Testing High Leverage Compounding

Pairs in Focus (London and NY)

EUR/USD: Long on pullbacks (or long periods of consolidation at current prices.)
AUD/USD: Long on pullbacks (or long periods of consolidation at current prices.)
USD/JPY: Short on rallies (watch for false breakouts)

Lesson 4: Change Your Environment, Change Yourself

"Incorporate a fresh look at self and markets each day to inspire new ideas, challenge stale ones, and tap sources of energy and inspiration that otherwise remain hidden in routine."

The Daily Trading Coach, Dr. Steenbarger

Today's Goal:

I am deliberate and exact with my execution. I do so without hesitation or doubt. This will allow me to get in at the best risk-reward situations, which often may only present itself for less than a second in intraday trading.

EU Short

In anticipation of a larger pullback to 1.1070 where longs are very attractive.

Scaled out half at intraday low.

back to positive for the day.

Got a feeling that UJ short and EU long will trigger at the same time.

Expecting a larger retrace back to 1.1151 for me to add to my shorts.

if it breaks below here, will shift expectations accordingly.

Don't forget the bigger picture...

hmmm may have made a mistake. was looking at the wrong time frame. from 1 min chart it seems I should have short at 1.11475.

but let's see, i've orders at 510 waiting.

if it breaks below the low here, will add to shorts at lower levels.

the optimum time frame to get short on that retrace was the 3 min chart... which I don't have access to at the moment.

but let's see if it breaks.

Switched to longs. Retrace is deep enough to validate one... Too much risk to stay short here when level holds.

Longs doing well. Will add more if 510 holds on retest.

Summary of Trade events (brief version)

O.K. Made a total of 4 ++ mistakes today.

The first one was mechanical. Jumped the gun on an entry by accident as I saw the candle time wrong and took a loss when price spiked immediately against me

The second and third one were slow closes. I should have exited at least half of my position when price could not hold above key levels or wasn't behaving as I expected. I did not so I took a larger loss than necessary on both occasions and also made it harder for me to switch to the other side.

The 4th mistake was on EU. I was a bit muddled after the loss so did not realise that the key level has already been broken and I instead should be looking for shorts as a continuation play. Missed a classic EW retrace to get back into the trend.

After that i kind of took a few small losers trying to catch the UJ trade. Again, not realising that the key level has been broken and I was taking trades without any reference points which is basically edge-less. Probably fatigue from staring at the charts too long.

Still, managed to end the session in the green, and I kinda discovered a new A+ set-up today so that's great. Also learnt from these mistakes.

***

Will be back during NY to see if there are any more opportunities, but will focus on R2R account.

Notice how sharp the GU drop was today on only slightly disappointing data. This could very well have happened yesterday if the data was bad yesterday. Luck plays some part... but over the long run it evens out.

So even though yesterday I took a 12 pip loss on the GU trade, the potential was definitely there for 100 pips+ TP.

hmm I can sense I am in danger of going on tilt if I hit a loser now...

Better becareful. deep breaths...

Did anyone get long? Was trading my R2R so didn't look at it. wow. the 1H bar.

If USD prints bad news this will rocket 300 pips and margin call shorts.

## AUD
June 1: AIG Manufacturing Index: 52.3/ - / 48.0
June 1: MI Inflation Gauge m/m: 0.3%/ - / 0.3%
June 1: Building Approvals m/m: -4.4%/ -1.7%/ 2.9%
June 1: Company Operating Profits q/q: 0.2%/ 0.1%/ -0.4%
June 1: Commodity Prices y/y: -19.5%/ - / -20.7%
Data was mixed but because China's data met expectations, there wasn't much selling pressure on AUD yesterday. The oversold conditions help to precipitate a bounce. The upcoming monetary statement should determine the general direction for the pair.
Since the release of the statement, there seems to be no sign that any further easing is to be expected. This should lead to a bullish bounce on the pair against the dollar.

June 2: Current Account: -10.7B/ -10.9B/ -10.2B
June 2: Cash Rate: 2.00%/ 2.00%/ 2.00%
Technical wise, AUD is over-extended and should experience a pullback. Will be good for longs at lower levels.

