Trade Strategy - Mch 4

Written by Research | 04 March 2010

for a fundamental & Technically driven FX market.

The US markets opened with session gains after a larger than expected decline on US initial jobless claims. On the FX markets the USD is soaring against the Yen working at 89.02 from 88.28.

Meanwhile EUR/USD & the GBP/USD after a rebound made their corrective movement after the news came out on the Jobless claim. The Dow Jones Industrials Index advances 0.4%, while the Nasdaq Index adds 0.2%, and the S&P500 Index trades 0.4% above its opening level, after the opening bell.The US initial jobless claims have declined by 29,000 in the week of February 27, to 469,000 claims the lowest level since January last year, beating expectations of a decline by about 23,000 claims.

Prompting the acceleration of the USD/JPY higher which have led a more direct effect on the Yen than the rest of the foreign currencies. The US Non Farm productivity has been revised up to a 6.9%, from the 6.2% preliminary estimation, while 3Q productivity was revised to a 7.8% increase from the 7.2% increase previously estimated.

The European Central Bank leaving the rates at the 1.00% level, the announcement of Greece making a huge concession of reducing their expenditures and selling thier bonds in the open market which were well accepted have led the Euro to recover and weaken in a relatively short period of time but within a major down trend channel on a technical basis. the volatility will obviously increase as major institutions have stepped up their position adjustments within this third period of the month and the closing of the 1st quarter of the year.

USD/JPY decline from 89.50 last Monday's high has reached a 2-1/2 months low on Asian session at 88.15-28, and the pair has soared almost 100 pips higher, from the better labour data to session high at 89.20 taking back most of the ground lost previously on the week.

EUR/USD has pulled back from 1.3695 high before US data and Trichet's press conference, and the pair has reached a new session low at 1.3625. GBP/USD decline from 1.5130 high on Wednesday has found support at 1.5025 ahead of the European session opening, and the pair has bounced up to re-gain lost ground and re-test 1.5130 resistance at US session opening This also affected the EUR/GBP to move lower from a session high at 0.9094 and currently working at 0.9029. The initial support of 0.8965-85 may hold for now as it used to be a resistance price now a support. Any attempt would only create some long positions along the way as the symmetrical triangle is still in place on an overall monthly market outlook.

To trade such a volatile market; a must have is a combination of strategy and tolerance levels where the average trading range for the past weeks have to be incorporated in each trade plan. A clear example are the up and down swings of at least 150 pips that could trigger any stop-loss even before being able to profit in a single currency. Hedging strategies should be in place in these type of volatility.