Basics For Every Forex Trading Beginner

There is a lot of information out there for Forex currency trading beginner. If you have decided that your ultimate goal is to become an expert foreign exchange trader, you should take a look at some must-have information. The first thing that should concern you is to find out what exactly Forex is all about.

The Forex market is one of the biggest financial investment markets in the world. Many think that the stock market is huge, but it can not quite measure up the size of the Forex market. Even if we add the futures market to the stock market, the Forex market would still have a bigger amount of money being traded every day.

In the past, only people with large capital are allowed to trade in the Forex market. Thanks to the presence of online trading companies, average investors can also have their share in this exciting field today. That being said, you still need to be able to afford the risk of financial loss.

When doing Forex Trading, people are actually buying and selling different currencies in the world. You buy one currency while sell another. As such, currency trading always involves pairs, and quotes of currencies also come in one currency against another. The major players include the U.S. dollar and the Canadian dollar (USD/CAD), the Euro and the U.S. dollar (EUR/USD), the U.S. dollar and the yen (USD/JPY) and the Australian dollar and the U.S. dollar (AUD/USD).

There are many advantages to trading in the Forex market. The transactions are fast because everything is electronic. You also are assured that there are often people who would want to trade with you. This is simply because there are so many people who are trading everyday and every hour of the day. You can buy and sell at anytime whenever you want to.

One other attractive aspect of currency trading is leverage. Your leverage capabilities are simply huge with a nearly unbelievable ratio of 50:1. With very minimal initial cash you can already manage a large amount of currency. This is probably the main reason why the market is quite attractive for those who want to increase their earnings impressively.

However, you should expect to get rich instantly in this market. People can lose too in currency trading. Those who do are often those who act impulsively with the hopes of getting rich instantaneously. If you do not take the time to learn the inner wheels of Forex trading and the technical aspects of leveraging, then you could lose everything you have put into currency trading.

As a Forex currency trading beginner, the best way to make sure that you have a rewarding and fulfilling experience with currency trading is to prepare yourself before diving into actual trading. If you are a small-time online investor, you can pick an online company that can help you learn. Many of them will allow you to first practice trading with imaginary currencies without any substantial cost or loss to you. Position yourself as a beginner and learn from the seasoned player, you will have a good chance of becoming an expert in this field.

Source: Jane MacRae

Forex Trading – How Can I Start?

The market of Forex currency trading has one of the biggest potentials for people to make money from it. As a result many people are currently interested in Forex trading and there are all sorts of information on the internet and in books and programs to learn about it.

While all this information is essential to your understanding of the market and how you can personally achieve wealth through it, you should keep certain strategies and tips in mind that overall summarize any information you will learn about this new business opportunity. You should invest a lot of time and energy studying in addition to reading articles like this one.

I would argue that the only proper way to do forex trading would be to first wait for the economy to stabilize, as the global economy right now is in turmoil and countries can suddenly increase or decrease their wealth which completely changes the Forex market at the time. Also be careful to keep your life in order. Any form of trading is a risky venture. It ALWAYS involves a risk of losing money, so keep that in mind when you invest, that you should never put your job or house on the line for something like this.

1. The first step to starting a successful career is to build a base of knowledge from which you can find your niche in the market and exploit it to your advantage. If you don’t know the basic strategies you will waste thousands of dollars and hours of your time on things that could have been avoided. You can choose automated Forex robots, or choose to go by yourself by learning from books or internet programs. Remember however that even if you use a automated software program you still need to learn the basics in order to tailor your robot to do exactly what you want it to do. An automated program is only as good as the one using it.

2. Manage your life before you manage your forex trading. Don’t be rash and believe in all of those get rich quick schemes, they are only playing off of your inability to make calm, calculated decisions when you’re infatuated with the idea of making money quickly. You need to have a plan laid out before you spend any money, you need a stable income to pay your rent, and DO NOT expect to suddenly make as much money as they advertise, give it at least 6 months before you can turn a profit.

3. Go slowly, walk, do not run. If you go all out chances are you’ll make some simple mistake that all beginners do and ruin your chances of slowly building a fortune, or you will quickly get discouraged and stop trading all together.

4. Currency will be around forever, unless of course aliens come and make everyone unite in peace and happiness. So until that day you have the opportunity to trade on the Forex exchange market. Spend your time being careful and plan everything out. Just like any new opportunity in your life, don’t rush into it headfirst and leave your back exposed, cover yourself, and don’t risk everything.

6 Reasons To Trade The Forex Market.

More and more savvy investor and entrepreneurs are shunning traditional financial markets, like stocks, bonds and commodities and building their fortunes in the foreign exchange (Forex) marketplace.
The reason why they are turning to the all electronic world of Forex trading is its numerous advantages over any type of investments.
Even if you are an experienced Stocks or Commodities trader you will discover how powerful the Forex is.
You can make $200 to $3000 in less than 30 minutes of work everyday.
Forex Trading is much less risky than trading currencies on the futures market, much more profitable, and a lot easier, than trading stocks.
Why should you trade the Forex market?
Here are the reasons why…

• The Forex market is open 24 hours, it never sleeps. You can enter a position, or exit whenever you want, whenever you are six days a week. You do not need to wait for the opening bell like if you was trading stocks. it is excellent for you as you choose the best time for you to trade.

• The daily trading volume of the Forex is around $1.5 trillion dollars. It is 30 times larger than the combined volume of all U.S. equity markets. This means that 1,498,574 skilled traders could each take 1 million dollars out of the FOREX market every day and the FOREX would still have more money left than the New York Stock would have daily!

• You profit in both raising and falling market. You have equal potential to profit in both a rising or falling market, because it’ s up to you to buy a currency, or to sell it, after you determined the market trend tendency.

• You can trade from anywhere. If you like to travel, this is a dream business, you just take your lap top with you and that’ s it, you can make money from anywhere in the world, all that you need is to be sure that you can access an Internet Connection.

• The leverage is considerable. In fact, you don’ t need a lot of money to trade Forex, it is recommended to start with $2000, but you can start with $300, then if you have a proved strategy, your investment will grow consequently, as you can trade up to 200 times your investment. You can trade 100,000- unit currency lots with as little as 1% margin, or $1,000. there is no comparison with the stock market where you need a big amount of money to start, if you want to see real profits. And beside that, you need to post 50% margin.

• Price Movements Are Highly Predictable. Price movement or highly volatile in the Forex, however, the foreign currencies market is moving in trends, and you can identify these trends – as they repeat in cycle- with the technical analysis.

• No commission fees. Unlike the stock market, brokers don’ t take commission on transaction.

