Aspenalysis: Simple To Follow FX Trade Ideas

Let's not make this more complicated than it needs to be.

EUR/USD - path remains clear: lower towards 1.2514

Traders, I have been noting for the last few days the pretty obvious scenario that is unfolding presently - a strong US dollar (Dollar Index - DXC). While interest rate differentials are quickly moving in favor of the US at large - no where is it more stark that against the UK.

1. Mark Carney has begun his term as the Governor of the Bank of England (BoE). Mr. Carney has mapped out his plans saying an interest rate rise “was not warranted”
2. Since then interest rate differentials in the short end of the curve has moved in favor of the US versus the UK and this is particularly predictive of future weakness in GBP/USD.
3. It now appears that monetary policy will be more dovish going forward than was expected.

Technically, the charts support this macro view as well. I am looking at it from 3 different perspectives:

1. Elliott Wave and Fibonacci analysis
2. Basic technical patterns, in this case a wedge/triangle
3. Momentum and trend indicators

Combined they make a compelling case to be short GBP/USD.

GBP/USD - basic triangle/wedge formation
GBP/USD - Elliott Wave/Fib and Trend/Momentum Indicators

No fancy macro analysis other than the fact the Bernanke and the other CB's are fools. But the price action in gold is very bullish.

Short-term target seen at $1320 and then beyond.

Here are some trigger points for clients looking for short-term hit and run type trades

1. GBP/USD - downtrend looking to re-establish itself here so bearish momentum is not ideal...yet. A break below 1.5075/60 should kick that in though
2. AUD/USD - downtrend is fully re-establishing itself. Like selling breaks below .9035 & .8995
3. AUD/CAD - very strong downtrend emerging. Currently prices have rallied off the overnight lows, a break back below .9400 and .9350 points to lower levels.
4. AUD/JPY - it may seem like you are chasing prices lower, but the down-trend is strong and a push below .8970 keeps the bearish momentum alive and well.

NOTE: these set-ups are derived from taking an overall view of the FX pairs/cross with an Elliott Wave framework and then overlaying proprietary gauges of price momentum for objective entry levels.

* Trade Ideas are not official recommendations but merely highlight set-ups that may be of interest to a broad array of clients who are comfortable managing their own trades. These are not NEW TRADE ALERTS

If you comfortable short-term trading, a couple of pairs/crosses to keep an eye on:

1. AUD/NZD sell below 1.1650 targeting the mid to upper 1.15 area
2. AUD/USD a break below .9194 suggests a bit of a correction lower is getting underway - perhaps towards .9120
3. NZD/JPY still is persistent ot the upside here and the trend is strong. Back above 78.90 should allow for further upside.
4. USD/NOK might be offering up both a short and medium-term set-up. The strength of the move lower off the early July highs is picking up (likely due to higher oil prices) and any break below5.9625 could kick in some solid selling.

NOTE: these are price action set-ups and objectively derived. Stops and targets are at clients discretion/risk tolerance. They are not NEW TRADE ALERTS and are suited for experienced traders comfortable managing their own positions.

A follow-up to last nights featured set-ups - comments in red lettering

1. AUD/NZD sell below 1.1650 targeting the mid to upper 1.15 area - so far prices have dropped 50 pips below the 1.1650 trigger level
2. AUD/USD a break below .9194 suggests a bit of a correction lower is getting underway - perhaps towards .9120 - 30 pip move lower thus far
3. NZD/JPY still is persistent ot the upside here and the trend is strong. Back above 78.90 should allow for further upside - 15 pips higher at this point
4. USD/NOK might be offering up both a short and medium-term set-up. The strength of the move lower off the early July highs is picking up (likely due to higher oil prices) and any break below5.9625 could kick in some solid selling - no trigger at this point

This is a new feature we are previewing at Aspen Trading - always looking to keep things fresh and moving forward.

Here are tonight's highlighted set-ups:

1. Long EUR/JPY above 131.90 stops at 131.10 - upside towards 133.00
2. NZD/JPY remains valid from last night with revised stops at 79.05
3. USD/JPY long above 100.65 with stops at 99.85 and upside towards 101.40

EUR/USD - I have been tracking/waiting patiently for prices to stall and begin tracking lower.

That time is now. Seeing a solid move off the lows in the Dollar Index (DXC) thus adding confirmation to the bearish EUR/USD view.

