Currency mayhem seems to be very fitting description of recent events in Forex market. There are so many conflicting forces at play, that it is very confusing and next to impossible to determine which developments take precedence. In face of free falling equities and practically frozen credit markets, some central banks moved to cut interest rates, with hope of facilitating money lending. Sweden and New Zealand did that. Some currencies, however are loosing value so rapidly, that their respective financial authorities moved to boost the rates. This is hoped to defend their currencies. Hungary and Denmark did so and might be followed by others. Meanwhile, panicked money kept flowing into USD and, most noticeably, Japanese Yen, resulting in markets swings unseen in decades. Even bigger that the famous collapse of European Monetary Agreement in 1992. There is more on that farther down this page.
Currency mayhem was not, however, at the top of headlines. Continued fall in stock markets grabbed most of the attention. Governments around the world are scrambling for solutions, but nothing seems to work. Commodities prices are also dropping out of site. Oil fell well under $70.00, causing OPEC to announce production cuts.
In all this our services had just about break even week, with one making and the other lossing few pips. Please see the results before and follow the link for details.
(Sunday 10.26.2008.)
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Here are the results for last week:
- Daily Pound lost 34 pips ;
- Daily Euro gained 29 pips;
Follow the link on the right to view details.
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Last week's results.
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Our trade of the week was a sell of EUR-AUD. Intended entry was at 1.9210 with a target of 1.9000. Trade happened as planned and we took a profit of 210 pips in short order. This pair remains very volatile. We will seek additional trades here, but one must be careful, since loss potential is also high.
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To put in perspective just how big current moves in JPY are, here is a very long term chart of GBP-JPY. On the far left we can see what happened in late 1992, famous event when Soros "broke the bank of England". Notice that current monthly candle is even larger. In the middle of the chart we can see another huge sell off in 1998, during the LTCM crisis. What is interesting, is that those drops were followed by several more months of decline, before recovery took place. Will the same happen now?
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With all that is happening right now, it is not easy to find a suitable trade. While basically any target can be reached due to ridiculous volatility, risks are just as great. Even tight stops are guaranteed tool, since slippage can be severe. Prudence dictates lowering trade size. With this in mind, we are taking a look at GBP-CHF. This pair has had a truly wild day on Friday, recovering sharply before the end of the day.
We are placing a buy order just above the high of last daily bar, at 1.8800. Our target is 1.9100. Normally the stop would be placed under the low of the same day, but it is not practical, due to the abnormal range of this candle. If our order is filled, we will track it on 4H charts, or maybe even 1H if volatility remains as high as it has been.
Have a great trading week!
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Once again we must stress that the trades highlighted here are only a small sample of our trades. If you have any comments or would like to obtain more information please contact us at info@spectrumforex.com .
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Risk disclaimer:
Substantial risk is involved. Forex trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the Forex markets. Don't trade with money you can't afford to lose. Nothing in our website shall be deemed a solicitation or an offer to Buy/Sell futures and/or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on our site. Also, the past performance of any trading methodology is not necessarily indicative of futures results. Trading involves high risks and you can lose a lot of money.
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