Saturday, April 12, 2008
R: 1.9800 / 1.9850
S: 1.9700 / 1.9660-50
Despite the weakness in the pair this week so far, GBP-USD has been holding
above its important Support of 1.9650, which is best highlighted by the
trendline on the second chart at http://www.kshitij.com/graphgallery/gbpma.shtml. A break below that would be required for a bigger fall to be seen. While the Support holds, the pair is likely to stay within its range of 2.0000 and 1.9650 for the remainder of today and early next week.
There has been little move in the pair today so far and it continues to trade above its Support of 1.9700. Below that the Support is at 1.9650, on the above-mentioned trendline. The statistically projected Max Low for the day is at 1.9600. On the upside the Resistance is at 1.9790, and then at 1.9840.
Our EUR-GBP Short has been exited at its breakeven of 0.8006, having missed the intended TP of 0.7960 by 7-10 pips earlier in the morning.
Limit Buy Order:
Buy GBP 10K at 1.9567, SL 1.9477, TP Open
USD-CHF @ 0.9978/82....Bearish Biased
R: 1.0050 / 1.0090
S: 0.9950 / 0.9900
USD-CHF has been volatile during the week. It hit a low of 0.9888 before
rallying sharply to a high near 1.0093. It has again come off sharply today once again. The pair is currently choppy, ranged between 0.9915-1.0165. It is likely to stay pressured later today and in the first part of next week. See the BIG Resistance at 1.0142-65 on the chart at
http://www.kshitij.com/graphgallery/chfcandle.shtml
For today, the immediate Support would be in at 0.9950. Below that the Support would come in at 0.9900, on the trendline on the Daily Charts joining the lows of 0.9637 (17-Mar) and 0.9888 (10-Apr). On the upside the Resistance would come in at 1.0050 and then at 1.0090. The pair is likely to face selling on rallies.
AUD-USD @ 0.9293/97....Holding Short
Holding:
Short AUD 10K 0.9286, SL 0.9323, TP 0.9228
Happy Trading!
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The Gulf Common Currency: Implications for the U.S. Dollar
By John J. Phillips IV
Seeking Alpha:
!~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~!
Amidst the US Dollar’s recent depreciation in the global marketplace the looming adoption of a common currency by the Gulf Cooperation Council has weighed down on the minds of many economists and market participants alike. With the adoption of the common currency tentatively scheduled for 2010 it is worth examining both the motivations for a common currency, and its implications in the global marketplace.
To begin with let us examine a few of the basic reasons behind the inception of the common currency as well as a few of the steps taken towards its creation. While majority of the GCC countries are highly dependent upon oil exports the GCC is trying to diversify member economies. The GCC ultimately seeks to increase private sector participation in interregional economic development. The GCC expects that the adoption of a single currency will yield a number of economic benefits. Namely, adopting a single currency will eliminate interregional currency conversion costs, which is expected to boost interregional trade.
Increased interregional trade and investment will lead to increased economic diversification in the GCC, and, in turn, will lead to increased private sector participation due to increased interregional demand for non-oil related goods. The elimination of conversion costs is therefore expected to contribute to development in areas outside of the oil sector and to economic growth as a whole.
In December of 2001 GCC authorities developed a timetable for the common currency. The timetable required member countries to establish a customs union by 2003. Member nations were also required to integrate their exchange rates by 2003 as well. An agreement upon the criteria for convergence was to be reached by 2005, and the adoption of the new common currency was scheduled for 2010. There has since been some speculation that perhaps the new currency will not be launched until 2012 or later. Keep in mind that the Euro was initially supposed to be launched before 1999, but was hindered by the UK’s rupture in 1992.
As per the GCC’s common currency timetable, exchange rate integration required GCC countries to officially peg their currencies the US Dollar in order to maintain cross exchange rate stability. The GCC chose the US Dollar because it is the intervention currency of all the GCC countries, majority of their foreign currency reserves are held in dollars, and most of the GCC member’s currencies had already been effectively pegged to the US dollar. While the official convergence criteria has not in fact been set in stone it has been developed in theory. The common currency has come thus far. We are now awaiting the finalization of convergence criteria followed by a consolidation of the member currencies.
With this brief history of the GCC’s common currency in mind let us examine some of the reasons why the development of this common currency is important outside of the Middle East.
Initially the general expectation was that the Gulf common currency would be pegged to the US Dollar considering that member nations had already pegged their respective currencies to the dollar for the interim period. Despite this the option to peg the new currency to special drawing rights [SDR] or a special basket of currencies also remains an option. While GCC authorities will have to decide how the new currency will be valued sometime before it’s tentatively scheduled launch, many question if the member nations will maintain their dollar currency pegs through then in the face of the Dollar’s recent depreciation.
If the new currency were to be pegged to another currency or a basket that excluded the dollar it is possible that oil will also be priced by some means other than the Dollar. If that were the case the US could be hit with a double wave of inflation if oil prices are on the rise, and the value of the Dollar is declining against whatever currency or currencies that oil is priced in. If the common currency were pegged to a basket that included the Dollar inflationary risks would be less extreme. In the event that the common currency is pegged to the Dollar it will help to maintain Dollar demand, something that the US can certainly use right now.
It is possible that the GCC members will move to revalue against, or de-peg from the Dollar before the launch of the common currency. The IMF’s Strauss-Kahn recently argued that, a 20% revaluation against the Dollar would lead to a $400B loss on external assets if all of these assets were Dollar-denominated. The GCC is estimated to hold some $2.0T in assets abroad, most of which are thought to be Dollar denominated. While the GCC states continually deny any plans to de-peg from the Dollar, it remains within the realm of possibilities and could damage Dollar demand. Some of the GCC members have already began conducting studies on taking such action.
On a separate note the management of a singular currency could prove to be quite burdensome. The current state of the Euro is a perfect example. Germany, the growth engine of the Euro-Zone, is not currently having any problems coping with the strong Euro as its economy continues to expand. France, the second biggest economy in the Euro-Zone, has voiced its concern about the impact of current Euro levels on its economy many times over. In short a singularized monetary policy may not fly in the GCC, and, in the long run, is likely to hit a few bumps in the road. As it is will the Euro now, the question then will be can a one speed monetary policy fit all?
In conclusion, it remains to be determined when exactly the GCC’s common currency will be launched. At the going rate it looks like the GCC could miss the initial 2010 deadline by at least two years. The implications of the common currency for the US Dollar are mixed. On one hand, if the GCC pegs the common currency to the Dollar, the common currency could generate Dollar demand, and held to restore faith in the Dollar. On the other hand, if the GCC moves away from the Dollar the implications for the Dollar in the global marketplace will be much less than favorable.
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http://seekingalpha.com/article/7159...the-u-s-dollar
4/11/2008 – AUD/NZD – The long-term AUD/NZD WEEKLY chart, as shown, is displaying some strong support/resistance dynamics at play. Perhaps most importantly, the horizontal support/resistance level around the 1.1750 region, as represented on the chart by the long yellow line, signifies a key long-term price zone. Multiple touches on both sides of this line are highlighted by the yellow circles on the chart. As of this writing, price has closely approached this level, which may currently act as strong resistance. In the event of a momentum breakout to the upside above this line, the next major resistance to the upside resides around the top of the parallel downtrend channel (the top red line). But the technicals are showing a slight bias towards the downside for several reasons, besides the long-term resistance posed by the horizontal yellow line. For one, the current resistance at the yellow line is reinforced by a key 61.8% Fibonacci retracement level (the high-to-low retracement span being measured from the swing high in early November 2007 to the swing low in mid-December 2007). Also, a relatively well-defined inverted flag pattern (in dotted yellow) is hinting at a downward continuation. And finally, this pair has been entrenched in a long-term downtrend since a price peak was hit in mid-2006. In the event of this downturn at resistance, the next major support to the downside resides around the medium-term uptrend line (the rightmost green line), and then further down in the 1.1150 region (the lowest point in the inverted flag).
