<span style="text-decoration: underline;"><strong>1. INTRODUCTION:</strong></span>

The title of this week's blog says it all. I am predominantly a USD major trader because of my timezone location and therefore I have been a little bored of late. As you know I will not chase currencies up or down so I have been limited in trades/tweets/thoughts...as we have been a little range bound to say the least. Yesterday, may well be the break that I have been waiting three weeks for.

This period of masterly inactivity has given me time to review many articles, many, many chart patterns have been examined, and these have resulted in me taking on a couple of exotic trades that hopefully will bear fruit over the coming two/three weeks. I bought and then took profits and re-entered positions...my usual attack to give me profits and then I can let them run. These are high volume/volatile trades so not my usual style but never say never!!

I wrote a few months ago that I thought that we were at a crossroads regarding the relationships/correlations and divergences between equities/forex/bonds markets. I may have been a little premature....but now the ducks (like in a fairground) are once again falling into line. If you check back over old blog posts you will see the comments made on the 20th October 2012 ,(I used chickens coming home to roost at that time rather than ducks in a row!!)   are pretty much to my way of thinking still valid today. I am looking for USD strength to come back into play. It may just be across commodity currencies in the first instance but I do think the longer term play given the diminishing returns that all the Central bank intervention gives the markets, will make for a stronger USD -  time will tell.

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<span style="text-decoration: underline;"><strong>2. THE VIEW FROM MY TRADING DESK:</strong></span>
<p style="text-align: center;"><strong>IF YOU TRADE JUST THE USD MAJORS (IGNORING THE JPY)....YOU MUST BE BORED STUPID....BUT MAYBE THERE IS A LIGHT ON THE HORIZON!</strong></p>
Moving to live in Canada, I kind of just fell into trading the USD major currencies as my base currencies to trade and I started to treat anything non USD based as exotic. I know it's a mindset but I found that trading pairs with a home base in my timezone just made sense to me. If you trade like pairs, you must be like myself bored stupid with this range bound market. I know we see little pockets of movement but in reality we are somewhat range bound across all the USD pairs , with the exception being the USD/JPY. Even with this pair, I will not chase at such elevated levels. I am waiting for a pullback to get a better entry price, somewhere around 86.00. With it's relentless weakening plus the accompanying volatility it just doesn't fit my trading approach via my trading plan.

So in summary, I have not really been trading much apart from pullback trading to scalp a few pips. Therefore, as a result my tweeting has also been limited.

But maybe there is a light on the horizon. Many, many times, I have written and tweeted that commodities lead the way and that my lead indicators that I research and examine every morning, every night, in fact every time that I look at my trading computers, just may be telling us something, because of  the non correlations in the markets.

What are my lead indicators: - "The Holy Trinity" (Gold, Oil and Copper), are my commodities and the USD/CAD, USD/NOK and AUD/USD are my three main currencies that I check out, and, in addition I look at $US 10 year notes (/ZN#O).

I could write for quite a long time taking each lead indicator individually, however for the sole purpose of trying to keep the blog a fast 15 minute read I will write a few lines about just one them to highlight my thoughts.

AUD/USD: Keeping it very simple, in the past two/three weeks the equity markets in the U.S. have kept a relentless grind upwards in play with the S&amp;P achieving 5 year highs on a number of occasions. Every time the S&amp;P squeezed higher, say over a three/four period where the S&amp;P rose 20 points you would usually expect the AUD/USD to rise 100 pips. We have been struggling to rise! In fact, the range of 1.0500 to 1.0630 was broken to the downside following the best Chinese PMi data for almost 2 years. This lack of correlation between the AUD/USD and the S&amp;P and the reaction to Chinese PMi data shows that all is not what it should be. The mere fact that the AUD/USD is testing 1.0400 and the S&amp;P testing 1500 says it all.

The AUD/USD can lead the way by two/three weeks, but this disconnect is worth noting. Copper is not rising either on the back of improving Chinese data.

We must also bear in my if the S&amp;P finally hits 1500...would this then spark some profit taking and then result in a pullback. If the AUD/USD failed to rise on an upward grind in equities, can you just imagine what would happen if there was an equity market sell off?

