Wednesday, May 7, 2008

You profit from GBP/JPY Carry-Trade Collapse! IFCN Wk 22 -Wed- Equity: $721.02

The attention in forex trading is decidedly moving away from US economic issues to the economic troubles in the European and Britain zones. The forex trading forecast for the US dollar is looking better, and it appears that the easy money slam dunk of shorting the US dollar is drawing to a close.

Even the Japanese Yen is stronger than European currencies.  That says a lot all by itself.

What's the problem with the Euro?

A run of poor economic data has it pressured in recent weeks after it hit it's record high above $1.60 vs. the dollar, erasing perceptions that the euro area was insulated from the U.S. downturn.

The euro zone retail sales have been anemic, suggesting that European consumers are slowing down much more than reporting businesses were willing to admit months ago. The outlook is deteriorating for Europe and that's why we should continue to see downward pressure on the Euro.

The GBP/USD currency pair is dropping in forex trading as news on the British economy shows increasing weaknesses. The industrial production contracts data shows the last strong domain (production) in the British economy is flagging.

This could mean that the Bank of England may cut interest rates sooner than expected to keep things from getting a lot worse real fast.

We have one FirstStrike trade in operation after 3 days into the week.

We are still short Gbp/Jpy @ 207.09, with the protective stop at 207.99. As of the time of writing this we have well over 350 pips profit and are up solidly for the week, despite experiencing losses on our other 4 trades earlier.

Since the short Gbp/Jpy has been profitable from the beginning of the week, with no backing up at all-- it looks like it should stay a winner.

Our current equity is $721.02.

Not too bad.

Joel Rensink

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