ForexSpirit

The market pundits seem to have correctly forecast the lack of volitility in the major currency pairs during the summer months. As the old adage goes, a broken clock is still right twice a day.

If the last two weeks are anything to go by, traders seem to be staying out at the Hamptons from Monday to Thursday and only turning up for work on Friday. The first four days of the last week of June saw another incredibly low range of 65 pips on EUR-USD. Even the FOMC interest rate decision on Thursday, which was kept unchanged as predicted by just about everybody, saw barely a nudge in price either way.

For the third week in a row, it was Friday that saw a fire lit under the euro. Friday’s 90 pip move up leaves price just over my median price level of 1.3500. The last trading day of June had price returning to Q3; the last time we were at such lofty heights was during the first week of the month.

The yen took center stage this week. All eyes were on the Japanese economy as Japanese authorities talked up the currency. Any strengthening of the yen is most likely going to see the EUR-JPY unwind much faster than USD-JPY. Over the short term this means that the euro is going to come off worse, which should see EUR-USD go down. In the medium to long term any unwinding of the carry trade will affect the US dollar more, and thus the euro should reassert its strength over the dollar.

With this is mind and the moribund price action in EUR-USD I decided to close out my trade entry from Q1 for a profit of 120 pips. I also placed a limit order for one of my Q2 entries from earlier in the month. I locked in 35 pips profit for this second trade exit of the week.

The first few days this week saw the yen gain some traction against the other majors, but the poor economic data out from Tuesday to Thursday put paid to that. The Japanese Fin Mins are trying to talk the talk, unforunately the economy just isn’t walking the walk just yet.

I have one final trade still active that was opened back on June 7th at a price of 1.3447. After Friday’s move up I am looking to get 100 pips from this trade.

Even with the three profitable trades I closed over the past two weeks, I still haven’t quite nullified the drawdown from closing two losing trades on June 12 and 13.

As I mentioned at the time of closing those two losing trades, my timing was probably going to be horrendous and that price was going to move right back up. My powers of prediction continue to astound me!

I hope my wistful sarcasm comes across forcefully enough

For the second month in a row it has been the cost of holding my trades open that has been the real killer. In other words, I haven’t made enough money to cover my trading expenses.

While traders who play the carry trade look to the daily interest payments as their main source of profit, when I trade to the long side on EUR-USD I have to view the negative interest payments on trades I hold as a trading expense, in the same way that spreads and trading commissions are trading expenses.

My return on trading equity for the month of June 2007 was: -4.69%.

It has certainly been an educational month. The market has taught me that I need more patience on waiting for market dips, and that I need to stick to my analysis and convictions of such a market dip taking place. The severe lack of market volatility over the past two weeks has also been an interesting experience, one where patience is again in great demand.