Currency Secrets

Another interesting chart presenting some clear formations at the moment is also the USDJPY.

(Click here for chart)

What do we see?

Well after the Yen strengthened against the USD at the beginning of this month we saw it retrace back to its 50% Fibonacci retracement level, which it failed to break. Another interesting Fibonacci development is that we can currently see over the last couple of weeks the USDJPY’s failure in staying above its 38.2% retracement level (you can see plenty of daily wicks passing through this zone but not too many closes above it).

Add to that the fact that during this congestion period there’s a nice bearish pennant forming.

So what does it all mean? How would I trade this?

Well, for me personally, I’d be looking at opening SHORT positions around the 38.2% retracement mark (around 117.60-5) with stops outside the downward sloping pennant line (plus some breathing space) at 118.15 (giving us an initial ~50 pip stop loss). Otherwise, if the SHORT limit entry is missed I’d be looking to enter SHORT on stops at 116.85 (a break below the upward sloping pennant trend line) my initial stop loss would probably be around 40-50 pips away from entry, but upon it’s breakout I’d quickly move the stop down to the high (+10-15 pips) of the breakout bar.

My target for both entries would be the pole length, being the difference between the 100% Fibonacci retracement point (~121.60) and 0% Fibonacci retracement point (~115.20) on the chart, which gives me a target of 640 pips!

What if I were to get stopped out on the 117.60-5 at 118.15?

If I were to get stopped out I’d stop and reverse my position going LONG with stops back at 117.65 (50 pips). I’d need to be careful here as a pennant formation could very easily turn into a flag and I’d be watching the 50% retracement zone very carefully (~118.50). If we get a successful close above the 50% zone I’d be looking for the USDJPY to hit the 100% Fibonacci retracement on the chart as target - being 121.60.

If the market were to hit my stop loss on my entry stop position I would close all positions and would NOT reverse my position - I’d take the loss on the chin and move on to the next trade.

Please be aware that medium and long-term outlooks may look as though they are going to work in the short-term, however, with the nature of things in this world one event can quite easily unsettle these views/chart formations and throw everything out of whack quickly. Just because I have a long-term view doesn’t mean I keep it for months and months regardless of what is happening. As traders we need to be on our toes. I know my view(s) can easily change in a week or two depending upon price action… but I always hope that it remains for months and months, because then I’d know I’m making money!

Anyway, we’ll see how it goes.

Once again the Aussie Dollar is trading around the long-term historical resistance area of 0.8000.

There are several interesting patterns on the AUDUSD that I’d like to share.

Here’s a weekly chart of the AUDUSD.

Notice how we have an extremely large (and albeit ugly) head and shoulders pattern. Add to the fact that the right shoulder didn’t dip as far south as the left shoulder and we have a currency ready to move.

Not only that but we also have an ascending triangle that has formed over the last 3 years.

So what does all this mean? Well I for one am quite bullish the AUD/USD - as this is a weekly chart I’ll be keeping an eye on how the AUDUSD closes at the end of this week, and then how it reacts to any successful close beyond 0.8000 the week after. As an example, if we have a successful break this Friday, yet by the following Friday we see the AUDUSD back below 0.8000 then resistance is still strong and we may get further downside before it attacks it again - provided the AUD/USD doesn’t retrace too far.

Potential targets for this move would be the ascending triangle’s side of about 1200-1300 pips (0.8000 - 0.6800), therefore being, around 0.9200-0.9300. The head and shoulders target is phenomenally higher again giving a target some 3200-3300 pips above 0.8000 (0.8000 - 0.4700) - if this gets reached then we’d see the ol’ 1980 glory days of the AUD!

But is this a strategy that anybody could use? It definitely isn’t one for us small retail traders - our stops would need to be very large making the position size so small we wouldn’t even be able to enter in.

However, by providing a long-term view of where we perceive a currency may go in the future it can help our trading by only short-term taking trades in the long-term direction.

Recently a comment was made on Currency Secrets by Excalibur Forex offering readers here a free trial of their signal services up until the end of March (see comment here).

There are a couple of things that I like about Excalibur, but there are also a couple of things that I have concerns about.

I’ll quickly go through my concerns: first, their web site is relatively new (something which they made known in their comment - so new in fact that it’s only been in operation for a couple of weeks!), however, while the age of a signal service web site does draw some concern to me it’s the performance chart they have on their web site that concerns me the most. Automatically this throws up a question: are these performance results ACTUAL or HYPOTHETICAL? If the web site had been in existence since the start of their performance figures I may have been led to believe that the performance figures were ACTUAL, but as this isn’t the case it has led me to believe otherwise.

My other concern is the free trial offered. Excalibur make note on their web site that they do not offer a free trial, so I thank them for politely offering one in here, however, I think it would be far more beneficial if Excalibur offered a free trial period over an ENTIRE month rather than just PART of a month. This can help verify our performance against THEIR performance statistics for that month.

Apart from that the things I liked about Excalibur’s approach were:

Firstly, they only place trades once per day (midnight GMT) on the top currency USD pairs including EUR/JPY & GBP/JPY (and each trade includes a stop loss).

Secondly, if they don’t make 200 pips in a month you get the next month free! Something that I haven’t seen too often with signal providers.

So with my concerns I emailed Excalibur and received a reply from Malcolm who mentioned that he had traded forex for the past 6 years and that indeed his performance results are hypothetical and that he would allow a free monthly subscription. I guess we’ll see how it goes.

If any of you have taken up Malcolm’s offer for a free subscription up until the end of March in the mean time I encourage you to add your comments below on how you have found (or are finding) his service.