ForexStrength

Championship October 2009 - 3 place in the championship of broker Bulbrokers, + 600% of the equity

2009-10-30T07:47:00.000-07:00

I dedicate this victory to a very special person who always twisted and believed in me and my work.

October 2009 - 3 place in the championship of broker Bulbrokers, + 600% of the equity

Consulting: edlivre@hotmail.com 55 11 6490-2107

Edson Bezerra Cavalcanti

BULBROKERS MARKETS

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Technical Analysis

2009-10-28T20:34:00.000-07:00

EURUSD

As I had expected, the EURUSD continued it's bearish momentum yesterday, bottomed at 1.4690 and closed at 1.4715. As you can see in my daily chart below, we area in critical technical phase where price is now testing the major trendline support. This trendline support could be a strong support area since overall in longer term the bullish outlook remains intact, but once violated to the downside, we should have further bearish scenario. So I think what is going to happen on that trendline support today and the rest of this week should be our technical focus at this phase.

On h4 chart below, after violated the bullish channel the bearish momentum seems strong with technical target back towards 1.4500 area. The bias remains bearish in nearest term targeting 1.4580 area but once again, pay attention to the major trendline support on daily chart above. Immediate resistance is seen at 1.4760. Break above that area should trigger further bullish pressure testing 1.4850 area and might be considered as potential end to the current bearish correction.

GBPUSD

The GBPUSD made had another volatile but indecisive movement yesterday. On daily chart below we can see that the pair attempted to stay above the bearish channel, topped at 1.6466 but once again failed to close convincingly above the bearish channel indicating that bullish pressure is not strong enough to push higher and might be exhausted and potentially trigger bearish momentum. I still prefer a bearish scenario at this phase with 1.6113 as the bearish target. Immediate resistance at 1.6430/60 area

USDJPY

The USDJPY continued it's bearish momentum yesterday, bottomed at 90.54 and closed at 90.73. After failed to break above 92.50 resistance area, the pair keep moving lower and now, as you can see on my h4 chart below, has violated the bullish channel to the downside indicating potential further bearish momentum. The bias remains bearish targeting 90.00 – 89.50 area. Immediate resistance is seen at 91.10 area. Break above that area should lead us into no trading zone.

USDCHF

The USDCHF continued it's bullish momentum yesterday, topped at 1.0276 and closed at 1.0262. On my h4 chart below we can see that the bullish momentum is now testing the 1.0280 resistance area. The bias remains bullish in nearest term but we need a clear break above 1.0280 to confirm bullish scenario targeting 1.0360 even back towards 1.0450 area. Immediate support at 1.0230 followed by 1.0166.

EURJPY

As I had expected, the EURJPY had another bearish momentum yesterday, hit my target at 134.40, even further, bottomed at 133.25. The bias remains bearish in nearest term targeting 131.00 before aim for 127.00 area. Immediate resistance at 134.00/40 area. Break above that area should lead us into no trading zone but I still prefer a bearish scenario at this phase and long position is not recommended

GBPJPY

The GBPJPY had a bearish momentum yesterday, break below my support area at 149.40, bottomed at 148.28 and closed at 148.69. On h4 chart below we can see that the pair is moving in a bearish channel indicating bearish tone. This fact should lead us to further downside pressure targeting at least 146.50 area. Immediate resistance at 148.50 area. Break above that area should lead us into no trading zone but I still prefer a bearish scenario and long position is not recommended at this phase

Technical Commentary

2009-10-27T19:11:00.000-07:00

Euro 1.4820

Initial support at 1.4770 (Oct 27 low) followed by 1.4762 (Oct 13 low). Initial resistance is now located at 1.5083 (Oct 21 high) followed by 1.5163 (76.4% retrace 1.6038 - 1.2330)

Yen 91.70

Initial support is located at 91.18 (Oct 23 low) followed by 90.49 (Oct 21 low). Initial resistance is now at 92.53 (Sept 21 high) followed by 93.3 (Sept 7 high).

Pound 1.6380

Initial support at 1.6241 (Oct 19 low) followed by 1.6120 (Oct 8 low). Initial resistance is now at 1.6533 (61.8% retrace 1.7043 - 1.5708) followed by 1.6693 (Oct 23 high).

Australian Dollar 0.9170

Initial support at 0.9113 (Oct 19 low) followed by the 0.8985 (Oct 12 low). Initial resistance is now at 0.9347 (Aug 4 08 high) followed by 0.9476 (Jul 31 08 high).

Gold 1040

Initial support at 1024 (Sep 17 low) followed by 1000 (Big Figure). Initial resistance is now at 1067 (Oct 20 high) followed by 1070 (Oct 14 high).

Oil 79.70

Initial support at 78.00 (Intraday Support) followed by 77.50 (Intraday support). Initial resistance is now at 80.00 ( Major Level) followed by 82.00 (October High).

Technical Analysis for Major Currencies

2009-10-25T23:32:00.000-07:00

EURO

The pair started today's trading with some upside potential yet we see on the hourly charts that the pair failed to close above 1.5045 or 1.5065 which resulted in a reversal to the downside where the stochastic indicator is showing a bearish crossover supporting the correctional decline. The pair does need a slight correction to the downside, despite the medium term trend remaining to the upside, where a breach of 1.4985 will confirm our expectations for today for a decline on the intraday basis.

The trading range for today is among the key support at 1.4710 and the key resistance at 1.5280

The general trend is to the upside as far as 1.4135 remains intact with targets at 1.6000

Support: 1.5010, 1.4985, 1.4955, 1.4860, 1.4815

Resistance: 1.5045, 1.5065, 1.5155, 1.5205, 1.5280

Recommendation: Based on the charts and explanations above, our opinion is selling the pair from 1.5030 to 1.4925 and stop loss above 1.5110 might be appropriate.

GBP

After the rapid decline witnessed last Friday, the pair continued to slump today once again as the 1.6205 will mark as a pivot point for today's trading. Trading is now below the 38.2% correction for the upside wave which suggests further declines on the intraday basis. Momentum indicators are showing the pair being oversold which may result in high volatility which may form a bearish technical pattern. The decline remains as far as 1.6360 is intact on the intraday basis and the 23.6% correction at 1.6460 on the short term.

The trading range for today is among the key support at 1.5860 and the key resistance at 1.6720

The general trend is to the upside as far as 1.4840 remains intact with targets at 1.7100

Support: 1.6200, 1.6165, 1.6110, 1.6085, 1.5940

Resistance: 1.6290, 1.6320, 1.6360, 1.6465, 1.6520

Recommendation: Based on the charts and explanations above, our opinion is selling the pair from 1.6290 to 1.6080 and stop loss above 1.6360 might be appropriate

JPY

The general uptrend continues despite the downside correction that the pair engaged in this week which was due to overbought signs appearing on momentum indicators alongside the weakness in the uptrend in the ADX indicator. All these signs suggest further declines on the intraday basis. Note that the short term trend remains to the upside and this decline is nothing more than a correction to gather bullish momentum.

The trading range for today is among the key support at 88.15 and the key resistance at 95.00

The general trend is to the downside as far as 102.60 remains intact with targets at 84.95 and 82.60

Support: 91.60, 91.25, 90.70, 90.25, 89.85

Resistance: 92.05, 92.50, 92.90, 93.15, 94.10

Recommendation: Based on the charts and explanations above, our opinion is selling the pair from 92.05 to 91.25 and stop loss above 92.90 might be appropriate.

Technical Analysis

2009-10-25T23:29:00.000-07:00

GBP/JPY

The daily closing that occurred on Friday -secondary image- supports our captured short term Elliott sequence while the GBP/JPY pair is forming the [A] wave as seen on our provided four-hour chart. The technical target of the aforesaid wave resides around 146.40. Hence we keep our overview to the downside on the intraday basis. A slight correction may occur before resuming the downside rally. Momentum and trend indicators support our overview.

Trading range for today is among key support at 143.90 and key resistance at 155.80.

The general trend is to the downside as far as 167.40 remains intact with target at 116.00.

Support: 149.00, 148.20, 147.40, 146.40, 145.50

Resistance: 150.00, 150.60, 151.20, 151.90, 152.45

Recommendation: Based on the charts and explanations above our opinion is, selling the pair from 150.00 targeting 147.40 and stop loss above 152.00 might be appropriate

EUR/JPY

The secondary image shows how the EUR/JPY pair is currently forming a bearish candlestick formation that may assist it to activate the fifth wave of the Elliott sequence. Therefore we keep our overview to the downside on the intraday basis. The technical target of our proposed [A] wave is currently located at 134.85 zones. Indicators support the scenario.

Trading range for today is among key support at 134.15 and key resistance now at 140.50.

The general trend is to the downside as far as 141.44 remains intact with targets at 100.00 followed by 88.97 levels.

Support: 137.30, 136.70, 136.10, 135.50, 134.85

Resistance: 138.20, 138.55, 139.00, 139.25, 140.00

Recommendation: Based on the charts and explanations above our opinion is, selling the pair from 138.20 targeting 136.10 and stop loss above 140.00 might be appropriate.

EUR/GBP

The pair is approaching the second technical target of the bullish scenario at 0.9260 after the acceleration occurred ahead of Friday's closing, supporting our detected Elliott waves count as seen on the chart above. Now, internal corrective waves may occur but it will not cancel the positive scenario of the intraday basis. The previous discussed harmonic pattern on Stochastic still supports our outlook.

The trading range is among the key support at 0.9030 and key resistance now at 0.9420.

The general trend is to the upside as far as 0.8020 area remains intact with targets at 1.0000 followed by 1.0400 levels.

Support: 0.9190, 0.9130, 0.9105, 0.9070, 0.9030

Resistance: 0.9260, 0.9300, 0.9340, 0.9400, 0.9420

Recommendation: Based on the charts and explanations above our opinion is, buying the pair from 0.9190 targeting 0.9300 and stop loss below 0.9105 might be appropriate.

Asia Session

2009-10-25T23:19:00.001-07:00

Although trading to start the week was relatively subdued due to holidays in New Zealand and Hong Kong, it did have its moment of excitement. The Financial News, a paper linked to China's central bank printed a report from a Chinese researcher stating that China should increase its holdings of both Euros and yen. This report helped push the EUR/USD through fresh 14 month highs of 1.5063 on a stop driven move that energized a quiet Monday in Asia. The pair initially opened lower and fell to lows of 1.4980 before the news sent the pair rocketing higher.

The yen benefitted as well from the report, as USD/JPY slid from recent highs near 92.16 to just near 91.57 for the day. Yen crosses all dropped in favor of a stronger yen, despite the fact that Asian equities shrugged off Fridays losses on Wall Street and were clearly promoting a stronger risk appetite.

The AUD/USD was initially soft on worse than expected PPI data which came in at 0.1% as opposed to the forecast 0.3%, but the pair was pulled higher by the gains in the Euro. AUD/USD touched a 0.9275 high after a bottom of 0.9195. NZD/USD also rode the wave to 0.7565 before settling down near 0.7535.

Inevitably, the report from China was eventually denied as a statement was released stating that the views in the report were 'fully personal' views of the researcher. Thus, most pairs returned to humbler, yet elevated levels as the day wore down.

USD Finding Support

2009-10-25T23:18:00.000-07:00

U.S. Dollar Trading (USD) was on the front foot as risk appetite waned and profit taking on the most pairs saw the USD gain across the board. The Euro struggled to stay above 1.5000 and USD/JPY made fresh multi-month highs above the 92 Yen level. September Existing Home Sales +9.4% vs. 5% forecast. In US Stocks, DJIA -109 points closing at 9972, S&P -13 points closing at 1079 and NASDAQ -10 points closing at 2154.

The Euro (EUR) had a mixed day but fell in the end with US stocks closing at 1.5000 but struggled to break higher. Weighing the single currency down was heavy losses in the GBP although EUR/JPY did manage to support as USD/JPY rallied. October IFO Business Climate at 91.9 vs forecast at 92. Overall the EUR/USD traded with a low of 1.4993 and a high of 1.5060 before closing at 1.5000.

The Japanese Yen (JPY) traded above 92 as the rally extended. Talk of the differing medium term outlook on interest rates are helping the USD to become the higher yielding currency. Also helping the Yen to weaken is the continued reemergence of the carry trade. Overall the USDJPY traded with a low of 91.29 and a high of 92.12 before closing the day around 92.07 in the New York session.

The Sterling (GBP) was sold aggressively as Q3 GDP remained negative leaving the UK in recession. The pair fell over 3 big figures giving up a week of gains. Q3 GDP -0.4% vs. 0.2% forecast. Overall the GBP/USD traded with a low of 1.6300 and a high of 1.6693 before closing the day at 1.6308 in the New York session.

The Australian Dollar (AUD) slipped on profit taking and risk aversion falling back to supports at 0.9200. AUD/JPY remained well supported as it ignored the falls in New York. Attention is turning to the RBA meeting in November and whether they will raise and by how much. Overall the AUD/USD traded with a low of 0.9200 and a high of 0.9295 before closing the US session at 0.9220.

Oil & Gold (XAU) Gold fell with USD strength but kept to the recent range. Overall trading with a low of USD$1051 and high of USD$1068 before ending the New York session at USD$1053 an ounce. Oil fell back to $80 a barrel supports. Crude Oil was down -0.69 ending the New York session at $80.50

Usd/Jpy: Bearish Below 93.42

2009-09-06T22:19:00.000-07:00

Usd/Jpy

Weekly Trend: Short. Main price points: 87.10, and 101.44. Looking for: Wave 5

Usd/Jpy weekly chart is showing a bearish structure with an ending diagonal pattern in the red wave 5 position. The market came down from the wave 4 top to the current lows with a decline of a three wave structure in each leg overlapping waves 1 and 4. This is a typical structure of an ending diagonal pattern, shown on the chart below that can only occur in wave C, or wave 5, positions, and indicates a turning point.

This turning point should follow as soon as wave 5, of the red wave 5 shown, is completed with a three wave pattern from the 101.44 area. The black wave 4 highs must hold. These lows may be found somewhere around the 161.8% extension of a black wave 4. The wave count will be invalidated if the 101.44 resistance area fails.

Daily chart trend: Short. Main price points: 91.74, 98.88, and 101.44 Looking for: Wave (X)

On the daily yen chart, prices fell down to the 91.74 support area with a three wave leg. For now it is labeled as blue waves A), B) and wave C). The current price action from the 101.44 area, the black wave 4 top is very tricky, as the market may be trading in a pull-back from the down-trend (blue wave (X)), or it may be the start of a new up-trend if the 91.74 support area holds. However, traders must be very patient, and wait on some important price points to be taken out. A break of 98.88 will lead us above 101.44, while the break of 91.74 will confirm a complex bearish trend in a black wave 5 position.

4 Hour chart trend: Short. Main price points: 92.50, and 94.05. Looking for: Wave III)

Usd/Jpy is still trading in a powerful down-trend channel, with a current low just a few pips above the 91.74 support area. If the 91.74 support area gets broken in the near-term, while the 93.42 holds as resistance, then we believe that a powerful move of a black wave III) will be in play. In this case, we will be looking for a move down approaching the first target at 161.8% extension, followed by a second target at 200% extension of a black wave I) distance, if equities get sold at that time.

FX Technical Commentary

2009-09-06T22:13:00.000-07:00

Euro 1.4325

Initial support at 1.4178 (Sept 1 low) followed by 1.4046 (AUG 17 low). Initial resistance is now located at 1.4407 (Aug 27 high) followed by 1.4447 (Aug 5 high)

Yen 93.15

Initial support is located at 91.74 (July 13 low) followed by 90.54 (February 13 low). Initial resistance is now at 94.07 (August 28 high) followed by 95.06 (Aug 14 high).

Pound 1.6405

Initial support at 1.6114 (Sept 1 low) followed by 1.6034 (Jul 13 low). Initial resistance is now at 1.6381 (Aug 28 high) followed by 1.6546 (Aug 24 high).

Australian Dollar 0.8530

Initial support at 0.8239 (AUG 27 low) followed by the 0.8156 (AUG 17 low). Initial resistance is now at 0.8694 (Aug 28 2008 high) followed by 0.8813 (AUG 22 2008 high).

Gold 992

Initial support at 944 (Aug 31 low) followed by 939 (Aug 24 low). Initial resistance is now at 997 (Sept 3 high) followed by 1000 (Psychological Round Number).

Dollar Weakness Before U.S. Holiday

2009-09-06T22:09:00.000-07:00

Dollar Weakness Before U.S. Holiday

Overall, the market saw hints of dollar weakness at the start of the Asian session. There is likely to be lower volume seen during the next few sessions as it is a holiday in the U.S. and Canada which means the banks and stock markets will be closed. The European session will see one medium level release, German factory orders during the session.
The euro (Eur/Usd 1.4327) bounced higher after the employment reports last week. The pair is currently testing the highs achieved during the previous session at 1.4328. The next major resistance level for the pair is a little more than 100 pips away at 1.4350.
The pound (Gbp/Usd 1.6404) has moved past the highs of the previous two days at 1.6410 during the early part of the Asian session. The pair is now firmly entrenched between the 20 day moving average at 1.6396 and the 50 day moving average at 1.6440.

The aussie (Aud/Usd 0.8531) broke above the critical 0.8480 level that has held the pair up for the entire summer after the employment reports were released from the United States last week. The next major area of resistance, as seen on the daily chart, lies in the 0.8790 level. Meanwhile, support can be seen at the 50 day moving average at the 0.8200 level.

The cad (Usd/Cad 1.0844) fell like a lead weight during the last session as the dollar weakened with the employment reports. The pair found support at the S3 level last week, widening today's pivots drastically. The pair will see intermediate resistance at the 1.0875 area, while support will likely be found at 1.0790

The swissy (Usd/Chf 1.0590) found resistance as the pair tried to hold above the 20 day moving average all last week. The pair moved lower at the start of the trading week in Asia, finding slight support at 1.0580.

The yen (Usd/Jpy 93.12) is approaching the high achieved during the previous session at 93.25 during Asian trading hours. The pair had a slight bounce off near the neutral pivot point and is trading 20 pips higher at the moment

Nikkei Rises After U.S. Jobs Report

Current Futures: Dow -13.00, S&P -1.10, NASDAQ -0.75

Japanese stock markets were advancing early in the Asian session after The U.S. employment reports were released last Friday. The rise has been attributed to U.S. companies laying off fewer workers than had been expected in August. The Nikkei has advanced 104.82 points or 1.03 percent while the Australian S&P/ASX has risen 17.30 points or 0.39 percent. This gain breaks a three day losing streak seen in the Nikkei. Sony Corp was seen gaining 1.4 percent while Nissan Motors was just behind that with a 1.3 percent advance.

Overnight, the Japanese Nikkei added 104.82 points (1.03%) to 10,291.93. The Australian S&P/Asx advanced 17.30 points (0.39%) to 4,452.80

Crude oil for October delivery was recently trading at $67.81 per barrel, lower by $0.21.

Gold for October delivery was recently trading lower by $2.90 to $993.80.

Event To Watch - US Non-Farm Payrolls

2009-09-05T00:39:00.000-07:00

Event To Watch - US Non-Farm Payrolls

US Non-Farm Payrolls August: US' non-farm payrolls probably dropped -225K in august compared with a reduction of -247K in the prior month. Although the decline remained rather sharp, the pace of contraction has slowed down. Over the week, the employment data we received were mildly positive. Both ISM manufacturing and non-manufacturing employment index improved while Chellenger reported reduction in layoff in August after rising in the previous month.

ADP employment dropped -298K in August. While this represented an improvement from a -371K reduction in July, it's worse than market expectation of -250K. Initial jobless claims for the last week in August fell -4K to 570K (consensus: 560K) with 4-week average rising +4K to 574K.

Unemployment rate should have risen to 9.5% in august following a surprising drop to 9.4% in July. We believe the downtick last month was driven by decrease in labor force and participation rate, rather than strong recovery in the job market. Volatility in participation rate usually makes unemployment rate difficult to forecast. However, as initial jobless claims remained hovering above 550K, this should have contributed to an uptick in the jobless rate

August 2009 championship - 21 place +20% -Edson Bezerra Cavalcanti

2009-09-05T00:29:00.000-07:00

Championship 2008 1st place + 795% - Edson Bezerra Cavalcanti

2009-09-05T00:26:00.000-07:00

Consultant and operator market financial Forex - championship 2008 + 400%

2009-09-05T00:12:00.001-07:00

Central bankers have made it very clear they are leery about taking away the punch bowl

2009-09-04T22:58:00.000-07:00

Mr. Trichet laid out the ECB concerns and potential paths in an editorial appearing in the Financial Times today. Stable prices are his first concern: “First and foremost, should the non-standard measures trigger risks to price stability, we will immediately begin to unwind them and ensure the continued solid anchoring of inflation expectations.”

