In times of uncertainty the Carry Trade unwinds.

The carry trade is where investors borrow from Japanese banks and re-invest in higher yielding markets like savings and stock in another country.  It is also done on the spot market by buying JPY pairs while selling other pairs to offset possible losses as the market fluctuates. In theory the JPY go up and interest is paid on the offsetting trades.

Now what if the JPY starts to strengthen too fast and the JPY pairs fall faster than other pairs go up. What if holders of foreign assets need to pay back the JPY they have borrowed, as their assets become worth less? The trades no longer offsets and positions need to be unwound as they start going negative. So during financial instability JPY pairs go DOWN!

So I would look for selling opportunities on all JPY pairs.

Cheers and good trading.

A buy on the pull-back with stops below the low presents a good risk reward.

There will still be one or two days before the plan is finally passed.

http://money.cnn.com/2008/09/29/news/economy/bailout/?postversion=2008092909

It appears as of this morning in Washington that an agreement is prepared for vote by congress on Monday. How this will effect the opening market is a big question.

http://www.bloomberg.com/apps/news?pid=20601087&sid=asBqtU7twpAY&refer=home

http://www.nytimes.com/2008/09/28/business/28bailout.html?bl&ex=1222747200&en=486a776f9f184e9c&ei=5087%0A

We are witnessing one of the most historic events in the last 100 years!

Please see my report on the US Bailout and how it will effect the currency markets.

http://www.fxstreet.com/technical/analysis-reports/fx-weekly-report/2008-09-27.html

The current pattern is still unclear. My bias is for a further move down but I’m cautious. There are levels defined by yesterday’s highs and lows. These levels could be good break points for a day trade.

Cheers

The GBP and EUR are not really moving one way or the other. The GBP appears on the cusp of a turn whereas the EUR is still stuck in range. So which of the two currencies is leading?

I am going to wait on the sidelines until the patterns clear up.

Cheers

Remember when your mother would say: You need to learn to lose gracefully. I don’t know about you but I had no idea what the h#$l she was talking about. I was angry and upset and mad at myself and everything and I didn’t even know what the word ‘graceful’ meant.

Fast forward 40 years latter and you know what… I still fill the same when I lose. So what can I do differently? First of all I have to recognise the problem. Realising that it does me no good to stay mad and not address what’s happened. Then consciously look at the problem as a learning experience. What did I do right? Did I follow all my rules. Was money management good? Did I enter at the right place? Etc.

If I made any mistakes I congratulate myself for doing a good review and I re-enforce that I will be more structured to what was missed on my next trade. If I did everything right, then I know it was the market that went against me and I know this will happen a certain amount of times per successful trades.

By doing this I learn how to lose gracefully and when I do lose, I have a plan to work through my upset rather than re-enforcing it. Do you have a plan to be graceful in loss?

Good trading,

This flag pattern is shaping into a double or triple correction. A break to the upside is favoured.

In the last 12 hours or so we have seen the momentum come out of the EUR/USD. We are either basing to go higher or starting on our way down.

I talk about psychology and follow trader sentiment by way of COT reports and sentiment indexes. At this time the COT still favours EUR strength. (Here’s a great report to follow by Jamie Saettele) Whereas the current move is flagging and the trend is in danger of reversing.

So for now, use a breakout strategy for the next move.

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