Tag Archives: forex signals

Trade Review: AUD/CAD (+311 pips)

Entered AUD/CAD long at 1.0248 on 12 Aug added on Aug 15 at 1.0295. Exited 23 Aug (+147 pips) at 1.0395 and 30 Aug (+164 pips) at 1.0459. Result: +311 pips.


Entered with a stop at 1.01 and a target of 1.05. Greatest open loss: 80 pips Greatest open gain: 340 pips.

Technicals were the primary driver for a long AUD/CAD entered on Aug. 12. The weekly chart caught my attention due to the dragonfly reversal. I also noted how rate hikes were overpriced in Canada.

My full reasoning was here

I noted that my next best idea was short CHF/JPY and that would have also been an excellent trade that was never in a negative position and gained as much as 600 pips in the same time frame.

After the break of 1.03 on Aug 14, we waited for a pullback and doubled our long position at 1.0295.

On Aug. 17 we noted there was no reason to take profits but the pair went on to post its worst one-day performance of the trade, falling 100 pips.

Despite this, we remained confident and felt a bounce to 1.03 (at least) was about to happen.

We went back to the weekly chart on Friday and it continued to look lucrative.

On Aug 22 we were rewarded with a surge to 1.04. We accurately saw this as a great time to take some profits. This allowed us to hang onto the second part of the trade for an additional 60 pips (above where we sold the first unit).

What I’ve learned: I may have rushed into buying the second unit after the break of 1.03. As we saw, there was a deeper pullback than I anticipated and this was the only time I was nervous about the trade. I targeted 1.05 so I may have exited the trade too soon. The weekly chart looks like it will get to at least 1.0550 but I’m nitpicking at a great trade.

 

What I’m happy about: Lots. I saw a lucrative pattern on a weekly chart and hung onto the trade for close to three weeks. The thing I’m most proud of is the way I sold the first part of the trade at the perfect time, nearly nailing the top on the bounce over 1.04 and locking in a nice profit that allowed me to easily wait out the next run toward the ultimate target. Opening a trade with two units or adding a second unit early on is my favourite manner of trading because it gives me this flexibility. I’m also pretty happy about noting that short CHF/JPY was my second favourite idea.

 

 

 

 

 

 

 

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Taking Stock, Looking to Buy USD

Today marks one month since The New Crisis started. It’s a good time to reflect and flesh out some thoughts on markets and where we’re heading. The lone trading position we’re holding is a long AUD/CAD position. He sold half of it for a 150 pip profit earlier in the week and we’re holding the other half, expecting it to go to 1.05 (spot is at 1.0348, about 50 pips higher than our entry point).

We planned to post far more trading tips here over the past month but it has been such a fast, emotional market that there haven’t been the clear trends and signals that I’m looking for. We blogged about GBP/USD for several days but the elements never aligned for us and we stayed on the sidelines. At the moment, we are thinking about jumping in on the short side.   First, let’s talk about the past month. Thinking about that time, the events that pop into my head the most quickly are:

  1. The debt ceiling debate
  2. The S&P downgrade
  3. Q2 GDP and the revision to +0.4%
  4. The Philly Fed falling to -30.4
  5. Consumer sentiment (Reuters/U Mich) falling
  6. The volatility
  7. The run/retreat in gold

 

So what has changed?

The clear casualty has been confidence. It’s hard to believe all those events took place in only a month because they have profoundly changed the mood in markets and the mood in the United States. Talk of a second recession is ubiquitous and in some ways, that is a self-fulfilling prophesy.

My own feeling is that the US will avoid a technical recession but the outcome will be far worse. It has long been my belief that the US is about to repeat the Japanese ‘lost decade’. Very slow growth and very low inflation for a very long time.

Given the differences in US culture, income disparity, low personal savings rate and fiscal squeeze the likelihood is that the US experience will be worse than what has occurred in Japan. On the upside, the largest multinational corporations will continue to profit from growth in emerging markets and China. Aside from gold and commodities, these are the only places to invest for the coming decade.

But this isn’t an investing blog, it’s a forex trading blog.

What’s going on now is the process of forming a top. This is most obvious in commodity currencies where you have investors still trying to pile into the carry trade only to be wiped out again. This will end badly. Commodity currencies, especially NZD, are going to be hit hardest in the coming weeks as risk unravels.

Why am I so confident that the risk rally is over?

Simply put: bonds. The fixed income market was first in the financial crisis and it’s first now. The bond traders are the smartest and best on Wall Street. If people are piling into 5-year T-notes at yields less than 1%, something very bad is about to happen in other markets. In this environment, you cannot be long stocks, risk FX or in any trade that has worked for the past two years.

Everything is about to reverse. When that happens where do you want to be? The US dollar. When the panic hits everything will need to be unwound. Traders will want to get out of every trade and the one they’re in the most is short USD.

In the month ahead, we will be looking to buy USD at attractive levels against the commodity currencies as we enter The New, Yet Unnamed, Crisis. The best money is going to be made in the early days so be prepared.

 

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Buy AUD Ahead of RBA Decision

Our best trades over the past month have been on Australian fundamental data so we’re going to continue to stick with what works by buying AUD/USD ahead of the RBA decision at 1.0970. That’s 110 pips below the record high and we’re expecting AUD to blow through that level by the end of the week.

I published my analysis of the RBA at ashraflaidi.com earlier today. http://tinyurl.com/3jhc7du

Let me sum up my thinking briefly:

  1. AUD/USD has broken out technically, hitting a fresh record high of 1.1080 last week.
  2. We have a pullback from the high that’s giving us a buying opportunity.
  3. We’re trading with the trend.
  4. Fundamentally, we read the RBA minutes as much more hawkish than some others and we’re going to trust our experience and knowledge.
  5. CPI was high last week and inflation is above target.
  6. Terry McCrann is a good RBA watcher and he’s overdue for a correct call.
  7. Our downside is limited. We have a 60 pip stop at 1.0910 and don’t expect it to get hit even if we’re dead wrong.
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USD/JPY Set for a Breakdown, Be Long AUD/USD

It’s getting more difficult to avoid insults and hyperbole when describing the debt ceiling imbroglio. Surely you haven’t stumbled here looking for a recap of the day’s news so I’ll spare you the exercise save for a few thoughts. 1) On Tuesday it actually appeared that debt ceiling talks were moving backwards. 2) the real deadline is around Aug. 15. 3) We estimate the likelihood of a downgrade from S&P, Moody’s or Fitch at 70%. 4) the US looks increasingly to be on the precipice of another recession.

We remain short USD/JPY. We booked a 120 pip profit on the first leg of the trade and we’re up 51 pips on the second leg (entered at 78.46). We’re moving our stop down to our entry on the second leg, ensuring that we’re now trading with house money. We really like this position right now and if we were a tad more greedy we would be adding to it. It looks to us like there might be a sharp breakdown below 77.75.

Our latest trade is in AUD/USD which is hovering around 1.0950. It’s going higher. Four days ago on Twitter (July 21) with AUD/USD at 1.0830, we wrote “Beautiful breakout in AUD/USD. That will be testing 1.10.” We’ve climbed 120 pips since then and we’re sure that the record of 1.1012 will fall. The catalyst is going to be a high Q2 CPI reading (above 0.8% q/q on the trimmed mean) today. We are buying AUD/USD asap with the announcement coming on Twitter via @FX_Button. We will hold it until the news turns better on debt ceiling talks.

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