June 3: AIG Services Index: 49.6/ - / 49.7
June 3: GDP q/q: 0.9%/ 0.7%/ 0.5%
Good data. Bullish continuation was expected yesterday after a significant retrace. Got a small spike during NY hours but nothing huge. Failed to make new highs and backed off. Still bullish bias from the fundamentals.

## CAD
June 3: Trade Balance: -3.0B/ 2.1B/ -3.9B
Horrendous data. One of the worst prints in its history. This should put significant pressure on CAD.

## CHF
June 1: Manufacturing PMI: 49.4/ 47.2/ 47.9
Strength expected. But given central bank comments, it is hard to say.

## EUR
June 1: German Prelim CPI m/m: 0.1%/ 0.0%/ 0.0%
June 1: Spanish Manufacturing PMI: 55.8/ 54.4/ 54.2
June 1: Italian Manufacturing PMI: 54.8/ 53.1/ 53.8
June 1: French Final Manufacturing PMI: 49.4/ 49.3/ 49.3
June 1: German Final Manufacturing PMI: 51.1/ 51.4/ 51.4
June 1: Final Manufacturing PMI: 52.2/ 52.3/ 52.3
The data from euro is improving. This signals a longer term fundamental play for bullish euro. But patience is key to wait for technicals to align. May consider buying a divergence double bottom.

June 2: Spanish Unemployment Change: -118.0K/ -115.4K/ -118.9K
June 2: German Unemployment Change: -6K/ -10K/ -9K
June 2: CPI Flash Estimate y/y: 0.3%/ 0.2%/ 0.0%
June 2: Core CPI Flash Estimate y/y: 0.9%/ 0.7%/ 0.6%
June 2: PPI m/m: -0.1%/ 0.1%/ 0.2%
Very strong data. Suggests fundamentals are indeed shifting. But price action is overextended. Long euro on a deeper or more drawn out retrace.

June 3: Spanish Services PMI: 58.4/ 59.5/ 60.3
June 3: Italian Services PMI: 52.5/ 52.8/ 53.1
June 3: French Final Services PMI: 52.8/ 51.6/ 51.6
June 3: Final Services PMI: 53.8/ 53.3/ 53.3
June 3: Italian Monthly Unemployment Rate: 12.4%/ 12.8%/ 12.6%
June 3: Italian Quarterly Unemployment Rate: 12.4%/ 12.9%/ 12.7%
June 3: Retail Sales m/m: 0.7%/ 0.7%/ -0.6%
June 3: Unemployment Rate: 11.1%/ 11.2%/ 11.2%
June 3: Minimum Bid Rate: 0.05%/ 0.05%/ 0.05%
Nothing new from Draghi. Improving fundamentals are becoming clearer by the day as price discovery pushes EUR/USD back to 1.2 region.

## GBP
June 1: Manufacturing PMI: 52.0/ 52.7/ 51.8
Weak data. Huge drop in GBP after that. In a trade weighted sense, GPB is still significantly over-valued. With no interest rate rise on the horizon, the good trade here is to see if data continues to weaken. It would certainly accelerate the downtrend and also provide a good opportunity to go long EUR/GBP.

June 2: Construction PMI: 55.9/ 55.1/ 54.2
June 2: Net Lending to Individuals m/m: 2.9B/ 2.3B/ 3.3B
June 2: M4 Money Supply m/m: 0.4%/ 0.4%/ 0.3%
June 2: Mortgage Approvals: 68K/ 64K/ 62K
Very strong data. In particular, it signals a booming housing market. BOE may be worried and start planning rate increases. This blew yesterday's plan of weakening fundamentals off the table. (for now) Neutral on the GBP.

June 3: BRC Shop Price Index y/y: -1.9%/ -/ -1.9%
June 3: Nationwide HPI m/m: 0.3%/ 0.4%/ 1.0%
June 3: Services PMI: 56.5/ 59.2/ 59.5
Bad print on Services PMI. Sharp drop yesterday after that. Although recovered in US session on weak US data. More poor data from UK and dovishness from BoE will spur further downward price action. At the moment, slightly bearish to neutral.

