Thursday, April 27, 2006

Big move today on EUR/USD

This morning we saw a large move on the EUR/USD. Initial claims came in a bit higher than expected and Bernanke suggested that the fed may take a break in its rate-raising campaign. This led to a 100 pip jump in the EUR/USD and other USD pairs. There was another great trade set up you could have taken by trading the breakout of the flag in the uptrending pair, with the stochastic indicator giving a bullish signal. These are the types of trades we look for and we talked about in a recent post.

Wednesday, April 26, 2006

Key #1 to Successful Currency Trading

Many people are looking for the "holy grail" of successful trading. Let me tell you that there is no such thing. With that Said, let me also state that there are "KEYS" that will help you become a more successful trader.

One of the things I like about the currency market is the ability the currency pairs have to trend for long time periods. This give us a distinct advantage over the stock or options market, in that we can jump aboard and catch a ride with what the "big" guys are doing. Therefore, the number 1 key in successful currency trading is to be able to identify the TREND of the pair you are trading.

KEY #1: Identify and trade the trend

A trend is simply defined as the general direction the currency pair is moving. If the pair is making higher highs and higher lows, it is trending up. If it is making lower highs and lower lows, it is in a down trend.

In the chart below, you can see an uptrending currency pair and circled you can see the points you would look to buy the currency pair. You would do the opposite if the stock was trending down.

Economic News move the EUR/USD

Sales of new homes rose in March by the largest amount in 13 years, reflecting a rebound from bad weather in February. But the median price of the homes sold last month actually declined, providing evidence that the nation's five-year housing boom is slowing.
The Commerce Department reported that sales of new single-family homes rose 13.8 percent last month to a seasonally adjusted annual sales rate of 1.213 million units. The increase represented a recovery from a 10.9 percent plunge in sales in February.

Tuesday, April 25, 2006

Trading Flag Pattern Breakouts

In the chart below you can see areas that are called flags. These flag patterns are good areas to look to buy on the breakout. You can see that buying as the price breaks above the red resistance line would have been a good entry point.
Below you see a drawing of what a flag pattern looks like. The red resistance line is where you would look to buy as it breaks above this. A flag pattern is simply a consolidation after a sharp uptrend. After the consolidation, you will anticipate the trend to continue after it breaks out. Look for this in every chart you are evaluating.

April 25 Economic News

Today the Existing home sales report and the consumer confidence numbers came out and were better than what was generally expected. These releses caused a bit of volatility this morning, but did not drive the pair in any particular direction for the day. In the chart below, you can see what happened as the report came out.

Notice the increase in volume when the announcements were made. In addition you can see that there were some signals given on the stochastic indicator to sell and then re-buy after the sell off. Currently, the pair is consolidating and I will look to buy or sell on a break out. The chart below shows a 5 min. chart with this consolidation.

Weekly Preview April 24, 2006

EUR/USD continued to move up on a weaker dollar. The pair pulled back this morning but immediatly ran back up to the 1.2400 area where it is trying to break above. The market has been fairly volitile witht he price of oil moving up above $75 last week. Currently, the oil price has moved down about $2 today. Continue to watch to see if the pair will be able to bust above this resistance.

The EUR/USD is currently in an over bought area according to the Stochastic indicator. This would mean a potential pull back on this pair. It is also possible to see this pair break above the current resistance areas and continue its uptrend. This morning it broke this resistance at 1.2400, but for just a few minutes. It then retraced back. Currently, it is trying to decide what direction it wants to move. Look for the announcements coming out this week to help this pair choose where it wants to go. Be prepared to buy or sell depending on the direction it wants to trend. Once it decides to break or pull back you can look for shorter term trades using the 60 min. or 15 min. charts.