James Chen
Chief Technical Analyst
FX Solutions
IMPORTANT NOTICE: These comments are for information purposes only. The information contained on this document does not constitute a solicitation to buy or sell by FX Solutions, LLC., and/or its affiliates, and is not to be available to individuals in a jurisdiction where such availability would be contrary to local regulation or law. Opinions, market data, and recommendations are subject to change at any time. Forex trading involves substantial risk of loss and is not suitable for all investors.
(Chart courtesy of FX Solutions' FX AccuCharts. Price on 1st pane, Slow Stochastics on 2nd pane; downtrend lines in red; uptrend lines in green; horizontal support/resistance lines in yellow; chart pattern in dotted yellow; Fibonacci retracements in grey.)
Sunday, March 30, 2008
Analysis by NewstraderFX
A deeper look into the Personal Consumption Expenditures report reveals that consumer spending is slowing at an alarming rate as the housing debacle takes its toll. The spending numbers look even worse when you consider that even though the job market has been weakening, unemployment is still at relatively low levels.
The average monthly increase in spending for Q4 2007 was just 0.1% when adjusted for inflation. The first two months of 2008 (the latest data), shows the average monthly increase to be just 0.05%, a 50% decrease from Q4. However, in downturns such as this revisions to this series are frequently adjusted to the downside, as seen in the month's report which revised Dec. 2007 from 0.0% to -0.1%.
Spending aside, the overall picture of the consumer going forward looks to be very bleak. The savings rate has been negative for 24 straight months, an unsustainable situation that has now come to a head because the consumer's main asset, housing, has depreciated as the real estate market is easily in the worst shape since the Great Depression. The negative wealth effect from the housing bust has been estimated to be around $5 Trillion to this point, which has caused a rise in delinquencies in other forms of consumer credit such as auto loans, student loans, home equity loans and credit cards. So with falling asset values and high rates of debt consumers are not likely to spend, except on the necessities.
Aside from the housing depression, rising layoffs, soaring costs for food and energy and a severe credit crisis have already taken their toll not only on headline Consumer Confidence (as measured by the Conference Board) but in the Expectations Index which is now at a 35-year low (Dec. 1973, 45.2), levels not seen since the Oil Embargo and Watergate. Put this all together and you have the first consumer-led recession since the 1970's.
Don't expect to see J.C. Penney being the only retailer to report weaker sales. The S&P 500 and therefore GBP/JPY can potentially come under renewed pressure this week as most retailers report their March sales, which are not expected to look good to say the least. In January and February, monthly sales at stores open a year (same store sales are considered the most inportant sales indicator) fell at just about every major department store, including Penney, Macy’s, Kohl’s, Dillard’s and Nordstrom.
A forward look at the data for next week suggests the dollar is very vulnerable. Traders will have several opportunities to buy into the rumors of weakened ISM and NFP figures and should those numbers surprise to the downside, expect to see the Euro form a base above 1.60 as the Yen heads towards 95. Manufacturing ISM has the potential to be below consensus based on weakening exports, while the NFP could see job losses of 70,000 or worse, given the rising 4 week moving averages in new and continuing claims.
Technicals-S&P and GBP/JPY Are Still Attached At The Hip
As you can see on the first chart, the S&P made a continuation of the Feb 27 Double Stoch Overbought (DS OB) on Mar 25, which was followed by three days of selling as seen on the second chart (BTW, when the DS OB was given on Feb 27, GBP/JPY closed at 211). Given that the market has been in a huge downtrend and that we still have a DS OB indication, along with the potential to see some really weak-looking data, we would suggest that the market is still vulnerable to the downside. It'll be interesting to see if price eventually closes stoch oversold at a higher price then Mar 10. That would be a DS Oversold and signal an uptrend, but whether that happens or not remains to be seen.
You can see how well the Double Stochastic has indicated S&P (and therefore GBP/JPY) direction-Before the Fed 27 downtrend, the first wave of selling was indicated with a DS OB at the end of Oct. and a second DS OB was made towards the end of Dec. GBP/JPY was at 239.8 on the first DS OB and at 226.95 on the second. With any luck, a DS OS will eventually be given. Fingers crossed.
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Today's mergers and acquisitions as a tool for forex traders
0 komentar Posted by Neutron at 9:25 PMby John Jagerson
Mergers and acquisitions are often a sign of economic health. That kind of corporate "friendliness" is usually only undertaken when investors feel like deals have potential to the upside from a growth perspective. Their outlook on the market is a big part of that. With all the news lately of a higher price for Bear and M&As looking more likely for ClearStation and ConAgra I am wondering if an uptrend in corporate activity is a sign of a potential shift in the risk environment. I think we have been teetering on the edge of economic recession in Western economies but this may lend strength to the argument towards recovery.
"Can you feel the corporate love?"
M&As are risky and generally deal teams are not inclined to pursue them at the rate we are seeing lately when you have risk and credit problems as serious as we do now. I will be interested to see how much more this escalates. M&A's matter to forex traders in a couple of ways. First, very large cross border M&A activity can affect the exchange rate between the respective economies. With a boost to the currency of the company that is being acquired. But that is very difficult to forecast and usually mergers are much more complicated than merely paying a price for one company.
More importantly, M&As are a measure of risk and business confidence. Right now we are seeing a lot of specific M&A activity in commodity companies and a fair amount generally. I think this bodes well for trader sentiment in commodity currencies and to high yield strategies like the carry in FX. If M&A activity continues to rise, it is usually a good sign for equities, which could impact currency pairs like the USD/JPY and USD/CHF in the intermediate term. Specifically, as M&A activity rises, we would expect a position trend in both of those currencies as capital flows shift and investor sentiment improves.
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by John Jagerson
We have seen a fair amount of of news this trading session about the boost to European stocks due to the actions of the ECB. It is all good information but is it useful for forex traders? I think it is extremely useful information. Equities are a good gauge for investor sentiment and confidence about economic growth. That can translate into a stronger currency, which can support or disrupt an existing trend in a currency pair.
In today's video I will show one technique you can use to leverage the information from stock prices to signal trading opportunities or periods of higher risk.
To see the video, click here: http://www.pfxglobal.com/video-archi...x-trading.html
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Sunday, March 23, 2008
Analysis by NewstraderFX
Tuesday's FOMC statement regarding rising inflation expectations along with the announcement of the Primary Dealer Lending Facility has already exerted a profound effect on currency (and therefore commodity) markets, as seen in the sudden burst of dollar strength against the high yielders. From the release of the statement, the dollar has gained 430 pips on the Pound, 365 on the Euro, 270 on the Aussie and 180 on the Kiwi. The Reuters/Jeffries CRB Commodity Index, composed of oil, gold, corn and 16 other commodities fell 9.2%, the biggest drop since the Commodity Research Bureau started calculating the benchmark a half-century ago as the Dollar Index gained 2.14% this week.
A number of different reasons have been cited in the financial press for the move in the CRB index-commodities were in a "bubble", traders were taking profits (perhaps to now invest in equities) and the threat of a demand slowdown due to the U.S. recession being three. While all seem plausible, that fact is the change accelerated right after the FOMC's statement was released around 14:15 EDT Tuesday and after Goldman Sachs and Morgan Stanley borrowed at the PDLF on Wednesday, in an effort to show leadership and that no stigma should be attached to borrowing there, which is crucial for the program's eventual sucess. Around $58B has already been borrowed.