To trade Forex, you don’ t need to have a lot of money to start; you can trade at any time, from anywhere, with a Internet connection, you will not have an order pending because of lack of liquidity, you will not have to work all during the day.
The forex market has many advantages over the other traditional investments, and for sure, it will give you more freedom, and more money.

Creating Profitable Forex Trading Systems in Five Easy Steps

One rule of thumb that every aspiring entrepreneur should consider is that to make colossal profits, you should be knowledgeable about how to do it by yourself—and not rely on other’s efforts. Being autonomous from other people will help you determine what things are best for your business.

Such rule applies on all types of investments, including foreign currency trading, or generally known as Forex trading. It cannot be denied that Forex is the biggest existing market around the globe, which is estimated to have an excess of 2 trillion U.S. dollars worth of foreign currencies are traded every day. It is larger than the magnitude of the New York Stock Exchange, which is approximately 50 billion U.S. dollars. Thus, Forex market exceeds all combined equity markets around the world.

With such colossal wealth circulating around the Forex market, one of your financial aims is to grab a main slice of that $2 trillion average each day turnover in the market. How you will be able to get a large portion of that average turnover if you do not know how you will manage your Forex business? Although you cannot live in the market alone (you need business partners and/or financial advisers to help you along), only you can decide what the best Forex business there is for you.

To get colossal profits out of your Forex trading career, you need to create your own beneficial system—a trading system that will bring your not just hundreds but thousands of dollars worth of Forex revenues. Such trading system is available on the market, but as previously mentioned, you need to be autonomous—and you need to have your own Forex trading system that will help you achieve your financial goals.

For new traders, it is tough for them to device their own trading system since they do not have too much knowledge about the Forex market. However, even a neophyte trader can device a trading system that will fit on his personal preference and needs—in just five easy steps!

Before we talk about the five trouble-free steps towards a profitable Forex trading system, you need to learn firstly the three main characteristics of a thriving Forex trading system. These are as follows:

1. A successful Forex trading system is easy. There is no need for a complicated trading system with too many rules. It is a proven truth that plain systems work better than difficult ones, and they have higher chances of success despite of the “brutal” characteristic of Forex trading.

2. A thriving Forex trading system cuts losses and runs profits. Remember that you need a trading system that gets the colossal possible profits and eliminates losses rapidly, if not at once.

3. A thriving Forex trading system follows long-term trends. You will never cover your losses if you are just generating small profits. Consider that the Forex market is worth $2 trillion U.S. dollars, thus there is no point in trading in exchange for just small profits if you have the chance to make trades for larger revenues. Focus on long-term trends and you will be able to see better results.

Now, here are the five easy steps in building a gainful Forex trading system:

1. As previously mentioned, your trading system must be as easy as possible. Incorporate few yet important rules and an extensive investment management system.

2. Always look for long-term trends (preferably on a weekly basis), then shift to daily charts and to time entry. This will help you analyse market trends efficiently.

3. The best way of trading foreign currencies is through breakout manner.

4. Every time watch for any break that you will note on your chart, which is normally confirmed by stochastic crossed with bearish divergence. This will be your great timing tool whether you will enter a particular deal or not.

5. You must add effective time management within your system. Time is gold and is one of your precious resources. Design a trading system that is time capable—where you can make best use of the potential of your time resources to generate huge profits.

Get away with difficult systems; it will just ruin your entire Forex trading career. Create a simpler one and see for yourself how lucrative it is.

Forex Market: Currency Pairs and Forex Quotes

If you are new to the forex market, you might find forex quotes confusing. Do not allow yourself to be overwhelmed with forex quotes. In fact, reading forex quotes can be quite easy.

In reading forex quotes or currency pairs, there are two important things that you must keep in mind. First is that the currency being quoted first is what we refer to as the base currency. Second is that the value of base currency always equals to 1.

The centrepiece or focus of the forex market is the US Dollar. It is also often quoted as the base currency for a lot of pairs. A currency pair that has the US Dollar as the base currency is what we call “major”. Examples of major currency pairs are USD/JPY, USD/CAD, and USD/CHF. In major currency pairs, quoted currencies are expressed as the US Dollar, specifically, one (1) US Dollar for every, or a fraction of the, unit of the second currency quoted in the pair.

As an example, let us take the US Dollar and the Swiss Franc. In the currency pair USD/CHF, the base currency is the US Dollar. In the quote USD/CHF = 1.0806, one unit of the US Dollar is equivalent to 1.0806 units of Swiss Francs.

If a currency goes up, you must take note of the base currency. In the aforementioned pair, the US Dollar is the base currency. If the quote goes up, it simply means the value of the US Dollar has increased compared with the value of the Swiss Franc. If the quote goes down, then one can easily conclude that the value of the US Dollar has depreciated to a certain degree.

There are cases when the US Dollar is not the base currency. We often see the US Dollar as the quoted currency when it is paired with the Australian Dollar (AUD), British Pound (GBP), and Euro (EUR). Let us take the AUD/USD currency pair quoted at 0.8044. This shows that one unit of Australian Dollar is equivalent to 0.8044 or less than one unit of US Dollar. One can conclude that the Australian Dollar is weaker than the US Dollar. If the quote goes up, then it means that the US Dollar has weakened against the Australian Dollar.

Currency pairs do not always involve the US Dollar. These currency pairs are referred to as cross currencies. Examples of which are EUR/AUD, EUR/JPY, CHF/JPY, and EUR/SGD. Let us take the currency EUR/SGD pair quoted at 2.0373. This shows that one unit of Euro is equivalent to more than two units of Singapore Dollar or 2.0373 Singapore dollars.

Source: Bart Icles

Forex Option Trading to Diversify Your Forex Trading

Forex option trading is a hedging instrument, used not only by big financial institutions, but also by many individual Forex traders. Forex option trading is a great tool for implementing both, hedging and speculating strategies. Forex options are among the most liquid options in the world. The buyer in this case becomes a holder of a foreign currency option. The seller becomes the writer, or the granter.

The forex option holder receives the right to exchange a predefined amount of currency at a predefined date and price. The option buyer is obligated to pay a premium to the seller of the option. In fact, this is the only liability of the buyer, making Forex option trading a field with very limited liabilities. The forex option seller has two ways to precede with his/her option – to buy the contract back or to hold it until its expiration.

Forex option trading requires buying at a fixed price, in a fixed amount as well as at a fixed expiration date. All of this unties you from the dangerous market fluctuations.

