Here’s What I Thought Was Odd About The Dollar Yesterday
In yesterday’s column I
asked the Fed to be kind and throw us some volatility. For the most
part, I think they listened; however, the volatility was really only apparent in
the 45-minutes following the announcement. The dollar (DXC) initially blipped
to the upside, which I thought was odd given the following reasons:
1. Relative weakness in our currency recently
2. The fact that the Fed appears behind the
curve
3. Interest rate differentials do not favor us
versus other countries
4. A lack of indication as to when rates will
rise stokes fears of further dollar de-valuation.
I went long the EUR
right when the announcement came out, I was filled at 1.2240, with the
DXC moving higher I was in the trade less than
a few minutes before selling it out for a 10 pip loss. In fact at one point the
trade was about 30 pips against me, but knowing how there can be such whipsaw
action immediately following the announcement, I managed to take a much smaller
loss.
Within moments however, the DXC showed its’ true
colors and starting to tank hard. I was long the EUR again at 1.2237, but this
time I was confident I had nailed it and increased my lot size substantially.
Ultimately the trade got the wind at its’ back and I scaled out at an average
price of 1.2258. A twenty pip gain, but this time on 5x the size then I had put
on in the first trade. The charts below illustrate the trades.
Please note, this is one of the few times that
you can take HVT strategies in their purest
form and apply them to FX. For the most part, FX trades are best suited to
daily, weekly and occasionally 60-minute charts. This has been my experience.
So were there opportunities in the stocks?
Sure. I focused on stocks on the opening, and played FX on the announcement.
Stocks would have worked just fine also, however, patience would have been
required as the S&P’s need to settle in for a few right after the announcement.
As I had mentioned yesterday, I have been
adjusting my approach for a few months now. Stocks (HVT) still play a role, but
only during limited times during each trading day, primarily the opening. Did
you see DHR on the opening? I mentioned
that that was one you may want to start watching.
Give me a few more days of observation with this
stock and I will start spotting those moves and taking advantage of them. Bear
in mind, volume is light relative to the standard HVT stocks, so make sure you
only drill down as low as a 5-minute chart and trade small until you get the
feel.
I decided to close out my long in the Yen
(JPY) that I put on last Friday at 107.90 for a 53 pip gain (each pip=$9.31 per
lot traded). I still think the Yen will trade higher, but the trader mentality
in me and the technicals told me it was time to take some money off the table.
I am real good about getting back into a trade when it sets up again, so I will
keep you posted. I am also looking for long entries on the Canadian Dollar
(CAD) and the Swiss Franc (CHF).
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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As always, feel free to send me your comments and
questions.