Russian Support Lifts The Dollar

Begrudging communist approval boosted the Dollar; ahead of tomorrow’s BRIC summit Russia said that it was too early for an alternative reserve currency.

For the past few weeks I’ve been banging on about the false picture of an improving housing market, distorted by low volume and a reluctance to sell at these levels. My concerns have been that unemployment will continue to rise, affordability levels remained too high and that mortgage rates were likely to rise soon.

Two of those concerns were already apparent; the third hit the press over the weekend with Nationwide saying that it’s going to raise its rates on fixed term mortgages by up to 0.86%. Others are likely to follow.

A day of mixed fortunes on the trading front with wins in equities and a loss in forex land.

First thing this morning on my Twitter commentary I highlighted the higher 21-day MAV on the Dax and pondered whether that had raised the level of support or just made a break more likely. I didn’t have long to wait, and boy was I glad that I kept faith in last week’s short position at the higher levels.

The sell off in the Dax posed the usual question, “Is this going to be the long-awaited collapse in share prices, or is it just an overdue pull back?”

I’ve no idea, but with the intra-day markets in an extreme oversold position I opted for closing out at 4949 to bank some profits. My logic is that even if this is the return of the bear market, the index will probably pop up to say a proper goodbye to the 21-day MAV, which is still trending higher. My trend system assumes that when the price crosses its 21-day moving average, still trending in the opposite direction, it will return to that level before any major reversal.

I’ve got to say it’s mildly irritating to see that with the FTSE over 100 points lower my short Lloyds position is actually losing money on the day. Granted, the bet size is a mere shadow of the original stake, but it’s the principle!

As so often the case I gave back some of this morning’s winnings on low-conviction trade. I’d sort of decided to leave GBPUSD alone until it tested support at the 21-day moving average; and I felt more confident in this view as equities fell this morning.

I resisted my normal 5-minute trigger to buy at $1.6360 (yep, that would have been an OK trade after all), but I’m testing another forex system that’s given a few good trades and, against my better judgement, decided to follow the buy signal at $1.6418. Almost immediately the trade was offside and the signs were ominous when the next move up stopped short of my buy price. I should have bailed out then, but decided to keep the discipline of the stop loss placed at $1.6345. In the end I did bail out early as my chart shrieked out a sell signal. I took a 56-pip thump on the nose, but with the consolation that my stop would have been triggered for a greater loss.

So, still up on the day, but with the gloss taken off the morning’s action.

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