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Daily Observations: February 13, 2013

Daily Observations: February 13, 2013

Christopher Vecchio, CFA, Senior Strategist

Current Positions:

- Long EURAUD from 1.3005, Stop at 1.2925, Target 1 at 1.3160, Target 2 at 1.3280, Target 3 at 1.3530

- Long EURCHF from 1.2018 (1/2), Stop at 1.2218 (locked-in +200-pips), Target 2 at 1.2750

- Long EURGBP from 0.8615, Stop at 0.8585, Target 1 at 0.8710, Target 2 at 0.8750

- Short GBPUSD from 1.5650, Stop at 1.5690, Target 1 at 1.5520, Target 2 at 1.5485

- Long USDJPY from (1/4) 90.35, Stop at 91.85 (lock-in +150-pips), Target 2 at 93.30 HIT, Target 3 at 95.00

Time Frame: 1-day to 1-week

Recently Closed Positions:

- Closed Short GBPUSD from 1.5775 at 1.5580 for +195-pips.

- Closed Long USDJPY (1/4) from 90.35 at 93.30 for +295-pips.

As per this morning's webinar covering the Bank of England Quarterly Inflation Report, I was looking at two GBP-based setups, on the basis that I was not only expecting the event to be GBP-dovish (which it was), but that my moving average trading systems were all pointing in the same direction: sell the GBP. The GBP has been trending lower all year, and I've been using the 8-EMA/21-EMA crossover on the 1H chart, conditional on the same setup on the 4H and daily charts, to issue signals. Ahead of the BoE release, the 1H 8-EMA crossed below the 1H 21-EMA in GBPUSD, as the 4H 8-EMA was already below the 4H 21-EMA, and the daily 8-EMA was below the daily 21-EMA. This was a clear indication of another strong move in the direction of the prevailing bearish trend in GBPUSD about to occur.

Likewise, using the same logic (vice-versa for bullish setups) on the EURGBP, a long was taken headed into the release. Simply put, I look at the EURUSD and the GBPUSD daily charts, and I can't help but think that the former is readying for another leg up, while the latter is heading lower; a long EURGBP thus is logical.

In terms of the EURAUD, I tweeted the 4H Symmetrical Triangle setup I've been watching, with support at 1.2975 hit overnight. I was able to get in a 1.3005. I'm giving this trade a bit of slack as the AUDUSD is rebounding more than I anticipated (if 1.0360/80 doesn't hold, a run towards 1.0460 can't be ruled out before a decline into 1.0135/75).

I also took more profit on the long USDJPY position today; now I have 1/4 of my core position still long. I've moved up my Stop as well to lock in +150-pips. I expect the JPY to be quite volatile with the G7/G20 meetings taking place the next few days, with a good deal of commentary focusing on currency debasement - yesterday already provided a sour reminder of how quickly trading conditions can change amid a few misconstrued words.

As always, any other trade ideas and general macroeconomic musings can be found in the Real Time Newsfeed, or by following me on twitter @CVecchioFX.

I also host a weekly Live Trading Q&A in DailyFX Plus, on Tuesdays at 07:15 EST / 12:15 GMT, in which I delve deeper into my positions and thought processes behind my analyses.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail

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