I'm staying on the sidelines this week. With oil pushing above $85, I'm not comfortable trading. I don't really understand how a Turkish invasion in Northern Iraq could affect oil supply. First, I didn't think much of the world's oil came from Iraq. Second, isn't it up the the United States to defend Iraq in its new occupier role? Although they are far more likely to attack Iraq in Saddam's absence--I figure he would have gassed the Turks and the Kurds if they'd tried--I don't see a country that's trying to enter the EU attacking anyone unless backed into a corner. Either I must not have a good understanding of geopolitics in the region. Crossing borders seems unthinkable but, then again, a lot of things have happened since 2003 on the global geopolitical stage were once unthinkable to me.

This was another week of misery for me as markets moved against the positions I've been holding for months. On Monday, I went long the USD/CAD @ 0.9810 in hopes of a larger rebound in the pair. The pair rose over 60 pips at one point so, not being too confident of the reversal move, I moved the stop to the opening price. The stop was hit a day later. On Thursday the 11th, I again went long at the same price with a 60 pip stop that got hammered a day later. I lost about 60 pips this week.

This week, my strategy remains much the same as last week. I will focus on trying to either fade the strength in the EUR/USD or buy the USD/CAD for a reversal. Of the 2, I think fading the strength in the EUR/USD is more likely to be successful.

Once again I drag myself to the screen to make an entry in my journal. The record drawdown in my account has turned my off the markets. For the week, I executed 2 trades. On Sunday, I bought the USD/CAD @ 0.9930 expecting the overbought pair to begin staging a technical rebound. The pair ranged for the whole week and I didn't want to be exposed to the NFP number so I closed out for 50 pips profit on Thursday night. On Friday morning when strong numbers came from both Canada and the U.S., I reentered the long at 0.9868 expecting the pair to rebound. Although the raw Canadian number was stronger when considering the smaller population, the overall unemployment rate in Canada still remains at 5.9% as opposed to America's 4.7%. In the past, the U.S. dollar has moved this pair with far less impressive numbers but, on Friday, that didn't happen. The pair dropped below my 0.9810 stop within 2 hours leaving me with an 8 pip loss for the week.

There will be a lot of trade opportunities this week but I will likely be on the sidelines. I will probably be watching oil prices for a possible reversal in the USD/CAD. I am also looking for a reversal in the EUR/USD but don't expect it to begin until next week. If I attempt it, I will probably do so using the GBP/USD since that pair is likely to fall further and faster.

Somebody please slap me. Until Friday, I stayed out of the forex markets for most of the week aside from 2 attempted USD/CAD long hedges that I closed out for 10 pips profit. Then, on Friday, I foolishly attempted a EUR/USD short @ 1.4202 thinking that there would be some profit taking on the pair going into the weekend. The pair rose to new record highs creaming my stop loss in the process. I lost 48 pips in 4 hours and ended the week down 38 pips. It would bother me so much if I hadn't known better than to take positions on my three unluckiest days: Fridays, the last trading day of each month, the last trading day of the quarter. Next time I do it, please slap me!

This will likely be another one of those tradeless weeks. Late on Tuesday morning, I went long 2 lots of the USD/CAD @ 1.0010. I only meant to go long one lot so closed out a lot for 5 pips profit. My expectation for the trade was that the Loonie would loose some strength with retreating oil prices. I picked the 25th because it's oil settlement day and, in thin markets, the Canadian dollar tends to be more resilient on that day allowing me to get in at a good price. Since then, the pair ranged as high as 1.0085 but I didn't close out because I was expecting a larger retracement in the pair. Today, crude prices rose from below $80 to over $82 so I defensively closed out the other long at 1.0015. Since tomorrow is the last day of the month, markets are likely to be whippy. If crude backs off, I might go long the pair again but I doubt it. I'll probably look at tomorrow's data and wait until next week to reenter the position if the market looks right.

I'm writing this late because I didn't expect much to happen in the markets today. It hasn't. Looking at the economic calendar, the most interesting release will be the German IFO. I am tempted to short the EUR ahead of the release. The high Euro against all of the other currencies should be having more and more of a negative impact on the European Union as time passes. but, even if the release is negative, the EUR/USD probably won't lose too much ground yet. Market sentiment is too much against the US dollar right now so I'll probably sit out for a few days.

For the week, I might look to short the Loonie with a close stop in expectations of the pair weakening in the face of a crude oil retracement.

