On the other hand, I am longing EUR/USD again. The news about Greece seem to be encouraging today. The bond yield is softening. What’s more, in anticipation of the rate decision of Fed, USD will be weakened again. I am seeing the current level of EUR attractive as long as there are no other Europe countries related issues.

What’s interesting to observe, the reaction of EUR/USD last Thursday and Friday was quite calm in the turmoil of Obama’s proposal and Bernanke’s reappointment. The downside risk might be limited so far.

EUR/USD    1    B    1.41465    1.40800

Last week was an splendid week for shorting risky assets because issues of Greece, China, Bank Regulation and Bernanke all came along. However, I did cease my trading after a few losses on Monday and Tuesday because I really cannot focus on the market.

As for the first trade plan this week. I am trading two topics.

1. Bernanke’s confirmation is becoming clearer than last Friday

2. The banker’s lobbyists are planning to soften the tone of Obama’s regulation.

3. Britain’s 4Q GDP will be positive this week.

4. Fed is about to cease the MBS buying but will hold on any new direction.

The only uncertainty so far is the speculation on China’s policy. The inflation expectation is emerging rapidly and therefore the fret about China is quite reasonable.

My positions:

AUD/USD    1    B    0.90294    0.90516    0.88800
GBP/JPY    1    B    144.825    145.061    141.800
EUR/GBP    1    S    0.87875    0.87930    0.88800

As for my trading, I’m not at the right tempo to follow many opportunities such as EURGBP and GBPUSD. The news from China last morning also interrupted some of my plans. I need to reassess some of my initial assessment.

1. GBP is quite strong recently no matter in GBP/USD pair or GBP/JPY, GBP/AUD pairs. The market risk sentiment isn’t perfectly correlated with GBP/USD, but the yen pair is still influenced by the Chinese news. What surprised me is the movement of last night. The 3% drop of the stock market in Shanghai didn’t influence any risk pairs in the FX market. I guess the market might consider it as a noise again to stick with the Chinese legendary.

2. Having said that, I heard several rumors about the trading recommendation of US IB of longing EUR/AUD and GBP/AUD. Let me get it straight. If the legendary continues, it’s hard to believe that Europe and Britain can recover better than Australia. However, considering the valuation difference, AUD did rise too much compared to other pairs. Only in this case, the longing of those pairs will work.

My current trade is like this.

The position of AUD/USD has reached 0.9200 while AUD/JPY reached the previous high. To avoid a potential double top, I exited both GBP/USD and AUD/USD.

The only position left is GBP/JPY which I entered this morning when the news was presenting the political turmoil in Britain. What’s interesting, Jim O’Neil talked about his favorite trade, GBP/JPY in DJ News Wire overnight. The idea corresponded to my plan too. My entry level wasn’t optimal while I’d rather leave it for a while in case USD/JPY will run ahead. NFP surly has high odds to be a positive number this Friday.

1. Buy the dip of GBPUSD

Actually I have already entered the position at 1.5960 level. The stop is below 1.5830. I am anticipating that the rate decision from Britain will show more confidence and hesitation for more QE in the current global economy. Although the market concerns the deficit problem and potential rating downgrade, especially the perspective from PIMCO. I see it as a good opportunity to buy the dips since I really believe GBP is undervalued and the condition isn’t really that bad nowadays. As for the potential downgrade, it’s really old news since S&P’s warning last year.

2. Buy the dip of USDJPY

I bought USDJPY yesterday rushly at 92.25 level, which proved to be wrong. I totally forgot to consider the effect of today’s pending home sale. Ironically, I knew about the distress gap from Calculated Risk for a long time. I should have expected the large fall of the data. Anyway, there will be ADP tomorrow and the uncertainty will be revealed soon.

3. Pick up AUD/USD

It looks like a consolidation pattern at a level above 0.9100. I have longed from 0.9110 and set the stop below 0.8965. Just heard of the news from EU that Greece is on its own. Risky pairs are all influenced by the news, except the USDJPY. Actually, I will take the news as noise since Greece’s problem is out of control for a long time. Its impact is still questionable.

1. Long Range Trade EUR/GBP.

GBP shouldn’t be out of the recent range before the rate decision on Thursday. I am betting about 1.5% risk on this range trade.

2. Long EUR/USD.

I lost the position of AUD/USD in the last few days of December. I still think that non-dollar pairs were oversold during the thin market in December. If that’s the case, the trader in January should pick the position back in anticipation of the uncertainty about the FED rate this year.

3. Long USD/JPY.

The recent jobless claim pushed me to think about a much better NFP this Friday. It would be better to get a better position to manage the risk before the data release. I’m ordering a long bet at 92.4 and stop at 91.7.

As for my trading, pathetically, the 2-months discretionary trading cost me all the profits in the first two months. There are several very good positioning but was damaged by the year-end volume and my trip back and forth to Chicago.

Anyway, I really believe that I need to follow my discipline on this blog more so as to restrict myself on the fundamental analysis and risk management.

Here is some of my thoughts about the FX market in 2010
1. USDJPY will be contained between 90 and 100;

2. AUDUSD will run for 0.98 again;

3. GBPUSD will break through 1.70 level and run for 1.80;

4. EURGBP will break 0.84 level and fall back to 0.77 level;

5. AUDJPY will run for 95 level.

All the thoughts are all based on the recovery theme and the continuous low rates environment. Let’s see how many of those speculations will be true.

Evaluation

Performance

Evaluation

Performance

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