German IFO Rose on Optimism about Spending Plans

eurusd was affected on Jan. 27 by the following factors:

- A better than expected reading of German IFO, thanks to optimism about the spending plans by the government to stimulate the Europe's largest economy.

- A comment from the ECB President Jean Claude Trichet, saying that the next important meeting will be in March, has a mixed reaction. First by raising speculations that the bank may not reduce its benchmark next week and second by making some investors worried about the negative effects of being reluctant to ease the policy and support the economy.

- Euro-zone current account deficit widened.

- German import prices fell

EURUSD A Day before the FOMC Meeting

The chart shows reactions from the eurusd on Jan 27.
- German import prices fell more than estimates
- IFO survey came better than expected, thank to the optimism about newly announced German spending plans.
- Euro-zone current account deficit widened in November.

FOMC will probably leave the target rate unchanged (zero to 0.25). But I think playing the FOMC rate decision is not an easy game; because:

- It is not a rate cut meeting
- Investors know the most probable message which the FOMC is likely to send (aggressive easing)
- German CPI figures will be released gradually before the meeting
- Obama's stimulus package would be discussed in the Congress as soon as tomorrow

For now, I think it may be better to wait for managing the U.S. GDP data on Friday.

Bad bet and carelessness made 39 pip loss

A buying order for gold automatically triggered at 925.0 and resulted in loss at 921.1 very soon. I was absent at the terminal when it happened just one hour to the US data, CaseShiller and Consumer Confidence reports and both came better than expected.

I always close positions or reduce the size significantly before any data release and this case was a clear violation to that rule.

Taking position ahead of US data

US stock indexes dropped as much as 2 percent when earning results looks not encouraging and a report from IMF made the picture of US housing market cloudy.

So I found it appropriate to sell dollar (against yen at 107.52) to take a position ahead of US Consumer Confidence and S&P/CaseShiller Composite, both scheduled for tomorrow.

I will increase the size in any opportunity; it is likely that tonight's data from Japan, including Household Spending and Retail Trade, make a better technical condition for selling dollar (or even other pairs such as GBPJPY).

30 pip profit from less profitable side of portfolio

I had another position, selling USDJPY at 108.15, which I opened earlier this morning. The technical condition was very great and I was a too conservative when I reduced the size later. However totally 30 pip profit made at 107.85 and as always I closed positions before US data. It was less profitable than having EURUSD which I closed it earlier.

When flexibility matters

I closed my position (buy EURUSD) in 10 pip profit, just before German GfK. As the chart shows even a weaker than expected GfK was unable stop Euro rising. Reducing the size was the best decision but I have not that flexibility. I am going to increase my capital to let me have more effective control over my positions. (the trade plan)

Buying EURUSD; Starting to price FOMC Rate Decision

Upcoming data from US housing market, manufacturing, and consumer confidence are all expected to reinforce concerns and make it easier to expect the Fed to delay raising interest rate.
In about one hour to the market close, technical data suggest that the recent negative impact from German IFO on Euro has started to fade. So I decided to buy EURUSD at 1.5516, and I might increase the size if I find more supportive facts.