(As written for My Paper on 11 October 2011. Click here to enlarge)
Risk currencies are having a brief rally this week due to three reasons:
1. United States employment situation beat expectations
2. Bank of England increased its asset-purchases ceiling
3. European leaders pledged to recapitalise banks
US non-farm payrolls (NFP) rose by 103,000 last month with private sector payrolls rising by 137,000. This was higher than the 50,000 estimate by industry experts. Additionally, the August NFP report was also revised up from zero to 57,000.
At the start of the week, EUR/USD edged up nearly 100 pips to reflect the cheer of the jobs report.
In a surprise move last week, the Bank of England raised the ceiling for its asset purchases to 275 billion (S$553 billion) pounds from 200 billion pounds. Tantamount to a quantitative easing, the move was the first loosening of British monetary policy since the depths of the global financial crisis in 2009.
After plunging 200 pips at the announcement, the GBP/USD has surprisingly rallied; climbing over 375 pips since the start of the week.
European leaders met in Luxembourg last week to hammer out concrete plans to stave off a European financial crisis.
German Chancellor Angela Merkel said European leaders will do “everything necessary” to ensure that banks have adequate capital, joining French President Nicolas Sarkozy in persuading investors that the situation is under control.
The heads of Europe’s two biggest economies reiterated their intention to keep Greece in the euro zone, and Mr Sarkozy set a deadline of Nov 3 – the date of the Group 20 summit – to address the crisis in Greece.
Despite the apparent good news that has buoyed markets, I expect the optimism to be short-lived. The worse is not over.
This is because QE3 is still on the cards as fas as the Federal Reserve is concerned.
With US unemployment hovering at 9 per cent for over two years and growth slowing down, the Fed is running out of options to stimulate growth and consumption.
Additionally, French-Belgian Bank Dexia has already become the first victim of the debt crisis in Europe. The purging has only just begun.
Trade Call
Short AUD/USD at 0.9930
On the four-hour chart, AUD/USD is moving in a range after a massive downtrend.
The optimism over the last week has created a brief risk rally in the AUD/USD. In the range, a resistance is detected at 0.9947. Our bias for this week is to the downside.
We will enter for a short once prices retrace and turn back down from the resistance level.
Entry is taken at 0.9930, a few pips below the resistance level. A protective stop is placed above the previous high and we will have two profit targets for this trade.
Entry Price = 0.9930
Stop Loss = 1.0010
1st Profit = 0.9850
2nd Profit = 0.9770
Ref AUD/USD, since resistance noted at 0.9947. How about going LONG- buying from present position wih 1 lot and capitalising on this. before going SHORT.?
Definitely possible; and I think you would have hit your profit target already had you taken the trade.
Hi Mario, today is my first day opening a trade for the first time for NZDusd . Already lost. Looking at the chart, my six sense tells me to sell and not to buy as the top line was about to cut the bottom line and is heading downwards. May I know for curiousity sake, why a buy was recommended by you. my tel is 93822138 in case you need.
Hi Mariam,
A buy was recommended on NZD/USD because the charts were breaking a new high. Risk currencies were heading upwards briefly as well.
3% risk or less. That’s the way to stay ahead of this business. Are you on FLEX? Do get up to speed with the trading methodologies there ya? All the best!
Hi Mario,
I am deciding which broker to use and have yet to open any account. I appreciate your trade calls information and would like to receive your email trade calls instead at my yahoo address from aia.
93211473
Hi Juan, ok noted.
We have a daily signal service if you are keen on that as well. Drop an email to coach@fx1academy.com for more information.
i would really like to be in your list for daily signals. thanks.
Hi Adrian,
Please contact coach@fx1academy.com for the daily signals k!
Hi I am interested in your daily signal service.
Sure!
Contact coach@fx1academy.com for this. Thanks!
Mario, today i lost another $850 EURUSD stop loss at 1.3711. this is massive for newbie like me. lately yr predictions have not been that accurate ?
Hi,
If the $850 is more than 2-3% of your current equity, you are risking too much.
The strategies are intact. Please manage your risk wisely k?