This, just gone year, has certainly been eventful for Forex traders. So let's take a little review and a preview of next year. Explosion of world financial crisis, started by real estate bubble in United States, ended and reversed muti-year long trends in currencies. After prolonged decline US Dollar demonstrated dramatic strength starting in early July. This process accelerated in September, with prices reversing somewhat by year's end. Another big gainer in 2008 was Japanese Yen. For years JPY was on the borrowing side of the carry trade. With financial crisis reverberating through all financial markets, many people were forced to buy Yen back, accelerating the process of JPY appreciation. This resulted in a spectacular run against most other currencies, in some cases setting all time lows. We think this process is about over. More on that farther down this page. Just like we warned at this time last year, interest rates seized to be driving force behind currencies movement. As a matter of fact, the opposite happened. Countries that responded to crisis by cutting aggressively have seen their currencies gain ground. Such was the case for USD and JPY. With falling commodities, came a fantastic collapse of the so called "commodities currencies", namely AUD, NZD and CAD.
Next year will likely remain volatile, but not on the scale of 2008. Later on in this update we take a closer look at couple of currency pairs, so scroll down this page.
Our trading systems had very good year. "Daily Pound" made 3121 pips in 2008, while "Daily Euro" produced 3827 pips last year. This is by far the best annual result ever achieved by "Daily Euro". While we expect EUR-USD volatility to remain high for now, it is unlikely that our system will repeat these results. Of course, you never know, markets have a way of surprising us, as we all found out in 2008. We must point out, however, results achieved by our services came with some pain, as both of them had a couple of uncomfortable draw down periods. In the end, though, they came through.
Detailed results pages have been updated through 12.31.2008, including performance graphs. Please take a moment to review them.
(Sunday 01.04.2009).
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Here are the results for 2008:
- Daily Pound made 3121 pips ;
- Daily Euro gained 3827 pips;
Follow the link on the right to view details.
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Last week's results.
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Our trade from last week was in AUD-USD. Plan was to buy at 0.6905. Trade was filled and it took couple of days but price moved to our target of 0.7005, for a gain of 100 pips. Good trade.
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One of the most dramatic moves of the year happened in GBP-JPY. In 2007 this pair has reached a high of 250, before falling a victim to the first of "unwind of the carry trade". Last year we witnessed, and participated, farther continuation and acceleration of this trend. GBP-JPY fell another 8000 pips, touching, by year end, an all time low of just under 130.00. Question on everybody's mind is "What's next?". We think this is the extent Pound's trouble. In 2009 we expect this trend to reverse, but in a rarther slow and orderly fashion. Volatility for this pair will likely be much lower, similar to what we have seen over last 3-4 weeks. We plotted Fibonacci retracement level for the latest down move. First target would be the nearest, 38%, which happens to be at around 160.00. I n our view this very attainable objective for GBP-JPY. At current level, an investor might consider buying and holding this pair, while a trader would want to wait for a buy signal to develop first. Bottom line is, we don't see any more, sizeable depreciation here in near future. Just the opposite.
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These most traded and liquid currency pair, EUR-USD, also had its share of dramatic moves in 2008. After reaching an all time high of 1.6000 by mid year, price collapsed to 1.2300 and rebounded to some degree by year's end. In our view this is on of the hardest prediction for 2009. Reason is different approach to combat financial crisis. FED has been very aggressive in cutting rates and adding liquidity, while ECB response was much more restrained. Over next few months we will see which actions had better results in stimulating respective economies. Will the new level of debt stall US efforts, or will Europe lack in recovery due to ECB's slow actions? This will have profound effect on EUR-USD. From a technical standpoint, most recent rally is over and testing of lows around 1.2300 is likely. Another leg down to 1.1500 area could be next. We don't see a compelling reason to enter a buy and hold position here either way and will stick to short term trades.
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Last few days' activity has created number of promising set ups across many time frames and currency pairs. We covered GBP-JPY longer term outlook and now we also think that a shorter time opportunity presents itself. On this 1 H chart we are looking for sharp move to the upside. Buy order is placed 134.82 with a target of 137.00. Due to the way price is behaving now, it is possible that this move might take some time, perhaps a week after order is filled, hopefully sooner.
Once again, we wish everybody great start and many profitable trades in 2009!
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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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