Do Forex options always get exercised? As a matter of fact, most of the time the options are not exercised by their purchaser with the Forex option trading; options are often offset until they expire. If the option gets exercised, a spot position is assigned to the option holder. There also is a threat of an option expiring worthless, if at the expiration time the strike price is lower than the purchase price.

As mentioned above, you only pay a fixed price for the transaction when you buy a Forex option. Forex option trading will safeguard you against losing more than you have invested into the option. In the event of the final strike price on the market being higher than the purchase amount, you will instantly profit. In the event of the final strike price on the market is lower than the purchase price, you will lose. However, you will never lose more money due to this fixed price, in case your transaction becomes worthless.

Forex option trading is applied strictly at the international exchanges, since it is a hedging instrument. While being probably riskier than regular Forex trading due to its uniqueness, Forex option trading is also potentially much more profitable.

There are two types of options in Forex option trading- call options and put options. Call options give the right to buy currency, and put options give the right to sell currency. Both these options generally change in respond to the change in volatility, i.e. if the volatility falls, the prices of both options also fall. There are common and customized Forex options, respectively called “plain vanilla” and exotic.

In order to shield yourself from potential losses, it is better to follow general safety with Forex option trading:

1. Do not place a large chunk of your total capital into Forex option trading.

2. Do not try to trade at all times. It is better to patiently wait for the proven signals.

3. Trade on a Forex option trading demo account prior starting to trade live.

Forex option trading is a good way to learn and understand more about the Forex market. Forex option trading is a risky but also potentially very profitable Forex trading instrument.

Source: Steve Maenshel

Forex Market Update 15-12-09

Market Comments:

The Yen caught a tailwind to open the week on a much stronger than expected Q4 Tankan survey and on assist from Bunds, which rallied strongly in the European session after last week’s rather steep sell-off. An interesting juxtaposition of article on our Bloomberg terminal this morning as one article proclaims “Yen Favored for Carry Trades as Japan Faces Deflation”, while another shouts “Why Japanese Government Bonds Yielding 1.3% Offer World’s Highest Returns”. The former article is rather interesting as it argues that Japan could become the funding currency of choice for carry trades as its Libor rate drops below the US rate. Another potential JPY negative in the New Year is fiscal concern as the government looks to stimulate its way out of a new deflationary rut with heavy spending that will only add to the world’s heaviest public debt burden. This could be a growing theme in 2010 and we may have seen a “distant early warning” of this with the large recent rally in USDJPY. The latter article simply points out that Japanese debt was the world’s best performer in November due to the Yen strength. The flipside of deflation is, of course, that each unit of a currency in a deflationary country becomes more and more valuable over time – and this is the paradox of the carry trade and trying to sell low yielders.

Pound rebounds on Dubai bailout
Abu Dhabi agreed to shovel $10 billion dollars into the real estate black hole of Dubai World, which allowed the latter to make good on debt payments that come due today and to buy time in an effort to renegotiate the terms of other debt. This boosted the pound overnight, with EURGBP trading back below 0.9000 at times in the European session after a weak close on Friday . Tonight we get the RICS House Price Balance from the UK. It is hard to believe that UK housing has come full circle and is actually appreciating in price on YoY comparisons. The RICS balance has fast reached close to the peak of its historical range.

Chart: GBPUSD
Three days in a row of indecision for GBPUSD heading into today. The recent break of the 1.6250 neckline-like area failed to generate a firmer southerly push for the pair, but neither was there a strong upside reversal. The recent low just below 1.6200 was very close to the key 0.618 Fibo, so that level will be in focus on any further weakness.  A break could lead to a test of the 200-day moving average, which is fast rising toward the 1.6000 handle. To the upside, bears would be discouraged by any close back above the 1.6350/75 area.

Looking ahead
The divergence in the old theme of the USD and risk appetite moving in a reflexive lock-step is clearly being challenged of the last week, a very interesting divergence from past behavior. Let’s see if this persists – it certainly makes it easier to believe in a continuation of the greenback rally when we don’t have to fixate on this correlation. To get the strong USD correction fully into gear here, we’d like to see CAD and AUD fail key support levels vs. the greenback as well. AUD remains supported on the recent employment report and continues to enjoy strength from risk appetite. The key support levels in AUDUSD at the moment are 0.9015 and 0.8900. To the upside, the important tactical resistance line is clear at 0.9125.

Key event risks out of the US this week that will help determine whether the USD rally has any legs include  PPI tomorrow and CPI Wednesday ahead of the week’s main even later Wednesday: the FOMC meeting and “rate decision” – i.e., monetary policy statement tweaking.

Forex Market Update 3-11-09

Market Comments:

This week has already picked up where last week left off, with yet another direction change in most of the USD crosses in Asian and European trading, though so far, the USD sell-off has been somewhat weaker than Friday’s USD rally. Clearly, the market is on tenterhooks after the dramatic expansion in volatility late last week and wondering whether this was a calendar month phenomenon or the real deal as we go into a new month and a week packed with event risks. 

JPY volatility
As if volatility wasn’t bad enough, JPY crosses swooned due to some bizarre situation in Tokyo with the ZARJPY cross and a misquote that triggered all manner of stop-losses across the board – even in other JPY crosses, so the sell-off and comeback that appears on the charts may be an artificial development from a technical perspective. It was interesting to note, nonetheless, that EURJPY once again found support right at its 200-day moving average, as the overnight action underlines that level as critical for the longer term outlook. JPY crosses are likely to remain the high beta crosses this week with all of the economic data and central bank’s decisions weighing on both risk appetite and interest rates as cross-market volatility is clearly heating up here.

Tonight’s RBA
AUDUSD slipped to a new low overnight in the Asian session, but that low couldn’t hold after strong house price data  has the market looking for that extra bit of hawkishness in tonight’s (Asian Tuesday) RBA rate announcement. Rate differentials between AUD and the USD (and more other currencies, for that matter) are still well off recent highs, so whatever the RBA has planned, it will need to reinvigorate spread widening for the AUD to regain the upper hand across the board. Risk appetite will also need to make a comeback for the AUD rally to get back on track. As we suggested last week, the AUDUSD rally may be facing structural threats from a technical perspective. Regardless of that latter fact, if the minority of analysts looking for a 50-bp. hike tonight are correct and risk appetite snaps back, we could see a rush back to 0.9300 in a hurry.  This is a busy week for data out of Australia as well, with the AiG services survey and Sep. Retail Sales set for release in Australia’s Wednesday session.