The FOMC's new inflation language noted for the first time in about 10 years that "some indicators of inflation expectations have risen." What this indicates is that the easing cycle, which is expected to continue, is likely to have peaked in intensity after having taken real interest rates close to zero based on either core CPI or PCE.
The Fed has also gone a long way in supporting investor confidence by lending to non-banks for the first time since the 1930's via the PDLF. The program accepts wide range of collateral, including AAA/Aaa rated mortgage-backed securities that have been marked to an actual market price while the interest rate, 2.5%, places the real rate about 25 basis points above zero. There is a lot more info on the NY Fed's website : http://www.ny.frb.org/newsevents/new.../rp080316.html
Stephan Jen of Morgan Stanley recently wrote an interesting article regarding what's required for successful monetary intervention. His conclusion was that the monetary policy of the country in question does not "need to be in sync with the intervention objective" but that "the relative monetary policies between countries needed to be." What this means is that the dollar can potentially strengthen while the Fed is still easing if the corresponding central bank is pursuing the same policy. I would extrapolate this out to how market forces can move price as well, since that does seem to be the pattern.
While one can't argue at this time that the ECB is on an immediate course to cut rates, because expectations that growth in the Euro Zone will slow and subprime loan losses will spread at European investment banks, investors may start to price in a change in ECB policy. meaning that the ECB may start to ease as the Fed slows. The BoE seems set to continue easing, as the surge in credit costs has choked off lending to consumers especially for new home loans. Australian consumer confidence plunged to the lowest level in almost 15 years in March and business sentiment in February held close to the weakest since September 2001, signaling a halt to tightening by the RBA. The average net wealth of New Zealand consumers fell for the first time in seven years as house prices declined and rising interest rates increased debt, adding to signs that household spending may slow and curb economic growth.
From a technical perspective, it does look like the dollar is vulnerable to giving back some of it's gains against the high yielders in the very short term, as it looks a bit overbought on the daily charts. There is a potential DS Overbought forming on EUR/USD if price rises a bit and closes oversold at a price less then the March 15-16 close. GBP/USD formed a weekly DS Overbought formation on March 2 at 2.0165, but has now made a DS Oversold on the daily chart. AUD/USD formed a daily DS Overbought on the close of March 13 from .9454.
The case for Dollar strength at this time also has to do with the fact the the world's reserve currency has depreciated in a disorderly way, not in terms of relative currency price perhaps but in terms of commodities. Oil has risen almost 80% the past year and while "disorderly" is subjective, it seems reasonable to suggest that an 80% increase is disorderly. More to the point, investor confidence, especially of foreign investment, has probably been shaken with the Dollar's decline. A couple of SWF's have gotten burned since their recent investments and I would suggest that while these super deep-pocket investors can handle market fluctuations, they will be less inclined to invest further if the U.S. continues to pursue a weak dollar policy.
No buy, hold or sell recommendations are being made.
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Chart of the Day - 3/21/2008 - AUD/JPY 3/21/2008 – AUD/JPY – A key carry-traded currency pair, AUD/JPY (the long-term weekly chart of which is shown) has just reached a critical support level. As the accompanying long-term chart displays, price action has been entrenched within a relatively well-established uptrend channel since at least mid-2004. With the exception of two accelerated bullish runs above the top line of the channel, price has consistently been confined within the borders of this parallel channel, as outlined on the chart by the two green uptrend lines. Within the past week, the pair once again reached support and turned back up at the bottom of the channel, attesting to the strength of this support. Therefore, any true breakdown of the bottom line of this channel would represent a considerable breakout shorting opportunity. In this event, the next major support to the downside would reside around the 86.00 region. At the same time, however, since the current uptrend support line carries considerable long-term strength and significance, the technicals are biased towards a near-term turn back up to resume the long-standing uptrend. In this event, the next major resistance to the upside resides at the key 38.2% Fibonacci retracement level around 93.00 (the high-to-low retracement span being measured from the most recent touch of the top of the channel on 2/28/2008 to the most recent touch of the bottom of the channel this week).
James Chen
Chief Technical Analyst
FX Solutions
IMPORTANT NOTICE: These comments are for information purposes only. The information contained on this document does not constitute a solicitation to buy or sell by FX Solutions, LLC., and/or its affiliates, and is not to be available to individuals in a jurisdiction where such availability would be contrary to local regulation or law. Opinions, market data, and recommendations are subject to change at any time. Forex trading involves substantial risk of loss and is not suitable for all investors.
(Chart courtesy of FX Solutions' FX AccuCharts. Uptrend lines in green; horizontal support/resistance line in yellow; Fibonacci retracement levels in grey.)
From my point of view there are a number of opportunities that are beginning to appear but with so much volatility, I am holding back a little. The real issue I am worried about is the Easter break. Several Western markets will be closed on Good Friday and a lot of traders are out for the Monday after Easter weekend. Considering the volatility this week, that may make for some very weird price action in the next day or two as traders prepare to be out that will make it tough to take longer positions.
However, in preparation of some trading opportunities I am looking for a potential break to the downside on the AUD/USD below the 23.6% retracement level that could take prices all the way to the lows of December and January. I will show a similar setup potentially appearing on the GBP/USD. finally, we are getting some contrary movement between longer term bond yields and the USD/CHF. That may be creating a nice environment for additional downside moves on the USD/CHF. I would wait for a bounce down from resistance at 1.0200 before getting to serious about that one but it could be another short term opportunity.
click here to see today's video: http://www.pfxglobal.com/pairs-archi...olatility.html
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Monday, March 10, 2008
March 10, 2008
Traders welcome back! This trading week market already started with new highs on cable. These current highs ruined my plan that I prepared for you, so nothing on this one for today. I will wait for another and larger retricement. Ok, USD/JPY is also interesting, like always.
USD/JPY
After Fridays payrolls and new lows on USD/JPY price quickly retrace and found resistance at 103,24. This high I labeled as wave (a). Right now is price in small down channel in wave (b) with double zigzag, I am expecting break in to the uptrend. What I am doing here is that I would like that market show me if I am on the right way. I am talking about confirmation of the trend. If my plan will come true, then I will sell somewhere around 103,50 – 103,70.
If you have any thoughts to trade on this way up, then I suggest you to go long after the breaking upper trend line of the channel, with stops bellow 101,70. Trade well, Grega.
30min chart
For all analyses please visit website http://www.trading-fx.si/fx/sloanaliza.htm
Analyses are made by
Gregor Horvat
chief executive officer
forex analyst
Capital Forex Group LLC
Blogged with Flock
A light news week could increase the emphasis on the unexpected
0 komentar Posted by Neutron at 6:58 PMby John Jagerson
A look at the week ahead...
Traders are still going to get plenty of inflation data this week but other than that things look pretty light. With the risk environment in the state that it is in, unexpected news, particularly from banks, will be much more important.
Much of the most important news is loaded towards the end of the week with interest rates for the CHF, consumer inflation and sentiment for the USD and trade data for the USD and CAD. This means we should keep our analysis open for now. A continuation of Friday's strengthening USD could be reversed at support levels if the news is bad for North America.
To listen to the podcast, click here: http://www.pfxglobal.com/content/blogcategory/75/186/
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The following is a Bloomberg article By Stanley White and Ye Xie
For the full article see: http://bloomberg.com/apps/news?pid=2...NYI&refer=home
March 10 (Bloomberg) -- For the first time in more than a decade, foreign exchange traders are confident that the Bank of Japan won't intervene in the currency market, paving the way for the yen to extend its biggest rally since 2000.