Perusing The Economist magazine financial data section, we were on the lookout for inflation (at least the common headline variety that shows up in CPI, not the asset inflation variety as in stocks). We noticed that with the exception of the Netherlands at +0.2%, and Greece at +0.6% for July, consumer prices in every major European country are negative or zero (Italy is zero; who would have thunk it?).

But what about those places where we’ve seen real growth like China? Well, according to estimates, China’s CPI fell 1.8% in July, slightly less than the -2.1% slide in US prices. Among the major currency countries, only the UK, at +1.8%, and Australia, at +1.5%, have positive CPI numbers. We imagine the UK may catch up soon.

So, there is reason for central bankers to be leery about removing the punchbowl—global deflation. Capacity utilization rates are falling fast across the industrialized world, as expected, reflecting the plunge in consumer demand. German capacity utilization fell to just 69% in July. That doesn’t bode well for Germany’s highly skilled workforce, and may not bode well for any of us. But this comes at a time when a whole bunch of new capacity is coming on line in China; they are already considered the culprit pushing final goods prices lower and lower. And if China stops stockpiling commodities, as might be the case, we would expect industrial commodities prices to sag also.

Yet all this and gold is soaring to $1,000 and likely beyond say the technical analysts. Is gold telling us inflation is around the corner, or is it telling us gold represents real money and a good place to hide in the coming global deflation?

Policymakers, and those still highly leveraged have to be concerned about deflation. As deflation is the markets way of cleansing. But politicians know cleansing the market could lead to cleansing of the various elected government officials at the same time—we can’t have that. But the broader concern for the global economy is this: If prices continue down and limited traction is gained, what is left? It seems the central banks virtually out of bullets?

We are penning a report at the moment, making the case for global deflation—we will make that available to you next week.
Maybe gold is telling us we are very wrong. But gold plays a lot of roles at different stages in the business cycle, especially one where massive amounts of money have been poured into the market ($35-$40 trillion since the last G-20 I think) and prices are going south. It continues to remind us of Japan. All that money, years of zero interest rates, and the horse never drank.

Cross-Eyeing: EURJPY

2009-09-04T22:50:00.000-07:00

What is up! Looks like I couldn't catch a break during today's trading session as my short orders at 136.00 never triggered. It was a volatile day for EURJPY as the pair fell to 134.00 during the Asia and European trading session then rallied to just under 136.00 during the US trading session. My short orders were missed by less than 10 pips! It was an opportunity missed as sellers pushed EURJPY back down for the rest of the US trading session.
With the lower highs the pair is making on the one hour and four hour charts, it looks like that buyers are somewhat in control for now and I am removing my short orders at 136.00. If that rising trend breaks I may jump in short again on this pair, so I will just have to wait and see what the market gives me. Thanks for checking out my blog and stay tuned for new updates!

Good afternoon Forex geeks! I'm back for another week of trading and it looks like EURJPY may provide the opportunity of the week. Will the pair move lower after testing previous resistance?
On the four hour chart, I have highlighted areas of previous resistance and interest around 136.00. The pair has recently tested that level, but with tons of data coming out in the upcoming trading session, we may see volatility push the pair up to retest that resistance area. I like a short play if this area holds, and I think the probability of success is high as stochastics are indicating that the recent rally may be overdone and that the market has run out of buyers in the short term.
Again, we do have a lot of European data, mostly from Germany, as well Japanese merchandise data coming up. Also, risk trends are highly influenced by US events, so the plethora of US housing data later today may sway risk tolerance one way or another at the end of the European trading session/ morning US trading session.
If we do see a retest of 136.00 and the falling trendline, I am going to short EURJPY. My stop will be a little more than half the daily ATR (200) since the market has to move up 100 pisp to hit my entry point. My profit targets will be the minor support at 134.50 and the major support around 133.00.
Short EURJPY at 136.00, stop at 137.50, pt1 at 134.50, pt2 at 133.00

Forex Weekly Trading Forecast

2009-09-04T22:42:00.000-07:00

Liquidity has been the bane of currency traders’ existence this past week; but a gradual return to normalcy may finally allow the dollar and general risk appetite to find its bearings once again. Even a perfunctory glance at a EURUSD chart conveys exaggerated congestion. This pair – and indeed all of the majors – has been relegated to a controlled range or gradual channel for the better part of three months. Now, passing through the extended Labor Day weekend holiday in the US, we are encountering the worst of the unusual market conditions. It wasn’t by chance that the dollar tumbled to test its lows through this past Friday’s close. At critical levels, the speculative ranks could either attempt a break against the dollar while most of the American market is offline or wait for the liquidity pool to deepen and instead work to reconcile the divergent outlook between fundamentals and risk appetite.The immediate concern heading into the new week is Monday’s holiday. While US markets will be offline, Asian and European traders can act upon any potential breakouts as there is time (though not necessarily momentum) to forge significant follow through. This leads us to consider what the primary driver for the dollar is. Did this past week’s data tip the fundamental scales and now we are just waiting for enough market depth to sustain a rally? Are interest rate expectations shifting against the FOMC pursuing interest rate hikes in the opening months of 2010? Have risk trends once again pegged the dollar as a key liquidity currency? In such a complex market, you can be sure that all of these themes are factoring in; but it is likely the whims of speculators and their appetite for risk that is truly at the helm.Where will the fuel for a surge in optimism or the spark to a spate of panic come from? Generally, it can come from anywhere as long as the market is susceptible enough – and sentiment certainly seems primed for a dramatic shift. The comments coming from Finance Minister and other policy officials ahead of the G-20 meeting in London tomorrow has been largely supportive of keeping stimulus in place; but being prepared with an exit strategy when the right conditions were met. This is very likely to be the consensus tomorrow – and it would send the market a somewhat bearish outlook as it would reinforce the notion that the global recovery will be gradual. What’s more, with the full summit scheduled for the 24th 25th in Philadelphia, this pre-game meeting will be more for setting out framework. Since investor sentiment in its simplest form is the balance of risk and reward, interest rate decisions from key policy bodies next week could in turn affect the dollar as a safe haven. The BoE is scheduled to announce rates on Thursday; but it is the commentary and outlook for growth as well as the size of the asset purchasing program that is truly remarkable. On the opposite end of the spectrum, we have the RBNZ’s deliberation. As a representative of what high yields global investors can reasonably expect, this benchmark will be used to set expectations for growth. The disparity between dim growth potential and the capital market’s steady rally over the past six months has only grown with time. It is already clear that the recovery will be slow; so it is not likely that market optimism can hold up long enough for data to catch up. But, as John Maynard Keynes said, “the market can stay irrational longer than you can stay solvent.”

US Dollar Recovers On Building Inflation, Sales Data

2008-05-13T18:50:00.000-07:00

US Dollar Recovers On Building Inflation, Sales Data

The US dollar advanced against most of the major currencies as fresh economic data led the markets to reduce expectations of further rate cuts by the Federal Reserve, but fell to a two month low against the Canadian dollar as oil prices peaked just shy of $127 a barrel. As a result, the low yielding Swiss franc and Yen took the biggest plunge against the greenback, with the New Zealand and Australian dollar following behind. Against the European currencies, the US dollar regained its footing as it rose against both the British Pound and Euro. The British Pound continued to tally up losses as it fell to 1.946, while the Euro inched lower to trade at 1.547.
On the economic front, Advanced Retail Sales for the US fell in line with expectations as it dropped to -0.2 percent from 0.2 percent, while Retail Sales Less Autos topped estimates as it rose to 0.5 percent - helping to ease downside growth risks. Amid the positive data, Fed Chairman Bernanke held a downgraded view of the economy as he stated the financial markets to be 'far from normal', and said that the Fed will increase borrowing to the financial sector to $150B from $100 a month.
The stock markets turned sour as Chairman Bernanke highlighted the downside risks in the financial sector, and pushed the markets into negative territory. As a result, the DJIA fell 44.13 points to 12,832.18 points, with HP and JP Morgan Chase topping the losers. Among the broader indices, the S&P500 shaved 0.54 points to hold off at 1,403.04 points, with 195 stocks falling to a new 52 week low.
Demands for US Treasuries wavered as many investors left the safe have of risk free bonds in search of higher returns. As a result, the benchmark 10-Year yield rose to 3.921 percent from 3.797, while the 2-Year yield jumped to 2.482 percent from 2.321.
Looking ahead, the MBA Mortgage Application will kick off the morning at 11:00 GMT, and will be followed by the Consumer Price index at 12:30 GMT. We expect the CPI data to be the main event risk for tomorrow, and forecast core inflation to hold at 2.4 percent, while we expect the headline reading to stay at 4.0 percent.

Forex Exchange Morning Report

2008-05-13T18:49:00.000-07:00

Forex Exchange Morning Report

News And Views

The New Zealand dollar lagged the other major currencies again overnight, but was generally sidelined in favour of more important themes offshore. The NZD stuck to a narrow range through most of the day and briefly popped back above 0.77, before succumbing to a stronger US dollar and slipping to 0.7640 by this morning.
The Australian dollar dipped slightly after last night's Federal Budget. The Budget delivered the promised tax cuts, but these were offset by larger than expected spending cuts, leaving it slightly less stimulatory (and hence less inflationary) than expected. The withholding tax rate was cut from 30% to 22.5%, which should encourage foreign investors and may prove to be AUD-positive over the longer term. The AUD slipped from 0.9440 to 0.9400 after the Budget, but largely held its ground against the USD for the rest of the overnight session.
The US dollar rose after US retail sales printed stronger than expected - continuing a run of data that have beaten forecasts even if they remain weak in outright terms. The USD also benefited from a sharp move in yields in its favour - two-year Treasury yields rose to 2.47%, their highest close since January. Renewed speculation about whether money market rate fixings have been artificially low helped to drive short-term rates 15-20bp higher. Comments from Fed officials were a mixed bag, with Hoenig and Fisher highlighting inflation concerns, but Chairman Bernanke noting that financial markets are 'far from normal', and Stern noting that the US is unlikely to avoid recession (an interesting view given that neither Q1 or Q2 GDP are expected to print negative).
US retail sales fell 0.2% in April due to known weakness in auto sales, but there were pockets of unexpected strength elsewhere in the report. Building materials jumped 1.9% and electronics rose 1.4%, both surprises given that the housing market is in free-fall and anecdotes suggest that discretionary spending (such as on TVs and stereos) is being curtailed as household income growth dwindles. Along with upward revisions to sales in Q1, April's 0.5% rise in core retailing looks quite decent. This could reflect some pre-spending of the tax rebates which started to be paid in the last week of April. Or lower auto sales could have freed up cash for spending on other items. Still, three month annualised core retail spending of 1.3% implies that sales are not keeping up with inflation (i.e. are declining in real terms), so the report is still weak - just not quite as soft as we were expecting.
US business inventories were held to a 0.1% March gain by a 0.5% fall in the retail component, on top of a known 0.1% fall in wholesale and 0.9% rise in factory stocks. The inventories contribution to Q1 GDP growth will need to be shaved a little lower as a consequence but there will be offset which will see consumer spending revised a little higher, and also from net exports (recall the narrower trade deficit reported last week). The net result is that Q1 GDP is likely to be revised a little higher compared to the 0.6% annualised advance result (revision due 29/5). In other news, import prices continued to soar in April, up 1.8%, boosted not only by a 4.4% jump in imported petroleum, but also by rising prices for other imports - a function of the weaker US dollar.
UK consumer prices rose 3% in April, even stronger than our top of the range 2.8% forecast. Food prices (up 6.9% yr) and utilities (9.1% yr) were expected to be drivers but household goods inflation jumped from 0.7% yr to 2.2% yr implying less discounting and other sectors showed upward pressure which more than offset ongoing declines in apparel. This result has alarmed financial markets which have sharply downgraded expectations for further BoE rate cuts this year. But other UK data reports were very weak, emphasising the difficult decision the BoE MPC must make each month. House prices are falling according to a net balance of more than 95% of all building surveyors. And the BRC reported another decline in same store sales in April, indicating slumping consumer spending.

Forex Trading Signals - Gbp/ Jpy

2008-05-11T21:01:00.000-07:00

GBP/JPY

Recomend:

Buy 201.40

Target 1 : +50
Target 2 : +100
Target 3 : +150

Stop : -100

Good Luck!

FXcast

2008-05-11T09:01:00.001-07:00

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Capital Market Services

2008-05-11T09:00:00.001-07:00

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24 Hour trading: Yes
Free demo account: Open a Demo Account
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Country: United States
Phone: +1-212-563-2100
Fax: +1-212-563-4994

Forex Brokers

2008-05-11T08:59:00.001-07:00

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Economic Calendar

2008-05-11T08:56:00.000-07:00

Sunday, May 11, 2008
GMT
Ccy
Events
Consensus
Previous
12:01
NZD
QV House Prices (YoY) (APR)
--
6.5%
23:50
JPY
Foreign Buying Japan Bonds (Yen) (MAY 2)
--
-588.0B
23:50
JPY
Foreign Buying Japan Stocks (Yen) (MAY 2)
--
301.3B
23:50
JPY
Japan Buying Foreign Stocks (Yen) (MAY 2)
--
11.3B
23:50
JPY
Japan Buying Foreign Bonds (Yen) (MAY 2)
--
-34.6B
23:50
JPY
Money Supply M2+CD (YoY) (APR)
2.2%
2.2%
23:50
JPY
Broad Liquidity (YoY) (APR)
3.1%
3.1%
23:50
JPY
Bank Lending incl Trusts(YoY) (APR)
1.2%
1.1%
23:50
JPY
Bank Lending Banks ex-Trust (YoY) (APR)
--
1.2%
23:50
JPY
Bank Lending Banks Adjust (YoY) (APR)
--
1.7%

Monday, May 12, 2008
GMT
Ccy
Events
Consensus
Previous
1:30
AUD
Home Loans (MAR)
-0.8%
-5.9%
1:30
AUD
Investment Lending (MAR)
--
-9.5%
1:30
AUD
NAB Business Confidence (APR)
--
-4.0
1:30
AUD
NAB Business Conditions (APR)
--
7.0
4:30
JPY
Bankruptcies (YoY) (APR)
--
8.0%
5:00
JPY
Eco Watchers Survey: Current (APR)
--
36.9
5:00
JPY
Eco Watchers Survey: Outlook (APR)
--
38.2
6:00
JPY
Machine Tool Orders (YoY) (APR P)
--
3.3%
8:00
EUR
Italian Industrial Production s.a. (MoM) (MAR)
0.0%
-0.2%
8:00
EUR
Italian Industrial Production w.d.a. (YoY) (MAR)
-1.0%
-0.8%
8:00
EUR
Italian Industrial Production n.s.a. (YoY) (MAR)
-4.6%
2.9%
8:30
GBP
Producer Price Index Input s.a. (MoM) (APR)
1.8%
1.8%
8:30
GBP
Producer Price Index Input n.s.a. (YoY) (APR)
21.4%
20.6%
8:30
GBP
Producer Price Index Output n.s.a. (MoM) (APR)
0.6%
0.9%
8:30
GBP
Producer Price Index Output n.s.a. (YoY) (APR)
6.4%
6.2%
8:30
GBP
Producer Price Index Output Core s.a. (MoM) (APR)
0.3%
0.3%
8:30
GBP
Producer Price Index Output Core n.s.a. (YoY) (APR)
3.2%
3.1%
8:30
GBP
Visible Trade Balance (British pounds) (MAR)
-7.500B
-7.487B
8:30
GBP
Trade Balance Non-EU (British pounds) (MAR)
-4.000B
-4.023B
8:30
GBP
Total Trade Balance (British pounds) (MAR)
-4.400B
-4.439B
12:30
CAD
New Housing Price Index (MoM) (MAR)
0.2%
0.3%
18:00
USD
Monthly Budget Statement (APR)
$160.0B
$177.7B
22:45
NZD
Food Prices (MoM) (APR)
--
0.7%
23:01
GBP
BRC Retail Sales Monitor (APR)
--
--
23:01
GBP
RICS House Price Balance (APR)
-80.0%
-78.5%

Forex and Dow Jones Recommended Levels

2008-05-06T22:45:00.000-07:00

EUR/USD
Today's support: - 1.5477(main), where correction is possible. Break would give 1.5463, where correction also may be. Then follows 1.5432. Break of the latter would result in 1.5409. If a strong impulse, we would see 1.5390. Continuation will give 1.5375.
Today's resistance: - 1.5560(main). Break would give 1.5581, where a correction is possible. Then goes 1.5614. Break of the latter would result in 1.5640. If a strong impulse, we'd see 1.5658. Continuation will give 1.5681.

USD/JPY
Today's support: - 104.66, 104.42 and 104.13(main). Break would bring 103.92, where correction is possible. Then 103.66. If a strong impulse, we would see 103.47. Continuation would give 103.28.
Today's resistance: - 105.11, 105.32, 105.64 and 105.86(main), where a correction may happen. Break would bring 106.02, where also a correction may be. Then 106.26. If a strong impulse, we would see 106.54. Continuation will give 106.88 and 107.05.

DOW JONES INDEX
Today's support: - 12 960.18 and 12 934.68(main), where a delay and correction may happen. Break of the latter will give 12 915.00, where correction also can be. Then follows 12 892.46. Be there a strong impulse, we would see 12 870.33. Continuation will bring 12 853.13.
Today's resistance: - 13 050.14 and 13 084.00(main), where a delay and correction may happen. Break would bring 13 100.63, where a correction may happen. Then follows 13 117.50, where a delay and correction could also be. Be there a strong impulse, we'd see 13 142.81. Continuation would bring 13 160.00.