GBP fadeaway
GBP fell out of bed to start the week after its rather odd bout of overexuberance late last week. The poor growth data from Q3 suggests the market may be looking for the waffling BoE to lean more on the side of QE than it expected before the latest batch of numbers. Still, home price data suggests that the easy money policy continues to prop up asset prices and the latest manufacturing PMI out today was quite strong. Industrial and Manufacturing Production data are also out on Thursday just ahead of the BoE decision. Regardless of the direction in risk appetite this week, we suspect that the USD will outpace GBP unless the BoE comes out with a more hawkish message on planned exit from QE than we or the consensus expect. Tactically speaking, the line of support around 1.6350 is interesting for today’s US session, and the two-week low at 1.6250 is the bigger potential downside trigger.

Looking Ahead
The US ISM manufacturing data is not likely to surprise to the downside today after two of the three regional surveys surprised strongly to the upside in October. The market has bigger fish to fry than the ISM anyway this week, and many are writing off any uptick in the manufacturing side of the US economy as part of the inventory restocking cycle, especially in autos after the Cash for Clunkers depleted inventories. Remember once again that we have the RBA up tonight, the Fed up on Wednesday, and the ECB and BoE on Thursday. This is all capped off with the US employment report Friday. Certainly a week for treading carefully!

Chart: GBPCHF
GBP found important resistance today it seems, as evidenced in a cross like GBPCHF, where the two-wave correction appears complete after an attempt at the 55-day moving average. The sell-off back through the old high suggests that further weakness toward the rising line of consolidation is the path of least resistance for the moment.

Forex Market Update 2-11-09

MAJOR HEADLINES – PREVIOUS SESSION

• CA Aug. GDP out at -0.1% m/m vs. +0.1% expected and flat prior
• US Sep. Personal Income out at flat, as expected, vs. revised +0.1% prior
• US Sep. Personal Spending out at -0.5%, as expected, vs. revised +1.4% prior
• US Q3 Employment Cost Index out at +0.4%, as expected and unchanged from previously
• US Oct Chicago PMI out at 54.2 vs. 49.0 expected and 46.1 prior
• US Final Oct. Univ. of Michigan Confidence out at 70.6 vs. 70.0 expected and 69.4 previous
• China Oct Manufacturing PMI out at 55.2 vs. 54.7 expected and 54.3 prior
• AU Oct. AiG Performance of Manufacturing out at 51.7 vs. 52.0 prior
• AU Oct. TD Securities Inflation out at -0.3% m/m, +1.2% y/y vs. flat/+1.3% prior resp.
• UK Oct. Hometrack Housing Survey out at +0.2% m/m, -4.2% y/y vs. +0.2%/-5.6% prior resp.
• AU Q3 House Price Index out at +4.2% q/q, +6.2% y/y vs. +3.0%/+4.3% expected and +4.2%/-0.7% prior
• JP Sep. Labour Cash Earnings out at -1.6% y/y vs. -2.1% expected and -3.1% prior

THEMES TO WATCH – UPCOMING SESSION

(All times GMT)

• Sweden PMI Survey (0730)
• HK Retail Sales (0830)
• Denmark Retail Sales (0830)
• Swiss SVME PMI (0830)
• GE PMI Manufacturing (0855)
• EU PMI Manufacturing (0900)
• UK PMI Manufacturing (0930)
• US ISM Manufacturing (1500)
• US ISM Prices Paid (1500)
• US Pending Home Sales (1500)
• US Construction Spending (1500)
• Swiss SNB’s Jordan to speak (1630)
• US Fed’s Tarullo to speak (2000)

Market Comments:

It was a disappointing close to the month on Friday for those looking to grasp risk by the horns after Thursday”s US GDP release. All the positive sentiment evaporated and Wall St gave back all the gains, and some more, though there was no one specific news item or event that triggered the heavy aversion to risk. Indeed, US data releases were generally better than expected with the Chicago PMI coming in at a very strong 54.2 versus 49.0 expected while the final University of Michigan confidence was revised higher to 70.6. The continued improvement in these kinds of numbers may be an encouragement to the bulls ahead of this week’s various ISM releases.

The weakness was apparent right from the get-go with the financial sector particularly vulnerable. Adverse comments on the outlook for the commercial real estate sector (a huge “crash” in the sector is just beginning) from billionaire investor Wilbur Ross and a negative speech by George Soros (the recovery is liable to run out of steam with a double-dip possible in 2010 or 2011) contributed to the gloomy mood and talk that Citigroup was facing more significant write-downs effectively consigned risk appetite to the dustbin.

The weakness of the financial sector also hit the headlines over the weekend as it was announced that CIT had formally filed for bankruptcy protection amid a “pre-packaged” restructuring supported by its creditors. While relatively old news and not unexpected, the headline caught the attention of early Asia traders and we saw a heavy “risk-off” move in currencies shortly after the open ( though, as has happened before, some suspected that traders had mistaken CIT for Citigroup!). In addition, another 9 banks were closed by the FDIC at the weekend bringing the total number of failed banks to 115 this year, the most since 1992.

So generally we started the week with a certain risk aversion theme permeating through markets and early thin liquidity adding to the mayhem. Optimists might wish to latch on to the better Chinese data at the weekend when PMI registered an improvement to 55.2 in October from 54.3 the previous month. It was encouraging that improvements were widespread across the various components, suggesting the economic rebound is broadly on track despite the tightening of credit control measures implemented by the China Banking and Regulatory Commission (CBRC).

Other positives for risk could be garnered from the Australian data that was also released this morning. The Australian government revised its near-term growth and inflation forecasts in its latest mid-year economic and fiscal outlook, upping growth for 2010 to +1.5% from -0.5% previously and +2.75% for 2011 from 2.25% previously. Inflation was also revised higher to 2.25% through 2010 to 2012, though still within the RBA’s target rate. In other data releases, the house price index saw another strong recovery for the second quarter in a row with a 4.2% q/q gain and the first annual improvement (+6.2%) since Q3 2008. AUD managed to regain the 0.90 handle slowly but surely.

As a result, risk was out of the emergency room by midday (though equities remained heavily in the red) and risk currencies staged a minor comeback after the early fall. Asia has been rife with talk that the wild moves early in the session were due to one bank incorrectly executing an order. With a very heavy risk event calendar this week one suspects that risk-on/risk-off sentiment will be switching with alacrity so it may be prudent not to get too attached to positioning one particular way. Today’s data calendar is populated by numerous PMI and ISM surveys of the manufacturing sector which have all been showing more positive tendencies of late.

