Trading update for 20th March 2013

Jarratt Davis

Special Consultant to the FPA
Messages
1,495
Hi Everyone,

First of all lets take a quick look at the last post i gave and the trade opportunity on the USD/JPY.

As you can see the markets 'gapped' down quite heavily at Mondays open, due to the debacle in Cyprus mainly, and this even had an impact on the yen pairs. These type of moves can be brutal, so it is not advisable to leave any kind of orders or trades open over the weekend just in case something like that happens.

If you did have an order left open at around 95.00 you would have to suck up a -70 pip draw down before the market even opened and brought the pair back to its 95.00 level. As Monday played out the price actually rallied up to our first target of 95.50 before coming back down to the 95.00 level again yesterday, and puncturing it by around 30 pips, before once again rallying back up to its current price of around 95.40.

Right now my focus is off this pair as the issues in Europe look to produce some better opportunities, so if you still have the trade on or are wondering whether to take it then it is probably best to leave it for now, and wait for more comments from the BOJ. I personally did not take the trade because it only came to 95.07 on Thursday / Friday last week before rallying and then i didn't want to leave a position open over the weekend.

So what am i looking at right now?

Basically i have been trading the Euro and the GBP as this is where most of the action is ....

The simplest pair to focus on for now is the EUR/USD and there are a few key things we need to look out for before we take any kind of trading decisions, so i will tell you exactly what i'm waiting for and then how i will play each scenario if it happens:

Right now things are extremely bearish as Cyprus is on the verge of going bankrupt and the only way to escape that is to basically steal ('tax') from bank accounts held in the country to cover the deficit. Yesterday their parliament voted against the tax so the EUR/USD fell, but today there is talk of the EU on standby to help and also a possibility of some deal being done with Russia (A loan maybe?)....

Rallies will occur on that pair as it all plays out but ultimately the sentiment is VERY bearish and it will take something pretty extreme to change that.

Even if they eventually go ahead with the tax then why not do it in Italy, and Spain and Portugal and Ireland? .... Then why not do it across the EU to solve the debt crisis once and for all?
This has real potential to cause a massive out flow of confidence and capital, which would obviously devalue the Euro....
(Obviously the politicians are saying this is not going to happen because they need the money to stay until that changes)

If no resolution is found then it goes bankrupt and this could start a domino effect amongst all the other countries ... With the same effect.

For these reasons sentiment for me remains bearish, pretty much whatever happens, and i will be looking to sell the rallies until something significant changes in the fundamentals.

1.3000 and 1.3100 are the levels i am watching and will be looking to short from right now.

We are targeting anything from 1.2950 down to 1.2800 and if it does play out as expected then i will update here.

As ever, do not risk more than 1% of your account on this so if you want to give the trade lots of room to play out do not use leverage, or if you do then just use small stops and so on...

Of course if something radical is announced that could cause the rally to turn into a new trend to the long side i will alert you all as and when i see that playing out :)

Hope you find this useful
 
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