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With the dollar still range-bound and trading without a clear direction at the bottom of the downtrend, there’s a lot of intraday chop to contend with.

The week as far as I’m concerned will begin on Wednesday after the election results are in and traders can then determine what they want to do with equities and the dollar. in the meanwhile, with a RBA rate hike seemingly imminent, I also look at the aussie, the uptrend and why I still feel the daily is being bought a corrections lower.

Not to be left out, the EUR/USD gets plenty of discussion as well as I explained what a “fist” is on the charts.

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*Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions.

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Quote of the day: Recession is when a neighbor loses his job. Depression is when you lose yours. – Ronald Reagan

EURUSD

Trading strategy: short at 1.3910, stop at 1.3960(0.5% risk), 1st objective at 1.3860, 2nd objective at 1.3780

The euro recovered some ground in Asian session as the support zone formed by the last weeks’ bottoms provided a stable support so far. The pair is back where it was 24 hours ago and, unlike yesterday, the intra-day sentiment is slightly bullish now. In recent weeks we seen that the euro is able to recover quite fast, but I doubt we’ll see the recent top side around 1.400 under pressure until next week. Meanwhile, current range will probably remain intact and there will be trading opportunities in both sides – downside being slightly favored as long as price doesn’t overcome 1.39. Above 1.39, bulls will be back in business. Today’s economic calendar events to affect EUR/USD are Trichet’s speech and U.S. Initial Jobless Claims data release. Full article…

In addressing the financial/credit/economic crisis, governments around the world have lowered interest rates, bailed-out bankrupt financial insititutions, engaged in wholesale money printing, guaranteed debt, and pumped cash into their economies. However, while such programs may have had some mitigating impact on the crisis, they did little to address the underlying cause. Specifically, debt was merely moved from one institution – one balance sheet – to another. Most of the bad debt that was at the heart of the credit crisis is still outstanding; the only thing that has changed is who is responsible for repaying it.

In many cases, it is governments which have assumed ownership of this debt. Fannie Mae and Freddie Mac remain in a US government conservatorship. The Federal Reserve Bank owns more than $2 Trillion in US Treasuries and Mortgage Backed Securities. The European Union has agreed to collectively back more than $500 Billion in debt belonging to Greece and other unspecified “troubled” member states. The Japanese government has managed to pass off 90% of its sovereign debt onto its own citizens.

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I’ve always tried to communicate the entry strategy behind the trades and set ups I post here. So in the interest of that - and because I have not done this in a while – let’s break down how I consider entries, Step by Step. Here are the broad strokes…and I will follow up this post with more detail and charts in my next update.

The first step of any entry is to ascertain the direction of the market. I call this market stages or phases or cycles. The correct terminology is stages or phases but I care less about terminology and more about meaning. The market can either trend up, trend down or move sideways. Determining which it is doing on the daily and also on the time frame you are setting up for a trade is always the first step.

The next step is to determine if price action is in an actionable price area. What’s the clarity of the market trend? Where is (if any) the momentum? Some price areas on a chart are best left alone until the market sentiment, momentum, and trend are clear.

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Quote of the day: In truth, the gold standard is already a barbarous relic. – John Maynard Keynes

EURUSD

Trading strategy: standing aside

Although it recovered some lost ground yesterday, the euro found resistance at 1.400 and was sold-off, the scenario repeating in today’s Asian session. Speaking of intra-day conditions – main question now is whether the recovery to 1.400 was corrective – the euro resuming Friday’s sell-off now, or not. It certainly seems corrective at the time of writing, so I’d hesitate on planning any long positions around these levels and rather look to sell or buy on break above 1.400 since that would confirm that uptrend resumes. Meanwhile, shorts on weakness might be considered – but carefully played as the short-term sentiment is highly bullish. The German Zew is today’s key event in the economic calendar. Full article…