Oil prices surge up. mixed dollar session and Poor UK GDP from friday

Dollar had a mixed session on Friday, as it benefited against the Euro but fell against the Aussie. Oil and commodities seem to be the cause of this, as supply concerns are in the markets, even though oil prices have retreated from Thursday’s high.

ECB VP Constancio has said that central bankers need to be extremely vigilant with respect to inflation expectations and ECB member Draghi has said that central banks are trying to assess whether the spike in oil prices wil have a permanent effect on inflation.

Cable pushed lower on Friday after UK GDP came lower at -0.6% from previous estimated of -0.5%

USDJPY remains in the range of 80-85. Seems like carry traders are not using the yen as a funding currency for carry-trade, when they can receive reasonable pick up by borrowing short and lending long within the single currency. This is because the yield curve is steeply sloped.

Data Today

Eurozone CPI – 10am GMT

US Personal Spending – 1.30pm GMT

Chicago Purchasing Manager - 2.45pm GMT

US Pending Home Sales – 3pm GMT

Stopped out on Euro trade and Aussie and Cable option trades

Euro Stopped Out
Unfortunately i got stopped out on my Euro trade. I guess the upward trend is still in motion. But i'm still not very convinced with the Euro strengthening and i would like to enter another short trade on the Euro. This time, i'll wait for a confirmation on the technicals such as a moving average crossover, before entering a short trade. (trade URL: EUR trade )

I didn't really enter into any spot trades today, was a little busy at work with other stuff, but i did enter into 2 option trades.

 
Aussie Strangle Option
I noticed with the Aussie that it's been in a range for the past few weeks. A strong resistance seems to be holding at 1.0199 and a strong support at 0.9957. I decided to do a 20-day strangle option, where i sold an AUD/USD call at 1.0200 and an AUD/USD put at 0.9900. The premium i received was 0.6% which isn't too bad.

Cable Strangle Option

  I also entered into a GBP/USD option trade where i again sold a strangle. Looking at the 4-hour chart we can see that the cable too has been in a bit of a range as well where 1.6297 has held up as a resistance and 1.5346 has held up as a support. I sold a GBP/USD call at 1.6400 and a GBP/USD put at 1.5300. I managed to pick up 0.5% in premium for a tenor of 1 month.

Lets see how these trades work out!

Euro higher after hawkish comments. Can it last?

Again we’ve seen a mixed dollar performance with a few major releases. The yen performed well with another down session in equities.

USDJPY continues to trade heavily as exporters step up their sales and longs established in the last week are getting unwound, with a lower US curve also weighing on the USD, as well as safe-haven flows.

Euro again ran up higher yesterday following hawkish comments by policymakers. I’m honestly not very convinced with this Euro movement, and I do feel it’s extremely speculative.

Sterling rose from 1.6220 to high of 1.6275 after BoE minute before trading to low of 1.6180 in NY with real money accounts selling. Bank of England minutes showed one more policymaker voting for an interest rate hike this month

Data today

German GDP – 7am GMT

Eurozone consumer confidence – 10am GMT

Eurozone economic, industrial and services confidence – 10am GMT

US initial jobless claims is due today -1.30pm GMT

US Durable goods orders – 1.30pm GMT

US new home sales – 3pm GMT

US house price index – 3pm GMT

Euro hitting a resistance level

The 4-hour chart shows the Euro coming quite close to the resistance level at 1.3735.

The previous uptrend, the Euro wasn’t able to break this resistance.

To clarify this, I’m going to zoom into the 1-hour chart. The 1.3711 level seems to be holding up quite well!

I’m going to play this a little differently where I’m going to place an order to sell Euro instead of waiting for a moving average crossover to occur.

Here’s the order I’m going to place.

Sell EUR/USD at 1.3710. Stop loss 1.3750 (40 pips). Target 1.3630 (80 pips).

When spot moves to 1.3670 (40 pips), I will move my stop loss to breakeven at 1.3710.

Update on the Yen!

Ok so this strategy didn’t quite pull through as the yen pulled lower instead so I ended up not receiving a buy confirmation and let this trade go.

strategy link: yen strategy 

Update on Cable short trade!

So price hit 1.6110 and I moved my stop to 1.6160 as planned. Unfortunately price hit a low of 1.6100 and then bounced back while I was snoozing away. So my stop got hit and I ended up with a 50 pips profit.

It is sometimes quite hard to make a decision when it comes down to trailing stops. Should we keep the stops closer so that we cut out on the opportunity cost when market bounces back as in the case of this trade?

Or do we keep the stop a little further in case the stop gets and runs back down on the trend again costing you the opportunity of more pips.

Tough decision! 

Trade link: cable trade

ECB Mersch pulls the Euro up

Yesterday during Asian session we saw the safe haven currencies benefit, especially the USD against the Euro and cable. We saw a lot of uncertaintly in the middle east especially out of Libya and the aftermath of the earthquake in New Zealand and Downgrade on Japan.

Euro managed to recover its losses during Asian session when Europe opened on the back of hawkish comments by ECB’s Mersch, despite some ratings warnings on Spain.

BoE's Posen and Tucker were on the newswires. Posen again sounded dovish as he said it would be a mistake to raise the BoE policy rate just "for the sake" of it and he did not rule out the possibility of deflation should the BoE raise rates right now.

RBA Stevens says rise in Australian dollar should help contain inflation.

For today we don’t have much data out today. BOE minutes could push the cable in a direction tonight, so keep a look out on that.

Data today

Eurozone industrial new orders – 10am GMT

Bank of England minutes – 9.30am GMT

US existing home sales – 3pm GMT

Yen on an uphill

Looking at the 4-hour chart, USDJPY seems to be consolidated in the range of 83.05 – 83.41.  If I look at the stochastic and MACD it seems like the USDJPY may head upwards, but the ADX is below 25, which suggests there isn’t a strong trend yet.

If I look at the 1-hour chart, we see the 10 EMA has just crossed over the 20 EMA towards the upside and MACD and stochastic support it. However again the ADX is below 25 which suggest there isn’t a strong trend yet.

At the moment I feel that I would play a breakout long on the yen if it breaks above 83.50 with ADX high than 25 on the 1-hour chart. So I’m going to watch this one out today, and enter once I get a confirmation on my charts.

 Update on Cable short trade!

Yesterday evening I left an order to sell cable at 1.6210 which got hit. I’m currently 43 pips in profit woohoo!

I’m going keep my stop loss at 1.6210 (at break-even). When spot moves to 1.6110, I’m move my stop to 1.6160.

Let’s see how this strategy works out! I’m hoping to cash in on more pips by keeping a trailing stop.

Libya tensions causing some movement this morning

Things were pretty quiet last night. This morning however we’ve seen quite a bit of movement!

USDJPY had a sudden 30 pips spike as asia session started which also coincided with Reuters headlines of Libyan warplanes bombing targets inside the city. Dozens of people have been reported killed in Tripoli. Fitch has also downgraded Libya’s long term ratings to BBB from BBB+.

Euro slipped lower this morning as well due to the tensions occurring in the middle east.

The Aussie too was under pressure on higher risk aversion, falling European equity and Aussie crosses selling.

 Data today

German GFK Consumer confidence survey – 7am GMT

UK public finances – 9.30am GMT

US Consumer confidence – 3pm GMT