Euro Breakdown A Welcome Development


JUST WHEN THINGS WERE GETTING INTERESTING - So we are heading into the long holiday weekend in the US, and with Memorial Day upon us, we can expect to see some lightened trade Friday. It's always a bit frustrating going into long holiday weekends when it looks as though markets may actually on the verge of getting interesting. But we will just have to wait until next Tuesday before normal trading conditions resume. Overall, on the surface, it doesn't look like much is going on. Stocks still track at record highs, USD/JPY remains confined to a well defined range, EUR/CHF hasn't moved, while GOLD continues to show a severe contraction in volatility. And yet, with the EUR/USD finally rolling over a bit in recent sessions, we could be getting a warning from the most liquid market, that we should all get ready to hold onto our hats. Perhaps it is fitting that EUR/USD is the first market to move, given that it is the most liquid of currency pairs. 

If we are going to emerge from the depths of historically low volatility in FX markets, it's rather fitting that EUR/USD is the market to catalyze the move. @jkonfx

POSITION OVERVIEW - So where am I positioned heading into this long holiday weekend? I have exposure in the two markets that I have been trading all year. I am short SPX, and I am short NZD/USD. While I have been in and out of the SPX trade several times this year, each time selling the market into a rally, I have been sitting on the Kiwi short, waiting patiently. Technically, Kiwi is looking more promising at the moment, with NZD/USD looking like it is trying to carve out a major top. But we will need to see a break and close below 0.8515 over the coming sessions to really confirm the structure shift and open the door for a major downside acceleration. My SPX short is out of the money at the moment, but even if we break to fresh record highs, I won't be looking to exit that position and may even consider adding to the short. It has been the strangest of years for me. If you would have told me equity markets would still be at record highs ahead of June, and we would continue to see super low vol in FX, I probably would have guessed I would be showing negative returns this year (especially because I have made money on the short side of equities). But it just goes to show, you never know how things will play out, and I am grateful for that. I hold my macro views and play those views using short-term price action developments. This has kept me in good shape, and I only hope I can continue to perform at half this rate into H2 2014.


Only in Their Infancy

We have some new trades open but they will need more time to really get going.

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