Day 147: Dollar’s power tested

$10.31 $801.19

I placed in a couple trades last night before I slept, longing the dollar. I thought the dollar would gain strength overnight, especially against USD/CAD before GDP numbers, and placed a small position size. The trades were actually doing really well until 8:30 when ECI numbers came out horribly. Employment Cost Index is not a huge market mover. However, since the dollar is so sensitive to data, it’s no surprise how an outlier can affect it’s movements. The ECI reported the smallest quarterly wages increase since 1982. Post ECI report, there’s rumors that the chances of a Fed September rate hike is less than 35%. From this news, the dollar gave it and collapsed hard, giving over 100 pips to EUR/USD. As for my trades, all of them hit their conservative S/L’s. Good thing it was only a small position.

I didn’t let my overnight failures hinder my morning performance. Even though the dollar fell hard from the ECI, it still hit support and managed to stay up. After a big move like today, there could only be two outcomes. Either the dollar crashes down more, giving it a reversal from a news catalyst, or it was just a news driven spike and returns to equilibrium. I took the opportunity to try and long the dollar, seeing if it can recover from the bad news, and luckily it did. I was also very confident USD/CAD would rise due to poor Canadian GDP news and it was one of my profitable pairs today. I was able to make up for my losses from overnight and end with a profit. The dollar’s power got test, however, it proved it was still the strongest currency.

Power of Technical Analysis

I’m not a strict TA trader (Technical Analysis) who only trades the markets from TA. I know many that do, however, I’m still skeptical of the whole idea that markets strictly move in patterns, waves, etc. I still learned the basic theories of TA, and got to admit, there are times where the markets line up so perfectly that it’s almost scary. Just like how there are Fibonacci patterns in nature, I think there are ebb and flows in the market that can’t be explained. I was looking over today’s movement and this AUD/USD pair caught my eye.

Below, you can see a diamond-like formation. The price had a downward move, spiked up from ECI news, perfectly touched 1.618 fib line then fell back down. The measurement of the initial leg down is IDENTICAL to the initial downward move. The red line measures the length from the two downward moves, the blue measures the distance from two tops and bottoms of the legs. The lines weren’t redrawn, but duplicated. I love seeing patterns like this. Seems too perfect for it to be a mere coincidence.

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Day 146: GDP!

-$105.09 $790.88

So yesterday’s trades did not perform too well. I stayed up all night waiting for a pullback but it never happened. I loaded up my cup with coffee and prepared for an all nighter to see how I would exit my losing trades. To me, yesterday’s FOMC wasn’t as hawk as I thought the market perceived it as. I also read that exports were soft, and that got me thinking about the upcoming GDP number. A quick info on GDP, there’s three types: Advance, Preliminary, and Final. Usually the the first GDP number makes the markets move the most, it gives trades the sense of how the country is performing in it’s quartile. So I was expecting huge movements.

It was 3:00 a.m and I was about to trade my first full London session. I was still in my losing trades, hoping the dollar would test bottom. As the dollar kept inching higher and higher, I decided to call it quits and face the losses. I was really contemplating whether to hold it until GDP announcement or not, good thing I didn’t. After I got out of my short dollar trade, I was free to trade it long. Luckily as it got closer to 8:30, when GDP was suppose to be announced, the market was anticipating a promising GDP and gave the dollar a push higher and higher.

At 8:30 when GDP finally announced, it came out short! The number was 2.3% vs 2.6% expected! Now, although I was right on it falling short of expectations, it still didn’t push the dollar any lower. I guess the number was just low enough to push the dollar up very slowly. Unemployment came out to 267K vs 268K exp, which helped the dollar as well.

All in all, I was able to regain most of my capital back from my bad FOMC decision. The dollar is crazy bull now and I would stay away from shorting it for a long term period. Now, back to fixing my crazy sleep schedule.

Day 145: FOMC CONFUSION

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The FOMC kicked my butt today. I saw a stable support in the DXY and played a long dollar trade among dollar pairs. My trades went so well I even took off work early and went out to run errands. I made sure to come back before 2:00 to not miss the FOMC.

