JUL18 – Market Analysis


  • Cable trade closed – stopped out for -119 pips – 0.95R.  Price basically bounced around a little and then rallied strongly on the BOE minutes, at which point my stop was triggered.  As discussed with Paul, I could have managed the entry better – waiting for after the UK retail sales, but other than that, everything was good. 
  • Major news items today – UK retail sales at 9.30 (10.30 German time), Bernanke speaks at 3pm (4pm Germany)
  • Equity markets have been consolidating and trading in a tight range over the last few days.  The first part of Bernanke’s testimony, which occurred yesterday, did not provide clarity on timing of QE3 tapering.
  • Promotion of CHF – Looking over the STAM matrix, I have now promoted CHF to a strength currency – thus we have EUR, USD and CHF as currencies we want to buy, and AUD, JPY and GBP as currencies we want to sell.  There is a clear gap between these on the matrix.  The immediate implication of that is that the CHFJPY and GBPCHF pairs are now ones we want to look at in more detail as they are in S1 environments.

Pairs with S1/S2 setups AND strength/weakness combinations:

  • EURGBP – still S1B environment and a very good strength/weakness combination – this pair had a nice retracement on Wed, thanks to the surprise result of the BOE minutes.  I am now waiting for bullish PA in order to go long on this pair.  Bear in mind that this pair does consolidate a lot and has a lot of wicks, thus we need to allow for daily volatility in setting stop losses.  I am looking to use a Corn Trade setup on the 4H chart.  I checked and the 4H candles will close at 8am, noon, 4pm, etc German time.  I will look at how the candles are looking around those times to see whether I can go long.  UK news at 9.30 Uk time.
  • USDJPY – this one is back to S1B – thanks to a rally yesterday – I am now looking to trade this pair – we have had a retracement, and as earlier on in the week I am now looking for the right price action.  The setup most likely here is a three bar breakout.  We have a good target with previous high at 101.50.  There is no clean Corn trade setup on the D chart because the moving averages are not in the correct location. There is no Corn trade setup on the 4H chart.  The candlestick patterns on the D chart are not giving bullish PA.  However because of Bernanke speaking this afternoon, I will wait till then, and potentially place an order later in the day today.
  • AUDUSD – still S1S – maybe a corn trade on the D setup, but there is still a lot of sideways movement – thus I would prefer some real strong PA – in any case Bernanke is speaking this afternoon, so couldn’t do anything prior to then.  Also bear in mind, that the momentum could change to bullish on this pair any time soon, thus invalidating any buy set-up.
  • GBPUSD – till S1B – strength/weakness – no setup for now – although a lot of people seem to be talking this up now – I am still looking to go short!!
  • GBPCHF – S1S – now considered strength/weakness – as discussed this pair is very volatile and wicky – additionally there is UK news this morning – let’s look at this pair at 10.30am UK time, an hour after the news has been released.
  • CHFJPY – S1B – this pair has been rallying very nicely with no pullbacks or opportunities to get long in recent days – wait for a pullback/retracement.

Setups but no strength/weakness combination – GBPJPY, AUDJPY

Pairs monitoring for future setups

  • EURUSD – This could change into S1S or S2S depending on where the D and W candles close relative to the moving averages.  However even when it does change into S1 or S2, I will be very careful to trade it, since those are the strongest two pairs right now.
  • EURJPY & EURAUD – continuing to monitor for S1B setups with strength/weakness combination
  • USDCHF – this could quickly change back to S1B and could also have a corn trade setup – but this would not be a strength/weakness combination.  Thus hesitant to trade it.  It would in fact be strength/strength.  So nothing to look out for on that one.

Required Action

  • Thursday morning 10.30 UK time – Review GBPCHF pair following UK retail sales
  • 8am/12 noon/4pm/8pm (German time) – check for corn trade setup on EURGBP
  • Thursday evening:  I will do another once-over on the market (wearing my STAM hat) this evening, to see whether anything has changed following the news announcements, particularly to see whether there might be something to trade on either EURGBP or USDJPY, also GBPCHF and CHFJPY.

Discipline Strategy

  • Buy trade on EU and sell trade on Cable.  Did everything correctly – analysis and execution.  Positions are both still open at time of writing this post.
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