Asia Session Recap

2008-05-06T22:44:00.000-07:00

Asia Session Recap
Tonight, amidst choppy trading, the US Dollar put the brakes on its two day skid after the Kansas City Federal Reserve Bank President Thomas Hoening stated that with 'serious' inflation threats the Fed may need to raise interest rates. The markets reacted rather quickly with EURUSD leaving its 1.5538 high in the rearview mirror on the way down to a 1.5485 low. As London woke up, the Euro had bounced a bit to the 1.5505 levels. Hoening's hawkish tone also stressed the Feds concern of rising inflation. USDCHF and USDCAD both gained a slight bit of ground as well. The Dollar is up 3.2% since it bottomed out against the Euro only a few weeks back.
Other dollar crosses followed the same path as GBPUSD fell from 1.9736 highs down to 1.9679 on dollar strength as well as UK consumer confidence falling to its lowest in over 4 years. The BoE will meet on Thursday to discuss rates, and it seems that the general consensus is that they will remain unchanged at 5.00% An AUDUSD chart looked similar to a Cable chart with the pair trading on the topside at 0.9505 and hitting its lows of 0.9462 later in the session. The Aussie bounced 20 pips from the low near the end of the session.
In Japan USDJPY started at 104.66, eased its way up to 104.94, and ended up back around the starting point by sessions end. The Yen gained strength vs. the Euro reaching a late session high of 162.25. The Yen also looked appealing against the Swissy too, as CHFJPY lost 40 pips to end the night near its 99.36 lows.
Not to beat a dead horse, but once again keep an eye on crude oil, which hit a new all time high again earlier today. With a major us investment bank analyst stating it could go to '$200' a barrel down the road, the speculating flood gates may be opening…
Upcoming Economic Data Releases (London Session):
0245 EDT FR - Trade Balance (Euros), previous: -2.8B consensus: -3.1B
0245 EDT FR - Central Govt. Balance (Euros), previous: -2.8B consensus: -3.1B
0300 EDT EUR - ECB's Bini, Smaghi, Stark speeches in Frankfurt.
0430 EDT UK - Industrial Production (MoM), previous: 0.30% consensus: -0.10%
0430 EDT UK - Industrial Production (YoY), previous: 1.30% consensus: 0.80%
0430 EDT UK - Manufacturing Production (MoM), previous: 0.40% consensus: 0.00%
0430 EDT UK - Manufacturing Production (YoY), previous: 1.90% consensus: 1.20%
0500 EDT EUR - Euro-Zone Retail Sales (MoM), previous: -0.50% consensus: 0.10%
0500 EDT EUR - Euro-Zone Retail Sales (YoY), previous: -0.20% consensus: -0.60%
0530 EDT UK - BRC April Shop Price Index
0600 EDT GER - Factory Orders (MoM) sa, previous: -0.50% consensus: 0.20%
0600 EDT GER - Factory Orders (YoY) nsa, previous: 9.00% consensus: 5.70%

FX Overnight Briefing

2008-05-06T22:43:00.000-07:00

FX Overnight Briefing

Financial News - US & Far East
Dollar fell after Fanny Mae loss
Nikkei up 0.9 % in morning trade
Oil floats near record
The dollar edged up against the yen
Today's Main Events
EUR Euro-Zone Retail Sales
USD MBA Mortgage Applications
USD Pending Home Sales
American Timezone:
U.S. Stocks Rose
U.S. stocks rose, sending the Standard & Poor's 500 Index to a four-month high, as loosened government restrictions on Fannie Mae sparked a rebound in financial shares and oil companies rallied on record crude prices. Fannie Mae gained, helping financials erase a 1.9 % decline, on a regulatory decision that will enable the biggest mortgage-finance company to buy more home loans. Anadarko Petroleum Corp., the second-largest independent oil producer in the U.S., climbed to a record after first-quarter profit exceeded analyst estimates and crude topped USD 122 a barrel.
Advanced Micro Devices Inc., the secondbiggest maker of computer processors, rallied the most since January on speculation the company may be split up.
USD fell after Fannie Mae loss
The dollar fell for a second day against the euro as Fannie Mae reported a larger-thanexpected USD2.19 billion loss, indicating the worst of financial-market turmoil may not be over.
The currency also weakened versus the yen after the largest U.S. mortgage-finance company said it will cut its dividend and raise USD 6 billion in capital.
Oil at new record high
Crude oil rose above USD 122 a barrel in New York for the first time on threats to supply in Nigeria and Iraq and growing Asian fuel consumption.
Far East Timezone:
Nikkei up 0.9 % in morning trade
Japan's Nikkei stock average rose 0.9 % on Wednesday to hit its highest point in nearly four months as easing concerns about the credit crisis boosted financial shares such as Mitsubishi UFJ Financial Group while high-tech exporters and automakers rose on a softer yen.
Resource-related shares such as Inpex Holdings and trading houses jumped after oil shot to a record above USD 122 a barrel on Tuesday.
The benchmark Nikkei average ended the morning session up 130.23 points at 14,179.49, hitting its highest level since Jan. 15.
The broader TOPIX index gained 1.6 % or 21.50 points to 1,398.89.
Oil floats near record
Oil prices traded within sight of a record high on Wednesday, capping any gains for the dollar, while resource stocks in Asia rose on sky-high energy and metals prices.
U.S. crude was steady at USD 121.79 a barrel, just off a record high at USD 122.73 in New York. Prices have doubled in the past year and Goldman Sachs -- which had predicted oil would hit USD 100 a barrel -- forecasts a potential spike to USD 200.
The surge in energy prices, agricultural commodities and base metals -- a headache for central banks eager to ward off inflation -- boosted shares in Japanese trading houses, such as Marubeni, and Australian miners, such as Rio Tinto and BHP Billiton . Asian equity markets were also supported by Wall Street's advance on Tuesday after officials of the largest U.S. mortgage financing company Fannie said they were cautiously optimistic that the worst of the credit crisis had passed even after posting a USD 2.5 billion quarterly loss.
Japan's Nikkei average rose 0.9 % by the midsession as the country's financial markets reopened after being closed on Monday and Tuesday for national holidays.
The dollar edged up against the yen
The dollar edged up against the yen on Wednesday as gains in global stocks prompted some investors to wade back into riskier carry trades.
The dollar has pulled back after punching to a two-month peak against a basket of currencies last week as the jump in oil prices to record peaks above USD 120 a barrel is seen as a negative for the U.S. currency.
Typically the dollar moves in the opposite direction of oil and gold prices, while the steep cost of crude is also seen prompting Middle East producers to shift some of the dollarbased windfall into other currencies.
The dollar climbed 0.2 % to 104.95 yen, up from near 104.75 yen in late U.S. trade.
Market players were looking to see if Japanese investors shift funds into foreign assets after the long weekend, while exporters may sell dollars to repatriate funds on any rise above 105 yen.

Forex Technical Analytics

2008-05-06T00:53:00.000-07:00

CHF
The assumed test of the key support range has not been confirmed but taking into account the relative rise of bearish activity in a short-term future with general level of low activity as before we presume a possibility of test of the nearest supports 1.0470/90, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term buyers' positions on condition of formation of topping signals the targets will be 1.0540/60, 1.0600/20 and/or further breakout variant up to 1.0660/80, 1.0720/40, 1.0780/1.0800. An alternative for sales will be below 1.0440 with the targets 1.0380/1.0400, 1.0330/50, 1.0280/1.0300, 1.0220/40.

GBP
The pre-planned breakout variant for sales has been realized but with a loss of several points in attainment of minimal assumed target. OsMA trend indicator having marked the fall of parties' activity in a short-term outlook has revealed the preservation of some minimal bullish potential for pair return to the range of 1.9780/1.9800, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sales on condition of formation of topping signals the targets will be 1.9720/40, 1.9680/1.9700 and/or further breakout variant up to 1.9610/30, 1.9550/70. An alternative for buyers will be above 1.9860 with the targets 1.9900/20, 1.9960/80, 2.000/20.

JPY
Previous trading day did not have any events for realization of earlier composed trading plans. OsMA trend indicator having marked the activity parity of both parties does not give grounds to choose planning priorities for today. Nevertheless because of chosen strategy we assume a possibility of range movement of the rate with another attempt of rise to earlier attained tops where to evaluate the perspectives of further rate movement the targets will be 105.00/20. For short-term sales on condition of formation of topping signals the targets will be 104.60/70, 104.00/20 and/or further breakout variant up to 103.40/60, 103.00/20. An alternative for buyers will be above 105.60 with the targets 106.00/20, 106.40/60.

EUR
The assumed test of the key resistance range has been confirmed with conditions for realization of the pre-planned short positions. For short-term targets the key guiding lines will be 1.5460/70, 1.5420/40 and/or further breakout variant up to 1.5360/80, 1.5300/20, 1.5240/60, 1.5200/20. An alternative for buyers will be above 1.5580 with the targets 1.5620/40, 1.5680/1.5700, 1.5720/40.

How to Make Consistent Profits-Trading Futures Part III

2008-05-05T14:10:00.000-07:00

Trading Futures Part III

A lot of traders are trading the stock indexes like the FTSE, the DAX, the S&Ps, NASDAQ and the DOW, but rather than use futures they are using spread betting firms. The reasons for using these firms is that they require very small amounts of capital to get started, a trader can trade very small amounts (like £1 a point on FTSE as opposed to £10 for FTSE futures) and these firms make opening an account so easy.
I understand the lure of being able to open an account with very little money and trading small amounts, but I have some serious considerations about using spread betting as a realistic vehicle for professional trading.
The two biggest selling points are no commissions and no capital gains tax. There are many different costs to trading, commissions are one and the spread is another (especially when you have to trade at the market as you do with spread betting, with futures you have the choice of joining the bid or the offer). Commissions are important for an active trader and as an active trader you can get them very low, but lets assume they are £8 per round turn for futures and lets assume that the spread in FTSE futures is an average of 2 points. If the spread with a spread betting firm for FTSE is 6 points and assume that we are trading £10 a point we can compare the two trading vehicles.
Last week (written Nov 2001) I made an average of 2.42 points per contract traded and I traded 48 times. That is, for each contract I bought and sold I made £24.20 before commissions, assuming my commission rate is £8, I made a profit of £16.20 per contract traded, which is £777.60 net profit if my average size per trade is one contract.
Had I had the same success trading with a spread-betting firm, with a 6-point spread, I would have lost £1718.40! Now I would rather pay tax on a profit that no tax on a loss.
There is one other very important reason for trading the futures market rather than a non-exchange traded market such as those offered by spread betting firms. The futures markets are exchange traded and this means that they are fully transparent, i.e. everything is visible and above the table, I can see every single trade that happens. Imagine the trading pit, as it used to be when traders stood physically in a ring trading with each other.
When a trade is entered, the order goes into the pit and is represented there, free to be taken by any other market participant. We can all see what is happening, we trade with the same information and with the same advantages/disadvantages. Now assume you are a trader who can only trade with one broker in the pit, you can trade as much as you like, any size you like, but he sets the spread he is willing to offer you and you have to trade at market (i.e. buy at his offer and sell at his bid). This broker doesn't want to loose money, naturally, so he always makes his spread wider than the real market spread, he also, naturally, puts his interests before yours, so he won't always be willing to trade when the market is moving fast and he is uncertain.
Remember whenever you make money he loses, so he is very careful to maintain his advantage at all times. Who wouldn't want to be in this brokers position (he isn't really a broker, though he claims to be)?
When you trade with a real futures broker, all the broker does is facilitate your trade; he gives you the ability to have you orders represented in the pit.
A real brokers concern is that they execute your order as efficiently as possible, that is their job, they do not take positions and they do not take the opposite side to you.

They naturally want you to make money because by making money you become a client who will continue to pay them commissions. Trading with a spread betting firm is absurdly costly, spread betting firms are like amusement arcades, they can be fun, but to imagine you are going to make your living from slot machines is illusory.

How to Make Consistent Profits-Trading Futures Part II

2008-05-05T14:09:00.000-07:00

Trading Futures Part II

The issue of direct access is an important one and it becomes more important the more short term your trading is. The market can change from a state of seeming paralysis to one of shocking volatility and activity in a flash.
The length of time it takes between you deciding to enter an order and the order actually being in the market is obviously important.
When I first started trading I used a phone broker and was dismayed that my fills would often be so far from the price the market was trading when I first entered the order.
The first time I visited the trading floor, I discovered why. When I called in an order, first my discount(!) broker would check my account equity, then he would call a phone booth on the floor, the phone broker on the floor would then write the order down and pass it on (by phone) to a booth next to the appropriate pit, at that booth my order would be written down again and then signaled to a broker in the pit to be executed.
As you can imagine this would take quite a long time, even longer of course if the market was very active, as this would mean that the broker in the pit would be too occupied to take new orders. Compare this to my experience of trading as a pit trader. In the pit I was in the heart of the market and could observe every single order as it was executed (there was no delay in my price feed!). To initiate a trade, whether it was to buy or sell at the market, or join the bid or the offer, all I had to do was open my mouth. You can start to see the huge advantage that trading on the floor gave me over off floor traders; and that doesn't take into consideration the fact that my round trip costs fell by 96%.
Now the floor no longer exists, not in Europe at least, so why talk about the advantages of pit trading? Well the level playing field is now open to all, but very few take advantage of it.
Trading with an electronic trading platform is exactly the same as trading in the pit, except I can sit down, it is much quieter and there are no crude jokes flying around.
I can trade with the click of a mouse; my order shoots to the exchange, enters in the market and appears back on my screen before I have time to blink.

I think the advantages of direct access trading are clear and any futures trader still using a phone broker should move to direct access, they will also find their commissions are less (around £8 for private client traders).
The next question that arises is why trade futures? That is an important consideration given that there are a variety of alternatives vying for your trading capital (spread betting, CFDs and options), but in my opinion, futures are the only option (no pun intended) for successful short term trading.

How to Make Consistent Profits-Trading Futures Part I

2008-05-05T14:07:00.000-07:00

Trading Futures Part I

One of the mistakes I consistently made in my early years as a trader was to try to make too much money in relation to my trading capital.
To make £1000 a day while Futures Trading with £10,000 is absurdly ambitious; of course I have done it many times, as would anyone with this intention, but I have also gone bust on more than one occasion. To have the aspiration of taking £1000 out of the market each day, when trading with £10,000 or under is, I think, a quick route to the poor house.
So what is a reasonable objective for a day / futures trader?
A few weeks ago I visited an ex-floor trader who has set up a trading operation backing young aspiring traders. I was interested to find out from him how he trains his team. The essence of his approach is to give them a grounding in discipline and confidence. He believes that confidence is one of the primary keys to success in futures trading and that confidence is a by-product of taking money out of the market.
One of the reasons he has chosen to work with young futures traders is that he wants people who have minimal financial commitments. He knows it will take a while for them to start earning an income from the business. So his belief is that if his traders can regularly take small amounts of money out of the market, their knowledge, skills and confidence will grow and in time they will become bigger traders. What is critical about this approach is that his traders do not grow in size until they have achieved consistent, regular success on a small scale; and we are talking small, I mean £25 or £50 in a day.
What can we learn from this low risk approach? Well first let me ask you: what is more important, to make money today, or to become a consistently profitable trader? Because if we want to become consistently successful traders we need to take a different tack than if we are just out to make as much money as we can today.
So back to the question, what is a reasonable objective for a day trader? Well let's look at bringing our daily target right down to £100, with £10,000 of trading capital, i.e. 1%. Now £100 a day, trading a market like the FTSE seems an achievable target to me.
That is a net profit of 10 FTSE points a day. Can you come up with a system that trades 5 times a day and has an average net profit of 2 points?
Or a system that trades 10 times a day with an average net profit of 1 point?

Is that a yes I hear? Because if you can make an average of £100 a day you will double your money in 100 trading days i.e. 20 weeks or about 5 months. If you double you position size every time you double your money, your account will grow to £1,000,000 in 140 weeks, which is less than 3 years! Of course this does not take into account the impact of tax; but my point is that by taking a low risk, conservative approach to trading objectives, we give ourselves the chance to grow and develop into traders, while also availing ourselves of the possibility of a deceptively good return.
If at this point you are tearing your hair out and screaming at the screen that I am a fool for suggesting that you can trade a strategy that averages a few points a trade, I assume that you are not familiar with the benefits of direct access trading. Direct access trading effectively gives everyone and their uncle the same low costs, immediate trade execution and access as was exclusively enjoyed by the floor traders before the advent of the electronic market place. To learn about the advantages of direct access trading...

Hedge Funds: Healthy Risk?

2008-05-05T14:05:00.000-07:00

It's easy to describe what an unhealthy risk is: scuba diving with a Great White Shark while holding a raw, rib-eye steak in your hand, for example.
But it's a little harder to discern what a healthy risk is. Some seem to think safety in numbers amounts to a healthy risk -- the more partakers, the less the risk. In other words, as measured by head count, it looks like a lot of investors have followed Wall Street's lead: Living on the h-EDGE fund is, indeed, a safe bet.
A December 15 New York Times article reports:
"Hedge funds have grown at supersonic speed [to become] the most important players in today's financial markets."
And, a Wall Street Journal column from the same day explains just how "important" IMPORTANT really is:
In the first 10 months of 2004, $106.6 billion flowed into hedge funds vs. $72.2 billion in all of 2003.
Assets in hedge funds have grown by 260% over the past five years, to a $1 trillion total ($1,000,000,000,000). With this many zeros, it's natural to think. Superior performance in hedge funds must account for the rapid growth.
Please think again: Hedge funds gained 19.6% in 2003 vs. 7.1% year-to-date through November 2004. Not to mention the fact that one in ten hedge funds go under each year, according to the Journal of Investment Management.
Oh, and another thing: hedge funds are not subject to government regulation, meaning information on performance is provided voluntary.We could go on listing the potential hazards of the hedge fund industry (high fees, inflated returns, etc.) but the fact is, the fire of "one of the hottest investment vehicles" is only getting hotter.
And it's not just the wealthy (investing in hedge funds typically requires a minimum net worth of $1 million) who are hopping in. The Wall Street Journal piece reveals: "Hedge fund investors include one in five pension funds," and many large institutions such as JP Morgan. In the words of one chief strategist: "The low hanging fruit has been picked over by swarming hedge fund investor locusts." Think about it: If the hedge fund "fruit" turns out to be rotten, who will suffer the most now?
The already-wealthy investor, OR the average JOE/JANE who entrusted their children's educational future, savings, mortgage, and retirement in the pension funds and banks that also ate of that fruit?
But hey, as one investment advisor observes: "Hedge funds are more likely to do well when stocks fare poorly. They are a way to not only garner double-digit returns but also to reduce the overall volatility of an individual's portfolio." Obviously when the stakes are this high, it's important to get the facts straight, and the straight story is this:
Most hedge funds are little more than "momentum players," as revealed in a recent study by two finance professors at Stanford and Princeton.
Extreme sentiment readings among hedge fund operators have been remarkably good "leading indicators" of an approaching turn in the stock market (the same is true of the U.S. dollar).
Today's sentiment readings among "Large Speculators" (i.e. hedge funds) regarding stocks now stand at all-time record levels.

Does this look like safety in numbers, or more like blood in the water? Eventually the answer becomes clear to everyone, and clearly too late to those who had it wrong beforehand. The facts and the evidence say that it's time to get the heck out of the water.

Entries - How to Buy on Dips and Sell on Rallies

2008-05-05T14:04:00.002-07:00

Those members who have purchased our systems will quickly acknowledge that we have a fondness for trading systems that go long on dips and short on rallies. We have developed at least one system with that strategy in each of the markets we trade. In the S&P market and the Bond market we have developed more than one system that takes this preferred approach. The benefits of buying into an uptrend on dips and selling into a downtrend on rallies are probably obvious.
If we compare the dips and rallies approach to entering on breakouts we can see that the "dips" entry strategy allows us to enter at cheaper prices with less risk and more profit potential. That is a nice combination of benefits. In this Bulletin we will share some of our conclusions from our many hours of research on how to identify these potentially profitable opportunities. First, the strategy is going to work best if there is a trend. (Lets simplify things by using examples only for the long side. Unless otherwise noted you can assume the procedure for selling short is just the opposite.) Trend identification is a big topic in its own right but for our purposes we don't have to come up with anything fancy. The direction of a moving average or the relationship of two moving averages will work just fine. We could also take a simple momentum approach and require that the close today must be a minimum amount higher than it was X days ago. For example, we might want the close to be more than three ATRs higher than the close twenty days ago. When we were at Dr. Elder's Trader Camp he recommended that stock traders should look for both a rising 22 week moving average and a rising 22 day moving average. That's an excellent suggestion. We have found that the specific method of identifying the direction of the trend is not critical to the success of the system. In fact we have used a different method of measuring the trend in each of our systems. If you already have a favorite definition of trend by all means use that. Once the direction of the trend is established we need to go to work on defining a "dip". Now here is a valuable tip: The stronger the trend the smaller the dips. This seems obvious once it is pointed out but we see too many traders overlooking this important concept. They typically want to get long in an uptrend when some oscillator like RSI or Stochastics is "oversold". We have found that oscillators only reach oversold levels when the market is weak or trendless. The ideal "dip" entry is a very small dip in a very strong uptrend. These ideal trades have the lowest risk and the highest profit potential. Fortunately we don't necessarily have to know the exact strength of the trend because we can define a minimum definition of "dip" so that we can catch small dips as well as any bigger dips. This procedure will allow us to catch the ideal trades as well as those highly profitable trades that are less than ideal. The most important point to remember here is that if we demand too great a dip we will be missing some of the best trades. Here are a just few ideas on how we might define a minimum dip: 1. The close today (or the low today) is 1 ATR or more below the close (or the high) 3 or 4 days (or bars) ago. 2. The RSI has declined 10 points or more from its high 3 or 4 days ago. 3. The low of the last 2 or 3 days has gone below the 7 day moving average. 4. A recent low has penetrated below some moving average of lows. 5. Some oscillator like RSI or Stochastics has gone below a threshold level (like 50 or 60). Remember: We don't expect it to reach oversold levels. 6. The Plus DI (part of the ADX indicator) has declined some amount from its peak. 7. The Minus DI has risen some amount from its low. 8. The slope of a short term moving average has turned down. I'm sure that with a little thought you could add extensively to this list. It is important to understand that we do not necessarily enter once the dip has reached the minimum level. We think that we can obtain a higher percentage of winning trades by waiting for some entry "trigger" that will signal that the "dip" is over and that the prevailing up trend has resumed. The minimum "dip" is merely a setup condition and we want some indication of strength to actually initiate the trade. Here are a few possible entry triggers: 1. Place a buy stop at yesterday's high. 2. Place a buy stop at X points or some fraction (0.4?) of ATR above tomorrow's open. 3. Place a buy stop some unit of ATR above the lowest low of the last 3 days. 4. Enter if the close tomorrow is X points above the open. 5. Enter when the close is the highest close of the last 3 days. 6. Enter on a higher close when the daily range has expanded. (Today's True range is greater than the 3 day ATR.) 7. After an inside day enter at the high of two days ago. 8. Enter on a stop at the 3-day moving average of the highs. There are lots of possibilities but you will notice that in each of these situations we are not trying to buy on the lows. What we want to see is some evidence that the correction is over and that the trend has resumed. This form of trigger along with our reliable identification of the underlying trend will give our trades a very high probability of success. Many skeptics assume that our systems obtain unusually high winning percentages from excessive optimization. We believe the high winning percentages are obtained from the sound logic of making sure that we are headed in the right direction at the very beginning of each trade. If we are making sure that the short, intermediate and long term trends are all going in our favor we should expect to have our trades showing profits right from the start. Whether or not they are profitable when we exit will eventually depend on the quality of our exit strategies.
In addition to the contribution to a high winning percentage our entry triggers also allow us to take advantage of setting our "dip" levels at the minimum. Very often our entry will not be triggered until the dip has gone well below the minimum level. You will notice that we have not tried to forecast the exact low of the dip. We will be happy to initiate the trade at any level once the minimum has been reached. If you are a day trader reading this Bulletin simply substitute the word "bars" whenever I have referred to "days".