## JPY
June 1: Capital spending q/y: 7.3%/ -0.1%/ 2.8%
June 1: Final Manufacturing PMI: 50.9/ 50.9/ 50.9
Much improving data. This opens up for a long JPY plays when the Central Bank shows hints of terminating QE policy.

June 2: Monetary Base: 35.6%/ 34.3%/ 35.2%
June 2: Average Cash Earnings y/y: 0.9%/ 0.4%/ 0.0%
June 2: 10-y Bond Auction: 0.45|2.7 / - / 0.43|2.2
Nothing much here. Monetary base beyond target so QE may be held off for a bit. Expect JPY to strengthen moderately.

## NZD
June 1: Overseas Trade Index q/q: 1.5%/ 1.6%/ -2.3%
Nothing new here.

June 2: GDT Price Index: -4.3%/ - / -2.2%
Probably more easing in the NZD expected.

June 3: ANZ Commodity Prices m/m: -4.7%/ - / -7.4%
More downside expected.

## USD
June 1: Core PCE Price Index m/m: 0.1%/ 0.2%/ 0.1%
June 1: Personal Spending m/m: 0.0%/ 0.2%/ 0.5%
June 1: Personal Income m/m: 0.4%/ 0.3%/ 0.0%
June 1: Final Manufacturing PMI: 54.0%/ 54.2%/ 53.8%
June 1: ISM Manufacturing PMI: 52.8/ 51.9/ 51.5
June 1: Construction Spending m/m: 2.2%/ 0.7%/ 0.5%
June 1: ISM Manufacturing Prices 49.5/ 43.0/ 40.5
Definitely suggests a revival in housing in the US. No clear trade opportunity unless data weakens considerably over the medium term.

June 2: Factory Orders m/m: -0.4%/ 0.0%/ 2.2%
June 2: IBD/TIPP Economic Optimism: 48.1/ 49.8/ 49.7
June 2: Total Vehicle Sales: 17.8M/ 17.0M/ 16.5M
Data not inspiring. If it continues to weaken, a strong trade opportunity will emerge. Friday's NFP is likely key now. If we see a weak print, expect a huge sell-off in USD in coming week.

June 3: ADP Non-farm Employment Change: 201K/ 198K/ 165K
June 3: Trade Balance: -40.9B/ -43.9B/ -50.6B
June 3: FInal Services PMI: 56.2/ 56.5/ 56.4
June 3: ISM Non-Manufacturing PMI: 55.7/ 57.1/ 57.8
June 3: Crude Oil Inventories: -1.9M/ -1.9M/ -2.8M
Mixed data that the market responded to by selling USD. Suggests more downside in USD may be expected. At the moment still neutral. Friday's NFP print will set the tone for next week.

Summary:
June 1:
1. Look for bullish continuation on AUD pairs.
2. Wait for EUR to bottom or technicals to align to go long.
3. Keep an eye for bad GBP data or bad USD data as signals for opportunities around the corner.
June 2:
1. Wait for AUD and EUR pairs to pullback before entering on their trends. Likely good play in NY session.
2. Watch USD data closely. Bad prints will definitely accelerate the current sell-off especially against the euro.
June 3:
1. Look for buys on AUD if it can hold above key support levels.
2. Watch for a EUR pullback before further strength is expected.
3. Look to sell CAD.

Pairs in Focus

- EUR/USD
Strong rally from yesterday is holding. If Europe opens near highs, look for a break-out failure play like yesterday.
Otherwise, wait for a retrace play to get long. 1.12090 level looks promising.

- AUD/USD
Get in on longs if price moves above 0.77348 and holds above. First target is 0.77538. Second target is 0.777. If price breaks above 0.778 and holds, add more.

Alternatively, look for a double bottom/false break-out play at intraday lows and add to position as it holds above 0.77348.

Not trading CAD pairs because of high spread but feel free to long AUD/CAD on similar play.

AUD Key Levels

EU Key Levels