As the statement releases at 2:00, I’m carefully trying to hear for hawkish or dovish clues as a reporter speaks on CNBC. Previously when Yellen spoke, she insisted on a rate hike this year whether it was September or December. However, this statement had no talks of a particular month. Nothing new came out in the FOMC. Just the usual data dependency, improvements in jobs, and slack in inflation. I took this as a Dovish signal and decided to short the dollar.

My profits were slowly decreasing and my P/L quickly changed from blue to red, dollar was going up and up. One thing CNBC stressed was that Yellen said job growth was “solid”. Not sure if the word “solid” single handily changed the tone of the statement, but I thought the FOMC was rather dove than hawkish. The stock market understood it as dove, why couldn’t the Forex market.

As we speak, I’m still in the negatives and I’m planning to hold onto my positions until tomorrow. GDP and Goods trade balance is schedule to release early in the morning tomorrow. I’m still trying to decide whether or not I should hold till then. One idea I had was, if Yellen knew tomorrow’s number and that they were better than expected, wouldn’t she have been full out hawk? One thing that’s bad for us traders is that Yellen said she won’t hint the Fed’s future moves. I guess we’ll all be in the dark until that one FOMC meeting where she announces a rate hike.

Day 144: Awaiting the FOMC meeting

$31.76 $895.97

Another down day for the dollar, which means an easy trading day. There was a lower than expected CB consumer confidence number of 90.9 vs 100.1 exp, which gave the dollar a push down for today. Although the EUR/USD and GBP/USD didn’t move much today, the USD/CAD dropped significantly. USD/CAD is so far up from the previous weeks, it has a potential of making more downward moves from it’s overbought condition, definitely a pair to pay attention to.

A FOMC statement is due tomorrow at 2:00 p.m. This would be important for the direction of the dollar; it can continue to head down, or find upward momentum again. My prediction for tomorrow will be Yellen restating about the anticipated rate hike this year, which is old news, while stating that she’s taking cautionary steps and waiting for the right opportunity. Yellen’s not a risk taker, and she’s definitely attentive to all the noise going around globally. If she does hint in any way of delaying the rate hike, I can see dollar crush through all supports in the bottom and continue down.

Dollar supports to pay attention to:

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Day 143: Lesson from Friday

Profit $31.34 Total: $864.21

One thing the market told us last week, especially Friday was that the dollar isn’t going up forever. There was global chaos and talks about the upcoming U.S rate hike that drove the dollar up fast and strong; it seemed to have lost it’s steam. The Euro is looking like it settled down, China’s market wasn’t as scary as everyone thought it was, and news about U.S. rate hike isn’t anything new. I can’t really see the dollar making new highs anytime soon. I’m still bull dollar for the long run, however, as Isaac Newton discovered, “What goes up, must come down”.

Friday’s market hinted that the dollar was due for a pullback. I started off trading later in the morning around 10:00 to make sure trend was bear. There was a better than expected durable goods number at 8:30 that made little to no effect in the dollar, which gave weight to my bearish dollar outlook. As soon as the dollar showed weakness and confirmed it was heading down, I shorted the dollar on multiple basket of dollar pairs. EUR/USD and GBP/USD was the strongest and showed relentless strength. With that said, there can be bounces from the dollar this week, but for now I’m still bear dollar.

Day 142: New home sales caught me off guard

Profit: -$53.38 Total: $832.87

Ouch, the dollar was hurt badly by a year low new home sales number. The data came in at 482K vs 543K exp which is the lowest level in 2015. Although new home sales rarely make a big dent in the market, today was a special occasion. The dollar was strong enough to fight the initial sellers but later gave in.

