GBP/USD Pivot Analysis Week of 04/23/07

First three days of the week saw the inability for the GBP/USD to close below the weekly pivot point at 2.0006.  Thursday, there was finally a blast below and a run down to the weekly S1 which just happens to also be the monthly R1.  It has found support at this level for now.


Afternoon 04-26-2007

GBP/USD 

  • Breached the Weekly Pivot for the classification of "bear week"
  • Found support today at the Monthly R1 pivot and the Weekly S1 pivot at about 1.9880
  • Only taking long positions at this time
  • Currently in short mode

I don't see there being a play long on the daily anytime this week and probably not for most of next week. 

USD/JPY

  • Broke up above monthly R1 pivot
  • A tell-tale sign of today's break might have been yesterday's close above the weekly pivot point
  • The price is approaching weekly R1, about 40 pips away
  • Take only long positions but the trend might not be clearcut. 
  • Currently in long mode
  • Japanese economic data out tonight that will move this

Unpredictable at this point and waiting for the economic data tonight would be prudent.  If we get a break above 119.85 (W_R1), I would consider the following trade:

LONG at 120.10; STOP LOSS at 119.67; TARGET at 120.90 (Risk 43 to make 80)

EUR/USD

  • Has run up a lot and is in short mode right now
  • Only take long positions
  • Pivots seem inconsequential

No plays anytime this week.

 

 

Success in Position Trading

My blog seems to be very negative lately in every way.  Take some time to read a more positive take on trading the market from a fellow visitor, Brent.  It seems he has found some possibilities in the position trading space.  This post is worth a read:

http://forex2stay.blogspot.com/2006/07/trading-update.html  

The USD this week

I think the beating the dollar took on Friday was unwarranted.  The reason was mainly due to the Nonfarm payrolls showing a less than expected increase of 108,000.  If traders were to just see this number in the report, I can understand their need to short the USD.  But the other important number was the revision of the November number to 305,000.   This was a revision of 90K.  So if you take this 90K and figure this into the 2 month average (Nov/Dec), you get an average increase of 206,500.   According to the unrevised November figure and what analysts were expecting in December, a two-month average expected was 207,500.

In addition, I think using November and December for determining future job growth is short sighted.  Yes, the retail industry does more hiring during the months of November and December but for other industries, more hiring occurs during the new year once budgets are solidified.

Looking at the EUR/USD, the pair was pushed up to the Daily 200 EMA.  On the weekly, the pair has hit resistance at the 100 EMA.   The USD/CHF shows similar behavior. 

I think these levels were hit a lot quicker than expected in 2006.  The technicals were showing that these levels would be hit in the next 3 months but not before a retrace.   Now this is strictly my opinion but I really see a retrace this week for the USD.  I’ll probably go long on the USD with stops above/below the key EMA.  I wouldn’t expect more than a .382 or .500 fibonacci retrace before consolidation.

The Future of the Dollar

There is an article in the latest issue of Newsweek that doubts the US Dollar will be able to remain bullish in 2006 for several reasons:

1.    US record trade deficit
2.    End of interest rate hikes in the US with the start of interest rate hike cycle in Eurozone and Japan
3.    China’s inability to continue its USD buying spree due to political reasons and possible Yuan revaluation
4.    US Manufacturers statement that the USD must decline by 12 percent due to rising energy prices
5.    Gulf Coast rebuilding costs
6.    Growing toll of the Iraq war

There’s a lot facing the dollar in 2006 but that’s also what "experts" thought at the start of 2005.

http://www.msnbc.msn.com/id/10513234/site/newsweek/ 

GBP/JPY pair characteristics

I am mildly interested in this pair for its volatility.  Obviously the volatility could be both good or bad depending on which end your on.  The other downside of trading this pair is the wide spread.

Last night, this pair moved 150 pips in a very short period of time.  I was chatting online with a currency trader in Japan who says this is all he trades.  He states that he does well by trading the long side during Asian session and short side during London session.  I don’t know how true this is or a lot of people would be doing it.  I would be interested though in finding out how close to the truth this is.

Does anyone know how true or untrue this is? 

USD/JPY at 87.0 by end of 2006

Thompson reports that demand for JPY calls, inclusive of a 1mth 117.00 strike, has helped inflate the risk reversal curve"s downside strike premium. The 1mth 25 delta R/R is currently 0.4/0.55 JPY calls over, having been 0.3/0.45 yesterday (when USD/JPY was threatening 120.00). News-wise: a US investment house predicts USD/JPY will plunge to 87 by December 2006. The prediction is contained within an FT article headlined "Yield pattern of the leading currencies poised for reversal" (p42). According to the senior G10 FX strategist at the US investment house: "The evidence is overwhelmingly in favour of lower-yielding currencies appreciating against higher-yielding currencies in the coming months". The US investment house also forecasts a EUR/JPY decline to 116. 

Forex Futures Volume: Flip for EURO

The 11/1/2005 CFTC futures volume report is available at http://www.forexproject.com/Forex_Volume

I’ve now included the new report statistics as well as last weeks report for comparison.  

There has been a flip from net short to net long for the EURO in the latest report.  Last week, the EURO had 20794 non-commercial long positions versus 23352 non-commercial short positions.

This week, the EURO has 26432 non-commercial long positions versus 19434 non-commercial short positions.   

EUR/USD shorts

I’ve had a decent start to the week since initiating a sell of EUR/USD at 1.2054.  The Euro has since traded as low as 1.2002 for a 40+ pip increase.   I stuck with the trend which has been downward and favorable towards the dollar.  I based a lot of my trade on the daily technicals shown.

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Trade 5325589 – Short GBP/USD

I made a trade at 2:30 a.m. this morning. I went short on the British Pound at 1.7648. After 10 seconds, the Pound started its descent to 1.7638. It’s only 10 pips but I’m expecting it to continue it’s descent for 2 reasons.

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