NZD/USD: Eyes on the Trend Line - Missed It Again!

NZD/USD: Eyes on the Trend Line - Missed It Again!

Trade Canceled: 2012-05-18 1:50

         Ugh, I can't believe I missed this setup! Yesterday we talked about how NZD/USD might suffer more losses. Unfortunately, the pair didn't rise enough to hit my entry order.

NZD/USD remained on a tight 50-pip range for most of the day yesterday despite the relatively sharper losses that occurred in European currencies. It found resistance at the .7680 area, which is a few pips below my .7700 short order.

Then, just when I was thinking of shorting at a retest of the range's resistance, the pair went on its merry way down a couple of hours ago as overall risk aversion was fueled by successive downgrades, mixed U.S. data, and weak Chinese data. NZD/USD broke below its .7630 support and is currently trading around the .7550 area.

Where have I gone wrong on this trade? Was I too picky with my entry point? A couple of my trader friends have pointed out that I could've also jumped in the bear party and just placed my stop above the range.

What do you think? How could I have played this trade better? As always, your thoughts are most welcome!

Trade Idea: 2012-05-17 2:17

My, my! It looks like the trends are really strong these days! Since I'm thinking the trend will still be my friend, I'm looking at this potential short on NZD/USD.

There's a falling trend line on NZD/USD's 1-hour chart that extends all the way back to the last week of April so I'm hoping to catch the retest of this resistance level. I used my handy-dandy Fibonacci retracement tool to figure out where I should enter, and I noticed that the .7700 major psychological handle is close to the 38.2% and 50% levels.

However, I did note that Stochastic is still pointing upwards, which means that Kiwi bulls could push this pair further up. Don't worry, I'll be waiting for this oscillator to reach the overbought zone and turn down before entering this trade. Once in this trade, I'll set my stop just above this week's top WATR and my target at the recent low of .7625.

As for fundamentals and risk sentiment, I do believe that the downbeat outlook for the markets could carry on, at least for the next couple of days. Although Greece already announced that they'd be having their elections next week, market participants seem to be pricing in the possibility of a Grexit later on.

Here's what I'm planning to do:

Short NZD/USD at .7700, stop loss at .7775, PT at .7625.

I'll be risking 0.5% of my account on this short-term trade and, if you're thinking of joining me, make sure you read our risk disclosure first.

I'd love to hear what you think of this setup so don't be shy to share your thoughts!

3 Ways to Expand Your Trading Skills

3 Ways to Expand Your Trading

              I have previously talked about niche trading and how mastering a particular trading strategy can help you build your account.

But as Forex Gump always says, all good things must come to an end. Your trading approach may work out well for a few weeks, months, or heck, even years! However, I'm willing to bet my brand spankin' new Sony SmartWatch that it won't last forever for the simple fact that market forces constantly change.

If you want to become a big baller in the unforgiving world of forex trading, you're gonna need more than one or two trading tricks up your sleeve. You not only have to know your strategies like the back of your hand, but you also have to be aware of other approaches that could land you pips.

In order to sustain your edge, you need to come up with fresh ideas. In trading, this could take the form of diversifying your skills. Don't worry, you don't have to drift too far from the skills that you already have. Sometimes all you need are a few tweaks in your habits to find new opportunities.

Here are three tips to get you started:

1. Look at other time frames

Just because the School of Pipsology's personality quizzes tell you that you're day trader doesn't mean that you have to stick to the shorter time frames all the time. Some hard core day traders I know find trades by checking out longer time frames for overall direction. Meanwhile, swing and position traders usually learn about significant levels and adding positions from day trading techniques.

2. Try trading other pairs

Think you've mastered the behavior of a currency? Why not step it up by trading it against other currencies? For example, if you're the AUD/USD expert among your peers, you can try looking at AUD/JPY, EUR/AUD, or even other comdoll pairs for trade setups. This way you're maximizing your ability to predict the Aussie's price action, but your trade ideas aren't limited to a couple of currency pairs.
3. Be open to other strategies

Expanding your trading skills ultimately boils down to you being open to new strategies. Again, you don't have to veer far from the skills that you already have.

