Daily Forex Market Commentary:

The U.S. dollar traded mixed against most currencies as conflicting data over U.S. trade balance and weekly unemployment claims worked to perpetuate already choppy trading conditions.

The greenback lost slightly to the euro, pound, franc, and Canadian dollar while gaining slightly against the Australian dollar, New Zealand dollar, and remaining unchanged against the Japanese yen.

Looking ahead, tomorrows U.S. retail sales data may prove to be a catalyst to get the markets moving again. Conditions have been very choppy this week and most currency pairs have traded erratically and with very little direction or volume. It appears as though the markets will need to receive more data indications that the economy is continuing to improve or that it is stalling before traders and investors determine a direction.

Stocks:

On Wall Street today stocks staged a late session rally on the back of advancing banking and retail shares. A scare over the possibility that rising inflation in China might cause them to raise interest rates kept stocks in negative territory most of the day.

However, retailers posted big gains with online retailer Amazon.com leading the way with a 2.4% rise one day before the monthly U.S. retail sales report. A renewed sense of optimism over the U.S. economy helped to offset concerns over the possibility of rising interest rates in China and the U.S.

The Dow closed 44.51 points higher or 0.42 percent, the S&P climbed 4.60 points or 0.40 percent to close out at a 17 month high, and the Nasdaq closed up 9.51 points or 0.40 percent.

Currency pair in focus: NZD/USD

Let’s take a look at how to actually execute a pin bar trade. We can see in our chart below the pin bar setup that we first discussed in yesterday’s commentary.

The entry trigger in this case was a break down of the low of the pin bar, so we sell on stop 1 pip below the low at 0.7006. Our stop loss needs to be placed somewhere near or just above the high of the pin bar, in this case we have it at 0.7080 which is in the top 25% of the pin bar tail.

Our target is placed near the next logical support level which is around 0.6850. Notice these trading parameters provide a risk to reward ratio of at least 1:2, this is what you want to look for.

We teach traders how to trade high probability setups, such as this NZDUSD pin bar from a key level, that provide risk to rewards of 1:2 or better. Price action trading is great.

For a more in-depth analysis of the major FX pairs as well as market commentary, please check out my forex trading course.