Very short term day traders may want to go ahead and enter "at the market" once the minimum threshold has been reached because the system as described will be giving up some potential profits waiting for signs of strength to trigger the entry.
When you are trading short term you need to maximize the profits, perhaps at the expense of sacrificing a few points off the winning percentage. Longer-term traders are better off taking the recommended entry triggers and maximizing their profits by using more patient exits. In a future Bulletin we will present some ideas on how to measure the actual strength of the trend rather than just the direction. Once the strength of the trend is measured then perhaps we can adjust our entries to make them even more accurate. We will also share some of our work on distinguishing between dips and trend reversals. Although we are not yet as proficient at this as we would like to be we have made enough progress to incorporate a filter into the Millennium ED System that helps us to avoid some dips that turned out to be reversals. We would hope to make more progress in this area as our research continues.

Disgruntled Trading

2008-05-05T14:04:00.001-07:00

The following situation happens quite often to many traders. Look it over and see if it has been happening to you:
You have been faithfully following your trading plan and the rules you've set for trading. By following them you are now in a trade that doesn't look so good.
At the same time, by following your trading plan, you see that you've missed a beautiful move in a different market, one that could have made you a lot of money.
You are in a bad trade and you've missed out on a great trade. You become disgruntled. You think to yourself that your trading plan must not be so great. You think there must be a better methodology that you should use that will prevent this from happening. You think to yourself, "Yes! That's it, I'll change the way I do things." So you create a new rule or modify an old one so that such a rule would have let you capture the trade you missed and avoid the one you took. Have you been making this mistake?
Here's another way it can happen: You are in a trade, and your rules cause you to be stopped out with little or no profit. Shortly after you exit the trade according to plan, prices take off and move to where, had you stayed in, you would have made substantial profits. The move leaves you sitting there thinking you are stupid. You reason that there must be something wrong with the way you do things.
Your rules, your plan, or both must not be right. So you change what you are doing, or make a new rule so that the next time this happens, you won't be left behind.
You have just abandoned all of the hard work you've previously done that enabled you to successfully trade futures. You've abandoned your education and learning. You've abandoned the wisdom that will enable you to be consistently successful as a trader. You've just started trading history, and you are supposed to be trading on the future movement of prices. You are trading what happened, not what will happen. By not being willing to be left behind, you are setting yourself up for being left out.
If you've been having thoughts, or have been acting as we've just described, you have a terrible problem with greed. Why? Because greed can never get enough. You can't satisfy greed. Greed wants more, and yet more.
Not every trade is your trade. Not every trade has to work out for you. You have to be satisfied with getting a reasonable share of trades that fit your description of a good trade. Some of those trades will turn out to be great trades, others are good trades, and a certain percentage of your trades will be bad. There's no way around it.
Not every good trade will turn into a great trade. When you enter a trade according to your rules and trading plan, you have no idea whether or not it will turn out to be a good trade, much less a great trade. The reality of trading is that, try as you might, you cannot know the future.
Whenever we miss a big move and then try to find some pattern, indicator, rationale, or modification to make to what we are doing so that the next time we will not miss the "big" move, it is a part of the hunt for something magic ¾ a continuation of our quest for the holy grail of trading.
What a terrible mistake to allow yourself to make. Winning as a trader consists of making some small profits and some larger profits on a regular basis. Obviously, there will be some losses. We regularly want to keep losses small, but there are times when a loss will get away from us and turn out to be bigger than desired.
If adversity causes you to become disgruntled, then you really need to examine your thinking and your approach to trading. Your trading plan must allow for disappointment and loss.
You've got to believe in what you are doing and be able to trade from the knowledge that when you follow your rules and your plan, you will make money from your trading.When you become disgruntled and begin to change your plan, your rules, or both, you are setting yourself up for almost certain failure and the worst thing that can happen to a trader ¾ you will lose the courage of your convictions. Without it you cannot trade with any level of confidence.
This is why we encourage you to write out the reasons and rationale for every trade you make, even if you have to do it after you have completed the trade. You must develop a keen recognition of the trades that are your trades.
Write out your trading plan every day and for every trade you intend to make. If you did not have time to plan every trade, be sure to review those you did make without pre-planning.
Then you can go back over your trading and be able to see why and when you are successful.

Reminder: Here are some steps to take before the market opens.
· View major formations on the charts of those futures you intend to trade. View potential congestion areas, get the big picture from the longer term charts.
· Write down all potential entries as you see them on the chart.
You need to go through this exercise every day that you trade. This takes discipline. However, doing so will help you develop the kinds of habits that will mold you into a great trader.
If you are too busy to be disciplined, then you are too busy to trade. If you don't discipline yourself, you will soon disappear from the trading scene

Discretionary Traders

2008-05-05T14:01:00.002-07:00

In browsing around the web I often encounter discussions of the merits of a particular trade and opinions about the direction of a market. I know that the traders who voice these opinions have good intentions and much of the discussions could be helpful to the person receiving the information. (Some of these discussions are on our Forum.)
However the provider of the opinion must be very careful that he doesn't start believing too strongly in his position because he has made the mistake of going public with it.
This is an important psychological issue that I seldom see discussed. Taking losses is always difficult and the reluctance to promptly acknowledge that we are on the wrong side of the market is probably the single most costly error a trader can make. Even under the best of conditions we hate to take losses. Publicly advocating a particular trade or the direction of a market just makes being wrong all the more painful and harder to accept. If we make it a policy to go around advocating the merits of our trades it will only make it harder to recognize when we are wrong. Many years ago when I was a young futures broker at E. F. Hutton and Company, the firm decided that it would be a good idea to send our commodity research analysts on the road whenever they came up with a well researched idea that appeared to have great potential. Let's assume for a minute that our sugar analyst has decided that sugar is going to make a big move to the upside over the next six months. After publishing his research he would be sent from city to city where he would speak at meetings for brokers and clients suggesting why everyone should be buying sugar. At first the analyst road shows seemed like a great idea. The clients received the benefit of hearing about a well-researched idea straight from the analyst himself and also had the opportunity to ask questions and engage the analyst in a discussion of the details of the sugar market. The clients enjoyed the meetings and a lot of new commodity business was generated as a result. However, it turns out that the objectivity of the analysts was completely lost after the story had been told and the bullish scenario presented a dozen times or more. The analyst felt obligated to the firm and to the clients. The firm had spent a lot of money to send the analyst on the road and to host these meeting all over the country. As a result of the meetings the clients now knew the analysts by name and his personal and professional reputation was clearly on the line. This analyst was now committed and he was going to be bullish on sugar regardless of what happened in the market or what new information came to light. From the point of the tours onward the analyst would only look for information to support his opinion. To ever admit that he was wrong would be such public humiliation that the analyst would tend to ignore any contrary information and would stick to his original position through thick and thin. We eventually learned that the talented Hutton research analysts did a much better job when they were free to change their minds as new facts were revealed without the pressure and responsibility generated by their repeated espousing of a particular position on a specific trade.
Discretionary traders should learn from this example and avoid discussing their open positions or their opinion about the direction of a market. It will only distort their objectivity and make it harder to take a loss promptly when that is the best course of action. Losses that only we know about are tough enough but losses that everyone knows about become much harder to stomach and we tend to postpone our exits in hope that the market will eventually turn around and prove us right.
Remember that the best discretionary traders are usually very neutral about their positions and tend to take their guidance from the price action and the flow of new information.

Its OK to listen to others talk about their positions but don't make it a habit of discussing your open trades. It will only cost you money, especially if you repeat your opinions often enough that you might actually start believing what you are saying.
Fortunately, systematic traders seldom get married to a position. They enjoy the luxury of being able to blame the system if a trade doesn't work out. Since there is little personal attachment to any trade, the psychological problems of systematic trader are much different than those of discretionary traders. But even systematic traders have their share of psychological problems. Perhaps we can discuss some of these problems in a future Bulletin.

What are the differences between trading and gambling?

2008-05-05T14:01:00.001-07:00

For example, let’s take a look at Black Jack. If you start with $10,000 gambling capital, placing bets of $100 per hand and play 100 hands per day, how long will you last? In the game of Black Jack, with Las Vegas Strip rules, a casino has a built-in advantage of 1.5% over the player in the long run. That means that on average, a player will lose $1.5 per any $100 he bets with. After 100 hands, on average he’ll be down $150. Starting with a capital of $10,000 a player would last about 67 gambling days. That is very similar to the previously described trading scenario. In such case I would choose gambling because at least I would be losing my money in a more pleasant environment.
I chose Black Jack for our example because it is the only casino game in which it is possible for a skilled player to increase his odds to such extent as to be able to beat the House in the long run. A skilled counter can obtain advantage of up to 1.5% per hand over the House in the long run. That means that such a player playing 100 hands per day and average hand being $100 could double his gambling capital of $10,000 in less than 50 days. Similar odds apply to trading stocks, with more potential for profit and less chances for being kicked out of a casino. In order to make it work for you, we’ll need to get the odds on your side. Now lets look at how we can extract as much profits from our trades as possible.
Understanding Trailing Stops
Once you are in the trade and the price has started moving in your direction, you need to extract as much profit as possible. Not being able to do so will make you a losing trader in the long run. How can a trader lose if he only takes small profits at a time? Profit is profit, isn’t it? Not exactly… Profit of $550 is not the same as a profit of $850. If such profits are followed by three losses of $200 each, profit of $550 will become $50 loss, while profit of $850 will become $250 win. Do you get my point?
Profits are always followed by losses and if the profits are small they will not make up for the losses that will eventually and surely follow. However, becoming too greedy can turn a small profit into a loss. This will make you lose money in the long run. The best solution to resolving these conflicts is to use trailing stops.
As the name says, trailing stop follows the stock price that is moving in your direction. For example, let’s say that we have bought two S&P 500 contracts at 875. We will automatically put our stop loss at 1 point below the support line or if that is over our 4% limit we will put our stop loss at 871. The price starts to move upwards and reaches 876. We will now move our stop loss at $871.75. For every one point move in our direction we will move our stop loss 0.75 points up (or down if we were in a shortsell trade).

However if we were trading two contracts and the price has in our example hit 879 (4 points profit for ES or 10 points for NQ) we would sell one contract to protect our profit and for the remaining contract we would use trailing stop.

Forex 1-2-3 Method

2008-05-05T13:57:00.000-07:00

This particular technique has been around for a long time and I first saw it used in the futures market.
Since then I have seen traders using it on just about every market and when applied well, can give amazingly accurate entry levels.
Lets first start with the basic concept. During the course of any trend, either up or down, the market will form little peaks and valleys. see the chart below:

The problem is, how do you know when to enter the market and where do you get out. This is where the 1-2-3 method comes in. First let's look at a typical 1-2-3 set up:
Nice and simple, but it still doesn't tell us if we should take the trade. For this we add an indictor. You could use just about any indictor with this method but my preferred indictor is MACD with the standard settings of 12,26,9. With the indictor added, it now looks like this:
Now here is where it gets interesting. The rules for the trade are as follows:
Uptrend
This works best as a reversal pattern so identify a previous downtrend.
Wait for the MACD to signal a buy and for the 1-2-3 set up to be in place.
As the market pulls back to point 3, the MACD should remain in buy mode or just slightly dip into sell.
Place a buy entry order 1 pip above point 2
Place a stop loss order 1 pip below point 3
Measure the distance between point 2 and 3 and project that forward for your exit.
Point 2, should not be lower than point 1

The reverse is true for short trades. As the market progresses you can trail your stop to 1 pip below the most recent low (Valley in an uptrend). You can also use a break in a trend line as an exit.
Some examples:
There are a lot of variations on the 1-2-3 setup but the basic concept is always the same. Try experimenting with it on your favorite time frame.
Good Trading

It's our job to trade "Futures" not "Histories"

2008-05-05T13:54:00.000-07:00

Back-testing does it work?
It's our job to trade "Futures" not "Histories" - Throughout the years I've been trading and writing I've often written about mind set-having the right frame of mind for your trading so you become a winner. I've stated that it is our job to trade "futures," not "histories."
The future is the next bar on your chart. You can't possibly know how it will develop, how fast prices will move, or where it will end up. Since none of us know where the very next tick will be, it's impossible to know where the tick after that will be, or the tick after that, etc.
All we know at any one time is what we're seeing. Interestingly, what we're seeing may not be true. If we are daytrading, we are not sure that what we're seeing is a bad tick, especially if it is not too far astray from the price action.
The daily bar chart doesn't always tell the truth, either. The open may not be where the first trade took place. The close is merely a consensus, and may be quite a bit distant from where the last trade took place. The high may not have been the high, and the low may not have been the low. If you don't believe that, then I challenge you to pick up any newspaper and take a look at some of the back months.
For example if the exchange has reported that a back month they opened at 9755, with a high of 9802, a low of 9760, and a close of 9784. Does that make any sense? How can the low be higher than the open? How can the close be higher than the high? Yet that's the kind of garbage we have to put up with in this business.
Now you know the problem with back testing. Back testing and simulated testing are based on nothing but lies. That's why they don't work when you actually put them to the test with real data.
In fact, there are many reasons why back testing and simulation won't work, and I may as well dump them in your lap right here.
Because you don't really know where the high or low were, or if the market ever really traded there, you don't know if your simulated stop was taken out or not.
If you say you have a system in which if you get three up days followed by a down day, the market will be up twelve days from now 82% of the time, then your whole statistical universe may have been based on what is not true.
Have you ever watched cocoa from the open to the close? You can clearly see it trading at the open, but by the time the market closes, the open will at times be placed opposite the close. That might be fifty or more points away from where you saw it open and trade, and also as born out by a report of time and sales.
The way they report cocoa prices is going to give a fit to a lot of candlestick traders. Why? Because they are going to see far too many "doji's" (open=close), more than are really there. Cocoa is not the only culprit, but historically, it is certainly one of the worst
When you see a completed bar on a chart, you have no idea which way prices moved first. You don't know if they moved down first or up first. You don't know whether or not prices opened and then moved to the high, went down to the low, and then traded in the lower half of the price range until the close, at which time prices soared up to the high and closed there. You have no idea of the overlap. I've seen prices trade from one extreme to the other more than once at each extreme.
In any of those instances, your protective stop could have been taken out intraday.
You know nothing of the market volatility on any given day, once you see a completed price bar. Were prices ticking their normal, exchange minimum tick, or were they ticking two or three times the minimum every time prices ticked?
Even if you purchased tick data for your simulation, showing every single tick the market made, you don't know what the volatility was. For instance, you don't know if the S&P was ticking five minimum fluctuations per tick or twenty-five minimum fluctuations per tick, and if it was doing it quickly or slowly. You don't know and you can't know, and anyone who tells you their simulated system works, based on such phony baloney, is a liar.
Not knowing how fast the market was means you can't really know what the slippage might have been. The faster the market, the greater the slippage. You can sit there and say that you would have gotten in at a certain price or that you would have exited at a certain price, but if you don't know the market volatility, and how fast the market was, you do not know enough to say that you would have done such and such. Not knowing how fast the market was, you have no way of knowing how much slippage there would have been on your entry or your exit. Without knowledge of slippage, you can't possibly know the risk.
That is also true of volatility. Volatility is made up of range of movement, speed, and tick size. If you don't know the extent of slippage, you will not know the extent of the risk you would have encountered.
As if that's not bad enough, you also don't know how thin the market was at the time you would have traded it. If you are position trading, you can't go by the reported daily volume (which is always too late to do you any good), because there is no way to know what the volume was at the time your price would have been hit. So here again you have no idea of what slippage you might have encountered, and once more you would not have known the risk.
If you want to spend your money on trading systems based upon the unknown, then you must assume the risk of doing so. Since this is a business of assuming risk, you are entitled to insure prices in any market that you care to.
Insurance companies spend a lot of money to make sure that the risks they take are actuarially sound. That is the equivalent of finding good, well-formed, liquid markets to trade in. But any market can become totally chaotic. Markets can become extremely fast, and they can become quite volatile. So even if your system was back-tested in a liquid market, when that market becomes fast and/or volatile, your back-tested, simulated system will not be able to cope with it and you will lose. It's like going out to write life insurance on a battle front.
If your back-tested, simulated system does factor in some room for fast and/or volatile markets, then, when you will be trading in slow, non-volatile markets with the built in factor, you will be utilizing a system that is totally inappropriate for the slow, non-volatile market you are in. The best you can hope for is an "optimized" system. How can you possibly expect to compete with traders who are acting and reacting to the reality that is at hand at the time?
Extensive back-testing is for historians, not traders. It is the wrong view of the markets. Your trading must be forward looking without being ridiculous about seeing into the future.
If you don't know where the next tick is, how can you possibly know where the next market turning point will be? Can you see into the future?
Maybe you like to trade astrologically. Those people are always trying to peer into the future.
In the auto business they have a saying, "There's an ass for every seat." Likewise, there's a fool for every fortuneteller who claims he can see into the future. I guess you can always go out to your local coven and hire a witch to tell you what beans will do tomorrow. She may even be right from time to time.
You could always do as one charlatan did and run the biorhythm for each market based on the day it first started to trade. Or, you can cast the markets horoscope based on the same date. With the biorhythm, you'll know what time of day the market should be on its highs, and what time of day it will be on its lows.

You'll know which day the market will be ecstatic and reach a new high, and which day it will be down in the dumps and make a new low. However, you'll find that from time to time the market will reach new lows on the day it was supposed to reach new highs. Well, that's easy enough to explain. You can tell everyone "We've had an inversion. Until the market inverts again, the lows will be the highs, and the highs will be the lows!"

Can The Dollar Continue Its Rally This Week?

