Seems logical to me. But will increased risk taking overwhelm the downside?

I like the looks of the 60 minute AUDCHF to the longside. The EURAUD is compressing also.

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Well, at this point, even the most cautious observers expect a 100 basis point cut from Bollard; so it is likely fully priced in.

I think we will need a bigger than expected cut or some commentary to suggest he will keep up the pace such that zero is a likely outcome in the end.

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John Kicklighter is the author of Dynamic Carry Trade Basket, Watch What The Fed Watches, and Forex Trading Weekly Forecast on DailyFX.com

Carry Trade IBD style.

This method has got me into a few good long term currency trades. Once in the AUDUSD and another time in the USDJPY.

If you follow the Big Picture they talk about an initial rally attempt followed by a follow through rally of 1.75% 4 to 7 days later on heavier volume than the prior day. I think they say about 70% of follow through days work. Today was a follow through day IMO from the rally in the SPY on 1/21/09. The NYSE and NASDAQ composite followed through on rallies from 4 days ago.

One negative for the stock market is a lack of leadership in individual stocks. I realize that this has nothing to do with currencies, however this is how I asses overall risk in the stock market which has a correlation with some currency pairs.

The USDJPY has made a double bottom and acted well today. The USDCHF acted well today also. The question in my mind should my prediction of a stock market rally be correct is which currency pair to buy. The USDJPY or AUDUSD?

My inclination is USDJPY since the world economy is clearly slowing. Unfortunately I sold my large USDJPY this moring at a small loss at precisely the wrong moment.

One other thing that was noteworthy in todays action is that the only stock sector that sold off of the major stock sectors I follow was Gold. I took on a small Gold short.

An increase in risk appetite will send traders to the higher yielding New Zealand dollar. Betting this way would be betting against the dominant trend though, so I will keep my expectations conservative.

EURAUD is breaking its ascending wedge formation, but there is little initial impetus for breakout momentum.

AUDCHF is a good looking setup. Haven't even looked at it in a long time.

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John Kicklighter is the author of Dynamic Carry Trade Basket, Watch What The Fed Watches, and Forex Trading Weekly Forecast on DailyFX.com

Well, my fears were proven correct. We saw a bearish break below 0.52 on that tight congestion. Follow through is lacking though; and I would expect it to considering the event risk in tomorrow's US GDP report. Good thing my first target on last week's range setup was reasonable and I was able to book modest profit on it before it reversed. This is a good example of why you should have time limits on your trades....

Anyone trading this or any kiwi crosses right now?

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John Kicklighter is the author of Dynamic Carry Trade Basket, Watch What The Fed Watches, and Forex Trading Weekly Forecast on DailyFX.com

Hi John,

I am trading the NZD/USD, well, no trades atm but am eagerly waiting until the GDP is released in USD - I am expecting it to improve the NZD slightly and then will try to short it - based on the OCR announcement yesterday, i.e. further cuts expected.

BTW, relatively new trader so take my words with a grain of salt :-)

What are you going to do if the sentiment surrounding the US GDP number is just as bad for the dollar as market confidence was for the RBNZ rate decision for the New Zealand dollar?

What do you think would be a 'good' number for the US report. You should set your own benchmark on sentiment, because you know the market will too.

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John Kicklighter is the author of Dynamic Carry Trade Basket, Watch What The Fed Watches, and Forex Trading Weekly Forecast on DailyFX.com

That is what I am hoping for. If the US GDP is -5.5 or worse I expect the NZD climb and when / if it does I will short the NZD and try to get some pips out of it..

I would not like to speculate on numbers as I am very new to this. I am simply going by the estimated -5.5 and will base my entry / exits on a comparison from that.

Nice call on that. I was on the wrong side of the AUDUSD and NZDAUD and went out with a loss. There seems to be an insatiable appetite for the USD. I didn't have the guts to switch my position and short the AUD, but instead shorted the EURUSD.

I did short the AUDNZD yesterday after the close. I know this is clearly fighting the trend but it seemed like a good play going into the Bank of Australia rate decision. I have my stop set at break even. What do you see as the greatest possible threat to this trade as far as news flow goes between now and the meeting?

Good policy.

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John Kicklighter is the author of Dynamic Carry Trade Basket, Watch What The Fed Watches, and Forex Trading Weekly Forecast on DailyFX.com

This is a substantial setup for AUDUSD. A broad rising wedge formation with enough momentum to potentially call an early end to the bullish bias.

I would prefer a break before the weekend as it is easier to generate momentum when traders are fresh and there is a pure follow through mentality in Asia and little London and New York volume to mess up a trend. Of course, we have held off this rising trendline for some time now.

A bearish break would only have about 300-350 points to run before hitting the more critical level anyway.

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John Kicklighter is the author of Dynamic Carry Trade Basket, Watch What The Fed Watches, and Forex Trading Weekly Forecast on DailyFX.com

Hi everyone,

The forum looks quite different from what I remember. I will try to post more often on the forum from now on, since the traffic seems quite low. I have been away for a while so let me introduce myself.

I mainly trade NZD/USD and AUD/NZD as I live in NZ and more familiar with these currencies. I have tried some other currencies but kept getting burnt, so I'm going to stick to these 2 for now.

I got into FX trading middle of last year, and was doing OK! After going to some seminars and reading more, I started to make some profit, supplementing my income. But then went for an overseas for about a month and after that, I just lost track of all the news.

There was just too much news coming out, with the credit crunch happening, all the govt interventions. Things got really volatile and there was just too many things happening. I tried to get back into trading, but just got burnt and lost nearly all the profit that I had made before my trip.

But now I am back. The RBNZ and RBA interest rate decision was too big an event for me to not take part in. and I have made all my profits back. I'm pretty happy with what has been happening.

Your thinking was the same as mine. I had quite a few short positions of NZD and AUD. but I decided to take my profits and closed all my positions a few hours before the US GDP announcement because I thought the US news will be real bad and NZD and AUD might go back up, so that I can short again.

Unfortunately, by the time the announcement came it, it was like 2am here and I was sound asleep. Thew news was not as bad so NZD and AUD continued falling did not go high enough to hit my limit sell orders.

After that I was too afraid to go in as it had already gone down so much and just watched them drop lower and lower.

missed opportunity.

There have been quite a few times that I wanted to go against the trend because I kept getting burnt. So now I leave the counter trend trades to the experts. Since I'm still a noob, I'll just follow the pack and make my little money and be happy with it.

Good luck to your trading. I guess everyone has different risk levels.

I dont really like AUDNZD because there is like a 10 pip spread. Thats too much. AUDUSD only has 2 pip spread. thats why its my favourite pair.

Hi John,

I would like to thank you for all your work/posts and your graphs.

I was checking another website and they also said that if 6300 is broken, that it will probably keep going down. So I went in at 6298. Its now 6265 and tomorrow is that RBA decision.

When you say "200 points to run", do you think that it will really go all the way to 6000? That is quite a long way away and I thought the market has already priced in the 100 pip RBA cut.

I'm just getting worried that a jump might be coming along, as AUD has dropped quite a bit in just a week.

Please share your opinion. Thank you.