January 3, 2012 Forex Signals

The Greenback extended its decline on Tuesday as better than anticipated manufacturing data from the US contributed to improved risk sentiment following an expansion in China’s manufacturing sector announced earlier this week. The Euro Dollar began the day close to 1.2920 however a strong start to equities in the Asian session dampened the Greenback, pushing the Euro to 1.2980 by the beginning of local hours.

With markets seemingly keen to focus on fundamental releases for the first week of 2012, both a decrease in the German unemployment rate and the aforementioned US manufacturing report added to the risk rally and the Euro continued to highs near $1.3070 against the Greenback, trading this morning at 1.3050.

Also weighing on the US currency was the release of the FOMC minutes for the central bank’s December policy meeting, where they agreed to make public for the first time forecasts for the benchmark interest rate at their Jan. 24-25 meeting. As Japan remained on holiday yesterday this sentiment directed the safe-haven pair and the USD/JPY also moved lower to where it trades at time of writing at 76.66.

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:  We are adding in a 75 pip trailing stop to our long position. In addition, we may close out half for instant gains while allowing the second half to run. If the price turns down, our trailing stop is still well into the profit zone. The price has returned to previous sideways channel levels. From here, we still see indications of a potential continuance to the move up, but if it bounces off resistance it could return back down.

GBPUSD:  We are also adding a 75 pip trailing stop on this trade and closing out half the position. As we see, the price on the Cable has also moved back up into the previous sideways channel range and may see a bounce back down. However, if it continues up, the second half will still allow us to get additional gains.

USDJPY:  We are still short on the Yen, currently about 80 pips to the good. It may be approaching support now, so we are considering selling off half our position. This will give us instant gains on half our trade while allowing the other half to run in case it continues to push down. If the price reverses, our trailing stop is still well into the profit zone for the second half.

USDCAD:  Very large drop yesterday pushed the price near support in the 1.0000 range. It did rebound back up about 100 pips from yesterday’s low, but without confirmation of a potential reversal back to the upside we don’t want to risk a trade today. However, if it continues to push down, tomorrow may see a good opportunity. No trade today.

AUDUSD:  Large move up yesterday pushing the price above primary resistance. We will wait to see if buyers remorse brings the price back down before trading. If it continues upward, we may be able to trade it tomorrow, but it would still be a risky trade. If we see a confirmed reversal, a short position may make more sense and have better opportunity.

USDCHF:  A relatively large push down created a Bearish Engulfing pattern which would normally indicate a good potential to a coming downward move. Unfortunately, the price is right near strong primary support and we could see it rebound. The stop loss required for a short trade today would be much to large for the small potential gain on a short position. Given the potential upward and downward movement, the reward/risk ratio would be around 1:2 or 1:3 which means mathematically it would be a poor risk trade.

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