Forex Market Update 22-10-09

MAJOR HEADLINES – PREVIOUS SESSION

• US Weekly MBA Mortgage Applications out at -13.7% vs. -1.8% prior
• JP Sep. Merchandise Trade Balance out at ¥520.6b vs. ¥620.8b expected and revised ¥183.3b prior
• JP Sep. Trade Exports out at -30.7% y/y vs. -29.7% expected and -36.0% expected
• JP Sep Trade Imports out at -36.9% y/y vs. -38.0% expected and -41.3% prior
• China Q3 GDP out at +8.9% y/y vs. +9.0% expected and +7.9% prior
• China Sep. PPI out at -7.0% y/y vs. -7.4% expected and -7.9% prior
• China Sep. CPI out at -0.8% y/y, as expected vs. -1.2% prior
• China Sep. Retail Sales out at +15.5% y/y, as expected, vs. +15.4% prior
• China Sep. Industrial Production out at +13.9% y/y vs. +13.2% expected and +12.3% prior
• China Sep. Fixed Asset Investment YTD out at +33.3% y/y vs. +33.1% expected and +33.0% prior
• JP Aug. All Industry Activity out at +0.9% m/m vs. +0.4% expected and revised +0.8% prior
• JP Sep. Supermarket Sales out at -2.4% y/y vs. -3.4% prior

THEMES TO WATCH – UPCOMING SESSION

(All times GMT)

• Swiss Trade balance (0615)
• Sweden Unemployment (0730)
• Sweden Riksbank Rate Announcement (0730)
• EU ECB’s Weber to speak (0730)
• EU Euro-zone Current Acct Balance (0800)
• UK Retail Sales (0830)
• UK BOE Lending Trends Report (0830)
• HK CPI ((0830)
• EU Euro-zone Govt. Debt/GDP Ratio (0900)
• CA Retail Sales (1230)
• US Initial Jobless Claims (1230)
• US Leading Indicators (1400)
• US House Price Index (1400)
• US Treasury’s Allison to testify (1400)
• CA BOC Monetary Policy Report (1430)
• US Fed’s Rosengren to speak (1430)
• US Treasury’s Barr to testify (1500)
• UK BOE’s Tucker to speak (1530)
• US Fed’s Lockhart to speak (1600)

Market Comments:

It was a bad day at the office for the greenback yesterday as the Dollar Index slid through the 75.0 mark to touch its lowest level since August 2008. It was interesting to note that a late sell-off in equity markets on Wall Street was not able to provide a sustainable lift to the beleaguered dollar and the index was left anchored to the 75.0 mark during the Asian session.

The dollar’s slide gave EURUSD enough impetus to break above the psychological 1.50 mark and currently seems quite comfortable above the level though gains past 1.5050 are seemingly a slow process. Among the more significant gainers against the dollar was GBP, which appears to be enjoying a bit of a hiatus from being the poor relation in currency markets. The strong up-move was promoted by a number of more-hawkish asides from BOE Governor Mervyn King, minutes of the last MPC meeting that showed members unanimously voting to keep the asset purchase plan unchanged at its last meeting, and reported large corporate flows linked to dividend payments. Not forgetting that the markets have been overly positioned short of the pound recently, both against the USD and EUR, and stops triggers looked brutal.

Asia walked in with all eyes on the China data that was scheduled for release. In the end, most indicators were in line with forecasts though the GDP numbers were a marginal disappointment. Q3 growth came in at 8.9% y/y versus a 9.0% forecast (though whispers had suggested it could come in above 9.1%). This proved to be the only disappointment though, with CPI and retail sales bang on forecast (-0.8% y/y and +15.5% y/y respectively) but it was the industrial production data that performed better, coming in at +13.9% y/y vs. +13.2% expected. There had been rumours circulating in markets yesterday that the data had been leaked and would be better than expected, and this proved to be true, so it is likely that this had already been priced into markets. The reaction post-data would seem to concur with this as the USD managed a slight rebound, pressing most major pairs some 30-40 points lower. The Index was up 0.3% by the Asian lunch.

Prior to the data release, a front page story in the FT caught the market’s attention as it headline that a top Chinese banker had warned on potential asset bubbles and was urging an immediate tightening in monetary policy, but the impact on markets was negligible. Indeed, after the data a National Bureau of Statistics spokesman assured that there would be no abrupt shift in policy with the *% growth target for the full year “a certainty”.

Other data releases in Asia centred around Japan, with trade data for September the major highlight. Exports were down 30.7% y/y and, while above the lows seen in February, indicate how difficult and fragile the global recovery has been. In the breakdown, exports to the US were down 34.1% y/y (similar to last month) while those to the Euro-zone showed a mild improvement (-38.6% y/y versus -45.9% last) and to China a greater improvement to -13.8% y/y versus -27.6% in August.

The Asian session was generally a “risk-off” session with the weak close on Wall St cited as an instigating factor. Add to this the possible disappointment in the China data and some suspicions that the liquidation of the Galleon funds may have a greater market impact than first thought. Nevertheless, EURUSD gave up the 1.50 handle but was sitting just above next support levels at press time.

Looking ahead to today’s session, UK data focuses on retail sales and the BOE’s lending report while the  Euro-zone sees August’s current account balance. The North American session is busier with weekly initial jobless claims, leading indicators and house price index. Canada’s retail sales data will precede the Bank of Canada’s monetary policy report. Another raft of Fed speakers tonigh as well.

Forex Market Update 21-10-09

MAJOR HEADLINES – PREVIOUS SESSION

• US Oct. NAHB Housing Market Index out at 18 vs. 20 expected and 19 in Sep.
• Germany Sep. Producer Prices fell -7.6% YoY vs. -7.1% expected an -6.9% in Aug.
• EuroZone Aug. Construction Output fell -11.3%  YoY vs. -9.8% in Jul.
• Canada Aug. Wholesale Sales out at -1.4% MoM vs. -0.4% expected
• Canada Sep. Leading Indicators out at 1.1% vs. 0.8% expected
• US Sep. PPI out at -0.6% MoM and -0.1% ex Food and Energy, vs. 0.0%/+0.1% expected, respectively
• US Sep. Housing Starts out at 590k vs. 610k expected and 587k in Aug.
• US Sep. Building Permits out at 573k vs. 595k expected and 580k in Aug.
• Bank of Canada keeps rates steady at 0.25% as expected

THEMES TO WATCH – UPCOMING SESSION

(All times GMT)

• UK Bank of England’s King to Speak (1915)
• US Fed’s Yellen to talk with reporters (1930)
• US Weekly API Crude Oil and Product Inventories (2030)
• US Weekly ABC Consumer Confidence (2100)

Market Comments:

The greenback touched a new low in the Asia session and into early European trading after stronger than expected corporate earnings from Apple boosted equity futures after the New York close yesterday. But the big round number at 1.5000 in EURUSD seemed to have the market shying away from pushing the USD further into its hole at least briefly. In Asia, the RBA minutes supported the hawkish RBA theme (the RBA said it was “possibly imprudent” to keep rates at such low levels and simply commented on the reasons for the Aussie’s strength without expressing any concern) and pulled AUDUSD above 0.9300 briefly before the pair eased back in European trading. Trichet was out trying to talk up the greenback once again with the usual comments about his interest in the US purported strong dollar policy. Other European officials were far more stark in their comments today, with one French official calling the strong Euro a “disaster”.  The unfairly strong Euro has become so pressing an issue that Trichet, Luxembourgs Juncker, and European Union Monetary Affairs Commissioner are planning a trip to China before the New Year. The intent is clear, though Juncker declined to “preannounce a message”.

