FaithMight

Month: July 2012

  • The Temperamental USD

    The USD has threatened to rally for months now. But the $GBPUSD remains in its 300-pip range between 1.5500 and 1.5800. Every time traders, and I do mean ME, gets bullish or bearish due to price action, the USD finds a way to do just the opposite.

    For example, despite completing the quarter to 1.5750 on USD ($DX_F) weakness this week, cable never broke above the level to challenge the highs at 1.5800 midterm support and resistance. I was bullish cable going into this trading session. I thought price would continue to rally into 1.5750 – 1.5800 zone and then experience a sharp selloff. The selloff came sooner than expected when risk aversion kicked in as Spanish bond yields and equities spooked the market

    So what happens next week? With Spanish (and Italian) yields hitting these high rates at the end of the European session, we can expect the USD to continue to rally when the market opens in Monday trading causing this “Strong USD, Strong GBP” theme to play out once again. As such, this week’s GBP bears should enjoy some profits heading into the weekend. $GBPNZD and $GBPAUD short positions, in particular, paid out nicely this week with continuations in the weak sterling vs. commodities trend. However, do not underestimate this USD. It still rules capital flows and when it is strong on risk aversion fever, GBP will also benefit in the crosses. Most notably, the $EURGBP, $GBPNZD, and $GBPCAD are strong candidates into next week. Trade what YOU see!

    EURGBP DAILY
    Looking for 0.7800 to hold on a bounce
    GBPNZD DAILY
    This week’s hold above 1.95 despite kiwi rally looks very good for bulls
    GBPCAD DAILY
    A close above 1.58 supported by the 61.8 Fib gives some life to bulls

     

     

  • Commodities Still Strong Against Sterling

    BoE easing and QE increases have been dovish for sterling. $GBPNZD and $GBPAUD have staged reversals that has dragged the $GBPCAD right along with it. The GBP breakout against the commodity dollars in the Q1 of this year was all but undone during Q2.

    GBPNZD DAILY CHART
    Breaks 1.95
    GBPAUD DAILY CHART
    Breaks 1.5250
    GBPCAD DAILY CHART
    Breaks 1.5750

    After breaking key levels, all 3 pairs are at lows to end the week. No interest in new entries here. Watch for profit-taking to end the week but it is more likely that sellers will be holding their positions for new lows in the short term.

    Despite the current weakness in commodities versus the US dollar, the rally in the commodity dollars versus sterling continues to advance. It seems to me that commodities bears shouldn’t get too comfortable. While the USD is likely benefiting from an on-hold Fed while other central banks are cutting rates, commodities may find strength again when the Fed does also move on monetary policy. And the China and global slowdown theory is overblown. While China rates are lower-than-expected, 7% growth in an economy is still ridiculously fantastic. Especially when there is no growth in the UK and only 1.9% in the US. China and other fast-growing economies will likely continue to demand commodities at decent rates to keep prices ultimately higher. Food prices around the world are still very high even as oil dropped nicely. When commodities finally turn and rally again versus the USD, it is more likely that the current bear trend in $GBPNZD, $GBPAUD, $GBPCAD will only steepen and continue the mid term bear trend.

  • GBP/USD Sets Up

    Cable is setting up ahead of the Bank of England decision tomorrow and Friday’s US jobs report. Both releases have impact on both sides of this currency pair so I always find it interesting to look at where the pair trades ahead of these back-to-back releases. Despite the overshoot break below 1.5500, the 61.8% Fib held to see cable rally back to 1.5700. With price exhausting at the whole number, a weak sterling has taken $GBPUSD lower into the zone between 1.5575 and 1.5600. This move lower technically gives bulls a nice buying opportunity. However given the event risk over the next 2 days, traders should assess their risk accordingly ahead of the BoE and NFP.

    GBPUSD daily chart

    If cable closes the week above 1.5500, the pair remains bullish and favors a move back into the major 1.5800 support-turned-resistance level. A move into 1.5500 still remains a buying opportunity unless $GBPUSD closes out the week below the major psychological level. At current levels, it is still all about 1.5500.

  • Summer Season

    Spring was hectic. This year I was School Site Council Chair, PTA Secretary, and a GATE parent volunteer. I managed to teach 2 classes at the art college. The big kids eeked out 2 activites each over the course of 3 months. The baby started school for the very first time complete with her first extracurricular activity too. Hubby and I did a high five after the last ballet recital. The school year is officially over! So happy for the kids because it has been a great year. Lots of growth in us this year.

    I say all that because it’s no surprise that this hectic schedule has forced me to trade slow. Slow and deliberate. More so than I ever have. And I found that there is a peace in not rushing trades. Trades are now limit orders triggered by my rules. And once set, I am free to watch the market however I choose: at my computer, in a meeting, during the boy’s basketball practice or the girl’s art class.

    The high-energy of active day trading has very little appeal anymore. Instead, checking price becomes a check on the chart rather than a check on my trades. That subtly in grammar is also the subtly in psychology that has really helped my trading. The chart is a 3rd person. My trade is very personal and very 1st person. Personal matters tend to be emotional whereas we can all can detach from a 3rd party’s issues because they are not our own. As a trader, markets work when it becomes less about me and more about it.

    The timing of my slower trading is not lost on me. The kids are back home full time. The whirlwind of winding up a school year is one I more appreciate now as a teacher and parent than when I was a student. The seasons have changed and, quite naturally, my trading changed with it. Trading is certainly a marathon, not a sprint. If you are in it for the quick thrills you probably can’t stay at it long enough to truly be rewarded. The longer I do this the more I understand that. Now I have entered a season in which I am truly living that out.

    TRADE SLOW — my new mantra.

    Why I do what I do how I do it 🙂