January 31, 2012 Forex Signals

The Euro climbed to highs above 1.3200 overnight before falling sharply to find support at 1.3050 with a multitude of events kept investors on their toes. Earlier in the day Greek PM Lucas Papademos said his government was close to a deal to ease its crippling debt burden, and this optimism led markets on a risk rally despite the rate of European unemployment remaining at highs of 10.4%. As the session wore on it became apparent a deal between Greece and its private bondholders was further off than implied and with speculation this could now drag on until February 13^th, the Euro dropped to aforementioned support of 1.3050. Adding to the deterioration of risk sentiment and hence the rise in the Greenback was disappointing consumer confidence and Chicago PMI from the United States. With the Chicago index of business activity an important barometer for the health of the entire nation, a fall to 60.2 from the previous 62.5 was understandably disappointing for a recovering economy. The Japanese Yen has also remained close to 3 months lows, 76.20, on heightened risk aversion and speculation is beginning to circulate as to a potential Bank of Japan intervention.

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:  A breakout below the lower channel line seems to confirm the reversal. We are going to enter a short position risking no more than 1-2% of our account balance. Keep in mind the stop loss is fairly high, so we will reduce our lot size to minimize our risk. We are also considering entering a 50 pip trailing stop.

GBPUSD:  The price is right in the middle of the steep upward channel. We are getting mixed indications of direction on this pair today. The piercing line pattern is a potentially strong continuation of the upward trend signal. However, the price is slightly above current resistance levels. We are also seeing potential short term indications of a move back down, maybe to the lower end of the channel. We don’t see a lot of strength on the upward side, but medium term indications are showing a continuation of the upward move. We aren’t going to trade this with such mixed indications. No trade today.

USDJPY:   Another down day, but appearing very close to a hammer pattern. The end of the day showed a push back up, but short term indications are still showing a downward potential. We could see this move back into the low 75.00′s range, but yesterday’s trading is indicative of a slowing of the current move. After such strong moves, we believe a consolidation is coming and we don’t want to get caught in a bounce up after entering a short position. No trade today.

USDCAD:  A long legged doji shows great indecision in the direction and control of the pair. It has seemed to level out with a vengence, along with the swings. No position or trend trading can be entered while the price is flat.

AUDUSD:  The upward channel is still intact. A Piercing Line pattern would indicate potential upward movement continuing, but as prices approach into new highs since October last year, there is concern of a flattening out or reversal. The shooting star followed by a drop two days later indicate new resistance forming, and a failure of bulls to keep the upward momentum running. We expect the price to move up over the next 24 hours or so, but don’t believe it will be a significant move and will likely fall back down again. No trade today.

USDCHF:  The Bullish Harami pattern from two days ago was confirmed yesterday. We have indications that the reversal is likely to hold and we should see a continued move up over the next few days. However, this bounce up could simply be profit taking and consolidation, and the downward trend may continue. We are going to enter a long position, but risking only 1-2% of our account balance max.  We are also going to use a trailing stop to lock in gains early, if the price should move in our direction far enough.

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