ForexSpirit

My current trade blotter doesn’t make for nice viewing at the moment. As the dollar bulls continued their stampede this week I have been flailing in my attempts to catch the bottom of the move.

The downward move has offered very little in the way of retracements, which has resulted in the rapid accumelation of positions. The close on Friday saw price making a slight bounce from lows for the day and week at around 1.3060. This represents a slight break and close below the bottom of my median grid (which is at 1.31). If the dollar bulls continue the move, taking price to 1.30 and below, this will constitute a new experience for me trading the 4×1 methodology. I have yet to deal with price breaking the median grid to the opposite side of my one direction.

My gearing is high, probably too high, at 19.5:1. This is primarily due to the four Q1 positions which I have open. While the short term dollar bulls seem to have the bit between their teeth, I still firmly believe that the dollar has further to fall. Most definitely in the medium term, and most likely in the short term. The only open position that I sort of kick myself about is the one I opened just before the US retails sale release.

Last Wednesday’s US retail sales figure of 1.0% provided a kickstart to the dollar bull move. The hugely US positive number surprised a lot of people, me included. What was not known at or prior to the data release is that the Census Bureau changed their sampling of retailers. They do this about every two and half years, and November’s number was one of those times. Thus this 1.0% is not comparing apples with apples, and gives a false reading if viewed in comparison with previous months data which used a different sample set. State sales tax collections show that things are not rosy at all, not by a long shot.

Of course the markets can stay irrational far longer than I can still reasonably handle, so I have to have an exit strategy in place for continued significant dollar bull moves. When I look at the current open loss of all my positions it doesn’t make for pleasant viewing. I didn’t enter all those positions at the same time. And so the trick to limiting my losses (if it comes to that) is that I don’t have to close out all the positions at once either. I can look to start my exiting out of the higher positions (like my one Q3 from 1.3322), while then looking to close out my lower Q1 positions for some profit if price rebounds back above 1.31.

With the Christmas holidays coming up it is hard to tell exactly how things will pan out for the last two weeks of the year. There are a few important US data releases in the coming week, with housing data tomorrow and Tuesday, PPI on Tuesday, the Philly Fed manufacturing index Thursday, and PCE and Personal Spending and Income to round things out on Friday.

The euro bulls that drove things in the week after Thanksgiving could all go on vacation early and just leave things to the dollar bulls, or vice versa.

If some euro strength has not returned by at least Tuesday afternoon then I will have to look at cutting my losses so as to reduce my leverage back to a more reasonable level. My dollar bearish bias will remain but I need to make sure that I preserve my capital at all costs.

If the break to the bottom of the median grid holds then I will also look to move the grid back to its former position of 1.28 - 1.32.