4 setups I see in Forex

  • January 23, 2006
  • Dave Floyd

 

There can be little doubt that the range in
the FX markets has now been broken – prices have been on a one-way move since
the markets re-opened on Sunday afternoon. We are now simply waiting for prices
to pull back a bit so that we can place trades that have a good risk/reward
ratio. While we have been waiting patiently for a break of the range, we feel it
is still prudent to wait just a bit longer for prices to settle down before
looking to place trades.

Presently, one can easily make the case for trying to fade this move, but one
could have made the same argument yesterday afternoon, only to see prices move
further still.

Here is our game plan on the major pairs:

EUR, GBP, JPY & CHF are all in an ‘oversold’ or ‘overbought’ state. Determining
the exact level however, is like chasing jello on a plate.

We see the following approach(es) as being more prudent and we will advise (our
clients) as the day and prices unfold:

EUR/USD: look for 1.2290 to cap upside moves (KRS Trade) but the more
practical trade will be to buy pull-backs into the 1.2220-40 level expecting a
re-test of today’s highs.

USD/JPY: 114.10 should provide a floor for prices presently. We would
look to short into the 114.50-60 level

GBP/USD: pull-backs into the 1.7795 level would be a good spot to look to
establish long positions. Look for 1.7910 to be the near-term target

USD/CHF: looking for 1.2610 to contain further downside – shorting into
1.2640-50 (1.2690 max) should provide the back-drop for a good short trade

 

As always, feel free to send me your
comments and questions.

 

Dave