Usually I love trading the news and I’m always ready to short or long a currency whenever there are extreme data like today. My biggest mistake today was practicing patience. I was off to a good start and was in the green by longing dollar. Overnight, the dollar rallied and USD/CAD even made new highs. However, a couple seconds before the new home sales released, the dollar quickly spiked down. I knew the data was set at 10:00 a.m but didn’t pay attention because new home sales usually has little to no effect.

After the record low number, I tried shorting the dollar but the dollar wouldn’t budge. I mistook the dollar’s stationary effect as false strength and switched from short to long, the rest was a huge ugly mess. Throughout the day the dollar was making lower lows and eventually hit a solid support and consolidated. Today should’ve been an easy trading day, I should not have been so impatient.

Day 141: Record low unemployment

Profit: -$157.16 Total: $886.25

Wow, unemployment data surprised the market with a 42-year low. The number came in 255K vs 279K exp. The data helped the dollar explode to the upside. For every USD pair, mostly including GBP and JPY, took a hard beating; the Euro, was surprisingly strong.

As for my trades today, I was able to recover a little bit from my previous trades that had gone rotten. I woke up to a horrible loss this morning when I placed NZD shorts against the USD, AUD, and GBP. All three of the pairs hit SL’s and took a good chunk away from my capital. Mind you, this would be the 2nd time getting burned, back-to-back, from these pairs.

Fortunately, when the unemployment number announced, I was able to get a small profit by going long dollar, and I mustered up the courage to short NZD against the three aforementioned pairs above. And unlike yesterday, leaving my trades open, I closed my NZD short trades when they were healthy green profits.

Although I had a series of bad trades this past few days, I’m still confident I can finish strong for the week. I just need to watch my R/R and control my money management.

Day 140: Tough day

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Another tough day of trading. Yesterday’s ugly day of trading was saved by my long dollar trades overnight, however, I bumped into some other troubles this evening as well. The day started off great actually; I woke up to profitable trades and had a positive NY trading session as well. The difficulties came at 5:00 p.m when New Zealand news came out. The market was expecting a rate cut of 25 basis points or even 50 basis points. I thought shorting the NZD was a safe trade, but it proved me wrong. The fickle Forex market amazes and humbles me thus proving that in the end, the market is not predictable.

I took another heavy loss today when the the NZD actually rose from a 25 bp cut news. My reasoning is that the market already priced in for the worse case scenario, and when news released it headed north. Guess NZD was too oversold from speculation. However, although I got burned from shorting the NZD, I added shorts again after the initial spike. I’m convinced the currency will drop hard once the chaos seeps in. We’ll find out tomorrow.

Here’s the ugly spike from the dovish news.

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Day 139: Rebound day

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Sigh… I should’ve really listened to my own advice from yesterday. Yesterday I hinted that a possible rebound day was coming, and here it came. The dollar fell during London session early in the morning and then had a snowball effect till late NY session. Luckily I had my long EUR/USD trade I left overnight. Unfortunately, I closed the position a bit too early. I could’ve had an awesome day today if I went short dollar or even kept my EUR/USD open a little bit longer. There’s always a should’ve, would’ve could’ve moment in Forex, and that’s the stressful part of it. I was too caught up on the bull rally days and it sure taught me a lesson.

Although there was a rebound today, the dollar is still strong. I still have my long dollar positions open from today’s NY session. I still have hope and will leave it open.

And here is the EUR/USD trade today that makes me tear up every time I look at it. Just yesterday I posted the same chart and went long on the green arrow. The red arrow is where I took profits a bit too early.

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Day 138: Dollar reversal incoming?

Profit: $2.75 Total $1,043.41

It was rather a slow Monday; there was no price gap in any pairs including the EUR/USD or any volatile movement. Later on in the day, it looked like the dollar was starting a potential pullback, but rallied back. I traded the pullback and went long dollar in the afternoon. The comeback in the dollar still shows how strong it is, however, I do feel like the market should pullback sometime soon.

EUR/USD is in an interesting place right now. If the market should pull back, it’s sitting in a potential support area with surplus room for a rally. This is the current structure I’m looking at.

Screenshot 2015-07-20 16.48.18