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

As I wrote in the Weekly Fx Drive-Thru last weekend, I am sitting in cash waiting for the Washington DC politicians to stop the nonsense agree to stop the nonsense and settle.

The markets have got increasingly twitchy as I predicted the closer we get to the debt limit deadline. I just cannot see why you would want to put yourself through trading this chop fest, as capital preservation is critical. As I have said many times before, trading is hard enough without adding layers of unnecessary stress

Having written that, I am still looking around at the markets and I do have a few trade ideas, but in reality, I need the dust to settle on a resolution in Washington first. Even then, it has to be a settlement not a kicking the can down the road deal, which, is looking like what is being offered at the moment.

The one subject that I think that is definitely off the table until possibly the second quarter of 2014 is “Tapering”. It is just not conceivable in my mind that the FED would start this given all the issues in Washington.

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<b><span style="text-decoration: underline;">2. EXISTING LIVE TRADES:</span></b>

I have none at this time.

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<b><span style="text-decoration: underline;">3. POTENTIAL TRADES ON MY RADAR:</span></b>

My favourite trading pairs are based around the AUD and NZD. I used to say the CAD was also a favoured pair, but I have had a lot of bad luck recently with the CAD, even though I use this pair a leading indicator. The CAD has therefore been relegated to division two as a punishment!!

I am at the moment looking at a continued “Chop Fest” with any pair that involves the USD, so I am looking at cross-rates that may offer reasonable trades.

As you should be aware, trading cross-rates involves usually a wider pip spread for entry and because they are not as liquid moves can be very wild and strong. The ATR (Average True Range) of cross-rates can be very large in comparison to the majors. Therefore, when looking to place trades with cross-rates you need to exercise caution. Trade smaller positions with wider stops to allow for the wider than usual volatile moves. Once you grab all of this and keep these factors in mind, then you are good to go!

I tweeted yesterday along the lines of maybe these Cross-rate pairs have been showing false bottoms and that a reversal could be in play. Here are the levels in the cross-rate pairs that interest me. These are early days, but the levels below are what are on my radar.

<b>EUR/AUD:
</b>I am looking to enter long this pair if I see it break above 1.4260.

<b>EUR/NZD:
</b>I think that the level of 1.6155 looks interesting to establish a small long position<b>.</b>

<b>GBP/NZD:
</b>On the 4-hour chart, there is a nice descending wedge. Looking at the last move 1.8970 to 1.9741. If we clear 1.9100 on the way back, a move to 1.9260 maybe even 1.9400 could be in play.

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I am also looking at: -

<b>EUR/GBP:
</b>Looking to short at about 0.8470 looking for a move to 0.8400. I am thinking close stops just above 0.8520.

With regards to the USD majors, I do think that we will spike on the news of a settlement. But my gut feeling, and I will need confirmation of such a move is that we will “sell” the news after the spike.

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With this in mind, here are my thoughts on the AUD, NZD and CAD pairs with the USD. If I do take these trades, my position sizes will be small until I see confirmation of the move in my direction.

<b>AUD/USD:
</b>This pair looks like it wants to break higher although 0.9530 to 0.9550 is holding it. A short at 0.9550-0.9600 with a 50-pip stop may be the trade. There could be a great risk/reward trade if the market plays the way I think it might.

<b>NZD/USD:
</b>I am going to stay away from this pair, as it is acting very strong at the moment and I can only see a short around 0.8500, but even then sentiment has changed with the outlook of the Kiwi.

<b>USD/CAD:
</b>I want to enter long at 1.0275-1.0300. We will hopefully see a pullback and this level offers a great risk reward.

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<b><span style="text-decoration: underline;">4. FINAL THOUGHTS:</span></b>

Trade carefully, if you feel that you must be in trades at the moment. Do not get suckered into trades, as there will be false breakouts and breakdowns.

Good luck and take care.

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Scott Pickering
The Pip Accumulator
Wednesday October 16th 2013

FOLLOW ME AT:
Twitter: @pipaccumulator

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