Japanese authorities sold the currency on all four occasions since 1995 when the yen approached the 100 mark in a bid to support exporters from Toyota Motor Corp. to Sony Corp. When the yen strengthened to a eight-year high of 101.43 last week, Finance Minister Fukushiro Nukaga stopped short of signaling that officials are concerned, only saying the government needs to watch currency moves ``carefully.''
An attempt to influence exchange rates would bring Japan into conflict with the U.S., which relies on a weak dollar to underpin an economy on the verge of a recession. Citigroup Inc. and Royal Bank of Scotland Group Plc, the third- and fourth- biggest traders, say Nukaga will let the yen break 100 because it's 40 percent weaker than its peak in 1995 on a trade-weighted basis.
``When I intervened, the U.S. agreed to it,'' said Eisuke Sakakibara, dubbed ``Mr. Yen'' for his ability to influence the foreign exchange market as Japan's top currency official from 1997 to 1999. ``The U.S. now welcomes a gradual decline in the dollar and Treasury takes the position of Detroit. This is affecting how Japan is responding now.''
Japan increasingly relies on Asia for growth, making the country less sensitive to a U.S. slowdown. Shipments to the U.S. accounted for about 20 percent of exports last year, down from about 30 percent in 2000. Asia consumes half of Japan's exports.
Tables Turned
Japan's economy, the world's second largest, may expand 1.5 percent this year, matching the growth rate in the U.S., the International Monetary Fund said on Jan. 29. It would be the first time Japan won't lag behind the U.S. since 1991.
``Compared to the U.S., growth in Japan is relatively robust,'' Sakakibara said. ``The tables have turned.''
U.S. officials probably won't support dollar purchases unless the yen breaks 90 and heads toward 80, said Sakakibara. Central banks intervene in the foreign exchange market when they buy or sell currencies to influence exchange rates.
The yen gained 0.4 percent to 102.24 at 12:51 a.m in Tokyo. Naoyuki Shinohara, currently Japan's top currency official, told reporters today he's ``carefully'' watching the market, reiterating Nukaga's comments.
The yen has gained 19 percent since June, the second biggest advance among the 16 major currencies behind the Swiss franc. Rather than a referendum on the economy, the rally was fueled by losses in the credit markets, which led investors to sell high-yielding assets around the world financed with cheap loans in Japan. They would need to buy yen to pay back the loans.
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Friday, February 29, 2008
The good news is that this outrageous trend still looks intact for now. This has been a nice breakout on pairs like the EUR/USD that had been channeling for months. USD weakness seems to be driving the trend, which is fine and I am sure most of us agree that the USD is not likely to look better from a fundamental perspective for a while.
However, the problem is that the bad news can cross the point that it is merely bad for the USD into a full blown panic, which could create a fast reversal. I am sure the correction in November 07 is still very fresh in everyone's accounts. If that occurs the subsequent flight to quality would push long term yields down and the USD up. I am watching overhead resistance on the 10-year index (TNX) and nearby support on the USD/JPY, USD/CHF and S&P 500. If those levels are breached the balance may shift.
Here is what I think the bottom line is - The trend looks intact and despite my concerns over the past couple of trading periods, the market has continued to move. However, I think prudent (tight) risk control is justified. That means stops or hedges should be in place and it makes sense to keep an eye on your level of diversification. Check your account to make sure you are not too overweight in any single currency.
To see the video, click here: http://www.pfxglobal.com/index.php?o...193&Itemid=149
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by Ryan Teeples
There's an old blues song called "Born Under a Bad Sign," (can anyone name the original artist?) that contains a classic line:
"If it wasn't for bad luck, I wouldn't have no luck at all."
(I embedded a youtube video of Cream performing it here:http://www.pfxglobal.com/index.php?o...192&Itemid=188)
I'm a news junkie, and as I opened and read the rags this morning, I became more and more depressed. As an investor, businessman, wannabe economist and American, I was overwhelmed with bad news. I found myself singing:
"If it wasn't for bad news, I wouldn't have no news at all."
The economy is tanking, inflation is rising, nobody is buying debt, and worst of all, politicians think they can/should fix it.
So I decided to be light in my analysis today, and blow off a little steam. I marked up my news page (don't worry, it was dry erase, so it will come off my screen) and I'm posting the news, and my comments below.
BTW: It's a sad day when the only good news is about turning crap into energy.
Some good news is, all the videos, education and analysis at www.pfxglobal.com is 100% free. Check it out!
Here's my morning news:
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Thursday, February 28, 2008
by S. Wade Hansen
Ben Bernanke, chairman of the U.S. Federal Reserve, addressed the House Financial Services Committee in Washington today. And as Fed chairman are wont to do, he waxed eloquent and opaque. Hedging his bets, he uttered this clarifying gem:
"Should high rates of overall inflation persist, the possibility also exists that inflation expectations could become less well anchored."
In case you can't figure out what in the world he is saying here, don't worry. I've cracked the code. You see if you take the first letter from each word, you get the answer:
"SHROOIPTPAETIECBLWA"
Which, if you unscramble it, gives you:
"RPIEECBTOSOAWTLIPHA"
And there you have it. Voilla! The dimal code unlocked.
OK, all joking aside, while Bernanke's statements were veiled, they did provide quite a bit of insight into how the Fed views the current state of the U.S. economy. Here are are few statements and my take on what the ramifications for the U.S. economy and the USD are:
Quote: "The Federal Open Market Committee will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks.''
Translation: You had better believe we are going to cut rates in March. Keep on buying stocks, Wall Street.
Quote: "A critical task for the Federal Reserve over the course of this year will be to assess whether the stance of monetary policy is properly calibrated to foster our mandated objectives of maximum employment and price stability."
Translation: Honestly, we have no idea if we are overshooting this whole "cut-interest-rates-at-all-costs" thing, but we're taking a stand and hope we don't screw up inflation too much.
Quote: "The economic situation has become distinctly less favorable since the time of our July report."
Translation: We've been pushing on this string by trying to lower interest rates, but there's only so much we can do.
Quote: "The risks include the possibilities that the housing market or the labor market may deteriorate more than is currently anticipated and that credit conditions may tighten substantially further."
Translation: Stupid banks. Just declare your losses and start lending to each other and consumers again. Can't you see that the U.S. economy has worked itself into a position where the only way it can continue to grow like it has in the past is if we all recklessly borrow like we did in the past?
The takeaway from all of this is the Fed is going to continue cutting interest rates in the near term. This should continue to weaken the USD for a while. However, the Fed may be forced to change its stance later this year to combat rising inflation.
Make some good money now as the USD weakens, but keep watching the horizon for signs of a change in the Fed's stance---they certainly seem willing to change direction if they need to.
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Wednesday, February 27, 2008
by John Jagerson
The breakouts this afternoon have been dramatic to say the least. How long the USD decline will last is uncertain but right now it is time to redo some of our original price targets based on the breakout. In particular, I will spend time on the EUR/USD in today's video. This is a good opportunity to apply a fibonacci analysis to forecast short term overhead resistance on the pair.
Besides the EUR and other USD quoted pairs, I am still interested in a weak CHF. I think the USD/CHF is would be unreasonable in light of the overwhelming weakness in the USD. However, crossing the CHF with some other stronger currencies may produce the results I am looking for. I talked about this a bit in the daily video but will go into more detail on that in this afternoon's video.
To see the video, click here: http://www.pfxglobal.com/index.php?o...185&Itemid=149
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I get a lot of emails from other traders asking why the market went the opposite way they would expect from the news that day. Today is a perfect example. It could be expected that prices would decline in stocks and that the USD would get squeezed to the upside with all the bad news today. However, we are seeing exactly the opposite. I think this confusion stems from two misconceptions.
