Michael Bridgman

The major event risk for the week was the ECB statement today and how the markets would react to Mario Draghi’s comments.

The EUR plummeted and it’s never prudent to chase a trade!  It’s better to let the dust settle, analyze your pairs for confluence and use proper money management including R/R.

When the dust settled today, the US stock markets were moving up as was oil.  This tends to be bullish for the USDJPY  as the JPY is not only a funding currency but also a reserve safe haven currency.

With a greater than 2:1 R/R… which I am comfortable with once the U.S. market is open, a long position is taken following a fourth higher low combined with a reversal setup. Price moved up to test its Asian high, yesterday’s high, Target 1 and tagged Target 2 fairly quickly. We closed at T2.

It’s a  new year but after ECB President Draghi’s comments today my bias remains the same for the EUR.  Will we see par and below this year?

A bounce in oil today but have we seen capitulation…I don’t think so yet… but we will keep an eye on the $30 WTI level.

Know what to look for and trading becomes much easier.  Using oscillators and ambiguous indicators and tools that institutional traders don’t use will result in inconsistent results.

Good luck with your trading!

Back tomorrow if we find a trade.

After making a 3 Drives to a top pattern during the Asian session, the USDJPY initially moved down shortly after the London open before making one last wave to the upside.  A reversal pattern  set up a short with a close below the Asian high requiring a 15 stop loss for a potential 81 pips to our Target 2.

The pair made its way down and the risk was removed from the trade by placing the stop loss at plus 1 pip.  Price moved lower but buyers entered just under the middle of the Asian range – leaving a very wicky bullish candle and the trade was closed for acceptable gains.

In a risk off environment this pair potentially could go a lot lower…

The GBP is getting hammered and even the EURGBP cross is underscoring the sterling’s weakness.

Commodity currencies are very active and the EUR remains in a range.  We will know more on the Euro after Draghi’s comments on Thursday.

Keep the stop losses tight.  Money management as always is paramount to trading success!

Good luck with your trading!

Back tomorrow if we find a trade.

 

Our critical levels mentioned last week held up nicely, so it was back to shorting the EUR today.  With the market consensus anticipating that the Fed will announce rate hike lift-off tomorrow…the USD was strong across the board.

We waited for the German ZEW release, then found a nice short setup in the EUR requiring a stop loss of 18 pips for a potential 75 pips to our Target 2.  The only negative to the setup was that it was in the middle of the Asian range.  As price immediately moved down, we took the risk out of the trade by moving our stop loss to plus 1 pip.  Price moved down to its Asian lows then descended to our targets after the U.S. CPI releases.

Will she or won’t she?  Tomorrow we will finally have the interest rate question answered.

Good luck with your trading!

The EUR made a “3 drives to a top” pattern yesterday during the UK/US session.  It however did not close above 1.1030 let alone move to test 1.1060. Weakness followed throughout the Asian session today.   Following a bearish engulfing candle early in the UK session, a short is taken with a 16 pip stop loss for a potential 89 pips to our Target 2.

My preference is still to short this pair, and avoid it for the time being when it climbs higher.  If it can close above the 1.1060 area and follow through to the upside, then I will change my opinion.  Until then, it’s a matter of finding short setups with tight stops and exercising sound money management.  I was hoping for a big move to the downside today but it didn’t happen.

The Euro continues to be a funding currency for buying U.S. bonds.  So…would you rather own U.S. dollars or Euros going forward?  Would you rather own German 10 year or U.S. 10 year bonds?

Good luck with your trading!

Back tomorrow if we find a trade.

 

 

 

A very similar trade to yesterday with the key being that the trade required a very small stop loss of 9 pips for a 3:1 R/R.  After a series of lower highs the JPY set up with a 3 candle reversal pattern.  Price behaved similarly to yesterday in that it was one directional to our targets.  As it continued lower through our Target 2, we locked in (bonus) profits and heeded the wicky candles forming near the 122.00 figure and exited.

In the current market it’s best to keep stop losses very tight and not to be greedy. With year end approaching and Janet Yellen’s yet to be announced interest rate hike looming in trader’s minds, the market is very jittery.  Those without tight stops are likely to experience pain as we saw last Thursday with a greater than 450 pip reversal in the EUR near the 1.0500 figure when Mario Draghi spoke.

If the JPY can close below 121.50 today, it will be very bearish.   This pair tends to be very technical in its movements.

As a USD bull, I would prefer to trade it upward, but that is not what the technicals are suggesting so far this week.

Good luck with your trading!  Keep your stops tight and exercise sound money management!

Back tomorrow if we find a trade.