Tonight's Simple Technical Trades (STT's)

1. EUR/NZD - finally showing signs of re-establishing an uptrend. Would look to build long positions above 1.6775, suggested stops at 1.6540 and initially targeting 1.7350
2. EUR/JPY - 5-waves off the lows might finally have completed Wave ii. Building longs above 130.75 points towards 132.75+

Note: STT's will be in beta phase until the end of August

Traders, some key data will be released later in Australia - see below (all times Pacific). It may well keep the downside pressure on AUD. Thus, let's consider the following STT's:

http://www.aspentrading.com/uploaded....13audDATA.png

1. Short AUD/JPY - short a break of 87.40 with stops at 88.25 and downside target of 85.70
2. Short AUD/CAD - existing open order in STT's (re-cap: short at 92.00, stops at 92.75, target of 90.00

STT's are in beta through the end of August

This was a big trade for us in EUR/NZD - topped out at 1.7100'ish

Good evening traders, just a few updates as Asian trading continues along here:

1. EUR/USD - still pushing modestly higher in a corrective manner as noted during the North American session. Likely to see prices move towards 1.3316
2. USD/SEK - still think there is room for lower levels here, looking to sell a break below 6.4715
3. Dollar Index (DXC) - if we see one leg lower towards 81.50/81.30 that should keep some upside pressure on EUR/USD
4. NZD/JPY - coming on nicely and keep pressure on JPY. A move above 79.00 should kick in the bullish momentum.
5. AUD/JPY - similar to NZD/JPY, looks like the bulls could take further control if prices can get above 89.80
6. EUR/JPY - our current open position (STT) is trying to get some steam here, but thus far still chopping back and forth. If AUD/JPY and NZD/JPY continue to kick higher it should weigh on JPY across the board and push EUR/JPY higher too.

For some time many more grounded traders/analysts have been quite critical of the Fed - and for good reasons in my opinion.

A recent article in the FT by Gillian Tett clearly shows just how out of touch individuals are with what the Fed's abilities, or lack of, to tackle the current economic mess.

The following is Bill Fleckenstein's take on Ms. Tett's views:

"...in today's Financial Times, headlined Central bank's chief needs to master the art of storytelling, concluded with what I thought surely had to be a spoof. But then I realized which paper she was writing for, and that she was deadly serious:
"The next Fed chair also needs to be a masterful storyteller and cultural analyst, who can read social sentiment, shape norms, (re)create trust and persuade us all to think in a manner that suits the Fed's economic goals, without us even noticing.
"Somebody, in other words, who can cast spells with both their spreadsheets and words. In short, what is needed is nothing less than a monetary shaman."
Like I said, at first I thought this was a spoof, but she is serious and I think this little soliloquy perfectly captures how far the pendulum has swung from the gold standard (and that it can go no further in this direction). What we need, in her view, is someone who can make us believe that reality is different than it is, and this is an absolutely priceless vignette to save for the future to illustrate how detached financial thinking has become from anything resembling common sense. Of course, the joke is on Ms. Tett, as she doesn't realize that what she wants is exactly what we already have: charlatans that have no shame.

Traders, good afternoon. Back from a week away from the monitors and certainly feeling refreshed. With one more week of summer officially still before us, we might see subdued markets ahead of Labor Day, but I will be back in the saddle on Monday AM - updating per my usual schedule - but potentially providing limited updates if markets are quiet.

That said, the attached PDF file should provide some good, albeit academic, reading on the markets at large.

I have subscribed to Grant's for years and get a lot of value out of it - I trust you will enjoy the selected articles below.

Dave

Grant's - selected articles

EUR/JPY - poised to continue the move higher. Establish/add to longs on break above 132.40, initial target of 133.85

Traders, if you are wondering why EUR/USD has not been getting much coverage here at Aspen Trading - look no further than the chart below.

http://www.aspentrading.com/uploaded....13eurMESS.png

Normally after a completed triangle, prices, in this case, would fall sharply lower. That has not been the case here. In fact, price action continues to move into a tighter and tighter range. Not to say there will not be a trading opportunity at some point, but for now, there are far better set-ups out there.

http://www.aspentrading.com/uploaded...stopcharts.png
http://www.aspentrading.com/uploaded...udjpy60min.png
http://www.aspentrading.com/uploaded...3eurTARGET.jpg
http://www.aspentrading.com/uploaded...3nokUPDATE.png

Traders, as you are well aware, trading is a pretty fascinating, complicated and at times, perverse, profession. Yet for many, myself included, it is so alluring - a giant game of chess is how I refer to it.

However, over the years, while I have slowly come to the conclusion that reading a lot of material, pouring over charts and having a solid thesis about how things may unfold is critical, I must stop one step short of picking inflection points in the markets. Nobody can ever do that with any degree of consistency. Rather, letting price action confirm or refute my thesis is far less stressful and certainly far more profitable.

It is a constant evolution and that is what keeps it interesting. I think you will enjoy the short essay below by the late Barton Biggs - excellent insights from a trading veteran.

Barton Biggs - It's Never Easy

http://www.aspentrading.com/uploaded...13/dowperf.png

Never underestimate a good correlation - a traders best friend. No mystery here - Dollar Index (DXC) and EUR/USD are inversely correlated - one does not stray far without the other in tow.

Thus, despite some rumblings that DXC had bottomed out yesterday after a steep decline, some quick analysis made it pretty clear it was not time to short EUR/USD. In fact, there are still another 30-50 pips on the table based on my read.

http://www.aspentrading.com/uploaded...3dxcTARGET.jpg

Thus, EUR/USD can only go one way under this scenario - up. We are long from 1.3280

http://www.aspentrading.com/uploaded...3eurTARGET.jpg

While we wait for prices to move towards 1.3330/50 we are also monitoring our short in EUR/GBP and long in GBP/CHF.