1. News is not fundamentals - The news and reports are not fundamentals. They report on the fundamentals (sometimes) but are usually one or two steps removed from the actual forces that move the market.
2. Economic releases are not current. Most economic releases are months or weeks old. They reflect what was going on in the market not what is going on in the market. In today's video I will talk about what that means and how you can tell the difference.
To see the video, click here: http://www.pfxglobal.com/index.php?o...182&Itemid=117
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by Ryan Teeples
A couple weeks ago, Wade posted an article about the EUR/USD, and asked you to speculate whether the chart showed a triple top, or an ascending triangle. (http://www.pfxglobal.com/index.php?o...091&Itemid=188)
The results were mixed, as you might imagine, but the bias was toward a triple top, 11-7 by count in the post at this forum. The best prediction was SeekingLight, who said: "I suspect a fourth touch and retrace then breakthrough/new high, exhaustion, gasp, descent."
Like Wade and SL said, there was the touch and retrace, and now we are left to consider more closely a breakthrough and a new high (a descent after the high is another story for now :)
Fast-forward to today, and we see a Pair at a Crossroads. Right now, it looks a lot more like an ascending triangle. A fibonacci retracement study tells us we're in for a bounce off resistance for the short term, but the bias is, in my opinion, still very much long.
Let's talk about the charts below. I'm planning for a short term bounce off resistance at 1.490 at the 0% fib line, followed by a quick bounce off support to complete that ascending triangle, followed by a break out of the pattern to the long, up to 1.500.
Don't be surprised though to see the breakout come without one more bounce off of resistance. That's why, as a new trader, I keep my positions long-term and avoid trying to trade those short moves. I may miss some of the quick profits, but I also avoid the hard losses.
Whether you agree or not, the next few days are going to be key for the EUR/USD, as that channel is getting ever tighter.
Check out more of our videos, education and analysis at www.PFXglobal.com. It's all 100% free!
Here are the charts I mentioned:
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Tuesday, February 26, 2008
I get a lot of questions about "educational" or advisory services advertising in the forex. Lately there has been a lot more advertising from these kinds of firms and the claims are quite extraordinary. I have found that there are some very obvious red flags for most of these services that traders can look out for. In today's video we will look at a great case study of a popular site that has all of these problems as well as why there seems to be a sudden burst of so much advertising right now.
There are good advisories and managers out there. If that is something that you are interested in then getting good information is critical to making a good decision. In the video I will share a few ideas for finding good information that you can access yourself.
To see the video, click here: www.pfxglobal.com
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Monday, February 25, 2008
With the late rally today, it seems that the appetite for risk continues to improve. This is good for several of the trends in the forex including a general bias towards a weak USD. However, all pairs are not created equal and I still see a lot of risk coiled up in the JPY. That leaves traders trying to take advantage of JPY crosses exposed to a disproportionate amount of risk.
In today's video I will take a look at a couple of the JPY crosses compared to some of the better trends. We will also review profit targets on the EUR/USD and NZD/USD.
To see today's video, click here: http://www.pfxglobal.com/index.php/P...near-term.html
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I have been asked a lot of follow up questions about the lesson on futures versus the spot forex in our Forex Essentials Course. (Here's a link to the course if you haven't seen that lesson yet: http://www.pfxglobal.com/index.php/B...roduction.html)
I gave a live presentation on the futures vs. spot subject Friday to help provide some of those details and examples I was being asked about. Here's a link to the recorded session:
http://www.pfxglobal.com/index.php/P...sentation.html
All our education, videos, analysis and commentary is free. Check it out at www.pfxglobal.com
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Friday, February 22, 2008
I send free daily swing signals through email, if you wish to be added to my mailing list, please send me an email at mbargouti@gmail.com
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Today's price action following the news from the US was good for most USD shorts but it revealed that risk is still high in currencies that are sensitive to changes in yields. The JPY and CHF are both sensitive to asset shifts from higher risk investments like stocks into safer strategies like bonds.
The bias for fast price movements in the USD/JPY and USD/CHF is set to the downside. That does not necessarily mean we should avoid trading those pairs on a short term basis but it does imply that traders should apply as much risk control as possible. It might seem logical to speculate with both pairs to the downside but with the recent action in the intermarket environment, I think a channel is more what we would expect over a strong trend to the downside.
To see today's pairs video, click here: http://www.pfxglobal.com/index.php?o...167&Itemid=149
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Tuesday, February 19, 2008
Analysis written by NewstraderFX
Wal Mart (EPS $1.02) is reporting their sales and earnings for the quarter ending Jan 31 tomorrow, Feb. 19 and what they have to say is likely to set a strong tone for overall market direction. While no specific time has been given for the release, when Wal Mart last reported on Nov.13 it was before markets opened (BMO).
The Equity/Carry trade market responded with a strong overall gain for the day after the report beat estimates. The S&P gained nearly 2.4% as GBP/JPY gained about 200 pips (the market was also helped in the last hour by an upside surprise in pending home sales). The only other major profit report that day was the disappointing one from Home Depot, but that was likely already discounted because of the weak overall housing situation.
Other important reports will be given by Barclay's (BMO, no EPS est.), H-P (no time given, EPS est. $0.81) and OfficeMax (BMO, EPS est. $0.52).
As the U.S economy has slowed, Wal Mart has re-focused on a strategy of low prices and according to Citigroup analyst Deborah Weinswig, Wal mart is likely to report Q4 same store sales rose 1.5%. The stock gained 2.9% in 2007 after 3 years of declines and have advanced 4% amid the tough 2008 market.
Other news to be on the lookout for regards the ever-popular bond insurers. New York governor Eliot Spitzer set a tight deadline for MBIA and Ambac to find new capital due to difficulties in the Muni bond market.
As for what might happen this week, if you look at last week's price action you'll see what I believe to be a remarkable resiliency in spite of what on face value should be taken as a period of high anxiety as equities climbed 1.5 percent. Recent economic and financial data has ranged from weak to downright terrible: Q4 GDP barely above stall speed, negative NFP, seriously contracting services ISM, a bottomless housing market, weak retail sales and seriously downgraded consumer sentiment have dovetailed with fractured credit markets and a high degree of uncertainty regarding the hinge upon which the markets will ultimately swing: the bond insurers MBIA and Ambac.
Yet despite all that's happened, the fear gauges continued to calm down last week-the Ted Spread fell almost 13% to 88 and the VIX nearly 15% to 25.02 (both are still elevated above levels seen during calmer bullish markets, but the VIX is about about 33% off the panic highs while the Ted Spread is down over 58%). The intra day market movement seen on Friday was especially interesting, given the severely depressed consumer sentiment. Markets rose after the 15.00 GMT report, fell back to make its lowest closing price almost exactly at the 15.00 GMT level, then rose to finish just about at the daily high.
Other factors are are indicating better times to come as well. LIBOR has fallen dramatically since the August highs which means ARM's will reset with much smaller gains (around 8% on average, or about $182/month as opposed to August's 33%). The drop in rates should help support consumption and along with the Fed's aggressive easing and the government's Fiscal Stimulus Plan, Q3 GDP could see a return to a 2.5% annualized rate.
The MBA's refinancing index surged to 5,103.60 on Jan. 25, its highest level since June 2003, from 1,620.90 in the week ended Dec. 28, 2007. The average rate on a 30-year fixed loan fell to 5.48% on Jan. 24, according to Freddie Mac. That means a homeowner would save $81.40 a month on every $100,000 borrowed now compared with June, when rates rose to 6.74 percent.