For the week, I executed 2 trades. I bought the USD/CAD @ 1.0275 on Monday morning with expectations of a retracement in the afternoon. The hoped for retracement never materialized so I exited the trade in the evening for 10 pip profit. On Thursday, after the massive moves in all of the currencies against the greenback, I went long the USD/CHF @ 1.1710 again expecting a profit-taking rally in the pair. I risked 50 pips and nearly lost it as the pair dropped to within 2 pips of my stop. The pair hit my limit the next morning for 50 pips profit. Altogether, I booked 60 pips profit and gained 120 pips on the AUD/CAD with 20 pips protected.

While trading was successful for the week, floating losses on my outstanding positions caused even larger drawdowns in my account. I have not come to terms with those yet.

I was somewhat shocked by the 50 basis point cut in rates. I didn't expect the Federal Reserve to be so swift and aggressive in cutting rates. I thought 5.25% was still in neutral territory. I don't think the U.S. economy is as bad off as the market thinks. I still maintain that it's just going through a soft patch. Today's jobless claims were lower than expected and the Philadelphia Fed survey results were better than expected. Right now, I expect the U.S. economy to stagnate (grow moderately) for the next year or so as it works its way through the subprime mess. With the baby boom generation retiring, I expect non-farm payroll growth to remain low but do not expect the unemployment rate to rise significantly.

Before the FOMC decision, I went long the AUD/CAD @ 0.8540. Since then, I moved the stop to 0.8560 and am currently up 100 pips. I am vulnerable to being stopped out but am more concerned about preventing losses right not. The charts and this technical article AUD/CAD: Ready to Explode Higher help justify my position. Today, I went long the U.S. Dollar against the Swiss Franc @ 1.1710 with a stop at 1.1660 and a limit @ 1.1760 in expectations of profit taking behavior to buoy the pair a little going into the weekend. In retrospect, a better and faster trade would have been a long USD/JPY.

In my 4+ years of FX trading, I cannot remember a Federal Reserve meeting preceded by so much anticipation. In a nutshell, the market is bearish the U.S. economy based on what it considers a series of negative data releases. Despite that it sees recession as a certainty, it wants to make sure that big brother Ben Bernanke and the other Federal Reserve Governors are of the same opinion. I am now anticipating a cut to 5.00% with a cautiously optimistic tone in their statement.

Yesterday, I bought the USD/CAD @ 1.0275 in expectations of a bounce. When the bounce didn't materialize, I closed out for +10 pips of profit. I didn't see much sense in being long the pair before the Federal Open Market Committee meeting today. Last night, during the Asian session, I went long the AUD/CAD after a rumor about some Australian banks asking the Australian central bank for help downed the Australian dollar. I would rather have taken this position after the Fed meeting today since the pair is susceptible to carry trade liquidation but didn't want to lose out on an opportunity to buy at low prices. I'm not too attached to the trade since my expectations of much lower oil in upcoming months have become less certain over the past few days.

The dollar got beaten up pretty bad over the past 2 weeks but inflation data coming from the European Union indicates that the ECB tightening cycle and the tightening bias of many other major countries might be over for now also. If that is the case, unless the Federal Reserve does something totally unexpected this Tuesday, the dollar may begin to base over the next week or two. What could Bernanke and crew do that is totally unexpected? Leave rates unchanged. In my view, that might be the best course of action for now but the markets would probably go nuts and make exacerbated moves. For the markets, the best thing right now is probably a 0.25% cut to meet expectations in the short-term.

This week, I will be looking for opportunities to go long the USD/CAD in anticipation that crude has peaked, long the AUD/CAD on long term economic outlook between the two economies or long/short the EUR/CAD on expected range trading.

This week came and went and I stayed out of the markets. I want to see what the Ben Bernanke does on Tuesday before I act. I still have the same 6 outstanding positions that have been open for months. My account equity moved significantly lower this week to bring my drawdown to an unmentionable low.

San Fransisco Fed President Janet Yellen announced today that the rate cut that the market has been confidently anticipating may not happen. I think she's saying that she has no intention of voting for a rate cut on September 18th. The U.S. will be releasing significant Advance Retail Sales, Trade Data, Michigan Sentiment, Industrial Production and Claims data later in the week. Unless 2 or more of these numbers is shockingly negative, I don't see Fed President Yellen changing her mind. I'm no Fed President but I would maintain a "wait and see" approach also. At 5.25%, the current rate seems neutral.

My strategy for this week remains the same as that of last week. I will look for opportunities to set up long-term Canadian Dollar short positions against either the US Dollar or the Australian Dollar. Since the Yen has run up a lot against the US Dollar and the interest rate differential is still quite wide, I might consider selling the Yen below 113. The Yen has been winning by default recently so I expect the pair to trend upward unless greenback selling gets really heavy.