NY Fed practices its exit strategies
Yesterday, the New York Fed issued a statement about the Fed’s test driving of the “reverse repo” exit strategy aimed eventually at soaking up liquidity from its massive easing and quantitative easing programs of the last year if a withdrawal of monetary accommodation becomes necessary. The statement was apparently aimed at stamping out speculation that the Fed is gearing up for an imminent end to its accommodative stance. The statement underlined that reverse repos are a normal part of the Fed’s activities, including “triparty” settlements:

 ”This work is a matter of prudent advance planning by the Federal Reserve, and no inference should be drawn about the timing of monetary policy tightening.  We have recently begun testing this capability with all involved parties and systems, and it is likely that the Federal Reserve will engage in additional tests in the future. No actual operations have been conducted as part of these tests. Recent Federal Reserve communications have also raised the possibility of expanding the set of counterparties he Desk might employ for conducting reverse repos beyond the Primary Dealers…..no decisions have been made regarding the types of firms that may be included.”

Brazil to tax inflows
Brazil has taken an interesting step in attempting to slow the pace of capital inflows and stem the appreciation of its currency by reintroducing a special capital inflow tax that it has used in the past. The 2.0% tax on all inflows is higher than the previous 1.5% tax and does not apply to equity transactions. Still, the move is strong enough that it is likely to disrupt the strength of the trend. This move came after yesterday’s story about Asian exporters looking to stem speculation in their currencies. Clearly, the development in currency markets are increasingly garnering a stronger and stronger official response from around the world and could slow the progress of recent USD weakening trend, all other factors being equal.

US Data, the USD and the JPY
The US data was a good test of the market’s  current themes: very ugly housing data puts a damper on risk, which is USD positive, while the very low PPI data suggests the Fed can continue to keep an accommodative stance as long as it wants to – a USD negative. Which side wins? The answer – as always of late – will be provided in the short term by the move in risk appetite.  The housing starts data and yesterday’s NAHB survey suggest that homebuilding is still barely moving and traffic of interested buyers is falling again now that it is too late to close a deal on a house purchase for first time buyers ahead of the expiration of the tax credit. Regardless of the effect on risk, the strong move higher in bonds today in the wake of the weak US data is likely to boost the JPY and see a reasonable correction in the overbought JPY crosses. USDJPY was down flirting with the 90.00 level after breaking through 90.40 support and could be in for a retest of recent lows if the round figure can’t hold.

Bank of Canada Guidance
The Bank of Canada was out with its interest rate decision just as we are finishing up this piece. The most interesting headlines are that the bank continues to expect to hold the rate at 0.25% through June of next year, that the strong CAD will more than offset growth factors, that it sees the Canadian economy at capacity in Q3 of 2011 (such confidence in a forecast!), that it still has policy flexibility despite low rates, and that risks to the economy are roughly balanced. This is relatively dovish relative to expectations due to the promise to keep rates low through June.

The rest of today…
With GBP trading at interesting levels of late, watch out for the speech from the BoE’s King later today. Also watch out for the US oil inventory data today and tomorrow. With oil up tickling the 80-dollar per barrel level, energy markets could suddenly become a drag on risk if they continue to rally as strongly as they have in the last few weeks.

Chart: GBPUSD
A lot of focus on GBPUSD today with its move through the trendline resistance. The big support at 0.9080 is also in play today in EURGBP. Mervyn King’s appearance could either confirm or spoil the technical break later in the day. From a fundamental perspective, it’s tough to see what the driver should be for a further appreciation in GBPUSD.

Forex Market Update 14-10-09

Pound disappearing act continues…
The pound reached new lows for the cycle vs. the Euro after the inflation data today failed to trigger any notion that the BoE would begin to fret the implications of the weak pound and its effect on inflation. It’s more than remarkable to see such low inflation readings considering the pounds remarkable fall of late. EURGBP was trading at 0.8000 a year ago – meaning the pound has weakened more than 15% in the last year, and yet the RPI retail inflation number is running negative on year-on-year comparisons? This kind of release really challenges proponents of the inflationist view, though some would argue that the 1.7% Core YoY CPI reading is still somewhat elevated relative to the average for the last 10 years. Considering the collapse of the currency, however, this is also a very mild reading. In any case, as long as risk appetite is otherwise healthy, this is a very pound-negative development as it encourages the view that the BoE can merrily keep its rates low and hope that a weak currency will help prevent the risk of deflation and revive investment in the country’s manufacturing and asset base.

UK Housing
Certainly the main asset market in the UK – housing – is showing strong signs of a recovery. The best and most leading housing related survey, the RICS house price balance – shows increasing percentages of respondents reporting price rises and the likes of the DCLG survey will likely turn outright positive for year on year comparisons in the months to come.

Compared to US housing….
In the US, meanwhile, the most popular S&P/CaseShiller survey’s most recent data point showed year on year comparisons still off more than -13%, and month on month readings that are only just beginning to stabilize just before an important tax incentive is about to expire at the end of November. Increasingly, however, it appears that politicians want to extend the tax credit beyond the original deadline. The bigger question for the housing market arrives somewhat later in next March, when the Fed will supposedly step back from its $1.25 trillion mortgage buying program. Housing will certainly not be the source of any recovery in end demand as the spectrum of likely outcomes for the US housing market run from stabilization at best, to large further declines at worst, as housing prices have some way to fall before they undershoot the longer term price trends.

