MIG Forex Research

The news that Abu Dhabi would be assisting it's ailing neighbour to the tune of $10bn has seen a sharp reverse in Dubai shares overnight. Indices in the UAE are up between 7 and 18% at present.

Nakheel has stated it will be able the fulfill it's Sukuk obligations for 2009 in the next 14 days and Abu Dhabi have also stated they will provide assistance to local banks.

The kneejerk reaction has been for a small jump in equities in the Asian session with the likes of StanCHart - one of the more exposed global banks to the region, moving into positive territory for the session. Despite a small jump in carry trades on the news, the market in currency space has been unable to retain initial gains with USDJPY again drifting below the 89 level and GBPJPY now down 1 yen on the day.

The post-Dubai news rebound in EUR/USD has stalled at 1.4686. The move saw an expansion of the daily range of over 50% suggesting that significant impact has been seen due to the news setting up what I call a “Big News Day Trap” trade. If, after seeing such a move the origin of the news at 1.4622 trades again during the global session, all of the buyers on the news will be underwater and will most likely exit their long positions in stop-loss selling which typically lasts for 1-3 days. My strategy would be to place a sell stop at the 1.4622 news origin (good until the US ‘close’). If the short trade is triggered, I would then place an initial stop just above today’s high so far, looking to trail it as the trade (hopefully) moves into profit. Objectives will be set if the trade is triggered.

Update 15 Dec :

The 1.4622 news origin has now been breached triggering my SHORT trade. Stop-loss at 1.4687, exit the trade in 3 stages, first target at 1.4557. Updates to follow......EUR/USD 5-minute chart.

Update 16 Dec :
My Post-Dubai News Trap SHORT from 1.4622 has met my first objective at 1.4557. I have lowered my stop to entry price for a risk free trade. Next targets are at 1.4492 and 1.4427. Exit at 22.00 CET on Thursday if still in the trade. Good luck!  EUR/USD 30-minute chart.