If you're a system trader and you can spot confluences even in your sleep, then it wouldn't hurt to try out other systems that have similar concepts. In fact, Robopip has a monthly Best Forex Trading System contest dedicated for traders looking for new trading systems.

Discretionary traders also have a lot of room for new ideas and trading opportunities. Think you're good at spotting trends? Level it up by using the STA strategy or the HLHB Trend-Catcher system!

If you're used to trading ranges and you know when they're about to break out, then maybe you could give breakout trading a shot. You can also play around with other skills like good position sizing, trading fakeouts, and even trading a particular indicator.

The point of the exercise is for you to acquire new weapons in your trading arsenal. Having an edge in trading is always a good thing, but you need to develop fresh sources of edge to sustain your advantage.

2 Reasons Why Gold Didn't Trade

2 Reasons Why Gold Didn't Trade Like a Safe-Haven Asset

         If gold is a safe-haven asset, then why did spot gold prices fall from a high of $1,671.70 to a low of $1,527.02 in just 15 days? Does this mean that it should be sold along with the Aussie, euro, and other high-yielding assets? Here are two practical reasons why gold weakened in the past couple of days.

1. Gold lost its hedging appeal.

Before you scratch your head or flip a table in confusion, we must first remember that gold is mainly traded as a hedge against currency speculation and not as a safe-haven asset. Investors usually buy gold when holding fiat currencies look risky, and then sell the metal when other asset classes look more attractive. It doesn't necessarily have to behave as a safe-haven or a high-yielding, risky asset.

With the possibility of a Grexit and debt contagion in the euro zone dominating newswires lately, it's not hard to imagine gold losing its hedging appeal. Recall that the value of gold is highly sensitive to investors' perception.


And with first-time-in-history events like a Grexit and a possible euro zone breakup rousing uncertainty in global markets, more than a few investors played it safe by liquidating their gold investments. After all, there's no guarantee that gold will continue to be valuable against currencies if financial markets start going haywire.

If you believe that there would be a zombie apocalypse next month, wouldn't you exchange your cash (which would be as useful as toilet paper in zombieland) to something more useful like guns, ammo, and food? Yeah, that's what I thought. This is what gold investors did as uncertainty pushed them into converting their gold to more useful assets like the widely-traded Greenback.

2. Investors had no choice but to sell gold

While some investors moved their money out of gold due to uncertainty, other traders simply had no choice. Greece's failed elections, debt contagion concerns, and QE speculations hit risk appetite hard this month, and caused sharp consecutive losses to stocks, commodities and other asset classes.

As a result, many investors were forced to liquidate their gold investments in exchange for cash. In fact, CFTC recently reported that hedge funds and other money managers liquidated more than $2 billion worth of gold futures last week

Gold's technical conditions weren't any help either. Spot gold had been failing to breach the $1,700 major psychological level since mid-March, so it was easy for investors to speculate on its overbought conditions and a possible mid-term correction.

Not all hope is lost for gold though. Spot gold ended the day in the green for the second day in a row yesterday. Interestingly, it started gaining ground when the weak Philly Fed manufacturing index hinted at more QE from the Fed. For some market players, this translated to weak Greenback and strong gold.

Does this mean that gold is back to predictably trading as a safe-haven asset? Maybe, but don't count on it just yet. We're trading in an unusually uncertain market environment after all. At the very least you should keep an eye on gold's price action over the next couple of days to see if a new trend forms for the shiny metal.

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Spanish Banks are Next in Line as Moody’s Downgrades 26 Italian Banks

Forex Daily Review: Spanish Banks are Next in Line as Moody’s Downgrades 26 Italian Banks

Moody's explains the adverse operating conditions; Italy's return to recession, mounting asset-quality challenges, weakened net profits as well as restricted access to market funding are the the main reasons for the rating cut.
26 Italian Banks Downgraded by Moody's*

