Buy Signal on $GBPUSD

• admin
• September 25th, 2009

Today we saw investors retreat to the safety of the dollar as Wednesday’s FOMC news took hold.  There appears to be little appetite for risk in an environment of less quantitative easing.  See post from @inegoveritas, How I will trade the FOMC http://bit.ly/zaMjB. 

The possibility of an empty governmental punch bowl rattled many investors going into today’s session.   The mood was heightened by a surprise slump in Housing Sales.  As a result we saw a strengthening of the dollar against the Euro and Pound.

Buy Signal on $GBPUSD

Fed announcements inevitably presents some of the best opportunities for currency trading.  Just a few hours after the FOMC meeting concluded, a BCMI (Bell & Circus Momentum Indicator) buy signal was triggered for the $GBPUSD  at 1.5922.  It is recommended to wait until price confirms at 1.5800 which is double support.  This 1.5800 level is significant because it is a double bottom and there is also a major trendline near this level.  I took a risk and entered the trade at 1.5922.  Over the next several days, we will track both approaches to see which yields the best return. 

Daily Buy Signals vs. Intraday Buy Signals

For currency trading, we have seen the most success thus far in trading the Daily Charts.  In her post, “What time are you trading?”, @ragheehorner, notes the importance of being cognizant of trading times http://bit.ly/SnZyW.  It is also important to examine which timeframe is utilized for technical chart analysis.  Is the 5 minute chart or 60 minute better for your trading style?   Although BCMI buy signals are received in all timeframes, only daily buy signals are recognized as legitimate.  Daily signals appear to be more accurate than intraday.  This may change as further back testing is completed.

$USDJPY Trading Channel

It is interesting that the indicator has been neutral on the Dollar Yen ($USDJPY).   We saw a significant deterioration of the dollar against the Yen over the past two trading days.  This was in spite of the fact that the dollar was strengthening against the Pound.  As we move into the holiday season this correlation is expected re-couple with Major Currency Pairs becoming more sensitive to consumer related data.  The most important trend for $USDJPY is a downward channel which has defined its trading range over the past 3 months.

As shown above, the $USDJPY is trading at the lower end of this channel currently.  If the Pair confirms below the lower channel then we would expect further downside.  Currently that level is $90.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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