pair out!

Case in point, two pairs we’ve looked at lately: AUD/JPY and EUR/USD. My opinion on which way they’ll go? Down, following continuing economic weakness. But, opinions are irrelevant (and often wrong, the world is complex) and we follow that which we see happens.

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candle.jpg Candle hunting sounds like some sort of freaky hobby, when really we’re talking about looking for candle patterns.

The AUD/JPY has had a couple in recent bearish bounces.

First off, to be clear, the trend is down and that’s the mood we want to be in here (… not down, but bearish) Name of the game is to find a bearish signal.

Candles are NOT the entry signals. They do not supersede the studies and are not stronger, technically, than either the studies or support and resistance.

Candles are meant to be little helper bees, confirming other stuff. If you get a signal, it is more powerful accompanied bya candle pattern.

audjpy.jpg Case in point, if using the MACD and Stochastics, they both rounded lower heading for red arrows as the price bounced down from resistance recently. There’s an entry signal. They were accompanied by a beautiful evening star (first green oval on the price) and by a so-so harami (second price oval). I put ovals on the studies showing the entry signals that occurred with them.

audjpysignals.jpgHopefully we will see some another candle pattern with a bounce down in the next day or two. The candle pattern that just happened today? A hammer.

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copy-of-bouncesmaller.jpg We’ve talked about it – all hail the Koruna, right? Still doing its thing. On the left, below is the chart as I’ve had it drawn out for months now. I thought it might help some to see how I made a subtle change to my chart to account for some recent price action.

gbpczk1.jpg Sometimes when a pair is in a channel (parallel support and resistance) it will run another more subtle, parallel support/or resistance within it. As price bounces between the channel lines, it’ll pull back only about halfway and then go back again. You’ll see what I mean by this other chart on the left with the extra line added in the middle of the channel.

gbpczknew.jpg Anyway, it is what the pair is doing now, and the whole point is that if you missed an entry recently, like when it bounced down from resistance, this affords you another chance to sell into the bounce.

 

(Green ovals mark how the mid-line in the channel developed by rejecting the price. Notice it may now become resistance and we may be in a new, down-shifted channel)

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Well, here’s to a new week! An excellent way to start out is spending a moment on the “big picture.”

comp.jpg Technically the euro remains strong, the pound and loonie weak, and the yen has been gaining strength. The comparison chart on the left illustrates this nicely.

Fundamentally nothing has changed – there is trouble, and trouble isn’t swept away under the rung from the Fed popping up one day and slashing rates. A great article by George Soros on the trouble we’re talking about is right here.

stocks1.jpg US stocks, which continue to influence currencies, aren’t looking any rosier. Perhaps the best things to do is to be prepared for volatility while the markets sort themselves out. Trade a little less, trade smaller positions, maybe a bit shorter term. And remember that if we get choppy, that often the market gets like that – the amazing trends we’ve seen across the board lately have been exceptional!

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shaysworthy3.jpg Jerome Kerviel seems to be hiding sub-prime losses. He is the winner! For the biggest loser…

Friday is gold aussie up day. DBA and DBC bouncing this bodes well for Commodity currencies

More discussion on how well things are going at InvestoolsFX.

What role the Fed announcement plays into analysis

Looking at the EUR/GBP, AUD/USD, NZD/USD, waiting for the yen to strengthen

Be ready to range bound trade and trade in a volatile market.

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shaysworthy2.jpgGold topping $900 commodities up while $ tanks.

Societe SA 7.2 bil loss and the huge losses over the weekend is the unwinding of that trade, possibly? Who is he, is he still alive? http://www.bloomberg.com/apps/news?pid=20601087&sid=aTNMJaurCbB8&refer=home

Commodities up as dollar goes down – what pairs to trade.

Euro goes up on ECB’s Weber confirming no rate cut.

Psychology with Pat and some intermarket analysis

Today is PIKER day- talking about pikers

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eurusd1.jpg The recent turmoil we’ve seen in stocks, the fears of recession, then the bounce back … they’ve taken their toll on EUR/USD. The euro, riding a wave of optimism over the economic strength of the eurozone, has stalled. It’s seen in the two peaks the pair made in November and this month: instead of being consecutively higher (= uptrend), they are even.

Not only does that give pause to the uptrend, it is a possible double or triple top, meaning price could reverse much lower. It was just a few weeks ago that we talked of this being one of the “darling” pairs, but my hasn’t it changed … there are much better trends to be had out there right now.

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