Interesting times for USD

While the USD is still on a long term upward trend according to the 200day moving average, the recent events, particularly over the past 3 trading days. With almost no particular news on forexfactory.com that is in USD's favour and GBP's detriment, the G/U pair actually dropped some 300 pips!

So there's the drop on the daily, which came to be quite a shock to me at first. My mentor told me that the downward trend since mid April is actually a retracement of the previous uptrend since early March, and that the long term trend is still upward as indicated by the blue line beneath all the price action.

Well, nevertheless, i drew channels for the current uptrend as well. In fact I drew it for the downtrend since mid April and the uptrend for the past 2 weeks. And so on the 4 hour graph that's what I saw. The red arrow indicates where I first observed the situation where the price is sandwiched between the upward and downward channel.

I boldly predict that the market doesn't know where to go now, and it would decide by entering either the short-term upward or medium-term downward channel. On that day itself, it was the last few hours of the market when the trend entered the downward channel. And so I shorted the pair at 1.9668. My current SL for that position is at 1.9750 and the TP at 1.9550. A risk of close to 100 pips and a reward of 200+ pips. So that's a comfortable risk-reward ratio.

And this is truly paper trading. Because I didn't even open a position using virtual cash on the platform, but stuck a post-it note on my desk to remind me of this action.

And the reason for the drop? Was anyone wondering? To me it's pretty technical. On the daily chart, the big selloff started when Parabolic SAR dots reversed and the Stachostics crossed too. I had a look at forexfactory.com's news indicators and found nothing that would have given the USD such a boost. In fact, the news there were very much more in favour of the Pound.

So I consulted Grace Cheng(or rather, her blog). And she told me that yields on 10-year Treasury Bonds have hit highs, beyond 5%, apparently a high for the past 11 mths. And there are speeches made by guys at the Fed Reserve that indicate they are still willing to up overnight interest rates to curb inflation, which is still seen as a threat. Well, I do have to agree 3% per annum is a little too high.

Anyway, I think she can say it better, so you guys can read her post at http://www.gracecheng.com/blog/413/Forex%20universe%20revolves%20around%20USD.html

I think I'm moving towards a professional trading system and practice. Haha, and it is said right, that "I think, therefore I am"?

Wishing all traders and friends out there a great week ahead!