ForexSpirit

This week the ECB and BOE kept rates on hold. No real surprises there. In the run up to the rate announcements on Thursday morning the euro came off its high, dropping 200 pips. Again nothing totally surprising there. The euro had seen a great six week rise against the US dollar. A correction was all but inevitable.

On the off chance that the slight dip (down to just 1.4220) that was seen on Monday was it I entered a Q4 position. The drop in the London session on Tuesday showed me that the correction was just getting started so I bailed out at around 1.4145.

The post NFP reaction on Friday morning makes me believe that there is a chance that the correction might have reached a bottom. There was a classic spike and reverse after the NFP data came out. I’m sure a fair few news traders got crushed if they didn’t get out successfully on the initial spike, but that’s the great danger in trading the initial reaction to the numbers.

I waited until the first spike had run its course, waiting to see what would happen after initial profit taking had taken place. There was no second push to take out the low created by the spike. My thoughts on seeing this price action was that all the good US data was now on the table (since the headline payroll number was slightly above consensus and there were big upward revisions to prior months, especially August). If there was no more good US data on the immediate horizon then the correction was running out of steam.

Based on this analysis I deemed that 1.40 had shown itself to a good support level. I moved my grid up to 1.40 to 1.44. Thus when I entered a trade on the euro after the NFP data my entry point was within my new Q1.

Price slowly rose all day, making a high of around 1.4150 before falling off slightly by the end of the day to 1.4135. Just before reaching that high, my Anti-Hedge limit entry order was triggering (which was lying in wait since I had closed out that losing Q4 trade from earlier in the week).

The US markets are closed on Monday as it is Columbus Day. Since there will be very little activity during the New York session the only significant moves of the day are likely to take place during the London session. The week ahead is also pretty data light, at least until the US Retails Sales, PPI and Consumer Confidence numbers on Friday. It is quite likely that whatever direction Monday’s London session goes in will be followed through for the rest of the week.

A break below 1.41 again and I think we’ll easily see a test of 1.40 if not 1.39 by week’s end. If the upward momentum after the NFP release continues then a slow climb to retest the highs at around 1.428 are on the cards.

Last week’s US dollar strength was mirrored on the USD-JPY pair. I entered two Q2 trades on the dollar rise, one at 115.75, the other at 116.25, looking for the rangebound conditions to persist. Instead the dollar slowly climbed out of the main consolidation area. Once price reached 116.75 I closed out half of my first position.

The NFP release caused a spike above 117 before it fell back. My Anti-Hedge entry at 116.75 was hit and my full two positions were again back on. My current feeling is that if the spike high (at around 117.30) is taken out then I’ll exist both positions and just re-enter them with the Anti-Hedge method once the yen starts to show some life again.

My current USD-JPY grid has a high at 118, so I’ll definitely be thinking about re-entering short if that area is encroached upon.