There's also a strong bullish technical indicator for the S&P that was given at the close of trading on Friday, Feb 8-the Double Stoch indicator (seen on the daily chart). How this works is very simple:
The market closed on Jan 22 at an oversold condition. Price rose from there and eventually fell back on Feb 8 but the closing price on Feb 8 was HIGHER then Jan 22. At that point, the Stoch indicated that the S&P was still oversold, even after price had risen. That's another way of saying that after the rise in price, the market still considered price to be cheap and as we saw, the S&P did indeed rise last week. The same indicator was given on the daily DOW chart.
BTW-I tend to assume you know this but in case you don't, as the S&P moves, the JPY crosses (G,E,A,N/JPY) move right along with it.
Thanks for reading my post and please use the box to vote. If you're interested in joining my ten dollar a week trade room, you can do so on my blog: thenewstraderfx.blogspot.com
Sources: Bloomberg, Financial Times, Wall Street Journal, Morgan Stanley Global Economic Forum
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Monday, February 18, 2008
EURUSD: Break Of The 1.4751/52 Area Required To Reduce Downside Threat
EURUSD- While recovery off the 1.4440 low(Feb 07’08 low) now suggests further strength, such upside incursion must break and maintain above the 1.4751/52 zone, its Nov 09’07/Dec 11’07 highs to open up more gains towards its Feb 02’08/2007 peak at 1.4955/67 and then its psycho resistance at 1.5000.A decisive close above the former will trigger the resumption of the pair’s MT uptrend on hold since Nov 23’07.The daily studies remain biased to the upside as they are pointing higher. On the downside, initial support resides at its ST riding trendline currently at 1.4419 followed by its Jan 22’08 low at 1.4364 with a break below there extending weakness towards the 1.4310 level, its Dec 20’07 low. The latter level is expected to provide a solid support and propel the pair higher. On the whole, although the pair continues to press higher, a sustained close above the 1.4751/52 zone is needed to open up risk towards the 1.4755/67 highs.
Directional Bias:
Nearer Term –Bullish
Short Term –Mixed
Medium Term –Bullish
Performance in %:
Past Week: +1.23%
Past Month: +1.90%
Past Quarter: +2.20%
Year-To-Date: +0.65%
Weekly Range:
High -1.4709
Low -1.4482
GBPUSD: Recovery Above The 1.9938/59 Zone Needed To Avert Weakness Towards The 1.9388/35 Levels
GBPUSD-A positive close at the end of the week has seen the pair recovering part of its losses prompted by its failure at the 1.9959 high posted in Jan’08.A clean breach and hold above there is now required to avert a relapse into further weakness towards its 2008 lows at 1.9388/35.If the latter (1.9388/35) is seen before the former, losses could be seen aiming at its Mar’07 low at 1.9180 and possibly lower. The daily RSI has now turned lower supporting the above scenario. On the other hand, on a close above the 1.9938/59 zone, its psycho resistance at 2.0000 will be exposed ahead of its .382 Ret (2.1160-1.9335 decline) at 2.0034.In short, as long as the pair continues to trade below the 1.9938/59 zone, odds are for a move lower towards the 1.9388/35 level or even lower.
Directional Bias:
Nearer Term -Mixed
Short Term -Bearish
Medium Term -Bearish
Performance in %:
Past Week: +0.79.%
Past Month: +0.23%
Past Quarter: -3.00 %
Year-To-Date: -1.23%
Weekly Range:
High -1.9739
Low -1.9402
AUDUSD: Eyes A Retest Of The 1.9401 Level And Beyond.
AUDUSD- While the pair continues to trade above its Jan 15’08 solid resistance now turned support at 0.9016 following the confirmation of its double bottom pattern (daily chart) break out, risk now remains towards a break and close above its nearby resistance printed on Feb 04’08 at 0.9101. Such a break will signal a move targeting the 0.9202 level, its .786 Ret at first and then its 2007 high at 0.9401 followed by its double bottom breakout price target at 0.9469.The weekly Stochastics and RSI remain positive and advancing suggesting further strength.However, if weakness is seen at the present levels,the 0.9019 area will be targeted ahead of the 0.8885/75 zone, which marks its Feb 07’08 low/Daily 50 ema.The former is expected to provide support and turn the pair higher again. Further support level is located at the 0.8681/41 level, representing its Jan 07’08 low/daily 200 ema.On the whole,AUDUSD continues to maintain its bullish short term structure which is in alignment with its MT uptrend.
Directional Bias:
Nearer Term -Bullish
Short Term -Bullish
Medium Term -Bullish
Performance in %:
Past Week: +1.50%
Past Month: +2.16%
Past Quarter: -1.31%
Year-To-Date: +3.71%
Weekly Range:
High -0.9099
Low -0.8923
This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are those of FXTechstrategy.com own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which FXTechstrategy.com incurs any responsibility. FXTstrategy.com does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report.
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Friday, February 15, 2008
There is a correlation between a currency's appreciation or devaluation and the economy's trade numbers. Economists describe that as the J-curve. One of the things it describes is that trade will lag the currency adjustment but it will eventually catch up. The CAD had the worst net trade numbers in the last 9 years in December. Following that release, this morning, the USD/CAD.... just sat there.
Is the movement already priced in? I don't know but I am using this info to set my bias in the near term. As traders feel their way through the data will we see a shift towards a devaluation? If trade continues in its recent trend, that is what the inverted J-curve would predict. That bias may create higher probability trades in the near term to the upside.
In the very short term that means I am looking for bounces off support on the USD/CAD for some speculative opportunities. One of those likely support levels is shown on the chart below.
To see more analysis of support and resistance on the USD/CAD, click here: www.pfxglobal.com
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The comments made by the Fed Chairman today disrupted the market but not necessarily in bad ways. Equity traders drove stocks down as traders became discouraged that the Fed was concerned about deeper problems in the economy.
However, that did not translate into a flight into safety and an appreciating USD. For the most part, the USD depreciated against most of the majors. That is a good sign that the risk bias is still muted and not out of control. That is interesting news for two reasons. First , it adds weight to the forecast that the USD down trend over the last several months is still intact, which could create some nice opportunities. The second is that with long term yields rising, we may get a nice boost in the USD/CHF and USD/JPY. That creates a good forecast for carry traders.
To see the video, click here: http://www.pfxglobal.com/index.php?o...144&Itemid=117
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What are you doing with your $600?
The Economic Stimulus Package is going to offer most Americans a check for $600, in an effort to get the economy ‘jump-started’. If things are really that bad, how did it stay hidden for so long?
Reality. In reality it really was only when Equities started to slide last November that most people became really aware that all was not rosy in the Markets. Most had accepted that the Housing market was pulling back hard in some regions, but had been told by the Fed that Wage Inflation and GDP was still their main concern. Within 2 months we saw savage Rate cuts, after seeing nothing for 18 months.
What went wrong, what changed so quickly that the Government is doling out money to all and sundry? More importantly, where is the money coming from?
If you take your $600, as the Government want you to, and invest in a Plasma Screen, a Refrigerator, a Car deposit, a Lap-top, or any other consumer product, you will be ‘Jump-Starting’ the economy. But, if you do not buy American made goods all that you are doing is taking the $600 and giving it to somebody Exporting their goods to the US, therefore increasing the Trade Balance, and sending the cash overseas. Maybe the Government should have issued a Credit Note to purchase American made goods only. Unless you ‘Buy American’, a chunk of your $600 rebate is not going to do the job that it was designed to do.
If you take your $600 and pay off a Credit Card, a Mortgage Payment, a Loan that is in arrears, or pay off Debt, all you are doing is paying a tiny slice towards the horrendous losses that are currently sitting on most Lender’s books. Paying off debt will not help the economy get ‘Jump Started’. Lower Interest Rates having time to get absorbed over the next 6-8 months will do that.
