Chinese Interest Rates Turn Dollar Sentiment

I don’t usually make trading decisions before the NY close. I’m a trend follower and focus on what IS rather than what I think or feel. However, my system rules are very specific and include a “score” from my daily fundamental analysis of world affairs. There are almost no single events that can change the sentiment of the “smart money.” But once in awhile, we do get a big surprise, and a prudent trader has to factor for those surprises in his system rules.

This morning the Chinese surprised the world markets by raising their interest rates for the first time since December 2007. This surprise move puts the global economic recovery in doubt and caused investors to move their money from energy, minerals and world currencies linked to those asets into the perceived safety of the USD.  Why does the Chinese interest rate move other currencies?  Well, let’s use the AUD and NZD as examples.  The AUD and NZD are tied closely to commodities.  The Chinese are major purchasers of these commodities.  When they increase interest rates, it’s a sign that they’re economic growth will slow.  As the Chinese economic growth slows, so will their appetite for commodities.  Everything is relative in markets.  big money traders have also likely priced in any Quantitative Easing efforts from the Fed. 

I’m not ready to say that we’ve seen the bottom for the USD, but I’m willing to sit on the sidelines and watch the retracement unfold and get back in on the next confirmed trading signal. 

Good luck out there!

Tim

Forex Analysis For Week Of 1 August 2010

Forex Weekly Forecast for the week of 1 August 2010

Forex market analysis published on 12 June 2010. SPs are are SWING POINTS. These are prices at which I am looking for trade setups.

Short Term Strategy (10 July 2010)

These are some of the trades I’ll be looking for early in the trading week.  I’ll cover some of these in the trading room.

Weekly Forex Forecast (For the Week of 20 June 2010)

EURUSD: For the week I’d expect to see trading between 1.2516 and 1.2115.  The current bullish correction should run up to at least 1.2656.  With summer trading well underway, we could watch the Euro go into a tight range between 1.2115 and 1.2516 for a month or so.  Only time will tell.  Early in the week, I’ll be looking for longs in the 1.2318 – 1.2292 zone.  Targets will be near 1.2450.

More to come later this weekend.

Tonight’s Forex Setups (for 18 June 2010)

USDJPY: Looking for selling opportunities at

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Tonight’s Forex Setups (16 June 2010)

If the  market looks active tonight, I may open the trading room to you guys and we’ll trade together and chat.  I’ll have to see what the market looks like though.  There’s not much need in wasting time in front of charts if there’s no money to be made.

EURUSD: I’ll be looking for continued bullish setups from the (more…)

Tonight’s Forex Setups (for 15 June 2010)

Tonight I’m looking at a few prices that have short term swing potential.

EURJPY: I’ll be looking for BUY setups at about (more…)

Weekly Forex Forecast (Week of 13 June, 2010)

Forex Weekly Forecast for the week of 14 June 2010

Forex market analysis published on 12 June 2010. SPs are are SWING POINTS. These are prices at which I am looking for trade setups.

EURUSD: Closed the week on the 50% fib from the weekly up-trend (October 2000 – July 2008).  There is a lot of Fibonacci confluence on SP1-SP3.  Watch for tighter ranges in all of the majors resulting from thin summer session trading.

GBPUSD: Closed the week on a significant level.  Price is currently supported by a confirmed 4 hour bullish trendline.  I’ll definitely be watching for breaks below SP4.  Summer trading makes me want to trade Shorts from SP1 and Longs from SP6

USDJPY: I’ll be looking for harmonic patterns on the SPs this week.  USDJPY is not in a committed trend by my definition and can be traded in both directions on all timeframes.

Today’s GBPUSD Trade – Use of Market Forecast

You could have placed the exact trade that I sent this morning, on your own, on Sunday.  If you read, and made use of the market levels that I posted in the Weekly Forecast you’d have been in a great trade!

Really, this trade was signaled this morning by almost all of my trading systems.  I traded the beautiful 30 minute Butterfly harmonic pattern, because harmonics and fibonacci are my favorite trading methods, but you could have caught this one on a head-fake system, crossover system, MACD divergence, Stochastic kiss, or any number of other systems.

None of these systems are worth squat unless they are confirming what you already have in your trading plan.  If you look at the picture below, you’ll notice thick gold lines.  These lines are placed on my charts on the weekend before trading starts, and they are levels at which I look for trade setups.  These same levels were posted to the world in my blog in the Weekly Forecast.  They will be again, pretty much every weekend.

Click the image to the left for a larger view.  You can easily filter your trades and setups by plotting the correct prices before your trading week.  This is an important step in creating your trading plan.

You’ll notice when you look at the weekly forecast that this trade was already planned and plotted out.  The entry and exit points were actually SP2 and SP3 for the GBPUSD.  These prices are places that I’d make a buy or sell if I were trading on a floor in NY, and I’m simply not interested in placing risk on an intraday basis at any other price.

Those of you who took the trade also know that I transferred your risk to the broker rather quickly.  I love transferring risk to the broker with my FK-1 orders!  At that point, only the broker can lose money on my trade and that’s a comfortable place for me to be.

Good luck out there!

Tim

How to Use The Swing Points

Any time I release a market forecast I get a few questions about what to do with the Swing Points (SPs).  Some people have marketed this data as “Bank Flows.”  These are prices at which a bank or commercial trader would be interested in buying or selling a particular asset.  It’s not as simple as placing a short trade at the first SP above the current price.  Even though that method will win quite often, I’ve found it better to watch these prices and see what the market is doing when it gets to these prices.

With the use of powerful trend filters, you can easily decide which direction you’ll trade.  The trend is in place for a reason.  It’s in place because the smart money is buying or selling.  The smart money tends to do this together, because they all have access to the best information regarding the economic situation to come.

Once you have established the trend, and price is approaching a Swing Point, it’s time to start watching price action.  I am looking for a specific breakout if I am going to bet on an SP failing.  I trade 1-2-3 patterns for breakouts, and nothing else.  There simply is no safer method of doing so.

If it looks like the SP will hold, I’ll start to look for reversal signals.  These reversal signals can be from almost any system.  Price Action, EMA crossovers, Stochastic Kisses, even certain RSI crossovers.  It just doesn’t matter.  The SP adds credibility to any system that you choose to trade.

I’ll post more information regarding my favorite setups in the coming days and weeks.  If you’re interested in forex signals from market mover Edge, I’d love to have you!  Subscribe Here!