2008-05-05T04:28:00.000-07:00

Talking Points
Japanese Yen: on holiday yen trades quietly on individual flows
Australian Dollar: ANZ job ads rose for first time in 3 months
Euro: Sentix ticks lower capping the bounce
Pound: UK on holiday
US Dollar: ISM Services on tap
A very quiet start to the week as both Japan and UK have national holidays, greatly limiting investment flows for the day. Throughout Asia and early Europe, EURUSD staged a mild retrace rally after last Friday's better than forecast NFPs took the pair below the 1.5500 level in the aftermath of the release.
Today's bounce in the EURUSD stalled right back at the 1.5500 level as the weaker that expected Sentix investor confidence survey which printed at 3.5 versus forecast of 3.9 put a cap to any upside momentum in the euro. 1.5500 appears to be the level of equilibrium for the time being with euro bulls still hoping for another retest of 1.60 while dollar longs are targeting 1.50 as the key level for the breakdown of the larger uptrend in the pair.As we noted in our weekly 'Having pierced 1.5500 support level this week, after gaining more than 300 points the dollar may find next week a bit slow going. This week the US economic calendar will not command nearly as much attention, with ISM Services and Trade Balance being the only possible market moving data points. The most important event this week will likely come from Europe when traders will focus on any change of tone from ECB chief Jean Claude Trichet at his monthly press conference. If Mr. Trichet makes even s casual suggestion of a shift to a neutral stance, the dollar may gain further, but if he remains hawkish we could see a rally back to 1.5600 as the week comes to a close. Still all things being equal, the EURUSD looks far more likely to hit 1.50 rather than 1.60 in the near future as market participants turn their attention to the slowdown in Europe rather than the problems in the US.'
With parts of Asia and Europe closed, today's US ISM Non Manufacturing report is likely to be the key driver of trade for the rest of the day. Markets are looking for a slight dip in the reading, but the greenback is unlikely to be badly hurt unless the number prints below 49 or worse. However, if that were to happen the EURUSD could return to the 1.5600 figure as all of the positive sentiment from last week's better than expected US economic data would quickly disappear

DayTechnical Analysis for Major Currencies-Forex Signals

2008-05-05T01:13:00.000-07:00

EURO
Last week the European currency retreated in a bearish movement, showing the strength the US dollar gained in the trading floor after Friday's trading session; the 15 nation currency couldn't breach the key resistance level at 1.5498, to draw back afterward till reached the key support level at 1.5360. While today technical indicators are pointing to a positive momentum that might push the currency upward.
The trading range is among the key resistance level at 1.5600 and the key support level at 1.5300.
The general trend is to the upside as far as 1.4260 remains intact; targets are set at 1.6080 and 1.6360.
Support: 1.5432, 1.5405, 1.5375, 1.5352, 1.5330 Resistance: 1.5467, 1.5488, 1.5505, 1.5525, 1.5545
Recommendation: Buy the Euro above 1.5435, with targets at 1.5520, stop loss below 1.5390.

GBP

The Royal currency moved in the past week in wide ranges, where the pound toughed the active resistance level at 1.9897, to drop once again to the key resistance level at 1.9733 to close in a strong bearish pattern. While today we expect that the British pound will incline back again to regain some of the losses that is faced in the past week, which are obvious in the technical indicators.
The trading range is among the key resistance level at 1.9900 and the key support level at 1.9600.
The general trend is to the downside as far as 2.0200 remains intact; targets are set at 1.9230 and 1.8700.
Support: 1.9727, 1.9709, 1.9682, 1.9648, 1.9600 Resistance: 1.9777, 1.9802, 1.9833, 1.9860, 1.9884
Recommendation: Buy the pound above 1.9730, targets at 1.9860 and stop loss below 1.9675.

JPY

The Us dollar rallied against the Japanese Yen last Friday, in a strong bullish movement which was filled with positive momentum, which took the pair to the major resistance level at 105.70 after forming at solid base at the key support level 104.36. While today we expect to see a downside movement to the pair in a correctional movement taking the pair in an overbought area.
The trading range is among the key resistance level at 106.30 and the key support level at 103.80.
The general trend is to the downside as far as 109.00 remains intact, targets are set at 92.40 and 90.00.
Support: 105.15, 104.85, 104.60, 104.44, 104.18 Resistance: 105.35, 105.55, 105.87, 106.20, 106.45
Recommendation: Sell the pair below 105.50, with targets at 104.60 and stop loss at 105.90.

CHF

The US dollar marched against the Swiss frank in Friday's trading session, after succeeding in staying above the major support level at 1.0465, to reach afterward to major resistance level at 1.0608. Due to that movement the technical indicators points out that the pair reached to an overbought area which makes us believe that the pair will be heading to the downside in a negative momentum.
The trading range is among the key resistance level at 1.0650 and the key support level at 1.0400.
The trading range to the downside as far as 1.1000 remains intact; targets are set at 0.9670 and 0.9370.
Support: 1.0520, 1.0503, 1.0476, 1.0447, 1.0422 Resistance: 1.0550, 1.0578, 1.0608, 1.0633, 1.0654
Recommendation: Sell the pair below 1.0560, with targets at 1.0470 and stop loss above 1.0610.

CAD

The US dollar against the Canadian moved in a random movement to tough the major support level at 1.0148 and the major resistance level at 1.0243, to close afterwards in a neutral pattern. Today we expect to see the pair falling down in a breaching movement to the key support level at 1.0100.
The trading range is among the key resistance level at 1.0300 and the key support level at 1.0020.
The general trend is to the downside as far as 1.0700 remains intact, targets are set at 0.9030 and 0.8840.
Support: 1.0160, 1.0148, 1.0120, 1.0090, 1.0075 Resistance: 1.0190, 1.0225, 1.0250, 1.0284, 1.0310
Recommendation: Sell the US dollar below 1.0190, with targets at 1.100 and stop loss above 1.0230.

Weekly Technical Strategist

2008-05-04T13:57:00.000-07:00

Weekly Technical Strategist

EURUSD: ST Weakness Persists, Targets The 1.5342 Level.
GBPUSD: Continues To Take Back it Recovery Gains, Sets To Accelerate Towards The 1.9676/01 Levels.
USDJPY: Maintains A Foothold On The Upside In The Short Term

EURUSD

EUR put in a second consecutive week of downside losses on Friday pushing it to as low as 1.5361, its lowest price since Mar 25'08.A follow-through to the downside should likely see the pair attacking and possibly cutting through its Mar 24'08 low residing at 1.5342.Below there will accelerate losses towards the 1.5227 area, its .50 Ret (1.4440-1.6018 high).The weekly studies remain negative suggesting further downside pressure. Upside objectives begin at the 1.5626/00 zone, its April 07'08 low/psycho level followed by the 1.5710 level, marking its April 18'08 low and then the 1.5895/I 5912 area, its Mar 31'08/April 10'08 highs with the ultimate zone resting at its psycho level/YTD high at 1.6000/20.On the whole, while momentum and price action continue to point lower, further weakness is expected in short term.
Directional Bias:
Nearer Term - Bearish
Short Term - Bearish
Medium Term - Bullish
Performance in %:
Past Week: -1.27%
Past Month: +0.84%
Past Quarter: +8.03%
Year-To-Date: +5.76%
Weekly Range:
High -1.5693
Low -1.5427

GBPUSD

GBP pushed lower at the end of the week taking back almost all of its recovery gains off the 1.9623 low. With this development, the pair is now set to weaken towards its April 30'08 low at 1.9676 initially followed by its April 15'08 low at 1.9601.Further decline will aimed at its 2008 lows at 1.9360/35 or even lower. Daily and weekly momentum indicators remain supportive of this view.However, while the last two support levels remain significant, continued trading above there will suggest a recovery higher targeting the 1.9727/19 area, its Mar 05'08/April 01'08 ahead of the 1.9965/2027 zone, its Feb 27'08/April 21 & 28'08 highs could be seen again. Beyond there if occurs will keep the pair putting pressure on its Mar 27'08 high at 2.0191 and then its YTD high at 2.0398.All in all, as long as the current downside weakness continues to be maintained, risks remains for the pair to head further lower.
Directional Bias:
Nearer Term -Bearish
Short Term -Bearish
Medium Term -Bearish
Performance in %:
Past Week: -0.70.%
Past Month: +0.20%
Past Quarter: -0.14 %
Year-To-Date: -0.74%
Weekly Range:
High -1.9965
Low -1.9623

USDJPY

After two negative weeks were seen since recovering off its YTD low at 95.75 in Mar'08,USDJPY continued on its upside offensive the past week trading to as high as 105.70 following its clean break through the 104.97 level, its Jan 23'08 low. Having maintained steady weekly upside gains for the past three weeks, chances of further extension especially now that its weekly studies are positive and trending higher is likely towards its .382 Ret(124.15-95.75 decline) at 106.61 and next the 108.61 level, marking its Feb 14'08 high. On the downside, the 104.97 level just eroded should now reverse roles and provide support on any weakness from the present level. Failing to do that could see the pair trading lower aiming at the 103.22/102.95 levels, its April 29'08 low/April 03'08 high with a break of there paving the way for a run at a stronger support standing at the 100.03/00 area, its April 10'08 low/psycho level. In short, USDJPY remains biased to the upside in the short term and should extend more gains in the days ahead.
Directional Bias:
Nearer Term -Bullish
Short Term -Bullish
Medium Term -Bearish
Performance in %:
Past Week: +0.89%
Past Month: +4.40.99%
Past Quarter: -10:69%
Year-To-Date: -5.71%
Weekly Range:
High -0.105.70
Low -103.22

Reserve Bank of New Zealand

2008-05-03T16:19:00.000-07:00

The Reserve Bank of New Zealand is New Zealand's central bank, and its overall purpose is to maintain the stability and efficiency of the financial system.
The Reserve Bank of New Zealand is the institution responsible for managing New Zealand’s money supply and for preventing inflation or other severe economic problems within New Zealand. The Reserve Bank, established in 1939, differs from other major reserve banks (including the US Federal Reserve) in that it is entirely government-owned and centralized, and the Reserve Bank thus takes a much stronger hand than non-centralized reserve banks in regulating monetary activities.
The Reserve Bank is directly and solely responsible for printing and destroying New Zealand currency. Since the Reserve Bank is willing to accept even non-legal tender as viable assets (including severely damaged currency or coins and bills that have been withdrawn from active circulation), this makes the New Zealand money supply slightly more stable than in some other countries, albeit harder to track precisely.
The Reserve Bank also ensures a high measure of control over other New Zealand banks by requiring a quarterly disclosure statement from all banks operating in the country, giving the institution information about the financial health of individual banks as well as detailed data about each bank’s activities. The Reserve Bank also sets the Official Cash Rate (OCR), which can be adjusted at eight regular intervals throughout the year, as well as at unscheduled times in the event of an emergency. Due to the Reserve Bank’s policy of lending unlimited amounts of money to individual New Zealand banks at above or below the OCR, no bank can charge an interest rate higher than the OCR without being undercut by Reserve Bank funds, making the OCR an unusually stable interest rate nationwide.

Reserve Bank of Australia

2008-05-03T16:18:00.000-07:00

The Reserve Bank of Australia's (RBA) main responsibility is monetary policy. Policy decisions are made by the Reserve Bank Board, with the objective of achieving low and stable inflation over the medium term.
The Reserve Bank of Australia is the institution responsible for managing Australian currency policies. The Reserve Bank was founded in 1911, but achieved its present form in 1960 when the bank’s function shifted toward regulation and away from commercial banking.
The Reserve Bank of Australia, like many central banks, has the power to increase or decrease the money supply in Australia. Unlike the US Federal Reserve, the Reserve Bank of Australia prints and destroys money directly, rather than working with other government institutions. The Reserve Bank also buys and sells treasury bonds to primary traders, which raises money for government operations as well as pumping money into the economy (or removing an excess of money) at critical junctures. The Reserve Bank also has the power to regulate nationwide interest rates, as well as to adjust the asset holdings of individual commercial banks, meaning that this Reserve Bank plays a heavy role in Australian financial affairs.
The Reserve Bank of Australia also publishes a number of reports on both a monthly and an annual basis. Traders in the Australian currency market consider these reports extremely accurate and useful in developing an idea of the state of the Australian economy at any point in time.
Since trade balances depend on a nation’s money supply, the Reserve Bank of Australia’s actions play a large role in determining the behavior of the Australian currency market, a fact which many foreign exchange traders take advantage of by closely watching the Reserve Bank’s actions and taking appropriate actions.

Swiss National Bank

2008-05-03T16:17:00.000-07:00

The Swiss National Bank conducts the country’s monetary policy as an independent central bank. In so doing, it creates an appropriate environment for economic growth. The National Bank is obliged by the Constitution and statute to act in accordance with the general interests of the country. Its policy goal is price stability, while taking into account the economic situation.
The Swiss National Bank is the central bank in the Swiss banking system. In addition to regulating the Swiss money supply and influencing the national interest rate–functions performed by any of the world’s major central banks–the Swiss National Bank plays a larger role than most national banks in attempting to influence the exchange rates between different national currencies, and is thus a key player in the foreign exchange market.
Fixed exchange rates between national currencies were standard until the United States’ move away from the gold standard in 1971, which led to the present system of variable exchange rates beginning around 1973. In response to this, the Swiss National Bank–which remained mostly gold-backed for much of its history, until a recent large-scale gold sell-off near the start of the millennium–began attempting to maintain the stability of the Swiss franc by directly buying and selling foreign currencies through “swap” transactions, in which foreign currency is purchased at the beginning of a “swap” period and sold back at the conclusion of a “swap” period for a comparable exchange rate.
Because the Swiss National Bank takes such an active role in influencing foreign currency exchange rates, the actions of the Bank should be carefully watched by any currency traders and appropriate measures taken in response. Additionally, the Bank’s willingness to deal with many forms of currency makes it an ideally stable point on which to base new investments in a variety of currency asset markets.

Bank of Japan

2008-05-03T16:16:00.000-07:00

The Bank of Japan is an organization that contributes to the stability of the daily lives of the people and sound development of the national economy by appropriately controlling the volume of money in the economy and ensuring the smooth circulation of money.
The role of the Bank of Japan is to maintain stability within the country's financial framework. It is neither a government organization or a privately owned business, but takes a position almost above society. It is responsible for issuing bank-notes, controlling currency and monetary policy, and keeping the Japanese financial kingdom stable. Its method for stabilizing the finances of Japan is by keeping strict control over how currencies are traded and utilized.
With over 32 branches (quite a few overseas), the Bank of Japan holds a high status in a country that values respect and innovation. The main headquarters is located in Tokyo, where it sits on a historical throne. It was established as a result of the Bank of Japan Act of 1882, and is run by a group of individuals known as "The Policy Board."As a "central" bank, if is more interested in the position of Japanese currency than anything else. The Bank of Japan has to hold both foreign exchange reserves(through the issuing of government bonds) and gold reserves, in order that their currency is traded effectively. It also oversees the exchange rates, managing some while allowing others to free float (change with the market). Still other exchange rates are influenced on a small level, bringing a cross between a managed/free rate, which is sometimes called a "dirty float."

Bank of Canada

2008-05-03T16:15:00.000-07:00

The Bank of Canada is the nation's central bank. The primary role of the Bank of Canada is to promote and maintain the economic well-being of the country. They do this through managing Canada's monetary policy, overseeing bank notes and managing retail debt as well as bank funds.

The Canadian $100 bill - Care of the Bank of Canada
The Bank of Canada, although it is run through the Canadian government, is ultimately owned by the people. The bank was formed in 1934 as a private corporation, but within four years it became a crown corporation and was taken over by the government. Unlike other government agencies, however, the bank's governor and senior governor are appointed by the bank itself.
The Bank of Canada was built and has remained in Ottawa since its opening. As a non-commercial bank, it doesn't offer banking services such as checking or savings accounts to normal consumers. However, it still contributes an average of $1.7 billion in profit each year to the Canadian government.

Bank of England

2008-05-03T16:14:00.002-07:00

The Bank of England is the central bank of the United Kingdom. Sometimes known as the 'Old Lady' of Threadneedle Street, the Bank was founded in 1694, nationalised on 1 March 1946, and gained independence in 1997. Standing at the centre of the UK's financial system, the Bank is committed to promoting and maintaining monetary and financial stability as its contribution to a healthy economy.
The Bank of England has been in place for more than three hundred years, although it wasn't nationalized until 1946. It serves a dual role as both a consumer bank and a government bank. As such, the "Old Lady of Threadneedle Street," as the Bank of England is often called, holds a primary role in the financial status of the United Kingdom.
In 1998 the bank's governing body was changed by the Bank of England Act. Now the Bank of Directors is composed of sixteen non-executive directors, two deputy governors, and the bank's governor. This has modified the bank's responsibilities; their two main purposes now include maintaining the UK's Monetary and financial stability, although it still has as many small-scale account holders as it does large corporate accounts.
In regards to the foreign exchange market, the Bank of England manages the Exchange Equalisation Account. The EEA was formed in 1932 and is the account responsible for influencing the exchange rate of the UK's gold reserves. It also holds foreign currencies and gold for trading purposes.

European Central Bank

2008-05-03T16:14:00.001-07:00

The European Central Bank (ECB) is the central bank for Europe's single currency, the euro. The ECB’s main task is to maintain the euro's purchasing power and thus price stability in the euro area. The euro area comprises the 12 European Union countries that have introduced the euro since 1999.
The European Central Bank, also known as the ECB was established on June 1st, 1998 and is one of the world's largest central banks. The European Central Bank is located in Frankfurt am Maim, Germany and is in charge of the monetary policy for the Euro, the official currency of the European Union. The Euro is currently used by twelve countries within the European Union. The European Central Bank is governed by a board of directors, along with a board of governors but is also spearheaded by a President. The board of governors consists of members of the board of directors and representatives of local central banks existing within the ESCB (European System of Central Banks.)
The primary objective of the European Central Bank, and also of the ESCB, is to '….maintain price stability' within the defined euro area, meaning of course, to keep inflations levels as low and steady. Currently the present target for the level of inflation within the euro area is to maintain inflation at a level below, but still as close as possible to the 2% mark. In addition to this the ECB is charged to support the economic policies decided upon by the European Union., although it is also charged to do this without prejudice to the objective of price stability.
Under the Treaty of Rome the European Central Bank was also given mandate to oversee the conduct of foreign exchange operations, to deal with the holdings and management of the official foreign reserves of the euro area countries and to promote the smooth operation of payment systems.

Fed -The Federal Reserve of the United States

2008-05-03T16:12:00.000-07:00

The Federal Reserve of the United States, commonly known as the Fed, is the organization responsible for monitoring and maintaining the United States currency supply. Established by Congress in 1913, the Fed is composed of a Washington D.C.-based Board of Governors, twelve large regional banks, and a number of smaller affiliated institutions.
The Federal Reserve of the United States has a number of methods for influencing the American money supply. Chief among these is the power of the Fed to increase or decrease the amount of currency in circulation. The Fed can purchase or sell government securities to its primary traders, which brings additional Federal Reserve Notes into circulation or removes excess paper money from the supply. The Fed also works with the U.S. Mint to print additional paper money, or to destroy unneeded currency.
Another of the Fed’s financial powers is its ability to influence the interest rate. The Fed does this by changing the default rate at which it loans money to fellow banks. Since the Fed’s default rate is one of the major factors in determining the nationwide prime interest rate, the Fed’s actions can indirectly increase or decrease the yield from interest-accruing assets. This in turn plays a role in determining investor behavior, and the trends of the market as a whole.
In more detail, the rate that the Fed lends money to depository institutions is called the Discount Rate. That is set above the nominal rate which is the rate that the depository institutions lend money to each other to meet reserve requirements at the Fed. The nominal rate is what is commonly known as the Federal Funds Rate. It is set by open market operations.
Since the money supply is a factor in determining the overall trade balance between currency markets, foreign exchange traders who work with US currency tend to keep a close eye on the actions of the Federal Reserve.
Ben Bernanke is the current Chairman of the Federal Reserve System.

Management of inflation: A Central Bank uses its authority to tweak interest rates to manage the inflation rate in the economy

2008-05-03T16:10:00.000-07:00

Management of the credit system in the economy:
Banker to the banks: A Central Bank acts as banker to commercial banks. It refinances their debt at the prevailing discount rates. Central Banks also act as a clearing house for the commercial banking system. Another key function of a Central Bank is that it acts as a lender of the last resort. This becomes important, when commercial banks face a sudden financial crunch or become insolvent. The Central Bank can step in to restore confidence in the system via devising various bailout packages for the commercial bank or banks.
Linkage to currency values and trading
For the forex trader, a Central Bank’s actions are key to discern the value of currencies. In using the various tools of monetary management, the Central Bank impacts the money supply in the economy. Excess money supply can lead to inflationary tendencies leading to a fall in the value of the local currency. A tight monetary policy can lead to a liquidity squeeze and exert an upward pressure on interest rates. Higher interest rates will attract more investment into government paper and the value of the local currency can be expected to go up.
In managing the credit system, a Central Bank instills confidence in the financial system and the economy. A stable and healthy financial system is indicative of macroeconomic stability, which in turn implies a stable currency.

Central Banks

2008-05-03T16:06:00.000-07:00

Central banks exist for most countries of the world. While central banks have many duties, their primary responsibility is to promote and maintain monetary and financial stability, usually by setting economical policies to help promote their country's economic goals.