So, where does the $1.5 Billion (That is a lot of Zeros) come from? This is not an economy that is flush with cash, far from it actually. This is an economy that runs a $9 Trillion (That is a lot of Zeros) deficit.
Ahh, what matters? With all of those Zeros what does 1.5 Billion more matter? Get the Printing Press running, throw some cotton and paper together, run some green ink onto it, put a promise on it that you will honor the debt, and get those US Dollars out there.
Reality. Sure it will need to get repaid at some stage, but hey, this is the US Dollar. The world trusts it, and anyway, what options does the World have but to use Dollars? It will all be OK……Did somebody mention the Euro? Opps.
Savings. Maybe the Government should have issued a Savings Bond, and tried to reverse the negative Saving Rate in the US. At least that may have given the public something that they can own, and not just a mortgage on their children’s future.
Children's mortgage? Bear in mind that your $600 is a loan that your children will possibly be paying back for many years.
Imagine if the ECB, or the BoE, the BoC, BoJ or the RBA announced such a scheme; the Euro, Pound, Cad, Yen and Aussie would be on the floor. Long USD? Not whilst this mess is going on.
Jack
TheLFB Team
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Thursday, February 14, 2008
Most traders find that it is easier to decide when to enter a trade than it is to decide when to exit a trade. Whether their emotions or a volatile market get in the way, these traders usually end up cutting their profits short and letting their losers run.
Learning how to effectively use stop loss orders can eliminate much of the guess work in your trading and protect you from incurring large losses. It can also help you protect the profits you already have in your trades.
This video was originally a 45-minute presentation. I have broken it up into six smaller sections covering the following topics:
- Using support and resistance levels when setting and adjusting your stop losses
http://www.pfxglobal.com/index.php?o...k=view&id=2139
- Using moving averages when setting and adjusting your stop losses
http://www.pfxglobal.com/index.php?o...k=view&id=2131
- Using the Parabolic SAR when setting and adjusting your stop losses
http://www.pfxglobal.com/index.php?o...k=view&id=2132
- Identifying an appropriate risk/reward ratio when setting and adjusting your stop losses
http://www.pfxglobal.com/index.php?o...k=view&id=2133
- Using FX options instead of stop losses
http://www.pfxglobal.com/index.php?o...k=view&id=2137
- Bringing it all together, a summary of effective stop-loss practices
http://www.pfxglobal.com/index.php?o...k=view&id=2138
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by John Jagerson
As most people that read our commentary know, Wade Hansen and I do not always agree. However, there is an important analysis that Wade did recently that I think should be repeated. If you would like to see his original article, click here: http://www.pfxglobal.com/index.php?o...id=188&id=1807
By now everyone knows that the positive retail surprise this morning played out as expected with a bounce from resistance on most USD quoted pairs. One of these, the EUR/USD however remains bound within its flag formation that has been emerging since the uptrend ended last November. We are near support on that formation and today's decline may have a short lifespan. A break back up to the upside could have a nice profit target well above 1.5000.
Although my comments above are technical in nature, I think the fundamentals are in line with this assessment. The Euro is not the strongest currency in the market but considering the "life-line" language coming from the US Treasury Secretary lately, I think the USD may be the weaker of the two from a fundamental perspective as well.
Bottom line: Watch for a near term bounce off support and a potential long term break above 1.5000.
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Wednesday, February 13, 2008
Buy the USD/CAD?---identifying and Using Support and Resistance
0 komentar Posted by Neutron at 11:25 AMby S. Wade Hansen
I produced a video today to illustrate a few ways traders can use support and resistance in the forex market. In this video, I outline a trade setup on the USD/CAD that I see forming today. To see the video and why I think there is a great buying opportunity for the USD/CAD today, click here:
http://www.pfxglobal.com/index.php?o...k=view&id=2124
For a sneak peak of what you'll get from my discussion of support and resistance, read on.
Here's what you will learn in this section:
- Support and resistance levels visually represent the struggle between supply and demand in the forex market
- Support and resistance levels can help you identify when a currency pair is going to stop and turn around, but they are not infallible
- Support and resistance levels are not exact price levels, they are ranges
- Support and resistance levels can be either horizontal or diagonal
Buyers and sellers are in a constant tug-o-war in the forex market. Buyers drive the prices of currency pairs higher, and sellers drive the prices of currency pairs lower. If you want to be profitable in your forex investments when buyers are in control, you need to follow the trend and be a buyer too. If you want to be profitable in your forex investments when sellers are in control, you need to follow the trend and be a seller too. Seems pretty easy, right? Well...almost.
Most forex investors are able to make money when a currency pair is trending in one direction or another. The trick is holding onto your profits and making money when the price of the currency pairs decides to turn around and start moving in the opposite direction. How many times have you asked yourself the following:
- "I've made some money on this trade. Is it time to get out?"
- "This trend has been going for a while. Can I still jump in and make some money?"
- "It looks like this currency pair is going to turn around. When should I enter my trade in the opposite direction?"
For the rest of this lesson and a video describing the buying opportunity on the USD/CAD I see today, click here:
http://www.pfxglobal.com/index.php?o...k=view&id=2124
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The GBP/JPY experienced a robust bounce up from support today with the rally in the GBP itself and heavy shorting of the JPY. Predictably, I am seeing a lot of buzz about whether the carry trade has bottomed out and likely to profit in the near term. In addition to the bounce in the GBP/JPY, the risk environment also looks promising for a bounce so I can understand why so many traders are interested. However, I would address this question in two ways...
First, the carry was never gone as a strategic concept. Concentrating all your risk in a single pair crossed with the JPY was never a good idea. The losses since 4th quarter of last year on the EUR/JPY or GBP/JPY have been intense but a diversified portfolio has done fine with a small gain.
Second, I don't think that the risk environment has changed substantially enough to justify long positions in JPY crosses yet. This can be handled by not taking positions with concentrated risk but diversifying your portfolio and the carry trade strategy.
To see the video, click here: http://www.pfxglobal.com/index.php?o...123&Itemid=117
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The commodity currencies have been looking good lately. As a carry trader, this has been good for me but is there trouble ahead? Perhaps.
The RBA came out yesterday with some really positive things to say about the Australian economy despite the international economic issues. That all sounds like there is the potential for another rate increase in the near term, which would widen the yield differential between the AUD/USD even more. However, from a technical perspective, some risk control would be smart. Here is a link to a great Australian source for a little more background on the release: http://business.theage.com.au/more-r...0211-1rkw.html
AUD/USD
I have been watching this resistance area, which bisects the gap in November carefully. The market was turned back from this level once already. Although this is not guarantee of a decline it is certainly justification for some risk control so we don't wind up as the feline in a dead-cat bounce. Tighter stops or a hedge probably make sense over the next few days.
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Monday, February 11, 2008
EURUSD: Reverses Its Two-Week Upside Gains, Risks Lower Prices Towards The 1.4310 Level
EURUSD- EUR closed the week lower wiping out almost all of its two weeks gains to end the week on Friday at 1.4504.Having failed ahead of the 2007 peak at 1.4967 and cut through layers of support to trade at the present levels, EUR now risks further decline towards its Jan 22’08 low at 1.4364 with a breach of there opening the door for further weakness targeting the 1.4310 level, its Dec 20’07 low. Breaking and holding below the latter will extend price weakness towards its Sept 28/07 high at 1.4278 followed by its daily 200 ema at 1.4212 and then the 1.272 Fib Ext. at 1.4134.Both the daily and weekly momentum indicators are positive and pushing lower supporting the above view. However, a break back above its Jan 01’08 low/.618 Ret (1.4310-1.4955 rally) at 1.4577/48 followed with a close above the 1.4751/52 zone, its Nov 09’07/Dec 11’07 highs will reduce its short term downside pressure and bring additional gains towards its Feb 02’08/2007 peak at 1.4955/67.On the whole, while the medium term trend continues to point higher, short term weakness suggests further lower prices in the days ahead.
