Week 49

[Anna-Maria]

The triple whammy of: thin holiday trade, renewed rumors of Central Bank diversification & potentially narrowing yields sent the $ Bulls scurrying for cover late last week.

Much of late Thursday-all Friday activity can be attributed to technical bullying on the part of the Bears, as the Indx got shunted to these early summer lows. Next level reaction zones aren’t far off, with the 78.6 sandwiched between the focal points for Bear target area’s.

These pairs are approaching oversold on the mid frames, and with trade cranking back to near normal levels next week, the emphasis will once more turn to the Data releases.

The (ftrs) consensus regards a reduction of rates at the March 21 meeting shifted quite aggressively last week from 11% to 51% on the back of recent under par data output.

Next weeks data bag is full of goodies on both sides of the pond, & with a heavy presence of Fed Chief rhetoric, the stage looks set for increased volatility!

[torero]

So what are gaps like in forex? Do these get filled like in futures? Looks like I'm witnessing one right now on Cable right after the Tokyo open. Maybe 50% fill? The spread is incredible--- 10 pips!!!! Wow! My mistake... bid 1.9150, ask 1.9400!!!!

[pipMonster]

Hi Torero,

I've been trading forex for a few years now and haven't seen a gap like this. Smaller gaps sure. This is quite unusual.

Right now, I'm out and flat, watching the market. I most likely won't be engaging until near the end of the Asian session. I find this price action incredibly interesting.

[torero]

Yeah, I was amazed to see a 24hr market with a big gap as strange too, unless some big news over the weekend may have something to do with it. I had the alarm on the break of the gap to fill but in the end, I overslept and missed the move. No biggie. Asian close, London open should be interesting.

[Anna-Maria]

	Quote:	pipMonster
	Hi Torero, I've been trading forex for a few years now and haven't seen a gap like this. Smaller gaps sure. This is quite unusual. Right now, I'm out and flat, watching the market. I most likely won't be engaging until near the end of the Asian session. I find this price action incredibly interesting.

They do occur every now & then. Thankfully, they're the exception rather than the norm.

You were certainly in an advantageous timeframe across there Jack, if you'd considered trading the pullback

But yeah, waiting for London to deal it's hand is probably the better option in these types of cases - wait for the genuine flow to reveal itself!

Looks like Euro & Cable are the only one's not to fill their gaps at the mo.

[Kiwi]

This reminds me of when i went long QQQ at the opening of 2000 ... It was about 3 days before it stopped going down

[torero]

Looks like it did fill in the end, I saw it stopped at the high of Friday but it pushed to closing. I got stopped out on that trade. I'm staying out until I see a better entry. I still see 9500 as target but not sure with this gap now, unless it makes over the top of the gap. But by then, the reward from there to all time high is a bit small. What do you think?

[Anna-Maria]

I guess if you're confident that the current fundamental is still to the $ neg, then triggering as close to the pre-gap support line (c9330) offers the better opp?

It allows a decent r/r entry to test the further $ downside potential?

Ignoring the spike high, the playable range is quite well defined.

It's simply a case of what you perceive to be the lowest risk opportunity if you're considering triggering at all.

Bear in mind, there's a whole slew of data/Cent Bank chatter this week - each camp will be trumpeting their side of the $ story!

But for now, it's still dawing the magnet to the $ negative until the data proves otherwise.

[torero]

Yes, I had my stop at 9336 and it took it out in one swoop when Tokyo closed. I thought it was safe, now I have to redraw it 9300 as support despite this spike down was a freak. I'll pass this up until I have a clearer answer possibly tommorrow. Yes, I agree I'm still looking for long plays.

[cowpip]

Hi torero!

This may be a good time when an analysis of things beyond just the currency of choice may be beneficial. The large move up last Friday was primarily stop-loss / order momentum driven. There was no particular reason (nothing really noteworthy) for the drop in the dollar. In the last few weeks/months, Fed chatter has been more hawkish than dovish, despite the poor numbers that have been reported. Yield's have also not responded the same way as the currencies have, which leads one to speculate that this large move up may not have a whole lot of breath left specifically because the move itself wasn't driven by a fundamental trigger. Sure, it may be the start of an overall longer-term dollar decline, but I wouldn't personally discount the strength of the dollar yet. As Texxas stated, there's a lot of Fed chatter coming up this week, and with some level of discomfort probably being noticed by the Euro 'bosses' not wanting to see the Euro strengthen too fast, persisting low expectations for future rate rises in Japan, and continuing anticipated optimistic outlooks (and a cautionary stance regarding inflation) by the US Fed, there's plenty of impetus for the dollar to regain some control in the short-term.

I'll continue to play what price action dictates, but I have learned it's always wise to keep one eye on the fundamental drivers as well. When they both align, the moves can be quite forceful and long-lasting.