Recap: Our short was triggered yesterday on the 16:16 support break at 1.2892. It got almost 40 pips into the profit on the wild swing of the volatile markets but instead hit our tightened SL for a 32 pip loss (we were giving it a little room to breathe).
The market volatility was the markets digesting Bernanke’s news that he will effectively buy US bonds, with no time limit or monetary cap, until the US job market improves. The idea behind bond-buying is that by bringing down longer term interest rates investors (banks) will be more likely to invest (lend) to riskier / higher reward endeavors that would then lead to job creation.
We’ve been calling for a short-term rise to 1.30 all week long, while also trading the shorts that are a part of a swing system, but – given yesterday’s volatility and the fact that we are now above 1.30 – we will stay flat for the day and pick up with an intraday update on Monday to give the markets time to decide on a direction.
We still see a bearish consolidation pattern on the weekly charts, but it is hard to deny the fundamental “feeling” that risk is back on after Bernanke’s speech. The major threat to this bullishness is two-fold: if markets have been buying the rumor then history tells us they will begin selling the news very soon. Secondly, market euphoria always washes off like a bad perfume – when the risk passes the markets will realize that the only reason Bernanke is doing this is because the global economy is so weak.
Should be an interesting day. See you on Monday with the intraday update!
For PRO members, we had a delay in our “surprise” last weekend and it has been delayed to this weekend. Watch your emails!
Today’s Important News Events:
DateTime (UTC)EventForecastPreviousEUR Euro-Zone Consumer Price Index – Core (YoY) (AUG)EUR Euro-Zone Consumer Price Index (YoY) (AUG)USD Consumer Price Index (YoY) (AUG)USD Consumer Price Index Ex Food & Energy (YoY) (AUG)USD Advance Retail Sales (AUG)USD U. of Michigan Confidence (SEP P)*To see a more extensive list of news events (not just those we consider important), visit our forex calendar.Trading Idea: We will stay flat today and watch the markets develop through the weekend. Aggressive traders could look to get short on a support break.
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