Dollar into correction, yen to go higher

US dollar index finally entered to a correction phase. CHF is still weaking against USD, but yen appreciate significantly.

This week, we heard a upbeat news from Japan, too.

But biggest contributor of the index’s correction is Euro’s rebound, of course. I made a 1% profit on EURUSD long trade this week.

I will probably try to buy EURUSD again in the next week from purple .4 to .5 (1.2734 level) as long as the current correction does not do lower than the red line (around 1.2430). As usual, I will wait until I see a clear initiation of the rally.

I entered a short position of AUDJPY from 75.10 with 80.10 stop loss. It’s a 500pips potential loss, but I thought it’s worth the risk. AUDJPY dropped below 72.00 soon after followed by almost 400 rebound. It’s a violent move, and we should keep our position size small. I know it’s a scary move to some traders, but the only those who can sit tight can make a lot of money here. I will probably take profit at 67.00 to .66.50 level.

Time to regain the longer term perspective

It’s a sign to stop trading frequently when I start having to correct my Elliott wave counts so often. I think now it’s time to regain a longer term perspective.

Gold experienced the biggest correction in a week today.  I had regretted a bit when it touched 1250 only after I booked profit, but now feeling better. Of course, I have not changed my bullish view, and after this black 4 (a.k.a. “take profit” phase), I will plan to establish a long position towards $1260.

I always come back to US dollar index when I try to figure out where the forex market is going in the mid to long term.

After looking the dollar is only accelerating the rally, I started to think we are the most powerful phase of the bull market: Wave 3 (or purple .III in the chart below)

We are about to be finishing black I of purple .III in my current view, and it should see some correction in later May or June, then take off again even stronger. I am aiming over 96.00 as the final target of the index.

I am thinking to add US dollar bullish ETF such as UUP in my portfolio after this correction for the mid-term position. To be honest, the performance on the short-term trading, has not been what I hoped for despite my correct prediction of the fall of the Euro since last fall. So, I feel the necessity of mixing short & mid-term positions I’m thinking this mid-term position would help me avoiding to be impatient when my short-term trade is missing entry opportunities. The biggest questions are what size and when I am going to enter the long position. I think I will apply my short-term trading rule based on Elliott wave except that the time spam I am looking at is daily chart like below. I will keep the clear loss cut line as I always do for the short-term trading, and keep the potential loss size in control.

After analyzing US dollar index, I tweaked my Elliott wave count to EURUSD. Here is the 720min chart, and I would not short EURUSD from here because of the red line (low of Oct 28, 2008), it’s a huge chart point, and we probably see a big rebound at least once. It’s good to step back and see the whole woods even when you are cutting a single tree.

Here is the 180min chart. Although I am short term bullish for the reason above, I would wait until 1.28 line to be overcome before deciding whether I trade long EURUSD.

I am going to travel for the weekend and come back on Monday. So no trading until Tuesday for me.

After gained 2.1% last week, I’m very cautious on cross $USD trades.

I lost money on AUDUSD short, but I made much more money on EURUSD short. Net was 2.1% gain. I am very happy with the overall analysis and execution. Nice way to start the new quarter. Besides, I was really lucky that I had decided to exit EURUSD because it had a great bounce back to 1.3500 immediately after. Well, it was not totally luck because I started to sense the price action started to be non-impulsive around 1.3280.

Now looking ahead…but it does not look so tasty.

Due to the great rebound of EURUSD, US dollar index naturally had a sudden fall as I showed with a red arrow here:

20100409-dx-daily

And for EURUSD, I demoted what I labled as purple .1 (240~120min cycle) last week to  black 1 (90~60min cycle), and now the end of purple .1 is at 1.3280. This is a minor tweak.  So I am basically maintaining my short term bearish view on EURUSD.

Having said that, I cannot ignore the fact that the sudden price rise on Friday that could potentially become an impulse wave, and it may be overcoming the trend line resistance (gray line). So, I will just observe the market with no position for the beginning of the new week.

20100409-eurusd-180

I had to recount AUDUSD now that it overcame Jan 14 high. AUDUSD may go higher than the high of Nov 16 2009 (0.9406), but I still think AUDUSD’s about to peak out.

20100409-audusd-daily

Real time trading tweets

The plan in the article may get rejected any time, so please check out my tweets on Twitter.

Current risk exposure:

"","","","","$29,058.30","","","","","","","","","","","","","","","","","","","","41.95%","","","2.00%","","","","","","","","","","","","","","","","","","","","","","","","","","","",""
Rational Move always use stop loss orders, and this is the worse case potential loss over the capital for the currently open positions. This is unrealized loss is less or equal to the risk exposure.

Capital growth

From recent 100 trades (%) The growth right before the 1st trade is set to 0%.
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Drawdowns

From recent 100 trades (%)
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Total returns

Since inception
(Aug 10, 2009)
Year-to-date Quarter-to-date
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This is a normalized value: the return on each trade is normalized against the capital just before the trade execution. This way, it is eliminating the effect by the capital change from deposits and withdrawals. The calculation thus reflects the trading performance of each trade. The value does not contain unrealized profits and losses. RM's trading strategy never risks more than 5% of the present capital. Not including subtraction by tax.

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