FXA updated

You have to love the move today. The diagnol spread discussed yesterday is up 45 cents or 25% today alone. It looks promising to continue. We will watch for an opportunity to take of the short side or the whole position, depending on how it stalls at near term resistance.

Buy on FXA options

The options on the forex ETFs are pretty cheap right now. I was looking at the fact that the AUD/USD has fallen back to a key support. The cost for a 105 September call would only cost $2.40 today. That is $240 per contract, the nice thing about an option here is we can sell an August call above the last resistance area near 108 for 60 cents and lower our cost to $1.80 or $180 per contract. Though the spot market may drop and could stop out a 180 pip stop loss, this would not be a concern to this position. We could see price fall as far as it wanted to and as long as it rallies back, back above 108, we can and will gain $120

GBP setting up for a pounding.

The GBP has pulled back to key support again. Sellers have not been able to get the GBP/USD to break through this support ner 1.50 over the past 3 months. With today's doji, tomorrow should provide the next directional move. A move above the high today should see the pair retest 1.63 but I am anticipating this is the time we see support broken and a drop to 1.56 if not 1.54

EURO Euphoria?

The euro rallied today on "optimism European policymakers will be able to control a political and debt crisis in Portugal". Now why would you rally on the ability to control a political and debt crises. That is like saying "I just cut off 3 fingers but I am confident I can control the bleading, hurray!!!" I expect the joy to be short lived which should lead to a drop in the euro in the near term. In fact, i really like the EUR/CHF short here. Take a look. Shorting EUR/CHF at 1.2870 stop of 1.3010 and an easy target of 1.250

Pounded the GBP/USD

We called the GBP/USD trade on the 29th expecting it to hit in 2-3 days but we hit in 1 day, a little quicker than expected but who can complain.

The pair has consolidated now and a break down below 1.5440 will see the pair test 1.5350 for a scalp. A break below 1.5350 will likely see the pair fall 800 pips or more. I, however, am expecting to see price break below 1.5440 and give a head fake to the 1.5350 followed by a bounce and a reversal.