Banca Carige S.p.A.
Banca della Marca Credito Cooperativo
Banca delle Marche S.p.A.
Banca Monte dei Paschi di Siena S.p.A.
Banca Monte dei Paschi di Siena, London
MPS Capital Trust I
Monte Paschi Ireland Limited
MPS Capital Services
Banca Padovana Credito Cooperativo
Banca Popolare Alto Adige-Suedtir.Volksb
Banca Popolare di Cividale ScpA
Banca Popolare di Marostica Scpaarl
Banca Popolare di Milano
Banca Popolare di Spoleto
Banca Sella Holding
BancApulia S.p.A.
Banco Popolare Societa Cooperativa
Banca Italease S.p.A.
Banca Popolare di Lodi Investor Trust III
Banco Popolare Luxembourg S.A.
Banco Popolare Societa Cooperativa, London Br
Cassa di Risp.di Bolzano-Sudtiroler Sparkasse
Cassa di Risparmio della Provincia di Chieti
Cassa di Risparmio di Cesena SpA
Cassa di Risparmio di Ferrara
Credito Emiliano SpA
Credem International (Lux) S.A.
Credito Valtellinese
Iccrea BancaImpresa S.p.A.
Intesa Sanpaolo SpA
Banca CR Firenze S.p.A.
Banca IMI SpA
Banca Monte Parma
Intesa Sanpaolo SpA Hong Kong Branch
Intesa Sanpaolo Bank Ireland plc
Intesa Funding LLC
Intesa Bank Ireland p.l.c.
Intesa Sanpaolo SpA, NY Branch
Societe Europeenne de Banque SA
MedioCredito Trentino-Alto Adige
UniCredit SpA
UniCredit Int'l Bank (Luxembourg) S.A.
UniCredit Luxembourg Finance S.A.
UniCredito Italiano Capital Trust III
UniCredito Italiano Capital Trust IV
UniCredito Italiano Delaware, Inc.
UniCredit Bank Ireland p.l.c.
Unicredito SpA, New York Branch
Unione di Banche Italiane S.c.p.A.
Banca Lombarda Preferred Securities Trust
Banca Popolare di Bergamo Capital Trust
UBI Banca International S.A.

*Source: Moody's Investor Service

Moody's threatened Credit Immobilier de France (CIF) with a huge 4 notch downgrade as auditors refuse to sign off on the 2011 accounts.

Next on Moody's hit-list are Spanish banks, Austrian banks, Swedish banks, Norwegian banks, German banks, Danish banks, Finnish banks, firms with global capital market operations, French banks, UK banks, Luxembourg banks, Belgian banks and Dutch banks. The reviews will be published in May and will end by June 2012.
Euro Zone GDP

The German Prelim Gross Domestic Product (GDP) rebounded in April from -0.2% to +0.5% despite analysts' forecast. EUR/USD gained on the back of the positive data, currently trading at 1.2858. German ZEW Economic Sentiment at 09:00am GMT will be given extra attention by forex traders to evaluate whether the German economy is indeed in recovery which could add to Euro-dollar gains.

EU commission Euro Zone forecast:

EU economy currently in a 'mild recession'
Eurozone unemployment to stay around 11% through 2013
Recovery in sight but economic situation fragile.
Spain GDP to fall 1.8% in 2012, 0.3% in 2013
Spain 2012 deficit 6.4%/ GDP, above 5.8% target
Spain 2013 deficit seen 6.3%/ GDP (vs. 3% Government target)
Greece GDP seen down 4.7% in 2012, flat in 2013
Greece 2012 deficit 7.3%/ GDP, 2013 deficit 8.4%
Greece 2012 public debt 160.6%/gdp, 2013 168%
Germany to grow +0.7% in 2012, +1.7% in 2013
Germany hicp seen at +2.3% in 2012, +1.8% in 2013

Greece's Debt Management Agency (PDMA) is planning to sell a new 13-week treasury bill (T-bill) maturing 17 August. Greek T-bill yields could surge amidst Moody's and Fitch, a warning to investors that risk for an exit of Greece from the Euro Zone has increased. Greece is also due to release the provisional 2012 GDP data from the first quarter that will reflect the austerity measures effect. Auction results are due to be announced around 09:15am GMT.

Reversed head-and-shoulders are forming on CAD/JPY 4hr chart. Although a clear signal has not been given at the time of this writing main resistance is seen at 80.19 (55 moving average, purple line). Should the price break above the 55MA, gains may extend toward 200MA (pink line), currently at 81.42.

Failure to break above the 55MA may result in a temporary weakness towards 79.30.