I think that with the markets being liquified so much by central bank intervention, the "Currency Wars" that are now taking place are having a nullifying effect across the forex market. The only result of this that I can see is USD strength in the short to medium term. Every country wants a weaker currency to improve exporting conditions and time will tell, but with the FIFO (First in First out) logic in place and with improving economic data in the U.S. the FED has already indicated that QE  to infinity does not mean forever, and that sooner or later, with improving economic and unemployment conditions, QE will end and interest rates will rise. This is why I think that the USD will strengthen.

The equity markets know that they will not be supported forever, and once the 1500 S&amp;P target is hit, maybe this will be the catalyst to send equities lower?

The AUD/USD is not acting normally and this should be noted. This is why I believe that there may be light at the end of the tunnel. If the Aussie rips higher or tears lower we will see the range bound market in USD majors busted as being a lead indicator the markets will react.

Remember, commodities lead the way.......watch "The Holy Trinity", then the Commodity currencies, then bonds......remember equities will always be the last to the party.

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<span style="text-decoration: underline;"><strong>3. MY LONG TERM TRADES:</strong></span>
<p style="text-align: center;"><strong>USD/CAD</strong>
<strong>Long</strong>
<strong>Entry Cost Average: 1.0016</strong>
<strong>Position Size: 20%</strong>
<strong>Closing Price: 1.0055</strong>
<strong>Stop Loss level: 0.9870</strong>
<strong>Limit/Take Profit target: 1.0350</strong>
<strong>Current position: +39 pips</strong></p>
<p style="text-align: left;">Finally the "Loonie" has broken higher. I do think that this pair will run higher. The EUR cross rate effect of the EUR/CAD is helping...plus the bad statistics on CPi yesterday did not help stop the move upwards.</p>
<p style="text-align: center;"><strong>AUD/USD</strong>
<strong>Short</strong>
<strong>Entry Cost Average: 1.0470</strong>
<strong>Position Size: 20%</strong>
<strong>Closing Price: 1.0424</strong>
<strong>Stop Loss level: 1.0630</strong>
<strong>Limit/Take Profit target: 0.9850</strong>
<strong>Current position: +46 pips</strong></p>
<p style="text-align: left;">I am expecting a whoooooosh!! lower in this pair soon. I may be proved wrong but for reasons already discussed in this weeks blog, I think that this pair will drive lower in coming sessions. I am completely different in opinion to "Money in Motion" experts on CNBC!!</p>
<p style="text-align: center;"><strong>EUR/AUD</strong>
<strong>Long:</strong>
<strong>Entry Cost Average: 1.2876</strong>
<strong>Position Size: 20%</strong>
<strong>Closing Price:  1.2905</strong>
<strong>Stop Loss level: 1.2550</strong>
<strong>Limit/Take Profit target: 1.4170</strong>
<strong>Current position: +29 pips</strong></p>
<p style="text-align: left;">I am a little late to the party with this pair...I looked....looked.... and looked again to confirm the move, waited for a kind of pullback and then leaped in. I am about 200 pips away from when I first thought Ah-Ha!! We are in a massive period of unwinding a carry trade with this pair. In fact its about 3 years plus of unwinding that I think we are about to see. So to be 200 pips late given the size of the move is not the worst place to be.</p>
On the daily chart there is an inverted "Head and Shoulders" pattern. Once this pair clears about 1.3000, it looks like the measured move will be on to just under 1.4200. That is 1200 pips or so from now.
<p style="text-align: center;"><strong>EUR/NZD</strong>
<strong>Long:</strong>
<strong>Entry Cost Average: 1.6069</strong>
<strong>Position Size: 20%</strong>
<strong>Closing Price: 1.6063</strong>
<strong>Stop Loss level: 1.5850</strong>
<strong>Limit/Take Profit target: 1.7000</strong>
<strong>Current position: - 6 pips</strong></p>
<p style="text-align: left;">The level that I am glued to is 1.6250. A break through here and my target of 1.7100 comes into play. This trade will motor if the equity markets start to sell off as the Kiwi should fall away and drop like a brick off the side of a house!! Looking forward!!</p>
