Forex Trading Log

Happy New Year to all my readers! I hope you have a successful year in your forex trading. It has only been 4 days into the new year and we have seen the Aussie dollar pass the resistance it was grappling with in the final days of 2006. The Aussie dollar has reached highs of up to US$0.7980 cents yesterday - even with no apparent economic data. Oh boy - but once some economic data came out of the US, reality came back to the trader’s heads and the dollar started falling… sharply. At 5pm this afternoon, the Aussie dollar had fallen down to 79.10 cents from 79.80 cents (The charts above and below are two day 1 minute charts). And at 9.23pm the dollar fell even more down to 0.7836. Note 0.7980 as a strong resistance point in future, just as how 79.10 acted as support in today’s fall for a few hours before falling sharply. Anyone who was long as a result of listening to all the talk about the AUD/USD pair making it to 80 cents this year are acting way prematurely. The market needs to see a little more proof before it is a sure bet.

It was a surprise for me to see the Aussie dollar rise so much without so much as any piece of economic data. John Kyriakopoulos from the NAB said that the rise was due to, thin trading, lack of data and favourable carry trades. He reckons fair value for the aussie is somewhere in the US$0.7770 cent range. The US dollar was stronger across all currencies overnight as US manufacturing data was especially strong. Also, Federal Open Market Committee’s (FOMC) December minutes decreased trader’s expectations of a near-term U.S. rate cut. Sue Trinh, a currency strategist at RBC Capital Markets says that, “I wouldn’t rule out a move to US$0.80 in the short term. A break above US$0.80 should generate an unencumbered rally towards US$0.8200.” She’s been really bullish about the dollar for a while now (depends what her definition of short term is…). I would expect the dollar to consolidate in the next few weeks.