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Sterling Digest, April 6, 2012: the big miss

Lightning
Holiday markets

The one flash of life was NFP as the markets hardly ticked beyond that this Good Friday. While most traders deservedly enjoyed a much longer weekend, today’s thin markets set the perfect stage for a US NFP miss. Very unexpected given the string of positive US data this week but also very much aligned with what Bernanke & Co. having been saying long after those minutes were recorded. The big miss leaves markets gobsmacked for  traders’ return after Easter not far from their NFP-induced peaks.

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Sterling Digest, April 5 2012: the herd shows itself

coins in water
Sterling down the drain...for the moment

Last week, the economic data built the case for a possible double-dip recession. This week, the PMI trifecta (industrial, construction, & services) came out quite strong. However, the bulls never rallied $GBPUSD back above 1.60. Then today we get dismal manufacturing and industrial production numbers and $GBPUSD takes a real hit in sentiment as price breaks to new lows for the week. $GBPCAD, $GBPAUD, and $GBPNZD are all lower on the week as well. Anytime the market shows its true bias, both technically and in reaction to fundamentals, you have to go with the herd. And sterling bears are keen on taking it lower short-term.

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Sterling Digest: April 4, 2012

A Bank of England Old One Pound Banknote
Looking ahead to the BoE

UK PMI numbers continue to surprise to the upside this week. While this string of positive data is not enough to declare a robust recovery in the UK, it certainly can be enough to keep the Bank of England from moving on monetary policy tomorrow and allow them to wait-and-see. With ECB out of the way today, traders look ahead to tomorrow’s BoE interest rate announcement.

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Sterling Digest: April 3, 2012

US Dollars
Today was all about the greenback baby

The $FED completely changed the game. While Bernanke had been on the circuit implying more QE was on deck, the minutes revealed a much more hawkish Federal Reserve. And as a result, the USD rallied across the board. Now the question going forward is whether the USD is really gaining strength or are traders being given a USD-selling opportunity?

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Sterling Digest: April 2, 2012

NASA PICTURE OF UK
The United Kingdom/Britain/England/UK

Sterling was very mixed bag in Monday trading despite stronger-than-expected manufacturing numbers out of the UK. GBP was able to push higher against the euro and greenback but lost a lot of ground versus the aussie, kiwi, and loonie. Traders are really looking ahead to the Bank of England later this week on Friday. While the BoE is expected to hold on monetary policy, poor economic data released in March has some market participants speculating that the BoE needs to increase QE now rather than later. However, trickle of positive news in the last few days may be enough justification the BoE needs to stay put for now.

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Sterling Digest: March 30, 2012


If central banks allow gold to become money, how would they enact QE??

A choppy week has given away to sterling strength with $GBPUSD breaking above the major psychological level at 1.60. Traders say month end flows are to blame for sterling strength when its fundamentals hold a more ominous outlook for the currency. BoE next week will continue these breakouts and trigger some profit-taking as most pairs sit GBP bullish at key levels into the weekend …despite the headlines.

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Sterling Digest: March 29, 2012

World markets as sheep falling off a cliff
UK is right on the edge

There are very mixed reactions to the UK economy. While it certainly appears that the UK is suffering from a double-dip recession, the government is in denial. The BoE is not confident that the economy will grow again at pre-crisis levels. And economists are dubbing this economy worse than the Great Depression. While it doesn’t seem that sterling can rally on such outlooks, it has and remains resilient in today’s trading. However, how long can that remain the case? Remember, the market can remain irrational as long as it pleases.

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Sterling Digest: March 28, 2012

Kal's Cartoon on The Economist
All eyes on oil

Sterling manages to stage a decent correction in today’s trading session. Yet, it is the AUD taking it on the chin today as it suffers from a double whammy of commodities weakness and USD strength. It was the only currency pair that sterling rallied higher against without much pullback. The timing with now confirmed Chinese softness (causing the commodities weakness) gives the $GBPAUD legs to run higher.

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Timing Is The Only Thing

Too many people say “I was too early on that one” to reassure themselves that they were right after all. The bottom line, though, is: if you didn’t make money, you weren’t right. So stop lying to yourself and work on your timing!

Great read over at Richard Todd’s blog on timing. Timing is something I strive to improve upon every time I’m in the market. I realized early in my trading that the entry of a trade is just as important as the exit. I personally feel it is more important. Todd’s post got me thinking about what it is I do to improve the timing in my trading.

  1. Use tighter stops. This is a recent change I made about a year ago. I know it is very counterintuitive and even ill-advised. But tight stops don’t allow you to be lazy when entering markets. There can’t be any “Oh I’ll just get in right here.” There must be a reason for every trade and that reason is your price. A trade is triggered because price has reacted a certain way at a specific chart level. It is at that level where we would love to get in at. It is the level that will maximize our profitability. An early entry is too impatient. Impatience is never a good way to trade. A late entry is a missed entry. Missed trades simply don’t pay which can be okay but refer to the above quote.
  2. Use limit orders. Trading live in the market can be exhilarating and boring. Both environments have positives and negatives but they have one thing in common. They both affect timing. In a volatile market, some traders get an itchy finger pulling triggers as fast as the market can oscillate. In a slow market, impatience rears as a trader enters a trade just to trade. Using orders allows me to time my entries to a certain extent as I let the market come to me. If the market never comes to me, then it’s time for a new setup and a new trade. With capital preserved, I can go into that next trade with a clear head.
  3. Using profit targets. There is aplethora of literature out there about using stops. Far less is dedicated to using limit orders to set profit targets. Many traders will place a stop but never set a profit target. Without a hard profit target set, the trader may be away from the screens when the market finally does move in her direction. Or worse, the trader hesitates, or simply refuses, to take profits off the table. Use hard (tight) stops. And use hard targets.

Todd says timing is everything. I agree, and take it further. Timing is the only thing.

Source: Timing Is Everything (blog.richardtodd.name)

Sterling Digest: March 27, 2012

Britain's budget for global business
Weak economy, strong sterling. Go figure.

Sterling refuses to weaken even as economic data slips and members of the BoE still look to add more QE. The $GBPUSD continues to make higher highs at 1.5999 though still remains capped by the major 1.60 level. Even the almighty commodity dollars (AUD, NZD, and CAD) are weak against the GBP. Are we seeing the beginnings of a bear trend reversal in sterling?

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