Look beyond the Dollar pairs for trade set-ups

  • February 15, 2006
  • Dave Floyd

Dave Floyd is a professional FX and stock trader based in Bend, OR and the
President of Aspen Trading Group. Dave’s approach to FX combines technical
and fundamental analysis that results in trades that fall into the swing
trading time frame of several hours to several days. For a free trial to
Dave Floyd’s Daily Forex Alerts


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Look Beyond The Dollar Pairs For Trade Set-ups

As I mentioned in a note to my clients this
morning, each morning when I turn my monitors on I hope to see that prices have
broken out of this tight range that we have been in now for several days — today
of course provided no such outcome.

The Dollar Index (DXC) as well as EUR, GBP, JPY & CHF remain stuck in sideways
chop. Patience will eventually lead to better trading opportunities in the ‘FX
majors’ but in the interim you may find better set-ups in the ‘FX crosses’.

While I am not sure why most traders avoid crosses, there is simply no need to
ignore a solid technical set-up simply because it is not EUR/USD or USD/JPY —
some of my most lucrative trades have been had in the crosses. There are two
benefits to crosses:

1. Lack of correlation to dollar volatility

2. Lower volatility overall — allowing traders to maximize winning trades
without being stopped out on tight stop-losses

Earlier this week, many of the New Zealand dollar crosses provided good
short-term trading opportunities — crosses like NZD/JPY, NZD/DKK, NZD/CAD etc.
Since then, NZD/JPY has rallied back to previous support and seems poised to
trade lower yet again. The chart below represents what I consider a ‘fluid’
chart in terms of price action — these set-ups simply do not exist in the majors
presently.

We continue to remain very selective as trading conditions have been tricky, we
do like the NZD/JPY cross as a short as noted above.

Some other key levels we are watching for are as follows:

EUR/USD: 1.1875 & 1.1925

GBP/USD: 1.7375 & 1.7445

USD/CHF: 1.3120 & 1.3060

USD/JPY: 117.00 & 117.80

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

Dave

Dave Floyd is a professional FX and stock trader based in
Bend, OR and the President of Aspen Trading Group. Dave’s approach to FX
combines technical and fundamental analysis that results in trades that fall
into the swing trading time frame of several hours to several days.