There’s a New Kid in Town

April 5, 2006

There's a new guest trader on fxcmtr.com. His name is John Putnam and he comes from Putnam Financial.

This is John's Trade Methodology:

FX Analytics (FXAN) is a blend of quantitative modeling, combined with
advanced technical overlays. PFI's trade and forecast models are built
around a balanced dollar index providing exceptional insight and
liquidity into a large group of US based pairs. FXAN utilizes a
mathematical model and scientific grade software to process a large
dataset across a distributive grid of computers. This forecast is then
triggered into actual trades through a series of overlays where
algorithm efficiency, market dynamics and specific risks are modeled
and factored in.

HIS ANALYSIS?

Trade Idea:

Long EUR/USD on a bullish candle reversal (1 hour or 2 hour bullish Harami) that fails to sustain a break below 1.2240

Stops below 1.2210

Target 1.2330

Dollar forecast for the next 24hrs: Bearish

Stronger EUR/USD, GBP USD & AUD/USD

Weaker USD/JPY, USD/CHF & USD/CAD

Market Dynamics:

Favored - Cyclical & Regression Models

At Risk - Trend Models

PFI exited its long EUR/USD trade this morning for 221 pips. For all practical purposes I could have stayed with it given the model bias remains bearish on the dollar. That said, with a major event risk on the horizon (NFP on Friday) I've decided to stand aside for the balance of the week.

Today's price action will probably look a lot like yesterdays and will remain choppy through the day. This makes the target of the trade idea (1.2330) a tough task in the short term and could push traders into Friday trying to achieve it; which I don't encourage. 1.2240 and 1.2210 are Bollinger Band and ma support levels (different time frames) with 1.2330 bringing in substantial Bollinger Band resistance.

Overall the dollar is finding some support at our lower channel; it would be unusual for the dollar to sustain a push deeper into this region after floating across the top for any length of time. If we don't see a substantial pull-back to a more neutral position tomorrow, I'd almost expect to see NFP come out stronger than expected or an overall muted reaction to poor numbers, which will leave the market in good shape for a technical reversal at the beginning of the week.