Aussie Long initiated

Following on from my comments on Gold in the previous post; we can also find a similar set-up in the AUS/USD pair.  As a commodity currency, the fate of the Aussie is often correlated with Gold so it is unsurprising that a similar set-up has materialized in both markets simultaneously.  That being said, they are not the same market and a position in both is somewhat diversified.  However, your position risk should obviously be carefully managed if going long both the Aussie and Gold as they are highly correlated when it comes down to global Macro economy especially China during the overnight session (GMT).

Gold Long set-up

As illustrated below it is apparent that we were correct to take profits when we did in Gold (post 27 March) as momentum did indeed slow and we have since seen a persistent pull-back.

On the 4hr chart below: a decent long set-up has presented itself again with another clear false break of previous support (forming the bottom of the bearish mother candle) this also coincides with the 61.8 Fib level which, if respected, can form the beginning of a powerful 3rd wave of momentum.

I am therefore looking to get long on a close above this level with a tight stop below the low of this latest Hammer candle.

  

Gold closed-out

I have closed out my gold position for a nice profit as momentum has slowed to the up-side here.

Gold false-break and double bottom.

In Gold we've seen a clear false-break of previous major support forming a hammer set-up on the 4hr chart as below. 

On the daily time-frame we can see the significance of this support level as it forms the low of the mother candle established on Tuesday last week.  A close above this level will provide further confirmation.

EURGBP double bottom

We've got a double bottom in the EUR/GBP cross pair which has put me long as shown on the 4hr chart below.  This is not a Macro-Risk trade and can be a useful addition to holding a net long or short risk trade in the major currency pairs such as the Dollar/Yen which has delivered a bearish outside candle on the 4hr chart below.  Accordingly I have a sell order in place as shown.

 

GBP/USD sell order

Following the FOMC decision and statement; we've got a nice set-up in Cable which I hope to exploit with the following sell order.

Aussie Trade follow-up

Apologies for the quality of this image.  My short position has only been partially displayed for some reason as text on the left hand-side of the pic.  Following on from my sell recommendation last week I am looking to take profit around these current levels for a respectable 1:2 risk reward.  If we can break yesterday's lows around 1.04850 I may look to get back in on the short side, but for now I think we've reached support and will be happy to take profits

As a side-note: the EUR/USD pair is approaching key levels in the form of previous support and the 50% Fib from the recent new low and bounce on the Daily.  I will be watching the price-action for any opportunities to get long here...

Aussie short opportunity.

On the 4hr AUS/USD chart today we've got a nice outside bearish candle set-up.  This price-action has come in around previous support and gives us an opportunity to get short with the bearish momentum that we have seen since this pair topped-out last week.  Placing a stop above the high of the candle we can manage a tight risk with potential for new lows and decent reward if the short-term bearish trend can continue.

EUR/USD Follow-up.

As we can observe from the latest EUR/USD chart below; The compression triangle formation discussed in my previous post last night worked a treat and as predicted price initially false-broke to the upside before a steep rejection and very healthy risk reward trade opportunity presented itself.  Unfortunately for me, this occurred during the Asian session and so I missed it! It is interesting to see, however, that once again this triangle pattern has worked really well in the EUR/USD pair when traded with the immediate trend, especially when preceded by a double top and bearish outside day.  These kind of set-ups are premium trading opportunities and definitely worth watching out for going forward.

Unfortunately we haven't seen the same momentum in Gold despite the break of the flag to the downside.  I missed the initial break and have been watching the price-action this morning but I haven't really liked anything so far.

Market Commentary 1st Mar 2012

There was an impressive 1st-of-the-month rally today in Equities as we saw decisive buying across the board, despite a weaker than expected ISM figure, resulting in a complete reversal of yesterday's panic sell-off in the FTSE! Reasons for this? Well; clearly we have reached the stage in this Bull market where negative economic data is merely being shrugged-off and any sell-off is considered a buying opportunity.  You could make the argument that Ben Bernanke's testimony has in fact reassured the market and is seen as a positive indictment on the health of the economy as the Fed doesn't seem to think that there is need for further stimulus.  Personally I don't buy this: The stock market and the economy are running on different time-lines and this entire Bull market in global equities has been driven by massive liquidity injections from day one.  So perhaps QE3 was never priced in by the market to begin with or the Fed has no credibility and Ben Bernanke's statement is not seen as decisive enough to convince the market of anything.  Market analysts who hold this view are pointing to a supposed fat finger yesterday evening that triggered a cascading effect in the global markets rather than a wide-spread sell off as a result of the content of Bernanke's testimony.  Judging by today's response in the stock market there may be some validity to this argument and although T-Notes have continued to sell-off; I would expect a much more aggressive move if the market was re-pricing an end to Fed Bond buying.  The problem is; when we look at Gold and USD there was an unambiguous response to the Bernanke testimony which has held  throughout today whilst Stocks have rallied.  Clearly, therefore, the market has taken the hint at less Fed dovishness seriously. So where does this leave us?  Ultimately the market will go where it wants to go and if we look at the fact of price behaviour it can be seen that Stocks are clearly Bullish while Gold failed to rally from its lows today and the Dollar has remained strong.  The complication of continued stimulus coming from the ECB may also be a contributing factor, but regardless of the catalyst, this tells us everything we need to know about the underlying sentiment in these markets and could even be a harbinger for a return to the traditional risk-on/ risk-off correlations in the Gold, Dollar and Equity markets.  This in itself would suggest a change in expectations about Central Bank policy and Quantitative Easing in particular.  Going forward, therefore, I will be watching for opportunities to short Gold and get long Equities on price-action retracements.  

Following on from the above post note the 1hr chart for Gold which has formed a Flag/ Triangle pattern with the 38 Fib providing short-term resistance.  There may be an opportunity to get short on a break of the flag or if price trades up to significant resistance at 1751.7 and the 618 Fib where I have left a sell order for the overnight session.

In the same vein; the EUR/USD pair has been unable to trade up in correlation to other risk assets including Equities and has instead formed a compression triangle as seen above.  I will be looking for opportunities to get short following on from Wednesday's outside bearish day and ideally expect to see a false-break of the triangle formation to the up-side before continuing the down trend.