Key functions of a Central Bank

''Management of the monetary policy:''
Issuance of currency: As a part of its responsibility of managing the monetary system of a nation, the Central Bank is issued with the sole authority of issuing currency notes. In some nations, the governments issue currency notes of smaller denominations and coins, which act as the ultimate legal tender, while the Central Bank issues the larger currency denominations.
Banker to the state: The Central Bank performs the all important function of being the banker to the government. It conducts all financial transactions for the government and also raises money for the government via instruments like bonds or T-Bills. This last function is also closely linked to the monetary management of the economy, whereby issuance or redemption of T-Bills impact the money supply in the economy. Setting of various rates: A Central Bank is usually vested with the authority of setting various rates, which constitute important monetary policy instruments with it. These rates include the interest rate and cash reserve ratio (CRR) amongst other instruments. The interest rate is managed by changing the discount rate at which the Central Bank refinances commercial banks. The CRR is the ratio of all deposits that commercial banks are mandated to keep with the Central Bank. By varying CRR, the Central Bank can automatically change the money supply in the economy. The Central Bank can also use its lever of interest rates to encourage or discourage investment and affect employment levels in the economy.
Open market operations: This is a key function of a Central Bank, by which it maintains exchange rate stability. The Central Bank steps in to buy or sell foreign exchange such that huge fluctuations in the local currency are avoided. Usually, in mature markets like the US, Europe or Japan, it is rare for a Central Bank to perform this operation as the currency is usually stable. Central Banks can also use open market operations as a monetary policy instrument. They can sell foreign exchange to reduce money supply in the economy and .

EUR/USD -GBP/USD -USD/JPY

2008-05-02T09:09:00.000-07:00

EURUSD
Remains in a short-term downtrend from 1.6019, 22 Apr all-time high, with loss of 1.5710/28 and 1.5511 support, triggering losses to 1.5432 on 01 May. Consolidation followed, ahead of fresh weakness clearing 1.5432 and 1.5406, to accelerate losses to 1.5361 so far. Further losses seen towards 1.5334, possibly 1.5282 on a break. Oversold hourly studies, however, warns of correction preceding downmove, with 1.5517/40 capping. Only break of the latter would improve the picture.
Res: 1.5432, 1.5482, 1.5499, 1.5517
Sup: 1.5372, 1.5361, 1.5334, 1.5282

GBPUSD
Has almost fully retraced the 1.9599/2.0024 recovery, reaching 1.9622 low on 30 Apr before rallying to 1.9907. The reversal from there and a lower top at 1.9965, kept alive fears of an eventual break lower to1.9535/05, 1.9439/10 on a break and possibly 1.9363/40 on the loss of the latter. The latest bounce from 1.9711/21 lows stalled at 1.9895, with fresh losses now underway.
Res: 1.9745, 1.9790, 1.9820, 1.9840
Sup: 1.9703, 1.9675, 1.9665, 1.9650

USDJPY
Extended recovery from 95.72, 17 Mar low, to reach 102.94 high on 03 April, before correcting lower to 100.03, 10 Apr low. Two week bull pattern formed and 104.83/104.89 highs were reached next. Yesterday’s lower rejection at 103.55, kept bulls in play and the current strength through the 104.83/89 ceiling projects gains to 106.60, 38% retracement of 124.14/95.72 decline. 103.55/22 now underpins.
Res: 105.70, 105.95, 106.18, 106.60
Sup: 105.03, 104.94, 104.86, 104.30

Dollar Faces Key Payroll Data

2008-05-02T03:35:00.000-07:00

Near-term dollar trends and underlying sentiment will inevitably be driven by the US employment report and the US currency should be resilient unless there is a very poor figure
The dollar broke Euro support levels near 1.55 and pushed to highs beyond 1.5430 after the US data releases. There was a further unwinding of short dollar positions while long commodity positions were also reduced and these trends tended to reinforce each other over the day.
The US PMI data continued the trend for major data releases over the past few days as it was weak, but slightly stronger than expected. The index for the manufacturing sector was unchanged in April at 48.6 and compared with expectations of a small monthly decline and did not provide any strong indication of recession.
Elsewhere, jobless claims increased to 380,000 in the latest week from a revised 345,000 previously which will maintain some concerns over the labour market ahead of the key Friday employment report.
Confidence in a Fed pause will be much higher if there is a respectable payroll figure on Friday and there will be a big boost to dollar confidence if there is any figure above the zero level.

Euro Inches Higher As Markets Await Payrolls

2008-05-02T03:28:00.000-07:00

Talking Points
Japanese Yen: Takes out 105.00 as risk returns to the market
Australian Dollar: Retail Sales beat to the upside
Euro: Retail Sales sink once again
Pound: Construction PMI declines as housing slumps
US Dollar: NFP on tap
Traders squared up their positions ahead of US Non Farm payroll data due to be released at 12:30 GMT today and EURUSD climbed back towards the 1.5500 figure after a day of battering yesterday that saw the unit lose nearly 200 points against the greenback. The buck has been strengthening all week on the assumption that the US economy may not be nearly as weak as analysts had previously thought, but today's NFP report could prove to be the moment of truth that resolves the argument of whether the US is in the midst of a serious recession or simply in a slowdown.
Our pre NFP analysis Will Non-Farm Payrolls Recover provides inconclusive evidence with 6 leading indicators pointing to further deterioration in the labor market while 3 hint at improvement. The NFPs are notoriously difficult to predict for a host of reasons including the birth/death model which makes monthly adjustments to the number as well as the possibility that public sector hiring may have increased in April and therefore mitigated some of the negative effects of the recent spate of private sectors layoff announcements.
Our best guess is that the number today will likely print better than –100k loss and we base that assumption mainly on the improvement in the four week jobless claims average. Nevertheless, the possibility of a surprise either way appears to be quite strong today and the post news reaction may be typically volatile. Therefore as always we prefer to stand down ahead of the number.
In other economic news Australian Retail Sales printed better than forecast rising 0.5% vs. 0.3% expected indicating that the economy Down Under continues to grow at a healthy pace. If the bulls are indeed correct that the worst of the credit crunch crisis is behind us and global economy will continue to expand at 3% pace or better, Australia becomes the strongest beneficiary of such an outcome piggybacking on China's voracious growth.
While RBA may have ended its rate hike cycle for now, it is unlikely to begin easing if economic conditions in Australia maintain their current levels. If RBA stands still, the Aussie with its 7.25% yield will remain a magnet for global investment flows and AUDUSD could hit parity if global risk environment remains benign

London Session

2008-05-01T07:12:00.000-07:00

Today is 'May Day', typically referring to with International Workers' Day, or Labor Day, which celebrates the social and economic achievements of the labor movement. Thus, staffs on trading desks are lighter than normal and liquidity has run thin. Price movement has been exaggerated across the board. The overall theme has centered on a weak Euro, which has been pressured to fresh lows versus the US dollar for the week. Most eyes remain centered on two key pieces of economic data coming out of the US over the next 36 hours.
The global headlines immediately put EUR on the defensive. It was reported that three bombs detonated by a separatist group in Spain's, though nobody has been reported injured. The currency imploded, shedding over a big figure against the Greenback from top to a bottom near 1.5510. Perhaps even more notable, EURGBP has descended to the technically important 0.7800 area (55-day simple moving average). Lastly, EURJPY followed the same path, plunging almost 100 pips from the 162.25 zone. The residual effect on the USD has been positive. USDJPY and USDCAD briefly saw the topside of 104.00 and 1.0100 respectively, and USDCHF plowed convincingly above 1.0400.
The next two New York Sessions bring very important data points in the eyes of the Federal Reserve Board. Today, the PCE deflator will be released at 0830 EDT. This number is notorious for being watched closely by Chairman Bernanke. On Friday morning, the all-important Non-Farm Payroll result will provide a glimpse into the employment situation of the US. This economic data historically has a significant impact on the FX market
Upcoming Economic Data Releases (New York Session)
0830 EDT US - Initial Jobless Claims, consensus: 365k (relevance: low)
0830 EDT US - PCE Deflator, consensus: +3.2% (relevance: medium)
0830 EDT US - PCE Core, consensus: +.1% MoM, +2.0 YoY (relevance: medium)

Technical News

2008-05-01T03:30:00.000-07:00

EUR
Yesterday the EUR experienced a rising trend against most of its currency rivals. Although it saw bullish trends vs. the USD and the JPY, it still depreciated against the GBP. The main reason for the EUR's bullish trend was yesterday's rate cut in the U.S. The U.S. rate cut led to a strong increment vs. the USD, moreover strengthening the EUR in other pairs. Likewise, the Consumer Price Index Flash Estimate expressed a slight lowering of the inflation rate, which should have had a negative influence against the EUR. In addition, the European Central Bank President Trichet, spoke yesterday stating that for the first quarter of 2008 the Euro-zone economy appeared to be strong and healthy, and declared that he expects the economy to be 'reasonably resilient' for the next few months. He continued saying that the International Monetary Fund is forecasting a 1.4% growth for the Euro-zone this year. He ended his speech with dismissing the proposition of a future interest rate change, saying that the steady 4.00% interest rate enables the ECB to control inflation.
Today, the first of May, is the European Labor Day. This will bring the European business activity to a minimum. Therefore, very low liquidity is expected today. Traders should keep their eyes open for developments from the US. These developments should be the main reason in determining the EUR's development today.
JPY
Yesterday, the Yen was extremely volatile during trading hours versus its major currency pairs. Although the Yen experienced a sharp decline and rise during the day, ultimately it finished near the opening rate. Yesterday some crucial Japanese data was announced.
The data began with an Interest Rate Announcement, which remains the lowest in the industrial world, setting it at 0.5%. Later on, The Bank of Japan (BoJ) published its Monthly Report. In the report, the BoJ stated that as a result of uncertainties in economic activity and prices, they will not predetermine the direction of future monetary policy. Furthermore, on condition that the BoJ's basic economic scenario will remain intact, they have agreed to adjust the level of interest rate in accordance to improvements in the economic and price developments. Even though the report did include the possibility of economic instability in the near future; the report ended with the expectation of gradual yet steady recovery for the Japanese economy. The BoJ continued a assess that growth will reach 1.7% for the coming fiscal year. The last influencing economic news was a speech by Boj's Governor Shirakawa. In his speech the governor stated that at present he is not inclined to adjust Japan's interest rate level. Saying that the BoJ first must prudently examine the income data, before it can decide which policy direction should be taken.
As for today, there is no significant economic data expected to be published. Investors should mainly determine their acquisitions according to the USD developments. Given that the Euro-zone is on holiday, US influence should increase over the JPY.
Technical News
EUR/USD
After several days of drops, the pair is showing a strong bullish signal on the daily chart. The daily Slow Stochastic is showing a bullish cross, and the 4 hour chart is supporting the bullish notion. There seems to be fresh reversal momentum that might take the pair back to the 1.5720 level.
GBP/USD
There is a bearish channel forming on the 4 hour chart, as the cable now attempts to breach through the upper level. If the breach validates, there could be much stronger bullish momentum created post breach. The 4 hour chart indicates that the possible breach might be quite imminent.
USD/JPY
The narrowing bullish channel continues, as the pair now floats near the bottom barrier of it. 103.10 should be a very strong support and a failed breach should probably stir fresh bullish momentum. Traders should wait for a dip around that support level before considering a long position.
USD/CHF
The daily chart is showing flat consolidation around the 1.350 level with no distinct price direction. The 4 hour chart is showing mixed signals, and the daily chart is dwelling in neutral territory. Traders are advised to wait for a clear signal on any direction or keep out of that one today.

The Dollar Declining After Fed Cut And Weak Economy

2008-05-01T03:23:00.000-07:00

The dollar declined against the yen, its longest losing streak since March, this comes before manufacturing and employment reports that may add to evidence the U.S. economy is still in bad shape. The greenback fell for a second day against the euro after the Federal Reserve cut its benchmark rate by 25bp points to 2 percent yesterday and said the economy is still weak. The dollar has lost 10 percent versus the euro since Sept. 18, when the central bank began lowering the fed funds target from 5.25 percent. 'I remain super dollar-bearish,' said Michiyoshi Kato, a senior vice president of currency sales in Tokyo at Mizuho Corporate Bank Ltd., Japan's third-largest bank by assets. 'With the U.S. economy still deteriorating, I see a very good chance of a rate cut in June.'
The dollar accounted for 63.9 percent of total reserves held by governments and central banks around the world at the end of 2007, compared with 63.8 percent at the end of the third quarter, the International Monetary Fund said on March 31 in Washington. The euro's share rose to 26.5 percent from 26.4 percent. IMF quarterly figures go back to 1999, the year the euro was introduced' I was looking at 1 percent a few months back. I still adhere to that,' Mobius, executive chairman at Templeton Asset Management, he said. 'I don't think the fear is over. You're going to continue to get more pressure on them to lower and lower.'
The euro may advance to as high as $1.5830 against the dollar based on charts that some traders use to predict price movements, according to BNP Paribas SA, France's largest bank. The EUR/USD is currently trading at $1.5537, 7:51 GMT. The currency has held above so-called support at April the 3rd at its low of $1.5510 and its 'oversold which creates short-term upside risk,' Andrew Chaveriat, a technical analyst at BNP Paribas in New York, wrote in a research note yesterday. Support is where buy orders may be clustered. Important data to look out for today will be the U.S unemployment clams, personal spending and the ISM manufacturing Index, predictions are that they will come in low thus weakening the dollar. The manufacturing PMI in the UK will be a market mover for the GBP today, GBP/USD currently at 1.9896, 8:00GMT

Gbp/Jpy +200 pips - 206.10

2008-04-18T03:43:00.000-07:00

Helo friends,
Today we had a good sign for the pair Gbp / jpy reaching our third target +150, and +200 pips can still achieve positive.
Wait new signs,
Thanks

Gbp/Jpy - Signals

2008-04-17T23:42:00.000-07:00

Recomend:

Gbp/Jpy - Buy 204.10

Tp 1 - +50
Tp 2 - +100
Tp 3 - +150
Stop -100

Good Luck!

Gbp/Jpy - Signals Free

2008-04-15T23:19:00.000-07:00

Recomend:

Gbp/Jpy - Buy 199.85
Tp 1 - +50
Tp 2 - +100
Tp 3 - +150
Stop - 100

Good Luck!!

economic commentary

2008-04-15T00:21:00.000-07:00

The release of UK CPI inflation will be keenly awaited today. We expect the annual rate to remain unchanged at 2.5%, but this would confirm that inflation has remained above the 2% target for sixth consecutive month. The key point is that inflation will not fall back towards target anytime soon. As the chart below shows, we expect CPI to rise above 3% in the second half of the year, which would prompt the BoE Governor Mervyn King to write an explanatory letter to the Chancellor. Yesterday's UK producer prices data were strong and underlined rising inflationary pressures, despite slowing economic growth, and this could well limit the scope for further interest rate reductions by the Bank of England. In the euro area, the German ZEW survey will be the key release. We expect a slight improvement in the main outlook index of the ZEW survey to -31 from -32. Importantly, we believe that this survey has been an overpessimistic indicator of economic trends in the euro area, with actual 'hard' data such as industrial production holding up relatively well, despite the stronger euro and slower global growth. A host of ECB speakers are scheduled today. In the US, producer prices, the NY Empire business survey and TIC (capital flows) data are due.
Currency commentary
Sterling has taken the o/n release of a decline in the RICS house price survey to -78.5 in March in its stride and is holding up remarkably well ahead of the CPI data at 9.30am. No change in the annual rate of 2.5% is forecast and means that any deviation may provide a catalyst for a knee jerk reaction. Equity market sentiment and Q1 earnings from Lehmans and US PPI are set to make an impact this afternoon as investors look for a way out of the credit market turmoil and consider the risk of inflation and the associated endgame in the Fed's easing cycle. €/£ is still bid above 0.80 but could well fall to some profit taking if the German ZEW survey disappoints at 10am. The index is forecast to improve for a 3rd straight month but worries about the US economy and the unrelenting credit squeeze could well have dented confidence. €/$ looks toppy here after failing to extend above 1.5911.
Major data and events today
UK BRC retail sales monitor (Mar) (00:01)
UK RICS house price survey (00:01)Feb -65.7RMar (actual) -78.5
UK Consumer prices index (nsa) (09:30)Feb +0.7% Y-O-Y +2.5%Mar (f'cast) +0.5% Y-O-Y +2.5%Median +0.6% Range +0.3%:+0.7%
UK Retail prices index (nsa) (09:30)Feb +0.8% Y-O-Y +4.1%Mar (f'cast) +0.6% Y-O-Y +4.0%Median +0.5% Range +0.2%:+0.7%
UK RPI ex-mortgage interest payments (nsa) (09:30)Feb +0.8% Y-O-Y +3.7%Mar (f'cast) +0.6% Y-O-Y +3.6%Median +0.7% Range +0.4%:+0.8%
UK Official house prices (DCLG) (09:30)Jan Y-O-Y +8.0%Feb (f'cast) Y-O-Y +7.5%Median +7.4% Range +5.1%:+7.7%
French consumer prices (07:45)Feb +0.2% Y-O-Y +3.2%Mar (f'cast) +0.4% Y-O-Y +3.1%Median +0.6% Range +0.2%:+0.8%
German ZEW survey (10:00)Mar -32.0Apr (f'cast) -31.0Median -29.0 Range -40.0:-22.3
US Producer prices (sa, prov) (13:30)Feb +0.3% Y-O-Y +6.4%Mar (f'cast) +0.8% Y-O-Y +6.2%Median +0.7% Range +0.1%:+1.2%
US PPI, core (sa, prov) (13:30)Feb +0.5% Y-O-Y +2.4%Mar (f'cast) +0.3% Y-O-Y +2.7%Median +0.2% Range -0.1%:+0.4%
US Empire manu. survey (13:30)Mar -22.2Apr (f'cast) -22.0Median -18.0 Range -25.0:+4.0
US Treasury Internat. Capital Data (14:00)Jan +$62.0bnFeb (f'cast) +$70.0bnMedian +$52.5bn Range +$45.0bn:+$70.0bn
ECB speakers including Stark (08:15), Ordonez (08:30), Garganas (12:00), Trichet & Weber (16:00) and Papademos & Tumpel-Gugerell (18:30)

G7 Gives A (Cautious) Warning Signal

2008-04-14T00:41:00.000-07:00

Sunrise Market Commentary
US Treasuries rebound on stock market sell-offLast Friday, Treasuries rebounded on a sharp stock market correction and a very poor Michigan consumer confidence. However, while the downside looks better protected for now, the technical charts still are not unequivocally positive yet.
ECB members defend steady hand policy for nowDuring the weekend, several ECB officials defended the current steady hand policy, as they are not sure yet whether the growth slowdown will be sufficient to bring inflation down. Friday's rally however indicates that the recent downward correction probably has run its course.
FX : G7 gives a (cautious) warning signalEUR/USD was not much affected by the global market turmoil on Friday, but the G7 changing its rhetoric on currency market volatility sends EUR/USD lower this morning. This probably isn't the big U-turn for the dollar yet, but it buys sometime.
The Sunrise Headlines
Weak GE results drag US and Asian equities down
G7 expresses fresh concern about 'sharp fluctuations in major currencies', which could threaten 'economic and financial stability'. Dollar gains at the open.
BoJ Minutes: Downside risks to global economy growing
Philips misses earnings expectations, citing 'softening in some mature economies'
ECB's Mersch sees no room to cut interest rates this year
NZ February retail sales fall, NZD loses ground
US retail sales in the focus today
Currencies: G7 Gives A (Cautious) Warning Signal
On Friday, the Euro opened strong against the dollar, but later in the session EUR/USD kept a sideways trading pattern. The poor GE results and the collapse in the Michigan consumer confidence fueled investors' recession fears, but both factors had no lasting impact on EUR/USD trading.
During the weekend, the G7 policy makers changed their language on the developments in the currency markets and expressed their concern that sharp currency moves could undermine economic and financial stability. This caused the dollar to open almost one big figure lower compared to the close on Friday. The key question of course remains whether this is a first step to coordinated action to stop the fall of the dollar. We don't think it is, but at least short-term this change gives the dollar some short-term protection.
Today, the calendar contains the US retail sales and the EU industrial production data. The first one of course will be the most important driver for trading. As this is a nominal series, an upward surprise in the headline figure is possible, due to surge in oil prices. However, from an economic and a dollar point of view, an upward surprise for this reason hardly can be considered a real support for the dollar.
We have a standing USD negative view. We think that a sustained and pronounced dollar rebound will be difficult, as long as it is not supported by an improvement in fundamentals and/or in the interest rate differential.
Last week, EUR/USD set a new minor high, but a sustained break proved one step too far, despite a hawkish ECB on Thursday and a poor US consumer confidence on Friday. The G7 statement also caps the ST upside in this pair this morning. So, at least for now, the short-term consolidation pattern looks confirmed. We're still not convinced at all that we have seen the high in this currency pair and if the data continue to point to a further deterioration in US eco situation the dollar still faces strong headwinds. However, in a day-to-day perspective, the G7 statement might at least buy some time for the dollar. So, short-term some further consolidation is expected and if the US data don't surprise on the downside, the EUR/USD might still lose some ground short-term.
Looking at the graphs, the bottom recently again proved rather well protected. Last week, the MTMA perfectly played its role as first support, but the level (1.5740 today) is again under test this morning. A sustained break opens the way for some further correction with 1.5510 the first point of reference short-term. The 1.54/1.5340 area remains the key reference area medium-term and as long as it holds, a further consolidation in the 1.5340/1.60 range is the favoured scenario.

