Trading Day 10/30/06

One of my favorite economic trend commentators is John Mauldin. In his most recent e-newsletter, titled, 'That Stubborn Yield Curve,' John makes the point that the yield on the 10-year bond is 43 basis points lower than the yield on the 90-day T-bill. Now, most folks know that such an inverted curve is a reliable predictor that the US economy is headed for a downturn.

While the typical longterm investment choice would be to go long bonds and reduce equity holdings, we Forex traders live in a vastly smaller time dimension ... like, what's gonna happen today?

My bet was that the EUR would fall a bit in the morning, consolidate, and then on release of the Core PCE Price Index, rise ... no matter what the number. I mean given the slowdown in the real estate sector and in GDP growth, how bad a number could it be?

So ... I bought the EUR three times as it nudged its way down before 8:30. When the news was released, EUR fell further but the 5-minute bar never closed below 1.2700, so I held on. EUR slowly recovered taking all morning to do so. I exited just after noon as I get anxious holding positions into the PM hours.

My trade was profitable, just barely, but it turned out that my thinking was fundamentally correct and the EUR kept rising.

I'm thankful that my trade made money, and I am open-minded about developing some better guidelines regarding afternoon trading ... like, don't open new trades, but stay with trades if indicators are pointing in the right direction.

As it was, the Fast Stochastic, RSI, and MACD all turned up and EUR rose an additional dozen pips ... a lesson for next time!