ZEW – continued divergence in expectations vs. reality
The slightly lower than expected and lower than last month ZEW Survey of Expectations out of Germany grabbed the headlines today, but is not a particularly significant development as this fickle survey has shown little ability to predict much of anything in past cycles, even if it did begin surging higher in the months ahead of the actual equity market bottom in March. As we’ve indicated before, the most interesting phenomenon of note is the astounding gap between expectations
 and the “present situation” ZEW survey, which improved very slightly to -72.2 from -74 in August. This survey is normally a fairly consistent coincident indicator with, for example, the DAX index, and yet it has only dead cat bounced in recent months relative to the exuberant recovery in equities. Hmmm……in a recovery, sentiment about the present situation needs to be positive.

Intel earnings in focus
There are no real event risks in today’s economic calendar as the focus will likely mostly center on earnings guidance from Intel today, which reports after the US close. This is a bellwether kind of  company, so actual results in addition to its forward guidance will be an important test for the market – even FX – at a time of day that is not normally known for much volatility – so we should stay on our toes as the report could have sentiment implications for the next 24 hours, especially if the guidance strays into pessimistic territory, considering that the averages are perched close to the highs for the cycle.

Chart: AUDUSD
Interesting to note the reversal today after the pair pushed to strong new highs on no news in particular. The last phase of appreciation has been steeper than previous waves of action in this uptrend and the rally has outrun the support from interest rate spreads widening in favor of the Aussie. If we have an ugly day on the equity markets today or tomorrow, this pair could be in for a steep consolidation lower.

Forex Market Update 9-10-09

The much better than expected labor report from Australia made the RBA look smart after having just done a surprise rate hike. The picture seems to be rosy in Australia, where they actually worry about a bubble in the housing market (must be the only place in the world by now). Critics are saying that Australia is just a sub function of Chinese growth, but so far that has served the Australians well. The level of economic activity has clearly not only stabilized but risen considerably since March. It looks like AUD is a “buy on dips” — certainly as long as the stock market continues higher and the risk appetite is strong. Who knows, if/when S&P500 is approaching the big-picture 50% Fibonacci retracement around 1121, the AUDUSD might be trading at parity?

Another intersting development today and yesterday is the news that the Latvian policy makers are considering (already decided) that lenders in the Latvian mortgage market can only collect collateral worth the ACTUAL value of the house that the mortgage was written on. This is a very dramatic change from the prior policy (law) where home owners were obliged to pay the whole value of the ORIGINAL loan. With a housing market down by around 70%, huge writedowns are waiting for particularly Swedish banks, where the entire shareholder equity is now at stake. It more and more looks like there actually was a reason for the Swedish FinMin hysteria last week. A bail-out is in the cards and both SEB and Swedbank are under pressure. The same goes for SEK. Look for a break of 10.37 in EURSEK today or tomorrow. Another interesting play would be NOKSEK, where the Latvian showdown apparently was feared/sensed in the past 12 trading days. Short-term SEK weakness could also be justified on the back of the disappointing Industrial New Orders and Production earlier today.

Another development these days center stage is the continuous rally in EURUSD (or rather weakness in USD). Rumors of the dismissal of the USD as a reserve currency and Asian central bank buying of gold and EUR are everywhere these days – even the ones that are promtly denied. That might be the forex zeitgeist and it more and more looks like these kinds of expectations and rumor-mongering could become self-fulfilling profecies. EURUSD faces tough resistance around 1.4844 (Sep high) and 1.4865 (technical level from a year ago – see above graph).

We expect the major USD support levels to be tested this week.

Forex Market Update 7-10-09

Market Comments:

RBA surprise hike
The RBA surprised markets with a move overnight, becoming the first of the G-20 banks to hike interest rates. And even thought the market was increasingly leaning toward a hike, there was more than enough surprise to pull AUD significantly higher vs. the broader market. This and renewed risk appetite brought AUDUSD within shouting distance of 0.8900, a new high since late last summer. The 2-year interest rate differentials for the US and Australia are still a tad below the highest level from September, however, when AUDUSD was trading a bit lower, so the direction for AUDUSD after the immediate kneejerk here will still depend on a further widening of the differential and continued robust risk appetite. In other words, it’s all priced in at the moment.
The RBA explained its decision as a result of an economy performing more strongly than expected and an inflation outlook in which “inflation will not fall as far as earlier thought.” The RBA also mentioned that Chinese growth has been very strong. On the strength in the Aussie currency, the RBA simply noted that the currency was strong and that its strength was “considered”. Lack of concern on the currency was also a green light for the Aussie bulls. Barring any exogenous shocks, the RBA is likely to hike at its next two meetings as well.

Sterling hits the skids
The pound hit the skids once again on awful production data, particularly concerning since the very weak pound (which is scraping very long term lows against an evenly weighted basket of the remainder of the G-10 currencies). GBP will continue to trade like a carry trade funding currency, it seems and the rejection at 1.6000 looked interesting in GBPUSD, with the recent 1.5770 low for the cycle the last local line of support. In EURGBP, the 0.9300 are is the key local resistance.

Anti-dollar conspiracy?
The weak USD action overnight in Asia was aggravated by a story in the UK’s Independent, which described a plot by Gulf Arab states, China and others to move oil pricing away from the dollar and possibly to a basket of currencies. The timing of the article with the RBA’s actions and gold stretching higher gave it more impact, even if the Saudi central bank governor later emerged to flat out deny the allegations in the article. Really, such a “plot” is necessary and would be better for the long run anyway, as it would help to iron out global imbalances caused by USD pegging. And even if the story was true, it discussed a timeline for such a move stretching to 2018.

Latvia and SEK (again)
Interesting for the Swedish krone at the moment are the goings on in Latvia, which may be moving toward a meltdown according to sources and some of their latest actions, as they refuse to go all out to introduce austerity in the state’s budget. The broader liquidity and risk picture suggests that the international community might let this one go now, since the contagion risk is lower now that so many believe things are headed the right way. This will inflict significant costs for Sweden, however, and explains why the SEK rally has derailed in recent days. Stay tuned there as the time line may be rather compressed and EURSEK is closing in on an interesting resistance area at 10.37.

Looking ahead
Watch the Canada Ivey PMI out shortly to see if CAD can also break to new highs vs. the USD. CAD is a bit like a weaker flavor of the carry trade. Canada has the commodity credentials of the Aussie or the like, but not the hawkish central bank expectations, so it has been slower to respond to the risk rally. Also watch out for tonight’s employment report from Australia – did the RBA get a sneak peek? Would certainly be interesting contrast if the report is as weak as it was last month.

Chart: AUDUSD
The performance in AUDUSD looks very strong, but the expanding triangle formation we are seeing is theoretically a bearish one – though we would certainly wait for a break of the lower bound of the formation for confirmation.

