Michael Bridgman

Another GBP short setup after 3 lower highs in the session.  Yesterday’s short didn’t get legs until the US session was underway.  After the US Advance GDP release, a beautiful setup occurred.  A long upper wick right after a news release… in my mind is a volatility aberration, so I don’t mind placing a stop loss halfway down the wick.  True structure is above but 3 lower highs, news behind us, a beautiful 3 candle reversal (highlighted area) makes for a compelling entry with the trend.  The larger charts are very clearly showing confluence.

As price moved down the very large 1.5000 level is difficult to take out.  Price moves through it but cannot reach our Target 1 which was at 1.4983. Before price can come back up all the way to retest yesterday’s low, we are taken out at “take profit” just above the 1.5000 figure.  Price needs to convincingly take out the 1.4950 level for a continuation move to the downside.  We will see next week if buyers emerge there – as they did today at 1.5000.

Commodity currencies continue to look weak and we are keeping our eyes on them.

Enjoy your weekend!

Back Tuesday if we find a trade.

Yesterday’s FOMC statement was similar to December’s.  The US economy continues to improve and our charts continue to show USD strength. Conversely, the UK economy is slowing, the EURO zone has lots to deal with and Greece will  remain topical going forward.

A GBP short set up nicely with a close below both yesterday’s low and the Asian session low.  To be clear, this was not a breakout trade.  We don’t do those.  The highlighted area shows a fairly typical “wash and rinse” of the early session breakout traders.  We waited for this pattern to be complete then looked for the real move to be confirmed.  The economic news calendar was light with US Unemployment Claims number pending later in the session.  With a stop loss above the session spike high, we had a R/R of greater than 3:1 to our Target 2.

 

Very often we see nice trending moves at this time of day.  However, it wasn’t until well into the US session that the trade got moving.  Patience is extremely important in trading.  As the trade moved down and cleared the 1.5105 area which was a key level today, it picked up downside momentum quickly.  As price closes below our Targets 1 and 2 we tighten up our take profit level and exit the trade as it moved back toward Target 2.

Position traders would be wise to watch how price reacts around the Jan. 23rd 2015 low and also the March and July 2013 lows.

Also, the EURGBP is very active and we continue to look for short opportunities there.

Good luck with your trading!

Back tomorrow if we find a trade.

 

The GBP failed to get above the 1.5218 level to challenge yesterday’s high.  After three attempts, a reversal sets up a short at the US open. The intention is to get through the Asian session lows before moving down to our Targets 1 and 2.   With FOMC later in the session the market has been subdued and many institutional positions were closed or lightened yesterday.  As the UK session concludes we exit the position before making it to the Asian low for modest gains.

 

Anticipating the FOMC message stays the same, we will look to trade with USD strength setups going forward.

Good luck with your trading!

Back tomorrow if we find a trade.

 

 

Looking at the 15 minute USDCAD chart, we can see there are no real buyers above the Asian highs or 1.2500 figure.  As the pair reverses we enter with a 17 pip initial stop loss for a potential 100 pip gain to our Target 2 – just below the 1.2400 figure.  As price begins to descend we need to clear the Asian low then the session low.  With the first round of US news pending and price right at the session low, we move our stop loss to just above the Asian low to allow for a retest with the worst case scenario being that we are closed out by the news reaction reversal for a positive trade.

Price retraces upward but does not retest the Asian session lows and begins to descend further.  Once it hits our Target 1, we see long lower wicks indicating buyers entering at this level.  We move our take profit level down in advance of the second round of US news.  The subsequent spike upward takes us out.

This pair is very sensitive to crude oil pricing at the moment…but not always.  The EURCAD and GBPCAD are bigger movers, so I watch the 3 pairs together and look for the best setup.

Good luck with your trading!

Back tomorrow if we find a trade.

ECB President Mario Draghi long awaited remarks were followed by more EUR weakness yesterday.  The forex market will get more interesting from here.  USD strength remains the overall trend – in my opinion.

It’s not unusual to see a bit of profit taking before the weekend or at the beginning of a new trading session.

The UK had a positive retail sales release early in the session and although price dipped – it could not close below the Asian lows.  Overall a very subdued move in the cable today.  Just in advance of the US traders beginning their session, a bullish candle closes above yesterday’s low.  An entry is taken as there are no pending major US economic news releases.

With only four hours left in the session, we will take a 2:1 R/R with our target being the Asian high.  Price begins to move up bullishly when a potential reversal setup occurs mid Asian range.  We protect ourselves by moving our initial stop loss to a plus 3 pip profit stop.  We continue to move our profit stop up as price makes its way higher.  In advance of the UK close we exit the trade at the Asian high where the momentum has failed to take the pair higher.

 

The main risk event of the week is the  ECB Press conference on Thursday.  What will Mario Draghi say this time and will it be enough?  Institutional position sizing will remain light in the meantime.

It is not unusual to see clear trends from the previous year become cloudy in January.  What is highly unusual is having a Central Bank completely surprise the market with an abrupt about face from their comments the week before.  I won’t mention any names.

As the market digests the news and USD trending strength took a hit, albeit temporarily, a short setup is found in the oscillating Aussie dollar.

 

As price ran into sellers above the Asian high and closes back into the Asian range with a lower high – a short is taken.  With a stop loss of 14 pips and our Target 2  60 pips away, we like the setup… preferring to trade with the larger trend.  Price moves lower but stalls near yesterday’s low.  When price breaks through yesterday’s low, we tighten our stop loss.  As price breaks solidly toward the Asian lows, long lower wicks appear… indicating buyers entering.  We tighten our take profit and the market closes us out.

Be extremely careful trading this week and keep your stop losses tight.  Money management is fundamental to trading success.

Good luck with your trading!

Back when we see something we like.