<p style="text-align: left;"><span style="text-decoration: underline;"><strong>4. LOOKING AHEAD THE KEY SUPPORT AND RESISTANCE LEVELS IN THE USD MAJORS:</strong></span></p>
<p style="text-align: left;"><strong>EUR/USD: Closing Price 1.3463.</strong>  We are finally breaking out of the channel that has held this pair captive. 1.3250 to 1.3400. The only negative point is that 1.3480-1.3495 has confluences of major resistance. We will need a big push at those levels to move on to 1.3600. We never achieved this yesterday despite all the hoo-hah yesterday morning.</p>
<p style="text-align: left;"><strong>GBP/USD: Closing Price 1.5798.</strong>  The UK economy is down the toilet. The only reason that cable rallied on bad news yesterday was the cross-rate effect that was placed on the other GBP pairs and the EUR/GBP. The range that has my attention is 1.5750 to 1.5900. A break below 1.5750 and look out there are long drops ahead. I was surprised though that we did not close well below 1.5800. I would not however get any bullish thoughts unless we break above 1.5870.</p>
<p style="text-align: left;"><strong>AUD/USD: Closing Price 1.0424.</strong>  Finally a break out of the range 1.0500 to 1.0630. If equities turn lower this pair is going to drop like a lead balloon. It fails to go up when equities rally so if equities turn...whooooosh!!. We are now testing 1.0400 to the downside, this a key level. This currency pair is key to me is absolutely crucial to the markets as we move forward.</p>
<p style="text-align: left;"><strong>NZD/USD: Closing Price  0.8376.  </strong>This is a very stubborn pair but like the Aussie, if equities turn lower so should this pair. 0.8300 to 0.8400 is my range.</p>
<p style="text-align: left;"><strong>USD/JPY: Closing Price 90.84.</strong> The relentless grind higher goes on. Not really sure where support and resistance lies now. The divergence in relative strength means nothing with this pair as we keep moving higher. On the Daily chart there is an inverted "Head and Shoulders" pattern that is in play. The measured move for it to play out is 92.40. Maybe this will be the stopping point. We will get periods of consolidation along the way, but we did have a 300 Yen rise in two days on Thursday and Friday, so bear that in mind also. Support is back at 90.00.</p>
<p style="text-align: left;"><strong>USD/CHF: Closing Price 0.9260.</strong> This pair  bounced off trend line support at 0.9220 overnight on Thursday. This is good support. Beneath here is really 0.9150. Long side resistance should be good at 0.9300 and 0.9350 (sorry for the round numbers).</p>
<p style="text-align: left;"><strong>USD/CAD: Closing Price  1.0055.</strong> Finally a breakout to the upside. BOC change in tone and some weaker statistics via news events has finally made its mark on this pair. After 1.0100 then 1.0150 and 1.0250 are keys to the upside. Support is good at parity then 0.9930 and then the pain in the neck level of 0.9880.</p>
<p style="text-align: left;"><span style="text-decoration: underline;"><strong>5. NEWS EVENTS THAT INTEREST ME THIS COMING WEEK:</strong></span></p>
<p style="text-align: left;">Some big items in the news for news: -</p>
<p style="text-align: left;">WEDNESDAY: USD - ADP Non Farm Employment Change.
WEDNESDAY:  USD - The FED - FOMC Statement
WEDNESDAY:  NZD -  Cash Rate and RBNZ Rate Statement</p>
<p style="text-align: left;">THURSDAY: CAD - GDP m/m
THURSDAY: AUD - PPi q/q
THURSDAY: CNY - Manufacturing PMi</p>
<p style="text-align: left;">FRIDAY: USD - Non Farm Payrolls and Unemployment Rate.</p>
<p style="text-align: left;"><span style="text-decoration: underline;"><strong>6. CLOSING THOUGHTS:</strong></span></p>
<p style="text-align: left;">I am in four long term trades at the present time, but they are very small positions given the fact that the week ahead has the potential to switch the markets in an instant.  I will say it again, I think we are at a crossroads. Price action will be extremely choppy so more than ever trade risk within your account capabilities and trade smaller lots with wider stops to cope with increased volatility.</p>
<p style="text-align: left;">Good Luck and happy trading.</p>
<p style="text-align: left;">Scott Pickering
The Pip Accumulator
Saturday 26th January 2013.</p>