Staying on the Right Track

The AUD/USD long trade I entered two days ago is going quite well, so far. I'm up 120 pips right now, but am not ready to take my position off just yet. Sometimes, these rallies can just keep going and going without coming back enough for another favorable entry point. In this case, I'll raise my stop to around the 0.9140 level, hence, locking in 70 pips of profit if the pair decides to come crashing down. If the rally continues, I will raise my stop once again.



The worst part of trading is being right and NOT making money, or worse, losing money - although certain people would argue that there is no difference. So, keeping true to that rule, since I am already "right" on this trade, I will try to stay in it without risking the rest of my profits (by raising my stop-loss). This way, if the pair has another big up day or more, I will still be on the train...

Going in the Right Direction - USD Weakness

With a rate hike coming out of the U.S. basically being completely ruled out for the remainder of the year at the very least, there is little reason to own the USD right now, unless panic sets into the global markets. If there is even the slightest risk appetite out there, the USD will depreciate.

I bought the AUD/USD this past hour is the hopes that it will continue its bullish trend, which has been in effect since the beginning of the year. I'm risking 100 pips with a potential reward of about 700 pips, based on the previous high off the weekly chart (shown below).

Wednesday's retail sales numbers have modest to weak expectations, Thursday and Friday's CPI, Industrial Production and U. of Michigan Confidence reports also do not show any promise of bringing the USD higher. However, these reports should bring some momentum to the forex world and, hopefully, push my positions in the right direction.

Down But Not Out

Yesterday's rally in the US equity market failed to lift the USD/JPY pair higher, or anything against the JPY as a matter of fact. This was surprising to me, as I'm sure it was for many others. Usually the JPY, like the USD, declines when the markets rally, as a sign of risk appetite in the marketplace flocking to higher-yielding assets and away from low-yielders (JPY) and safe havens (USD).

The USD/JPY chart showed a nice reversal pattern last week, yet has not gone higher since, however, it has not broken the support level either. For now, my trade from last week is down but not out. There isn't much in the way of economic data this week to get help from the fundamentalists, so I'll have to rely on basic market trends and momentum to lift my trade into profitability.

Getting In Ahead of the Game

Yesterday's GDP data came in better than expected, showing that although the greatest economy on Earth is still contracting, it's doing so at a slower rate:

GMT 12:30 PM USD Gross Domestic Product (Annualized) (2Q F)

-0.7% (actual) -1.2% (expected) -1.0% (previous month)

This morning's jobless claims numbers was basically a wash, coming in as expected, however, pending home sales for the month blew expectations out of the water:

GMT 14:00 PM USD Pending Home Sales (MoM) (AUG)
6.4% (actual) 1.0% (expected) 3.2% (previous month)

Tomorrow is the all-important NFP and Unemployment Rate figures, probably the single biggest market-moving data of the month. There are modest expectations going into tomorrow, so the stage is set for a potential nice surprise.

The USD/JPY showed a reversal bar off the daily chart this past Monday (highlighted in the chart shown). This is a good level to get in, ahead of the NFP report tomorrow, in anticipation of a potential reversal. Support lies at the 88 level, making for approximately a 150 pip risk trade. If the reversal takes place, USD/JPY can easily go up to the 92-93.50 level, creating a very favorable risk/reward bet.

Hold Your Horses...

My USD/JPY and EUR/JPY trade from last week is still moving in my direction and isn't showing any real sign of abating. Aside from taking some profit from my USD/JPY position, I've basically held my trade as is until I see reason not to... I raised my stop for the USD/JPY to 91.69 (locking in 70 pips on my existing lots) and EUR/JPY to 134.71 (locking in over 200 pips).

Language Worth a Thousand Pips

Aside from Durable Goods and New Home Sales figures due out this Friday (both have positive expectations), the FOMC is expected to announce the Fed Rate this Wednesday, which is widely expected to remain at 0.25%. I'm not sure anyone on the planet expects rates to actually be hiked this Wednesday, however, there is debate about the language that will be used. The transcript to every Fed rate decision is carefully analyzed for certain key words that may have an enormous effect on the equity and forex markets. If the Fed's commentary is somewhat hawkish, signaling that a rate hike has moved up in its timetable, then the status of the USD as a pure "safe haven" currency will begin to diminish, and it will once again be looked upon as a high-yielding currency where investors can park their cash. This would undoubtedly begin a change in momentum for the USD against some of the majors, particularly the EUR and GBP. If the Fed makes it known that rate hikes will begin soon, the EUR/USD can easily come down from it's current 1.4600 level to the 1.3 level within weeks or months. If not, the current USD bearish trend may very well extend through the remainder of the year.

Holding onto a Good Thing

Since I doubled down on my bet against the JPY about 24 hours ago, things started to go my way in a hurry. A rush of positive economic data from the U.S. has pushed the markets higher, which in turn creates more risk appetite for higher yielding currencies. I'm up over 150 pips on my EUR/JPY trade and I'm in the green on my USD/JPY trade, which was about 20 pips from being stopped out for a loss yesterday. With housing starts and initial jobless claims due out any minute, I expect the market to take these pairs even higher. We shall soon see....