Nearing the end of the month..
Dear Friends/Fellow Traders,
The month has been a dramatic one for the Dollar, switching camps from Bearish to Bullish to Bearish again and then Bullish again, and finally Bearish. The shift in sentiment has been so frequent and extreme that I've almost been thrown into confusion along with the rest of the market; despite all this confusion, my medium-term outlook remains bearish for the Dollar, and I stand by that when I'm monitoring my medium-term positions. My stops are generally very wide for my medium-term positions, and I could be seeing floating losses of up to 150 pips at times when market volatility kicks in, but as long as my emotions are in check and I remain focused on my goal, it should work out fine in the end. Now I'm not saying that it will always swing back in my favour and I do take losses sometimes when sometimes strings of data/news releases goes against my trade, but good risk management/money management has served me well in my trading days, and I tend to win much more than I lose. One thing to always remember, is to ALWAYS abide by your stops, because if the trade has gone against you that far, chances are that it will continue to go against you and your best course of action would be to cut losses and preserve capital to trade another day!
Enough about risk/money management, now here is my outlook for the various currencies nearing the end of the month:
US Dollar: A clear bearish bias, with weak data and not-so-hawkish outlook from the FOMC statements. It looks like the US Economy is geared towards a soft landing.
Euro: Rather cloudy, without a clear medium term directional bias. Short-term bias is up, however, with the German IFO numbers stronger than expected. The Germans are doing very well but the Italians are weighing down on the Euro with its widening trade deficit. The Euro will continue to be a good diversification option out of the Dollar in the long-term.
British Pound: The pound continues to be strong across the board, even with the occasional weak data that may temporarily weaken it for a day or two. For the past few months, the pound has gained the most but weakened the least against most of the other currencies, so that's why I'm usually so reluctant to short the pound because of its "toughness".
Japanese Yen: The Japanese Yen continues to underperform due to the overhyped North Korean Nuclear Tests that is having an effect on the Asia-Pacific region, and the uncertainty surrounding the newly-elected PM Shinzo Abe. However, the economic data continues to impress with strong numbers and I think the Japanese Yen is due for a re-evaluation in the medium-term; having said that I mean that the Japanese Yen is extremely undervalued and I would advise caution if you are planning to short the Yen for carry trades.
Swiss Franc: The Swissie has been on and off for the past few weeks because of the dilemma of the franc being a good contender for carry trades (due to the franc's low interest rate compared with the other majors) and its status of being the world's safest currency. If you've been trading the franc lately you may have been very frustrated because of the lack of direction. However, the swiss franc is a good long term hold as nearly a quarter of its currency is backed by gold reserves. Whenever there are geopolitical risks, a lot of capital flows into Switzerland, despite the low interest rates.
I hope that you have been doing well in your trading, and if you have any questions for me don't hesitate to ask, I will try my best to answer it!
To successful trading,
Dickens
The month has been a dramatic one for the Dollar, switching camps from Bearish to Bullish to Bearish again and then Bullish again, and finally Bearish. The shift in sentiment has been so frequent and extreme that I've almost been thrown into confusion along with the rest of the market; despite all this confusion, my medium-term outlook remains bearish for the Dollar, and I stand by that when I'm monitoring my medium-term positions. My stops are generally very wide for my medium-term positions, and I could be seeing floating losses of up to 150 pips at times when market volatility kicks in, but as long as my emotions are in check and I remain focused on my goal, it should work out fine in the end. Now I'm not saying that it will always swing back in my favour and I do take losses sometimes when sometimes strings of data/news releases goes against my trade, but good risk management/money management has served me well in my trading days, and I tend to win much more than I lose. One thing to always remember, is to ALWAYS abide by your stops, because if the trade has gone against you that far, chances are that it will continue to go against you and your best course of action would be to cut losses and preserve capital to trade another day!
Enough about risk/money management, now here is my outlook for the various currencies nearing the end of the month:
US Dollar: A clear bearish bias, with weak data and not-so-hawkish outlook from the FOMC statements. It looks like the US Economy is geared towards a soft landing.
Euro: Rather cloudy, without a clear medium term directional bias. Short-term bias is up, however, with the German IFO numbers stronger than expected. The Germans are doing very well but the Italians are weighing down on the Euro with its widening trade deficit. The Euro will continue to be a good diversification option out of the Dollar in the long-term.
British Pound: The pound continues to be strong across the board, even with the occasional weak data that may temporarily weaken it for a day or two. For the past few months, the pound has gained the most but weakened the least against most of the other currencies, so that's why I'm usually so reluctant to short the pound because of its "toughness".
Japanese Yen: The Japanese Yen continues to underperform due to the overhyped North Korean Nuclear Tests that is having an effect on the Asia-Pacific region, and the uncertainty surrounding the newly-elected PM Shinzo Abe. However, the economic data continues to impress with strong numbers and I think the Japanese Yen is due for a re-evaluation in the medium-term; having said that I mean that the Japanese Yen is extremely undervalued and I would advise caution if you are planning to short the Yen for carry trades.
Swiss Franc: The Swissie has been on and off for the past few weeks because of the dilemma of the franc being a good contender for carry trades (due to the franc's low interest rate compared with the other majors) and its status of being the world's safest currency. If you've been trading the franc lately you may have been very frustrated because of the lack of direction. However, the swiss franc is a good long term hold as nearly a quarter of its currency is backed by gold reserves. Whenever there are geopolitical risks, a lot of capital flows into Switzerland, despite the low interest rates.
I hope that you have been doing well in your trading, and if you have any questions for me don't hesitate to ask, I will try my best to answer it!
To successful trading,
Dickens
posted by ForexDragon at 6:42 PM
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