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Thursday, June 9, 2011

Trend for 10th of June 2011


News from Europe creates huge moves in currency market

Pretty cool day in forex market, wasn’t it? I hope you see how important economic news is and how big moves it creates. News from Europe (interest rate decision) caused Euro to collapse across the board. The same piece of news 45 minutes earlier did not create such big impact for British pound. It is not a big surprise that Euro collapsed. You saw how it has been going up during these two weeks. I guess it is pretty natural to have sharp corrections after such sharp advances. So, Euro was the biggest loser. Who was the biggest winner then?

From loser to winner and from winner to loser

I think you could answer the question yourself. Who was the biggest loser these two weeks? Canadian dollar! So, it is very natural for losers become winners and for winners become losers. At any rate, profit has to be taken by big dogs who are driving financial markets. So, they did take profit in Euro and reversed their positions. You could have joined the fiesta by shorting eur/cad pair. Today you might have faced some problems doing that if you did not choose the right point for your entry. 

Possible problems with entries

I have already talked about this manipulative phenomenon that happens when important news is released. You can notice it in eur/usd, eur/cad, eur/jpy and even in eur/gbp pair. Just look at 5 minute chart to see what happened quite soon after the news was released. Euro went down, then jumped fast up and then fell down again and continued falling throughout the day. Depending on where you placed your sell orders and stop losses you either were kicked out of your trades or had some nice profit. 

As these macroeconomic events create a lot of volatility in the markets you have to give room for the price movements and your stops have to be larger than usually. So, in case of eur/usd your sell stop order had to be at around 1.4555 and stop at 1.4657, eur/cad 1.4259 and stop at 1.4355. As the market proceeded downwards you had to move stops accordingly. If you had placed your orders at those levels the price would not have opened them during this primary move down and would not have closed your stop loss. I hope you were smart enough to place your orders in this way. 

Friday can see similar moves as we had today

Friday can bring similar moves as we had today. Data from Europe (German Consumer Price Index) at 6:00 GMT could continue sending Euro down and data from Canada (Net Change in Employment) at 11:00 GMT could strengthen Canadian dollar even more. Careful preparation has to be done so that you would not be kicked out of the market during these news events. I am bullish towards Canadian dollar at the moment and bearish against Euro. I think Japanese yen will weaken tomorrow. It looks bearish on most currency pairs, even against Euro. 

Gbp/jpy, cad/jpy and usd/jpy look very bullish. Cad/jpy hit 200 sma on 1 hour chart and maybe facing some resistance for the time being, but I think that will be taken away some time tomorrow and Canadian dollar will continue strengthening during next week. 

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Disclaimer
Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.