I finally managed to find the rhythm in trading last month despite a red number in P&L.  Market trading on the back of bear traps after a worse than expected NFP early in January helped me to pick the levels for a possible risk aversion. Guessing the turnaround in S&P and Crude Oil helped me to stay on the track for the rest of the month at the times of troubles.

Staying short EURUSD from 1.44s, AUDUSD from 0.9250s vs. long USDTRY from 1.45s and USDJPY from 88.50-89.30 area was good enough to cheer me up while losing money in illiquid Asian session two-way customer flows and stop-loss order executions in Wellington openings.

With the expectation of a black number in February, it is time to keep the motivation, confidence and team-work as high as possible to clear the sky from suspicious clouds. To make that happen, I need to have a better decision making mechanism which is only possible if I am energetic and in shape so  No drinking and losing weight policy for 2 months starting from today.

We are going to have the mighty NFP this Friday ( +15k exp.) and once again,  the rest of the month will be more based on that number.  I will be paying a lot of attention to a weekly close below/above at 1070 in S&P and 1.3868 ( 200 SMAVG in weekly) in EURUSD.

I am yet again not surprised that the market  reacted so slowly to the bad numbers such as last Friday’s  NFP  when the positioning is not in the same direction.  Big players  were  keen to save time to hand over the hot potatoes to the other risk bulls and used good China numbers over the weekend as a good reason.

Below is the story of the overnight price action.

AUDUSD dropped from 0.9305 to 0.9171 and  GBPAUD rallied from 1.7293 to 1.7615.

EURJPY got smashed from 133.82 to 131.63 and USDCAD bounced from 1.0314 to 1.0414.

Basically XAU dropped 26$ and Crude chased the tail for 2.5$ led AUD, CAD suffering while risk off theme led EURJPY getting hit as well.

I think for the rest of the day, as long as any good news dominates the session with better recovery stories, every squeeze of risk shorts must be a good chance to sell on rallies.

*Stocks, Oil Drop as Bonds Rally on Concern Recovery to Slow

Jan. 12 (Bloomberg) — The Standard & Poor’s 500 Index dropped for the first time this year while European stocks fell the most in three weeks and Treasuries rose on concern the economic recovery will slow as governments withdraw stimulus.The S&P 500 tumbled 0.9 percent to 1,136.22 at 4 p.m. in New York. Europe’s Dow Jones Stoxx 600 Index declined 0.9 percent. The 10-year Treasury note yield declined 0.10 percentage point to 3.72 percent, while the yield on the German bund slipped to the lowest level this year. The yen strengthened against all 16 major counterparts, while crude oil slumped the most in five weeks. Grains plunged in Chicago after the government said farmers harvested record corn and soybean crops. China ordered banks to set aside more reserves to cool the expansion of the world’s fastest-growing major economy, stoking concern that recovery from the global recession will falter.
“On top of that, there’s also China weighing on the market. As the global economy shows signs of strength, central banks will have to start tightening at some point.”

Post NFP last Friday, AUD and CAD rallied on the back of higher commodity prices.

With US rate hike possibilities fading away and US treasury yields dropping like a stone led greenback getting hammered as well in FX universe.

First thing on a Monday morning without checking the FX prices after a -80K NFP numbers vs.  expectations of flattish, I would sell risk trades and buy EURUSD as a knee jerk reaction but seeing S&P above 1140 and Crude Oil above 82.5$ is a bit worrying. In addition to that worry, AUD and CAD rallying on the back of higher commodity prices do not make any sense at all.

First of all, buying stocks and commodities on the back of  less chance of rate hike in US ? how about slower recovery on the back of growth prospects and less demand for energy when you produce less ? and effect on profits of companies ?

I think we may have a bumpy Monday session later on today with good chance of resistances holding in S&P and Oil which may lead a turn around in AUD and CAD on the back of risk trades getting sold off. I expect S&P breaking 1125 this week and heading down to 1085 while Oil holds it firmly at 84.40 and retraces back to 80.25.

On the back of the argument above if the rally continues in AUD and CAD,

Sell AUDUSD at 0.9285 and 0.9325, tight SL at 0.9345 and take profit at 0.9175.

Buy USDCAD at 1.0235 and 1.0195, tight SL at 1.0170 and take profit at 1.0415.

Bear in mind that:

A break of 0.9155 suggest a drop down to 0.8985 in AUD and a break of 1.0420 in USDCAD opens further room on the topside for 1.0665.