EUR/USD: correction on G7.
Support stands at 1.5678/72 (Boll Midline/ST low), at 1.5628/25 ( reaction low/ MT Break-up hourly) and at 1.5552 (LTMA) and at 1.5510 (03 Apr low).
Resistance is seen at 1.5755 (STMA), at 1.5804 (St gap open), at 1.5841 (daily envelope), at 1.5915/25 Reaction high/Bollinger top) and at 1.60 (psycho).
The pair is still near overbought shortterm.
USD/JPY
On Friday, USD/JPY opened strong in Asian and in Europe. However, the GE results hammered stock markets and this also triggered renewed safe haven yenbuying with USD/JPY setting an intraday low in the 100.65/70 area on the poor Michigan consumer confidence release. USD/JPY closed the session at 100.98, a loss of one yen compared to the close on Thursday. Contrary to EUR/USD, the gains of the dollar against the yen after the G7 statement are very limited. Asian stocks starting the week deep in the red continues to support the yen also at the start of this week. There were no important eco data in Japan this morning.
Recently, the downside in USD/JPY has become better protected and the pair tried to break above the 101.04 level painting a short-term double bottom pattern on the charts. As a consequence, we amended our short-term bias for USD/JPY from negative to neutral. The jury is still out on this pattern, but currently the pair again trades below this level. The 102.85/95 gradually looks like becoming tough resistance short-term. Last week, we advocated a buy-on-dip strategy in this pair, among other things based on the assumption that global stocks markets could enter calmer waters. This of course is far from a done thing as this week the earnings' season gears up. We remain neutral to cautiously positive for USD/JPY as long as the pair stays above the 98.57 reaction low (buy-on-dips approach). A break below would reopen the way for return action to the lows in the 95.78 area. .
USD/JPY: cautiously lower on equities.
Support stands at 100.71/62 (Bollinger mid-line/ST low), at 100.29/03 (Daily envelope/ST low) and at 99.74 (weekly envelope).
Resistance comes in at 101.64/80 (STMA/Reaction high), at 102.85 (Last Week high), at 102.95/98 (Reaction high/38% retracement), at 103.52 (1st target double bottom).
The pair is still unwinding overbought conditions.
EUR/GBP
On Friday, sterling remained under pressure and EUR/GBP set a new high in the 0.8037 area in the afternoon and stayed close to the highs going into the close. The broader euro correction in EUR/USD on the back of the G7 statement was also mirrored in EUR/GBP as the pair opened below the 0.80 mark this morning.
Today the UK calendar contains the PPI data.
After a brief period of calm two weeks ago, sterling last week resumed its downtrend against the euro as the prospect for more BOE rate cuts in the short-to-medium term and the poor prospects for the UK economy continue to weigh on the UK currency. We remain skeptical on the potential for a sustained sterling rebound against the euro. Some consolidation in EUR/USD short-term might also temporary ease the upside pressure in EUR/GBP, but we still don't expect a sterling rebound to have strong legs. The 0.7750 area is the first important reference and we expect this level to give strong support.
EUR/GBP: new high on Friday, but correction on the G7
Support stands at 0.7964 (reaction low), at 0.7933 ( MTMA), at 0.7924/15 (Weekly envelope/Break-up daily).
Resistance comes in at 0.8008 (Daily channel top), at 0.8038 (Reaction high), a t 0.8048 (Boll top) and at 0.8069 (daily envelope).
The pair is still in overbought territory.
New
US: Consumer sentiment at 26-year low, while import prices surge
The early April Michigan consumer sentiment survey was really awful, as sentiment dropped to a 26 year low and the survey contained no single sprinkle of hope. The headline index fell another 6.3 points to 63.2. The index has now lost 21 points since January. Both the current situation and the expectation sub-indices contributed to the decline. High energy prices, a housing slump, slower economy, rising unemployment and restriction of credit availability are the factors behind the feeling of despair. To make things still worse, inflation expectations are rising. The 1-year ahead expectation rose to 4.8% from 4.3% but also the long term expectations went up, notably to 3.1% from 2.9% previously.
Import prices rose a steeper-than-expected 2.8% M/M and 14.8% Y/Y in March, following a 0.2% M/M and 13.4% Y/Y in February. Expectations were for a 2% M/M increase. The price increase was driven by a 9.1% M/M jump in petroleum prices, but also food and other commodities went up in a pronounced way. The double digit increase in import prices is obviously driven by a weaker dollar and higher commodity prices. It puts the risk for the PPI results on the upside too.

ECONOMIC DATA

2008-04-11T02:48:00.000-07:00

GE Mar Wholesale Price Index: M/M 1.6% v 0.5%e Y/Y 7.1% v 6.0%e
SP Mar CPI: M/M 0.9 % v 0.9%e Y/Y 4.5% v 4.6%eSP Mar Core CPI: M/M 0.7% v 0.7%e Y/Y 3.4% v 3.4%eSP Mar Harmonized CPI: M/M 0.9% v 0.9%e Y/Y 4.6% v 4.6%e
SW Feb Activity Index Level: 123.7 v 122.9 prior Prior revised from 122.9 to 123.1
SPEAKERS/COMMENTS
IEA: Cuts 2008 world oil demand growth forecast by 310K bpd to 87.23M BPD China may cut tax on crude oil imports to 4% from 17% China may cut tax to pare refiners' losses Sees US oil demand declining by 2% in 2008 Sees Chinese oil demand rising by 4.7% in 2008 Sees Middle Eastern oil demand rising by 5.7% in 2008 Cuts 2008 demand forecast for OPEC crude by 200K bpd
EU President: Foreign exchange rates must reflect economic fundamentals EMU economy is doing well, but 2008 growth will slow slightly EMU inflation is absolutely a matter of concern FX volatility is not conducive to growth
FIXED INCOME/FX/COMMODITIES/ERRATUM
In energy news overnight the IEA cut its 2008 oil demand growth forecast for the third consecutive month, making the largest cut in seven years. The IEA reduced its 2008 oil demand growth forecast by 310K bpd, and cut its 2008 OPEC oil demand forecast by 200K bpd. The IEA also said that China may cut its oil import tax to 4% from 17% in order to help pare refiners' losses. The IEA sees US demand declining by 2% in 2008, and expected Chinese and Middle Eastern demand to rise by 4.7% and 5.7% respectively. JP Morgan raised its average 2008 Brent and WTI oil price forecasts to $89/barrel and $90/barrel respectively.
European government bonds opened lower in the session, and have remained in the red faced with little economic data. One interesting view circulating amongst analysts centers around the slow rise in M&A activity seen around the world over the past few weeks. This has, perhaps, helped to chip away at the markets' recent 'flight to safety' mentality. There was no new supply overnight, however Germany did make a €16B cash payment. Going into the weekend focus is likely to rest upon G7, which is widely expected to be a non-event.
The European indices are currently trading in positive territory in the session, led by the basic resources, and industrial goods and services sectors. There was little in the way of significant equity related news overnight. According to wire reports EDF plans to bid for British Energy, but the bid is expected to be help below 700p/share. Looking ahead, Dow component GE is due to report earnings results ahead of the open today.
In currencies, the market maintained a subdued tone ahead of the weekend's G7 meeting in Washington DC. Dealers suspect that G7 will try to show a clear determination to ensure financial stability as global markets remain in a turbulent mode. FX dealers will see if members of G7 are serious regarding the recent USD weakness and EUR strength. However, it is more likely that G7 will agree that China's CNY will need to rise. In the event of any surprise at G7, any statement along the lines of EU protests against too strong Euro could increase the short term volatility, although the G7 states that disorderly, excessive FX moves are certainly not welcomed The EUR/USD at 1.5830 and exhibited some softness in the session after Harvard economist Feldstein stated that currency intervention to support USD would be wrong. The is JPY softer across the board with equities in positive territories. Dealers citing the continued financial sector relief rally after the recent Wamu cash infusion deal earlier this week. The USD/JPY at 101.85 and EUR/JPY higher by 10 pips at 161.20.

GBP/USD-Signals

2008-04-11T02:41:00.000-07:00

The Cable managed to recover its growth achieved earlier - it dropped yesterday down to 1.9705 and closed at 1.9707. Today supports for the Pound are expected at 1.9640, 1.9420, and 1.9360. In upward direction resistance levels are expected to be 1.9970, 2.0070, and 2.0300.
Technical resistance levels: 1.9970 2.0070 2.0300Technical support levels: 1.9640 1.9420 1.9360
Trading range: 1.9730 - 1.9805
Trend: Upward
Buy at 1.9741 SL 1.9711 TP 1.9791

EUR/USD

2008-04-09T22:56:00.000-07:00

Resistance for the Euro against the US Dollar is yesterday's top 1.5860, followed by the top record rates around 1.5910, and the psychological 1.6000. In downward direction first support is expected at yesterday's bottom 1.5685, followed by 1.5620, which is 61.8% correction of the climb 1.5515 - 1.5795, and the bottom from last week at 1.5525.
Technical resistance levels: 1.5860 1.5910 1.6000Technical support levels: 1.5685 1.5620 1.5525
Trading range: 1.5825 - 1.5890
Trend: Upward

Competition forex where I was champion

2008-03-27T02:18:00.000-07:00

References me, I link to the site where forex competition was champion and one that I am participating in second, ends this month.
Http://www.forexhsi.com/competition.php?show=history Http://www.forexsim.org/Concursoforex.htm

Gold +750 pips - target 3 - Montly +1.605 pips

2008-03-27T01:46:00.000-07:00

Helo friends, today we had a very good signal we + 750 pips in gold and we in a total of this month + 1,605 pips positive, I hope that everyone has enjoyed and unfortunately ends the period of signals free.The peoples interest in my signals daily contact us at msn: edlivre@hotmail.com. Contact us in Portuguese, Spanish and English
The monthly value of the signals will be $ 250 usd.
Good luck to all!
Edson Cavalcanti

Signals Gold

2008-03-27T00:12:00.000-07:00

Recomend:

Gold - Sel 951.15
Target 1 - +250
Target 2- +500
Target 3- +750
Stop - 250

Good Lock!

Gbp/Jpy , Montly +855

2008-03-25T08:55:00.000-07:00

Helo friends, yesterday and today were days and bad strangers, yesterday in moment the signal had fought in a resistance of my system and turned ,signal to sell and fell below 15 pips rose after 80 and then was positive, more rose again breaking resistance . was +40 Today, more then fell 100. had the opportunity to close positive.

Signals - Gbp/Jpy

2008-03-25T00:08:00.000-07:00

Recomend:

Gbp/Jpy - Buy 200.15
Target 1 - +100
Target 2 - +150
Target 3- +200
Stop - 100

Good Lock!

Gbp/Jpy

2008-03-24T02:12:00.000-07:00

Helo friends, this signal has 15 pips positive and rose through a resistance, I now close at 198.25, -45 pips not always hit, await new signals

Signal Gbp/Jpy

2008-03-24T00:08:00.000-07:00

Recomend :
Gbp/Jpy Sel 197.80
Target 1 - +100
Target 2 - +150
Target 3 - +200
Stop - 100

Good Lock!

Signals Gbp/jpy +200 pips ,Montly +1.000 pips positive

2008-03-20T03:57:00.000-07:00

Helo friends, we had one more positive sign gbp / jpy + 200 pips in total this week we are + 500 pips positive and this month with +1,000 pips positive, very good! I hope that everyone has enjoyed and await new signals. Greetings, Edson Cavalcanti

Signals - Gbp/Jpy

2008-03-20T00:12:00.001-07:00

Recomend - Gbp/Jpy Buy 196.30
Target 1 - +100
Target 2 - +150
Target 3 - +200
Stop = -100

Signal Gbp/Jpy +300 pips

2008-03-19T02:37:00.000-07:00

Helo, we had a great day today getting in a single operation Gbp / Jpy +300 pips positive, very good!Wait new signals! My compliments everyone that accompany my blog.

Signals - Gbp/Jpy

2008-03-19T00:22:00.000-07:00

Helo,
Recomend Gbp/Jpy -199.10 Sel

Target 1- +100
Target 2- +150
Target 3- +200

Stop- -100

Economic commentary

2008-03-18T01:35:00.000-07:00

The US Fed is tonight likely to follow up this weekend's 25bp cut in the discount rate by a larger cut in the fed funds rate, but whether a reduction in the fed funds rate helps to facilitate the provision of credit to households and corporates, and targets the counterproductive tightening in lending standards that could delay an economic recovery remains to be seen. Signs have accumulated since the January FOMC meeting that US economic activity is stalling. This could result in a stagnation of gdp growth in the first half of 2008. The risk of a more protracted downturn in housing, a deteriorating consumer backdrop and the threat of a fully fledged banking crisis means we expect the committee to vote in favour of a cut in the fed funds rate of at least 75bp. Weak data for US February housing starts and building permits earlier in the day could give the Fed extra arguments. Producer prices for February are also due. Inflation data will take centre stage in the UK this morning. A sharp increase in annual CPI is forecast in February to 2.5 from 2.2% in January, partly due to a change to the methodology of measuring utility price changes. Gas and utility price changes were previously phased in over a 4-month period. From this month, this will no longer be the case. A stronger set of inflation figures may only temporarily dampen speculation of a reduction in base rates next month, as the BoE is confronted with rising Libor rates and a widening spread over Base rate.

Currency commentary

Currency markets stabilised overnight in Asia and trading ranges are likely to stay relatively contained as participants square up for the Fed rate decision at 6.15pm. The situation is very different in emerging markets where risk aversion and repatriation flows are causing a serious pullback. $/Krw is up 8% since the start of the month. The Inr and, to a lower extent, the real, are also under pressure from the flight to quality of profit taking. UK CPI is due this morning and will impact sterling crosses. A rise in annual CPI above 2.5% may be required to keep sterling underpinned at a time when participants are going short £ as bets are raised that the BoE may cut rates next month. €/£ backed off its all-time high of 0.7912 yesterday but continues to look quite perky as worries about the UK economy intensify. US Q4 broker earnings from Lehman and GS will impact equities this afternoon and may steer fx flows ahead of the Fed decision.
Major data and events today
UK Consumer prices index (nsa) (09:30)Jan -0.7% Y-O-Y +2.2%Feb (f'cast) +0.8% Y-O-Y +2.5%Median +0.8% Range +0.4%:+1.0%
UK Retail prices index (nsa) (09:30)Jan -0.5% Y-O-Y +4.1%Feb (f'cast) +0.9% Y-O-Y +4.2%Median +0.8% Range +0.4%:+1.0%
UK RPI ex-mortgage interest payments (nsa) (09:30)Jan -0.4% Y-O-Y +3.4%Feb (f'cast) +1.0% Y-O-Y +3.9%Median +0.8% Range +0.4%:+1.0%
US Producer prices (sa, prov) (12:30)Jan +1.0% Y-O-Y +7.4%Feb (f'cast) +0.8% Y-O-Y +7.2%Median +0.4% Range +0.2%:+1.0%
US PPI, core (sa, prov) (12:30)Jan +0.4% Y-O-Y +2.3%Feb (f'cast) +0.4% Y-O-Y +2.3%Median +0.2% Range +0.1%:+0.4%
US Housing starts (sa) (12:30)Jan 1.012mnFeb (f'cast) 1.000mnMedian 0.998mn Range 0.95mn:1.03mn
US Building permits (12:30)Jan 1.061mnFeb (f'cast) 1.050mnMedian 1.020mn Range 0.98mn:1.06mn
Fed FOMC interest rate decision (18:15)Current: 3.00%Forecast: 2.25%
Canada consumer prices (11:00)Jan -0.2% Y-O-Y +2.2%Feb (f'cast) +0.3% Y-O-Y +1.8%Median +0.3% Range +0.2%:+0.7%
Canada consumer prices, core (11:00)Jan +0.1% Y-O-Y +1.4%Feb (f'cast) +0.3% Y-O-Y +1.2%Median +0.3% Range +0.2%:+0.4%
ECB member Mersch speaks at an event in Luxembourg (17:00)

Signal Gbp/jpy

2008-03-13T00:13:00.000-07:00

Helo,
Gbp/Jpy - buy 203.70
Tp1- +50
Tp2- +100
Tp3+150
Stop - 100
Good luck

Gbp/jpy +100 pips

2008-03-12T14:00:00.000-07:00

Helo, today achieved yet another positive sign the gbp/ jpy going to 206, and we +100 pips.Very good! Await new signals!

Signals

2008-03-12T00:18:00.000-07:00

Helo, fortunately not opened any order in the latest signs that sent because we saw the market go Quite contrary.Being thus no pip negativo.
For today the beginning Gbp / Jpy sel at 207.20, Target 1 -50 pips, Target 2-100 -and stop 100.
Good luck!

Signals

2008-03-10T17:52:00.000-07:00

Signals:1. EUR/JPY - Short - 155.71 AUD/JPY - Short - 92.96 NZD/JPY - Short - 79.994. GBP/CHF - Short - 2.0460

Tp 1=+50
Tp 2=+100
Tp 3=+150

Stop=-100

Good luck!

Signal Usd/Cad

2008-03-09T10:08:00.001-07:00

Helo, closing Friday 07/03 with a positive sign of 100pips Usd / Cad and hope that this week will be profitable for all. Stay well!

Signals Usd/Cad

2008-03-06T16:12:00.000-08:00

Hello Friends,
Todays’ Signals:1. USD/CAD - Short - 0.9847
Tp 1 =+50
Tp 2=+100
Stop=-100

EURO/USD - GBP/USD

2008-03-04T00:10:00.000-08:00

The European currency yesterday fluctuated in both directions as it managed an upside move in the early session to hit a record high at 1.5275 before reversing back to the downside in the last session as investors engaged in profit taking transactions to take the currency down until the levels of 1.5180s support area. Today the euro is expected to move down since a reversal pattern has been formed
The trading range for today might be between the key resistance level at 1.4950 and the key support level at 1.4700.
The general trend is up as far as 1. 4060 remains intact targets now at 1.5360 and 1.5800
Support: 1.5144, 1.5110, 1.5089, 1.5047, 1.5030 Resistance: 1.5200, 1.5231, 1.5276, 1.5289, 1.5312
Recommendation: We expect selling Euro below 1.5230 with a target at1.5110, stop loss above 1.5280.
GBP
The British pound yesterday failed to reach the major resistance level at 2.0000 to hit the key resistance at 1.9940scausing a massive drop to take the currency below the opening level showing a significant bearish signals which in role might drive the pound down today as well.
The trading range for today might be between the key resistance level at 1.9998 and the key support level at 1.9700.
The general trend is down as far as 2.0200 remains intact targets now at 1.9230 and 1.8700.
Support: 1.9825, 1.9807, 1.9777, 1.9750, 1.9726 Resistance: 1.9846, 1.9862, 1.9880, 1.9900, 1.9922
Recommendation: We expect selling sterling below 1.9880 with a target at 1.9790 stop loss above 1.9930

EUR/USD - GBP/USD

2008-02-21T00:00:00.000-08:00

EUR - The pre-planned breakout variant for sales has been realized but without attainment of minimal assumed targets. OsMA trend indicator having marked the break of key supports with a considerably high level of sales' activity because of chosen strategy gives grounds to choose bearish planning priorities for today. Hence and because of bullish character of indicator chart with the features of formation of reversal bearish signal, we assume a possibility of attainment of 1.4735/55, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sales on condition of formation of topping signals the targets will be 1.4690/1.4700, 1.4630/50 and/or further breakout variant up to 1.4580/1.4600, 1.4520/40, 1.4480/1.4500. An alternative for buyers will be above 1.4800 with the targets 1.4840/60, 1.4900/20, 1.4960/80.

