Boris and Kathy's FX Blog www.bktraderfx.com

Dear Raheem,

On January 2, 2007, we launched our Premium Subscription Service, BKForexAdvisor. Since our start, we have scored 3 out of 3 winning trades and sent out an analysis on what is happening in EUR/JPY as well as AUD/CAD using some of the setups in our e-book. Market volatility has picked up significantly since the beginning of the year and we look forward to sharing more great trading ideas and tips with our subscribers! To start your free trial, visit bkforexadvisor.com

It has been a shortened trading week, but not shortage of volatility in FX! Here's a recap of our past week's emails.

1/2/07 Welcome to BKForexAdvisor!

We want to welcome everyone to our BKForexAdvisor trading community! The markets have broken out today and we already have a few potential trades that we are watching. No one wants to be long dollars on the first day of trading with the US markets closed for the mourning of former President Gerald Ford and the Euro rallying thanks to hawkish comments by ECB member Liikanen and more talk of reserve diversification. Here's some information on updating your SMS so that you can receive your alerts as quickly as possible:

1/2/07 What is happening in EUR/JPY

EUR/JPY is shooting to the moon and scoring fresh all time highs on a near daily basis in the process. Having already broken through the 50% Fibonacci retracement of the 211.37-88.69 decade long sell-off (See Chart), there is no major resistance until 165. Fundamentally, with the European Central Bank sticking to their plans of continuing to raise interest rates while the Bank of Japan only warns of gradual rate changes, the trend has both fundamental and technical support. However we want to take a slightly different perspective in explaining EUR/JPY's move.

Take a look at the chart of EUR/JPY and the Dow - you will see that the charts going back the last 4 years are near mirror images of each other and this is because EUR/JPY is exceptionally sensitive to global growth. Therefore EUR/JPY has been benefiting from the rally in the Dow and if the Dow begins to top out, we could expect the currency pair to do the same . In fact, a close examination of the chart below reveals that frequently, the Dow can be a leading indicator for the movements in EUR/JPY.

See Chart
Source: Bloomberg

The Dow - EUR/JPY analysis and chart is made exclusively for our BK Forex Advisor traders.

Feel free to shoot us questions at bktrader@gmail.com. We continue to be watching some exciting trade setups and will be shooting you an email as soon as we see a good entry level!

Good luck and good trading - talk to you tomorrow!

1/3/07 EUR/USD Long

We have waited patiently to buy the Euro on a retrace and we are finally getting that opportunity. US ISM runs the risk of coming out weak this morning while the change in German unemployment printed at the strongest level in 15 years. The combination of technicals with fundamentals makes long EURUSD an attractive trade.

Therefore we are buying here at market (1.3230) with a stop at 1.3207. Our first target is 1.3249. Once that level is reached, move your stop on the second lot to breakeven and target 1.3282 for the second lot.

T1 Hit on EUR/USD

At the speed of light on the back of the horrid ADP number (-40k vs. 120k expected), we hit our first target on the EUR/USD at 1.3249 (+19). We have now moved our stop to breakeven on the second lot and are targeting 1.3282. The markets are moving quickly this morning so we hope you were able to get in.


1/4/07 Sell NZD/JPY

We are seeing massive carry trade liquidation today to the point where major uptrends are being broken in the commodity currencies. The moves have become very extended and we think that with the Bank of Japan interest rate hike just slightly more than a week away, we could see further liquidation. The New Zealand dollar has benefitted the most on the back of the rally and as a result, it could correct even further. There is also a massive head and shoulders formation in the NZDUSD that stretches back to 2004. We are going into this trade with half of our usual position (1 lot) because there may be an opportunity to sell at a higher price.

Therefore we are shorting NZD/JPY at market (currently 83.30) with a stop at 83.80. Our first target is 83.07. Our second target if we get to lay the second lot on at a higher price will be 81.65. Look out for a follow up email on that.

Taking T1 on NZDJPY

We never got a chance to sell higher in NZDJPY and the currency pair has now come within 3 pips of our initial target and is potentially bottoming out here. Both the hourly charts of the "legs" which are the NZDUSD and USDJPY look like they are finding support as well. Therefore we want to take profit on our 1 NZDJPY lot at 83.10 for a +20 pips gain on the trade.

As you know, we never want to let a winner turn into a loser and no one ever went broke taking profits!

1/4/07 AUD/CAD - Extension Fade Strategy in the Works

We were upgrading our email servers last night, so we were unable to send out this trade alert (and we did not take it ourselves), but we do want take this opportunity to show you yet another example of how to use the strategies in our E-book since the BKForex trading community is not just about trading signals, but also about education.

Take a look the following chart of AUD/CAD See Chart

We have pointed out that up until yesterday, AUD/CAD had rallied for 8 straight days which means that it was ripe for an Extension Fade (page 68 in the e-book). Now the strategy in the e-book is called the Seven day extension fade and it tells you to focus on seven days. 7 days is on average as long as a continuous move can last. However, this strategy is about statistical significance and to effectively use this strategy, what you should do is each time the setup forms, go back in the charts and look to see how many candles a move has extended for that SPECIFIC currency pair. Each currency is a different animal. For some, the move will indeed stop at 7 days, but for others it can last for as long as 10,11 or 12 days.

For AUD/CAD specifically, the sweet spot is 8 days. After reviewing our charts, we have seen that in the past 10 years, there have only been 6 periods where the AUD/CAD has strengthened for 8 straight trading days with only 1 out of those 6 extending beyond 8 days. Therefore there was a very strong statistical likelihood for the AUD/CAD's rally to top out yesterday, which was at the end of 8 days. If you followed this strategy you would have been able to forecast the reversal move before it happened.

We hope that we have shed more light into how to use one of our favorite strategies in our E-book!


1/5/07 Short USD/CAD

Even though US payrolls came out very strongly in the month of December, Canadian payrolls were even better with the unemployment rate sinking to a 30 year low this morning. And although IVEY PMI printed below the 50 boom/bust level for the second month in a row, the market may be looking past the number as traders begin to appreciate the positive impact of the lower loonie on the Canadian economy, which is why we think that the Canadian dollar could bounce even further. Technically, USD/CAD also currently offers an attractive risk / reward profile as it tries to form an exhaustion top.

Therefore we are going short USD/CAD at market (currently 1.1760), with at stop at 1.1792. Our first target (T1) is 1.1742. Once that price level is reached, move your stop on the second lot to breakeven. Our second target (T2) is 1.1685.

T1 Hit on USD/CAD

Our first target has already been hit in USD/CAD, earning us another easy 18 pips. We are now moving our stop to breakeven on the second lot (1.1762) and aiming for our second target (T2) at 1.1685. For those of you who do not wish to hold the trade over the weekend, you can close the trade here at 1.1728, for a 34 pip gain on the second lot. We're choosing to stay in the trade.

To start your free trial, visit bkforexadvisor.com