September Market Update (Week 3)

The dollar climbed to a six-year high versus the yen, reaching levels unseen since the collapse of Lehman Brothers Holdings Inc., after Federal Reserve officials raised their target-rate forecast.

The greenback was set for the highest closing level in four years versus major peers after Fed policy makers increased their median estimate for the key rate to 1.375 percent at the end of 2015 versus June’s forecast for 1.125 percent. The yen fell as Bank of Japan Governor Haruhiko Kuroda reiterated comments on easing. The pound rose as Scotland votes on Thursday, on independence. The euro touched its weakest since July 2013 before the European Central Bank allots the first funds under its targeted lending program.

5 Best Trades this week

  1. CHFJPY (Daily Chart) – Breakout of Resistance Long – 17.09.2014 – The big 115.00 handle had proven in the past 6-8 months that it was tough to penetrate, providing both support and resistance. So when price aggressively headed into this price zone it was expected to hold again and looked like doing so on Monday with a clear seller reversal bar. However there was no sign of divergence between price and the stochastic to suggest a reversal was going to take place. Instead, we had convergence and the likelihood of a breakout. Trading the breakout of the level, with a tight stop just under resistance to prevent the false break out, meant that the risk to reward was excellent and Thursday proved this to be the case as price headed strongly higher for an open profit of +4%.
  2. S&P500 (Daily Chart) –Power Pivot Long – 16.09.2014 – A classic continuation of trend power pivot trade. An almighty uptrend finally gave way last week with a mild P2 pullback. Price beautifully returned back down to its previous high, resistance becoming support, and provided a low test buyer bar set up indicating buyers were ready to take over again. This proved to be the case with entries (above Tuesday’s high) triggered on Wednesday (stops under Tuesdays low) and price rallying back to its previous high for a +1% profit. Profit was taken here because of the market looking quite toppy.
  3. GOLD (Daily Chart) – Power Pivot Short – 17.09.2014 – The trend was heavily down on Gold and had been for quite some time without any real retracements however this week we finally got a weak retracement. We liked the setup as it came directly back to June’s low so former support was now becoming resistance. Price was the final confidence factor, as we witnessed a significant high test reversal bar off the resistance level. Taking the trade as a power pivot enabled an efficient entry into an oversold market and +1% profit was taken because of this rather than holding out for more.
  4. CADJPY (5 Min Chart) – Pivot Trade Long – 16.09.2014 – JPY was weakening significantly across the board and by observing the daily chart of this pair we could see there was only one winner, and one direction price wanted to head in – higher. This makes life difficult to trade the daily timeframe as getting an efficient entry becomes the challenge however this is where the pivot or sniper strategy come into their own. The pivot was used on this occasion simply due to the very healthy reward to risk on offer. There were a couple of setups to take advantage of during the early London session, each providing +1.53% within a few hours.
  5. 5.    AUDJPY (Daily Chart) – Power Pivot Trade Long – 16.09.2014 – AUD has been very weak over the past couple of weeks, bringing this pair down to the cleanest of horizontal levels around 96.40. Here price reacted beautifully to this level, providing a clear and significant low test buyer reversal bar. There was also some comprehensive hidden divergence on the stochastic reading. Here we saw clear room for a decent profit back up to the major highs. Trading the power pivot strategy allowed an efficient entry and decent reward to risk potential. Currently just shy of +1% and still open.

EFFECT OF THE NEWS LOOKING FORWARD

The vote for Scottish Independence, or not, is finally here. With pre polls still showing a closely fought battle between the YES and NO camp, the GBP still trades tentatively against its peers.

The pound advanced slightly as polling stations opened in Scotland on Thursday for voters to decide on the future of a political union that dates back to 1707. Voting ends at 10 p.m. local time with final results due by 7am on Friday (19th Sept).

Uncertainty around the final result is mounting. GBP will likely rebound further in case of a ‘No’ vote, though it has already seen some rebound in the past few days, while a ‘Yes’ vote would likely exert further downward pressure.