GBP
The pre-planned breakout variant for sales has been realized with overlap of minimal assumed target. OsMA trend indicator having marked the relative rise of bearish activity because of chosen strategy gives grounds to preserve bearish planning priorities for today. Nevertheless the absence of development progress from sales and strengthening of bullish counteraction activity reduces the perspective of further rate fall with a considerable renovation of attained minimal weekly targets. Hence and because of ascending direction of indicator chart, we assume a possibility of attainment of resistance range 1.9520/40, where it is recommended to evaluate the activity development according to the charts of shorter time interval. For short-term sales on condition of formation of topping signals the targets will be 1.9440/60, 1.9360/80 and/or further breakout variant up to 1.9300/20, 1.9340/60. An alternative for buyers will be above 1.9600 with the targets 1.9640/60, 1.9700/20, 1.9760/80.

Overnight News Bullets

2008-02-19T23:49:00.000-08:00

SW CPI Headline MoM/YoY (Jan) out at -0.8%/3.2% vs. -0.4%/3.6% expected.
SW CPI Underlying MoM/YoY (Jan) out at -0.8%/2.1% vs. -0.5%/2.3% expected.
E-Z Construction Output sa MoM/YoY (Dec) out at -0.6%/-3.3% vs. -0.8%/-0.8% prior.
CA CPI MOM/YoY (Jan) out at -0.2%/2.2% vs. -0.1%/2.2% expected.
CA CPI Core MoM/YoY (Jan) out at 0.1%/1.4% as expected.
CA Wholesales MoM (Dec) out at -2.9% vs. -0.7% expected.
US NAHB Housing Market Index (Feb) out at 20 vs. 19 expected.
US ABC Consumer Confidence (Feb 17) out at -37 vs. -37 expected.
AU Westpac Leading Index MoM (Dec) out at -0.2% vs. 1.0% prior.
AU DEWR Skilled Vacancies MoM (Feb) out at -2.2% vs. 1.1% prior.
AU Wage Cost Index QoQ/YoY (4Q) out at 1.1%/4.2% vs. 1.1%/4.2% expected.
GE Producer Prices MoM/YoY (Jan) out at 0.8%/3.3% vs. 0.3%/2.8% expected.
Markets
FX: Range bound USD ahead of the US CPI today. AUD weakens after bad figures limit the scope of rate increases.
Stocks: Europe slightly higher, US erased early gains closing marginally lower. Nikkei down 3.25% o/n.
Fixed Income: US 10yrs higher gain on risk aversion, EU Schatz gaining on subprime worries in Europe, related to BNP and Credit Suisse. JGB's very strong.
Commodities: WTI Crude just broke the psychological $100 level, but has sold off a tad on speculation of increasing stock. Precious metals continue higher.

EUR/USD

2008-02-19T23:41:00.000-08:00

First resistance for the Euro against the US Dollar today is 1.4745, which is 61.8% correction of the descent 1.4945 - 1.4445. Next resistance is 1.4835, and when/if that level is broken, the upward impulse is expected to get stronger towards the top record 1.4960. In downward direction support today is expected at 1.4595, which stops the dropping for now, but break at this level would worsen the Euro position and next target would become 1.4495, followed by 1.4320.
Technical resistance levels: 1.4755 1.4835 1.4960Technical support levels: 1.4595 1.4495 1.4325
Trading range: 1.4690 - 1.4755
Trend: Upward
Buy at 1.4701 SL 1.4671 TP 1.4741

TRIX

2008-02-19T13:46:00.000-08:00

TRIX is a form of momentum indicator known as a technical analysis oscillator and was developed by Jack Hutson, the editor of Technical Analysis of Stocks and Commodities, in the 1980s.
The purpose of TRIX is to clearly and accurately demonstrate the derivative slope of a triple smoothed exponential moving average of closing prices in the market, the name Trix having itself been derived from the TRiple EXponential nature of the indicator.
Because the TRIX indicator oscillates around a zero line, the report is designed to automatically filter out stock or currency movements which in probability are insignificant to the larger, overall trend of the market.
With TRIX, just as with any other moving average indicator report, TRIX's triple EMA nature is trend following and allows for easy recognition of the current trend movement. Because of it's zero line alignment up trends and down trends are easy to spot as crossing the zero line signals a change to the trend. This is especially useful as it allows the zero line to act as an active signal line, so that the indicator showing a positive cross over the zero line may act as a buy signal and a negative, or downward cross over the zero line acting as a sell signal.

Fibonacci Spiral

2008-02-19T13:45:00.001-08:00

Fibonacci spirals provide the optimal link between price and time analysis and are the answer to a long search for a solution to forecasting both time and price. Each point on a spiral manifests an optimal combination of price and time. Corrections and trend changes occur at all those prominent points where the Fibonacci spiral is touched on its growth path through price and time.
You will be astonished to see that if the correct center is chosen, Fibonacci spirals pinpoint turning points in the market with an accuracy seldom before seen. Investing based on spirals is neither a black-box approach nor an overfitted computerized trading system. It is a simple universal geometrical law applied to different sorts of products such as futures, stock index futures, stocks or cash currencies.
The Fibonacci spiral is one of the many Fibonacci studies for analyzing markets in terms of support and resistance levels for the price of a given asset.
Unlike several of the other Fibonacci studies, the exact methods for calculating Fibonacci spirals are kept as something of a secret. The basic idea behind the Fibonacci spiral is that a certain extreme point on a market chart is taken to be the center of the spiral, and then a Fibonacci spiral based on the golden ratio is drawn emanating out from that center. Certain points along the spiral are then considered to be strong indicators of market events, such as reversals, price spikes or high levels of resistance or support. The Advocates often tout the Fibonacci spiral as an extremely accurate method of predicting the behavior of a market based on both critical times and critical price levels, rather than simply on price levels. Several pieces of software exist for calculating Fibonacci spirals on a computerized chart. The secret nature of the calculations, however, makes it difficult for a prospective Fibonacci trader to assess the actual efficacy of the device.
In general, Fibonacci spirals are generated by picking a starting point and then increasing the width of points along the spiral from the center by multiplying the width by a Fibonacci ratio for every quarter turn. In markets, this Fibonacci ratio would likely be determined by certain price levels within the market.

Stochastics

2008-02-19T13:43:00.000-08:00

Stochastics are an indicator used in technical analysis. Stochastics compare closing prices in a market to the high and low prices for that market over a certain period of time.
Stochastics are calculated by taking the lowest low price and the highest high price for a number of previous trading periods, usually fourteen. The difference between the current closing price and the lowest low is divided by the difference between the highest high and lowest low, and the result is multiplied by 100. The product, expressed as a percentage, is considered to be the stochastic oscillator. Three varieties of this oscillator exist--fast, slow, and full--each applying a different transformation to the value of the basic stochastic oscillator.
Stochastics can be used to determine when a market is overbought or oversold. According to technical analysis, when the stochastic oscillator rises above 80%, the market is overbought, and when the oscillator drops below 20%, the market is oversold. Thus stochastics can be thought of as strong selling or buying signals, respectively.
When using stochastics, foreign exchange traders need to take into account the fact that the forex market, being a twenty-four hour market, has no closing prices. Forex traders typically use the price at the time of the New York Stock Exchange's close as the forex market's closing price, since the volume of trading drops off shortly after the close of the NYSE.

Ichimoku Kinko Hyo

2008-02-19T13:40:00.000-08:00

Ichimoku Kinko Hyo is an equilibrium chart used in technical analysis. The chart's name means, roughly, "equilibrium chart at a glance", which also describes its function: providing information about the equilibrium behavior of an asset with a single look. Ichimoku Kinko Hyo was developed by Goichi Hosoda and released in 1968, although the chart didn't gain popularity in the West until the 1990s.
Ichimoku Kinko Hyo is composed of five lines. Tenkan-sen averages the highest high and lowest low and is calculated over a fairly short period of time (seven to nine periods.) Kijun-sen uses the same equation, but is calculated over twenty-two periods. Chikou Span plots the current closing price a full twenty-two periods behind. Senkou Span A averages Tenkan-sen and Kijun-sen, and is plotted twenty-six periods ahead. Senkou Span B averages the highest high and lowest low over the last forty-four periods, and is plotted twenty-two periods ahead. The space between Senkou Spans A and B is known as the Kumo.
Traders use Ichimoku Kinko Hyo to generate a variety of signals for market behavior, based on the interaction of the chart's lines with the Kumo. Because of the comprehensiveness of the chart, traders consider it to be a very powerful tool for technical analysis. However, foreign exchange traders should be aware of the chart's drawbacks in forex markets: since forex markets never close, no close prices are generated, and it's unclear how the Chikou Span should be plotted. Good judgment should therefore be used both in choosing the time periods from which to generate the chart, and in deciding which price should be chosen as a forex market's close price.

Parabolic SAR

2008-02-19T13:37:00.001-08:00

The parabolic SAR (short for Stop And Reverse) is a very complicated predictive algorithm designed to establish a trailing stop-loss level for asset markets that follow strong bullish or bearish trends. The algorithm was introduced by J. Welles Wilder, Jr. in his 1978 book, “New Concepts In Technical Training Systems.”
The parabolic SAR for any given day is calculated before that day's trading, incorporating the extreme high or low value of an asset from the previous day as well as a variable acceleration factor designed to make emerging trends more visible to the trader. A parabolic SAR graph takes the form of a series of points—ideally arranged in a parabola—either above or below the price line. When the SAR points cross below the price line, long positions should be closed; when the SAR points cross above the price line, short positions should be closed. Since the SAR point for a day is calculated in advance, this graph allows traders to set their stop-loss levels at the beginning of the day in order to capitalize immediately on probable trend reversals. This creates a stop-loss level highly responsive to large-scale shifts.
The parabolic SAR is effective only for markets with strong trends, which, according to Wilder, comprise only 30% of markets. In horizontal markets, or markets dominated by rapid yet irregular fluctuations, the SAR becomes much less accurate at finding useful stop-loss levels, and other predictive tools should be used.

Bollinger Bands

2008-02-19T13:35:00.000-08:00

Bollinger Bands are a simple technical analysis tool developed by John Bollinger, and are used to measure the volatility of a market as well as to indicate relative price levels.
Bollinger Bands consist of three lines. The center line is calculated by taking a simple moving average of the price of an asset. Traders most commonly use a 20 or 21-day moving average when calculating the center line of a Bollinger Band. Once the center line is calculated, the upper and lower bands are drawn two standard deviations above or below the moving average. The standard deviation of a market price varies depending on the difference between high and low prices for a given trading day, which means that when an asset becomes more volatile, the Bollinger Band expands, whereas when an asset becomes less volatile, the Bollinger Band contracts. This gives traders an idea of an asset's volatility.
If prices fall outside of two standard deviations of the median price (meaning that, on a candlestick chart, they fall outside of the Bollinger Band), those prices have reached an extremely high or extremely low level for the asset at that time. This can be a signal that a breakout from the trend is imminent, or a warning that an asset is overbought or oversold. When such indicators occur during a period of low volatility, this can be a very strong indicator of a coming reversal in trend, giving traders a signal to take the appropriate action with respect to that asset

CCI

2008-02-19T13:33:00.000-08:00

The Commodity Channel Index is a tool developed by Donald Lambert to measure the point at which cyclical price reversals for a given asset can be expected. One of the fundamental assumptions behind the CCI is that price trends reverse at regular intervals within an asset, allowing investors to take the appropriate action when the CCI indicates that one of those cyclical reversals is imminent.
The CCI is calculated first by averaging the high, low and closing prices into a measure called the True Price, or TP. A 20-period moving average of the TP becomes the Simple Moving Average of the True Price, or SMATP. A standard deviation of the difference between SMATP and TP over twenty periods is also taken. The difference between TP and SMATP is then divided by the product of this standard deviation and a constant value of .015 to produce the CCI.
The constant value of .015 ensures that the majority of CCI values fall between 100 and -100. In the case that the absolute value of CCI exceeds 100, Lambert's theory indicates that the market is approaching one of its cyclical reversals, and that traders should take the appropriate action. The CCI also indicates overbought and oversold levels, which are any levels whose absolute value exceeds 100. If the CCI moves outside of the -100 to 100 range and then returns, either a buy or sell signal is generated, depending on whether the CCI was below -100 (oversold) or above 100 (overbought.)

RSI

2008-02-19T13:32:00.000-08:00

Relative Strength Index, sometimes shortened to RSI, is a price oscillator used in technical analysis to show changes in the strength of prices.
The Relative Strength Index is considered a popular tool and is a relatively easy one to interpret. This price following oscillator is depicted as a basic graph and ranges from zero to one hundred.
By far one of the most popular methods of analyzing the Relative Strength Index is to look for an area on the graph that shows a divergence away from the current trend, in particular seeking an area of divergence in which the currency price seems to be aiming to create a new high, but where the Relative Strength Index has as yet failed to reach a level on par with it's previous price high.
This sort of divergence can often be considered a good indication of an impending price reversal to the current trend and when the RSI does reverse and falls in a down trend that extends below its most recent low, the RSI could then have been considered to have completed what is known as a 'failure swing'. Such a swing is generally considered to be a confirmation of an impending reversal in the price of the currency in question.

MACD

2008-02-19T13:31:00.000-08:00

Moving Average Convergence/Divergence, an indicator used in technical analysis that was invented in the 1960s as a means of showing the differences between both the fast and slow EMAs (Exponential Moving Average) of closing prices, although since 1986 the graph has been produced as a histogram.
The moving average as expressed by the MACD is essentially the average of a price over a certain set amount of time and the MACD enables easy demonstration of the relationship between two exponential examples of the moving average.
Generally, a fast EMA would be considered one within a time frame of twelve days, whereas a slow EMA would represent a twenty-six day period.
The formula: MACD=EMA[12] of price - EMA[26] of price with a signal line of EMA[9] then plotted over the top of this MACD result, allowing as a trigger point for interpretation of buy and sell signals.
Generally, it is considered that when the MACD falls below the signal line it can be regarded as bearish and may well indicate a time to sell, whereas when the MACD rises above the signal line indicating a bullish trend which may indicate an upward trend in price.

ADX

2008-02-19T13:29:00.000-08:00

The average directional index, or ADX, was developed by J. Welles Wilder as a measure of a current market trend's strength. The ADX is derived from two directional indicators, known as DI+ and DI-, which are in turn derived from the directional movement index (DMI).
ADX is calculated by finding the difference of DI+ and DI-, as well as the sum of DI+ and DI-. The difference is divided by the sum, and the resulting number multiplied by 100. The product is known as the directional index, or DX. A moving average is then taken of DX, typically over a fourteen-day period (although any number of periods can be used.) This final moving average is the ADX.
The ADX takes the form of a number from 0 to 100. A value of 0 indicates that the market is equally likely to move in either a positive or negative direction, meaning that there is no overall market trend. A value of 100 indicates that the market is exclusively moving in either a positive or negative direction, indicating an extremely strong trend. Values of greater than 60 are uncommon in practice, and any value of greater than 40 is considered to be a strong trend. Any value less than 20 is considered to be a weak trend, and may signal an upcoming reversal. Because the ADX is derived from both positive and negative directional indicators, it only measures the magnitude of a trend rather than its direction.

Technical News

2008-02-19T00:47:00.000-08:00

EUR/USD
The pair is showing strong bullish sentiment again, and has made a relatively fast move that topped at 1.4710. The 4 hour chart is bullish and the slow stochastic is pointing to a strong bullish momentum. Next target price is 1.4750.
GBP/USD
After several failed attempts to breach through 1.9480, it appears that the cable is showing some bullish signals with increasing momentum. The bullish cross with the positive slope on the 4 hour chart strengthens the notion that a move back to 1.9600 is quite imminent.
USD/JPY
The consolidation around the 108.20 level has ended, and the pair is showing strong bearish momentum again. It appears that the bullish breach above the range was not validated, and that range trading might be the name of the game. Taking short term selling positions might be the right move today.
USD/CHF
The 4 hour slow stochastic is showing a strong bearish cross, as the pair already started to drop. Both daily and 4 hour chart are showing plenty of room for the bearish trend, and a touch at the 1.0900 might be very possible today.

EUR/USD

2008-02-17T23:41:00.000-08:00

The Euro managed to close above the 55 day MA against the US Dollar last week. This morning the currency couple remained locked between it and the 21 day MA. To see movement in either direction, we would first need to see one of the above levels overcome. First resistance is the above mentioned 21 day MA 1.4700, followed by 1.4760, and the top from 9 November 1.4830.In downward direction support today is expected at the 55 day MA 1.4630, followed by 1.4590, and the 100 day MA at 1.4540.
Technical resistance levels: 1.4700 1.4760 1.4830Technical support levels: 1.4630 1.4590 1.4540
Trading range: 1.4665 - 1.4730
Trend: Upward
Buy at 1.4676 SL 1.4646 TP 1.4716

Majors, Scandis & Funding

2008-02-14T23:31:00.000-08:00

Overall it looks as though market participants have got a bit of breathing space as the macroeconomic data released over the past couple of days has been fairly decent thus dampening recession fears for a while. However yesterday Bernanke warned that credit losses will restrain growth and as analysts said that Intel may be hurt by slower computer sales US stocks fell.
Market participants still expect the ECB to have cut the leading interest rate by at least 75 bps by year end. However under the current circumstances with inflation well above the central bank's target we find that this is extremely overdone. Furthermore yesterday's strong GDP data and recent comments made by several ECB members support this view for now.
As a consequence of the recent improvement in market sentiment - which everything else being equal should be negative for the USD in the short term - and our view regarding market expectations to future rate cuts from the ECB we have decided to recommend buying EURUSD (selling USDDKK) at this point. Furthermore we note that technical indicators seem to suggest that momentum is on the upside and that a retest of the recent peaks around 148.80 in EURUSD (lows around 5.00 in USDDKK) is in the cards.
NOK has strengthened quite a bit and has had further tailwind after the surprising rate hike in Sweden on Wednesday. Furthermore central bank governor Gjedrem said in a speech last night that rates in Norway may have to rise further to dampen the effects of a high growth in wages and that we may experience a longer period of time where rates in Norway are high relative to rates in other countries. Against this background investors are now pricing in a 25 bps rate hike at the monetary policy meeting in Norges Bank in March. As EURNOK seems to have broken trough several important technical levels and momentum remains on the downside it seems as though there is further room for NOK-strengthening in the short term. Hence we recommend selling EURNOK (buying NOKDKK) at the current levels.
Note that markets in the US are closed on Monday due to a national holiday.
Emerging Markets
As expected the Icelandic central bank left the key rate unchanged at 13.75 %. In our view the statement indicated an unchanged key rate on the next meeting on April 10th. This will support ISK. The risk to this is deteriorating conditions on the global financial markets, which will put pressure on ISK once again.
In Turkey the central bank lowered the key rate by 25 basis points to 15.25 %. It was the sixth consecutive reduction. In total the central bank has lowered by 225 basis points since September. We expect further cuts of 75 basis points this year. The Turkish investment case is still one of the best in emerging markets - the central bank is pursuing a reliable policy and the government has a strong mandate to carry out reforms.
We expect a day with only small moves in the markets, due to the lack of important US-data. We are neutral on all of the four currencies we follow closely. However, in the short term we rank them as follows: TRY, ISK, CZK and ZAR.
Today's key events
10:00 Trade balance (NOK)
11:00 Trade balance (EUR)
11:45 ECB's Quaden and Liikanen speak (EUR)
15:00 TIC data (USD)
15:15 Industrial production (USD)
15:45 ECB's Trichet speaks on a structural reform (EUR)
16:00 Consumer confidence from Uni. Of Michigan (USD)
18:45 Fed's Mishkin speaks (USD)
19:00 NAHB housing market index (USD)