Trade analysis

Trade Analysis for 31 Jan 08

Currency Pair: GBPUSD

Analysis: GBPUSD started falling on the 9^th of November from 2.1143 to a low of 1.9754. Currently prices have retraced from its low of 1.9754 to 2.0021 but prices did not manage to close there for the day. Prices closed at 1.9930 instead, forming a bearish doji. The high of 2.0021 was also near the 61.8 fib retracement and because it got rejected, I believe prices will start dropping with momentum on the 2^nd of January.

S/R Areas: 2.0021, 1.9892, 1.9754

Direction: Down

As you can see, the last candle there is the doji and prices are below the 89 SMA.

Currency Pair: EURJPY

Analysis: Although prices seems like it has been rising on the daily, the pair has been unable to break its previous highs for at least 3 times. The pair faces strong resistance on its upwards ride and seems poised to fall if it does not manage to break through. Moreover, a bearish hammer candlestick was formed and the MACD has given a red bar for the day. On the weekly, prices have been moving in a triangle formation and a break-out will occur soon. Current direction is unclear and it would be better to wait for the break-out and react instead. However, a move lower seems more probable and I will react if pric

es start heading downwards.

S/R Areas: 1^st Resistance: 167.63, 2^nd Resistance: 168.93

1^st Support: 165, 2^nd Support, 161.73

Direction: Down

Phew, what a year.

It was a great year for all those who called the right moves!

2007 was marked as the year where investment banks and banks started facing huge losses caused by the sub-prime mortgage problems.

So what has this got to do with the currency markets?


Firstly, the yen pairs.
The infamous carry trades collapsed as risk appetite over the world dropped drastically. With the markets in such a turmoil ( stock and bond markets ), who would dare to take on the risk of carry trades especially where the movements in the yen crosses became so volatile? The risk/reward ratio of that just don't match.

I believe that there will be further unwinding in the coming year as the credit crunch caused by the sub-prime problems spread globally.

Then, the rest.
First hit would be the pound, then aussie, and lastly the euro. So basically, I'm calling for a lower GBPUSD, EURUSD, and AUSUSD. The yen pairs would be ranging and further lower movements would not be shocking. The USD would rise not because its undervalued, but because the other currencies are just overvalued.

But, what's the point of saying so much in this when the future is so unpredictable? As traders, we should just focus on the charts and go with what happens.

A little about me

I've been trading for 4 years now and damn, I come across something new every single time. I had a private website prior to this to keep records but I've decided to blog it all down for 1 main reason. That is, with people reading it, I will be more disciplined and I'm sure we all know how much discipline means to us.

I'm a trend follower and I love breakouts. My trading system is a very simple one and although I have a stable one, I still test systems all the time and I really enjoy looking at different ones. My own system places a lot of emphasis on price action and regular technical analysis and I do use fundamental analysis as well. My trigger for entry is a basic moving average cross.

Simple as that. I will be posting my trade analysis and journal here from now.

Cheers!