January 22, 2012 Forex Signals

Global equities gained half to a full percent on Friday as Spain and France both successfully sold 14.6 billion EURO worth of bonds. With lower borrowing costs temporarily sidelining fears of further fiscal and debt contagion, Europe has for the early parts of this year showed some very real signs of stabilizing. Following the successful auction, the EURO received some much needed support and after reaching an earlier low of 1.2886 against its US Counterpart was snapped up by investors reaching an eventual high of 1.2985. Running into some stiff resistance around the 1.30 Level, the medium-term outlook for the 17-Nation currency still remains relatively bearish. In the US on Friday evening a handful of data releases, in particular The Philly Fed Manufacturing Index and December CPI Figures both came in below forecast with a report due out later this week expected to show annualised growth figures of 3 percent. With reporting season also continuing this week, the US Recovery story is slowing starting to gain pace despite the strong headwinds it continues to experience out of Europe. Meanwhile this morning the US Currency opens stronger against the Japanese Yen at a rate of 76.959.

Now, on to our open positions and new trades. Lets take a look at the specifics:

Open Orders

New Orders

All Pending type orders are only good for the day. Set the pending order to expire within 24 hours.

Use the Lot Size Calculator to determine lot size. In general, never risk more than 2-3% on a single trade, but that also depends on your own personal trading strategy and risk management.

EURUSD:  The pair gapped down on open tonight, stopping out our open trade for a +233 pip gain on the remaining position. Often, a gap down such as this after a Hanging Man pattern would indicate a potential market push down. However, even though we may be seeing a reversal of the risk aversion, we want to wait to trade this pair for confirmation. The price may also fill the gap and continue moving up. No trade tonight.

GBPUSD:  Also with a gap down on open, the Cable price is currently well above the moving average. Also, it is sitting in the middle of Fridays trading range, as well as the wider channel created prior to the last down and up swing. Our indications are showing a potential move down, perhaps as a 50% pullback from the last upward swing, however, we need to see confirmation of that prior to entering a trade. The only potential difficulty is that if the price does drop, we may see it drop well into the last swing which would give us little trading potential following that. Unfortunately, a trade in either direction tonight would be too risky. No trade today.

USDJPY:  Friday never broke through the upper trading range and actually fell a bit throughout the day. Tonight the pair opened with a small gap down indicating a potential for downward movement. However, the price is almost dead center of the wide channel created over the past few weeks. It is also right near current moving average values. With other indications, we expect the price will likely swing up and down, but close somewhat near its current value. This means it would be a poor choice for a trading opportunity for position trading. No trade tonight.

USDCAD:  We are currently long on this pair, and short term indications are still showing upward move potential. Our stop loss is set below the potential support level which should allow us enough room in case the price fluctuates into the loss zone. If the pricing continues to follow patterns of the decending triangle, we should see it move up to our profit target point. The gap up is potentially a good sign and we believe it will carry the price upward over the next day or two. We would not, however, enter into any new trades tonight.

AUDUSD:  We see the Aussie continue to climb into new highs, and neither Friday, nor the small gap down on open today, is showing any possible slowdown or reversal. However, as we have the gap down, there is some potential that it may continue to move down on consolidation, or it may continue to move up on strength. One concern is that the price is currently at long term resistance, and we may see it bounce off that level back down. Either way, we cannot risk a trade on this pair right now.

USDCHF:  We are well into the profit zone on this pair. Still holding a short position but within just a few pips of our current stop loss. We expect we will be stopped out over the next 24 hours, but if so, we will be near a +160 pip gain. If the price moves down, then our gains will increase. However, short term indications show a potential move up. The price bounced off primary support and gapped up on open tonight. Even though we are still short on this pair, we are going to enter a long position to catch the reversal, if indeed it is going to move back up again. The benefit is that the price is fairly close to our stop loss, so our risk may be limited while still having a decent lot size for the trade. If we are wrong and the price continues to fall, the loss will be negated by the gains of the current short position, until the long trade gets stopped out. If we are right, the current short position will get stopped out with little loss of current gains, while allowing additional gains to build from the long position. We don’t want to risk more than 1-2% of our account balance, however, and we are actually going to place the long position trade equal to the lot size of our short position on this pair. That way if the price does move down, it will actually be a wash and no loss or gain will occur until one or the other sides is stopped out. We are also going to add in a 50 pip trailing stop.

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