MP FOREX ADVISORY

Posts Tagged ‘eurusd’

The GBP/USD and the EUR/USD both trended upwards last week in a very gradual and in a very choppy and somewhat erratic manner.  We saw more false breakouts in our model last week than we have ever seen with our breakout model.  It appears that there is substantial, although discreet, market manipulation, which has been keeping the EUR/USD at artifically higher levels and preventing it from a continued decline, which would be supported by the fundamentals.  Such efforts almost never succeed as currency pairs will eventually yield to the natural forces of the market.  However, central bank manipulation certainly can wreak havoc with technical trading models as explosive breakouts can occur at unusual spots that leaves traders relying on technical tools of analysis somewhat befuddled.  We have been spending quite a bit of time working on several enhancements to our model, which primarily are focused on dramatically improving our risk-reward ratio.  We believe that such enhancements should allow us to post strong gains even if we have weeks with lower than normal success rate.  We will begin utilizing these enhancements beginning this week.  We will keep you posted.

It was difficult to ascertain any clear sense of direction this week in the forex market – a week that was loaded with significant news announcements, including the British and European Interest Rate Announcements and Monetary Policy Statements. The EUR/USD began the week by posting its lowest price since March 2006; however, the pair reversed course and made a singificant correction during the remainder of the week, closing just shy of the 1.2100 level. The GBP/USD was far more choppy. The Cable started the week with a bearish gap, followed by a sharp V-reversal on Tuesday, which sent the pair all the way up to 1.4757. Then, the pair made another sharp V-reversal, sending the pair back down to near the 1.4500 level.  We believe that there are great trading opportunities around the corner by taking adavntage of these current levels of volatility.  We will keep you posted.

The main story in the forex market this week is centered on the EUR/USD, which continues its steep decline as it crashes towards parity with the US Dollar.  On Friday, after two weeks of consolidation, the EUR/USD broke the significant support level around 1.2143 and continued downward to close below the psychological support of 1.2000.  The next major support level is around 1.1640, which was the low that was posted in November 2005.  We believe that this continuation of the downtrend will open the way for some excellent trading opportunities in the Euro pairs over the coming weeks.  While an eventual reversal is inevitable, at this point it does not appear that the downtrend will be ending any time soon.   

This week was a challenging one as the EUR/USD, on continued troubling economic news, pushed down to its lowest level since March 2006, only to reverse course in dramatic fashion, closing the week more than 400 pips higher than its weekly low of 1.2143.  It is possible that the EUR/USD may have posted its lowest level for some time, and we may be headed for several weeks of reacement or possibly even a new uptrend.  Such a reversal appears to be completely contrary to the fundamentals; however, this is what the technical picture looks like for the moment.  Next week will be critical in determining the near term picture for the EUR/USD.  If the 1.2143 level gives way, then we are likely to see a much more dramatic decline.  We will keep you posted.

We saw quite a bit of choppy price action today.  The GBP/USD suffered early in the European session after the release of a terrible British Manufacturing Report.   The EUR/USD, after an initial drop to around the 1.3543 level, surged late in the European session to a stone’s throw away from the 1.3700 level before closing for the day around 1.3643.  We entered some trades today in the GBP/USD, which we decided to close for a very small profit after receiving an alert from one of our volatility filters.  Tomorrow, we will look to the US Unemployment Report, along with the US Trade Balance Report for direction. 

Today, we entered a short position in the EUR/AUD, which was spread across multiple price points.  Our price target was never reached and we ended up cutting the trade just before the beginning of the Asian session in order to reduce our exposure.  After several weeks to the down side, it appears that the EUR/USD may be forming a reversal or at least retracing some of the recent decline; we will look for confirmation of this as we proceed through the week.

This Forex Trading System is a range trading system that is designed to capture a series of small but consistent gains during the afternoon trading hours when the market is tame and far more predictable. Most currency traders refrain from trading during the hours between 17:00 GMT and 23:00 GMT simply because the market tends to be very non-volatile and boring during these hours. However, what most traders fail to realize is that there is a tremendous opportunity in trading during this time period. In the midst of the apparent boredom of a sideways range trading pattern lies a predictability and a rhythm that should be the envy of any good speculator!  In essence, we are exchanging excitement and volatility for predictability, and predictability is far more valuable when it comes to trading.

The goal is not to be entertained by the market but rather to use it as a mechanism whereby we can generate consistent profits. Generally, the market produces consistent and predictable sine waves late in the US session and before the open of the Japanese market. We have discovered that applying this Forex system during this time period provides a literal gold mine of opportunity!

The purpose of this blog is to provide updates on a daily basis of the results of this trading system and to keep you informed of significant market events that may effect the trading.

Best wishes! -

MP Forex Advisory