Directional Bias:
Nearer Term –Bearish
Short Term –Bearish
Medium Term –Bullish
Performance in %:
Past Week: -2.02%
Past Month: +1.90%
Past Quarter: +2.20%
Year-To-Date: -0.57%
Weekly Range:
High -1.4849
Low -1.4440
GBPUSD: Follows Through To The Downside, Keeps Focus On Its YTD Low at 1.9335.
GBPUSD-A second-week of downside weakness saw the pair taking back most of its recovery gains off the 1.9335 low printed in Jan 22’08 the past week. The said weakness now leaves the pair trading below its weekly 100 ems with further losses envisaged towards its YTD low at 1.9335.Overcoming this level will open up the pathway for more downside weakness aiming at its Mar’07 low at 1.9180 and may be lower. Its daily momentum action remains suggestive of additional downside pressure as they continue to point to the downside.Conversely,nearby resistance on any recovery from here stands at the 1.9507/1.9481 zone, its weekly 100 ema/Jan 11’08 low followed by the 1.9653/23 area, its Aug 17’07 high/.50 Ret (1.8091-2.1160 rally)/Jun 08’07 low and then its daily 50/ Sept 18’07 low/weekly 50 emas at 1.9878/1.9938.Further resistance lies at its psycho resistance at 2.0000 and its .382 Ret (2.1160-1.9335 decline)/daily 100 & 200 emas at 2.0024/61.All in all, with price action and momentum indicators now pointing lower,GBP is poised to head towards the 1.9335 level.
Directional Bias:
Nearer Term -Bearish
Short Term -Bearish
Medium Term -Bearish
Performance in %:
Past Week: -0.98.%
Past Month: +0.23%
Past Quarter: -3.00 %
Year-To-Date: -2.00%
Weekly Range:
High -1.9787
Low -1.9388
USDJPY: Remains In a Consolidating Mode, Maintains Its Bearish MT Outlook.
USDJPY- USDJPY has been consolidating since hitting a low of 104.97 in Jan 23’08.As long as the it continues to consolidate below the 107.22/55 zone, its Nov 23/26’07 lows or even the 109.13/108.99 zone, its Nov 11’07 / May’06 lows, odds are for the pair to head lower to resume its decline off the 114.46 high registered in Dec 27’07.In such a case, below the 104.97 level should accelerate weakness towards the 104.20 level, which marks its May’04 low with a breach of there paving the way for further downside pressure targeting the 103.63 level, its Mar’05 low and then its Jan’05 low at 101.54.On the upside, breaking decisively above the 107.22/55 zone and the 109.13/108.99 zones is required to reduce downside pressure and turn further upside gains towards its Aug 12’07 low at 111.58 with a loss of there exposing its Sept 12’07 low at 112.60.The pair’s nearer term corrective recovery is now supported by its daily stochastics which is heading higher.Overall,USDJPY’s present price action remains corrective and should turn and head lower in continuation of its medium term downtrend on completing that recovery.
Directional Bias:
Nearer Term -Bullish
Short Term -Bearish
Medium Term -Bearish
Performance in %:
Past Week: +0.77%
Past Month: -4.91%
Past Quarter: -2.67%
Year-To-Date: -3.96%
Weekly Range:
High -107.83
Low -105.92
This report is prepared solely for information and data purposes. Opinions, estimates and projections contained herein are those of FXTechstrategy.com own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness and neither the information nor the forecast shall be taken as a representation for which FXTechstrategy.com incurs any responsibility. FXTstrategy.com does not accept any liability whatsoever for any loss arising from any use of this report or its contents. This report is not construed as an offer to sell or solicitation of any offer to buy any of the currencies referred to in this report.
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I've found something interesting that I think you'll find interesting too. It's a fairly rare circumstance-I can only find 3 instances of it happening on the daily chart going all the back to October 2003 before it happened again on Friday.
If you use Stochastics at all, you know it indicates overbought/oversold conditions. The Stoch indicated an oversold condition at the market low back on Jan. 22 but what's interesting is that it's indicating an oversold condition for the second time at Friday's close, which is at a higher price then the Jan 22 close. That's a bullish sign, because the Stoch is saying price is still a bargain even though it's risen.
The only times I can find the Stoch forming similar patterns were in Oct 2003, Aug 2004 and July 2006 (see charts) and each incidence of this was followed by a strong rally.
I looked for the opposite too-times when the Stoch indicated an oversold condition for the second time at a higher price and found that each time, instances of strong selling occurred after that. There's an instance of it on the DOW and S&P chart in November, right before the plunge.
Obviously at this time, the markets are very volatile and therefore sensitive to new information. The potential for a new shock to the system is there and certainly if one appears, the market can be knocked down further. But given the present set of circumstances, I believe the potential for a rising market is there.
What are the present set of circumstances? Well, everyone knows about the recession, housing is expected to weaken further and no one is all that positive on consumer spending. The Fed is expected to continue slicing the overnight rate.
What constitutes a new "shock" to the system? Well, Goldman, Morgan, Merrill, PIMCO et. al. have already said the economy will contract in Q1 08 and has probably entered a recession, so more recession news won't do it and I don't think more lousy housing numbers will either. The bad retail spending number we'll see this week has to look seriously bad to shock the system, IMO. (I found an excellent chart that correlates the ISM and consumer spending that I'm going to post this week).
Another negative NFP certainly won't help and if the UE rate ticks back up another 0.3% that will be a shock. A second contraction reading in the non-manufacturing ISM would scare me. Certainly the collapse of a major commercial bank or large brokerage would (highly unlikely). A downgrade of either MBIA or Ambac would also be a shock-but that's also unlikely despite the continued threats from Moody's. The bond insurer situation is certainly one to follow closely because a downgrade will force the banks like Citigroup and UBS to take additional write downs onto their books, putting further pressure on fragile credit markets. In addition to that, problems are developing in other credit markets besides those for mortgages: commercial real estate, leveraged loans, student loans and credit cards. Those products were structured and sold off just as mortgages were, potentially leaving bond holders with additional write downs and if these markets deteriorate, which will put further pressure on the bond insurers. Last but not least, the Fed holding in March will take the air out of any rally, unless nearly every piece of economic data between now and then beats the consensus.
Currency Implications
As we have seen in both rising and falling equity markets, the JPY crosses are highly correlated to their movement. In a rising equity market, the dollar will tend to weaken vs the high yielders as it gains on the Yen, which causes the JPY crosses to rise. We've seen this correlation hold true again as equities have fallen over the last several months-the bear dollar market died with the fall of the equity markets. GBP/JPY has fallen right along with equities-about 3000 pips worth.
Here's a research note from Morgan Stanley that was published on Friday:
"As the stimulus from the tax cuts and massive Fed easing filters through, the US economy should get a lift in the summer, and our US economics team is forecasting a healthy 4.5% annualized growth rate in the Jul-Sep quarter. That would make for a mild and short-lived recession in the US."
And something else:
Hedge Funds May be Scenting Market Turn
http://www.reuters.com/article/hedge...75227620080207
It looks like equity markets, which look 6-9 months in advance, could be starting to look 6-9 months in advance (or at least Morgan Stanley is).
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