Forex Market Update 6-10-09

Market Comments:

The USD weakened again late Friday after the market had apparently already priced in enough risk aversion after Wednesday’s very negative ADP number, so that the negative Nonfarm Payrolls surprise was actually priced in. The USD limped into the close as equities staged a bit of a comeback. The G-7 offered little help, as it merely issued a milquetoast statement on “disorderly” currency moves being detrimental to stability – essentially a repeat of a statement made in April.

More important for the future is to follow the trajectory of rhetoric such as Weber’s mention that there should be talks with “some Asian countries” about their currencies. This issue is at the crux of global imbalances and Mr. Weber is right to worry, as the persistent, renewed USD-pegging by China is what is creating a good deal of Euro demand as they diversify reserves. Euro should be falling against the renminbi, not rising sharply because the USD is weak. There is also something fishy about the Chinese growth story – if the country is growing so strongly again, why not begin to let the renminbi back on its managed float, which would certainly see it strengthening against the USD? Keeping the current repegging regime is aggravating imbalances and is a position of weakness from the Chinese government, not one of strength. There must be fear within the regime that not all is as well as it appears on the surface…

The new Japanese FinMin Fujii moved deeper into the verbal intervention, trying to stem any effect he may have had on the JPY strengthening move of late, as he said that the government would intervene if the JPY were to move in a “biased direction”. This type of talk has become almost humorous, though it seemed strong enough to keep the JPY on its back foot for much of today’s session. More important for the reversal back to a weaker JPY late Friday was a rather climactic reversal in the steep rally in bonds after they crashed well through the 3.25% level in the US 10-year benchmark. That level now serves as a resistance level for yields and therefore as a resistance level for JPY crosses.

Aussie likely to be volatile tonight with the RBA set to announce its cash target. The last meeting failed to give convincing hints that the bank would raise rates at this meeting, and one has to wonder if the strength of the Aussie plays any part in determining the bank’s course of action. A majority are likely looking for a November hike going into the meeting, though a growing minority are looking for a hike tonight. So baseline expectation is essentially that tonight’s meeting will be a set-up meeting that hints the bank will move, even if the split expectations mean that direction for the Aussie will be either/or tonight. The biggest shock to the downside for the Aussie would come on no real hints on when tightening is to occur.

For now, we look at the ISM non-manufacturing index for market sentiment. It is expected to rise to the 50 demarcation level that divides expansion and contraction for the first time in over a year. The Manufacturing ISM often leads the services PMI, though some might say that it could be a bit different this time around as the collapse in manufacturing has created a need to rebuild inventories that may not follow through to the services side of the economy. In any case, this survey is key, as the services sector is the dominant sector of the US economy. The weak USD trend remains in place until/unless we take out the highs in the USD from last week.

Chart: USDJPY
For USDJPY, we now have a pretty reasonable argument for basing action in place, after the two recent hammer reversal formations, though we need to see good follow through above 90.40 to get confirmation. Back below the recent lows and we’re back to the old bear trend. Again, interest rates are in important coincident indicator, especially for the higher beta crosses like AUDJPY, which is guaranteed to be a big mover tonight.

Forex Market Update 25-09-09

THEMES TO WATCH – UPCOMING SESSION

(All times GMT)

• US Aug. Existing Home Sales (1400)
• US Fed’s Evans to Speak (1430)
• US Treasury Secretary Geithner to Speak ahead of G-20 (2030)
• New Zealand Aug. Trade Balance (2245)
• Japan BoJ Meeting Minutes (2350)
• Japan Aug. Corporate Service Prices (2350)

Market Comments:

USD rally fizzling quickly…
The USD rally that began so enthusiastically late yesterday after the FOMC meeting failed to keep the risk party going, has already started taking on water in today’s European session. The USD bulls are having a tough time keeping a lid on EURUSD and AUDUSD and USDJPY is almost back to its recent lows. This is a bit surprising if we glance over at equity markets, which are still well off yesterday’s highs in the S&P futures, though the Asian and European sessions today were fairly constructive. The JPY is the only clear winner at the moment – partially no doubt due to bond strength yesterday, though seasonal effects right here before the end of the Japanese economic half-year and rumors of corporate repatriation may also be playing a part.

Pound knocked for another round
The salient development in today’s European session was a story out from the Telegraph announcing that policy makers are looking to convene a “crisis meeting” of economists next week to discuss the reasons for the pound’s fall and the BoE’s QE measures. The market apparently smelled fear in these actions and GBP was blasted back into the basement across the board. GBPUSD is back threatening the recent lows, with the bigger support at 1.6110 not far beyond. EURGBP set a new high since early April of this year. Speculation is swirling now on whether the policy makers could go forward with cuts on deposits by banks with the BoE, but from where we are sitting, the meeting may be more about playing defense and figuring out a way to accomplish the BoE’s objectives without causing a currency panic. Competitive devaluation is one thing that could have positive effects in the near term. while a currency meltdown is to be avoided. With similar problems to the UK (fiscal profligacy, low rates, etc…) in the US, this may be one of the reasons the USD has lost steam so quickly, as the market could be playing on this theme. Still – JPY has the same problems, and it is certainly not suffering at the moment, though its current account is positive enough for it to escape the immediate vulnerability of a country with a large deficit like the UK.

Interest rates on the radar today
Today is the final of the three huge US treasury auctions this week – with $27 billion of 7-year notes on the block. Now that the FOMC is out of the way and failed to produce huge surprises, bidders may feel more comfortable than in the auctions of the last two days (of 2-year and 5-year notes, in which results ended with higher yields than initially anticipated) and they may also like the higher yields on the longer duration debt. A strong auction is likely and could continue to support the JPY (again we note the conundrum of simultaneous strength in AUD and JPY – not likely to last for long…)

FOMC outcome – glacier change, but change nonetheless.
The Fed meeting is widely interpreted as slightly on the dovish side of the spectrum of possibilities, but it nonetheless marks the important beginning of an exit strategy since it provides a time table for withdrawal for one of the Fed’s “sets of tools” aimed at supporting liquidity and the flow of credit. The US economy is still on life support, but it will soon be on less life support, meaning that it will need to show a little more life on its own accord. In the economic intensive care unit, the Fed will have rolled away the debt monetization machine by the end of next month and the hulking mortgage buying machine by March of next year. Still in place, and not mentioned in the Fed’s statement yesterday, are other programs like the TALF aimed at consumer credit, commercial paper facilities, and various money market-related facilities. Even discussing rate adjustments at this point is extremely premature in the US. Norway, on the other hand, is ready to tighten the screws next month.

Back to the same old same old.
All in all, the market seems to have taken the not-terribly-surprising FOMC developments and a slightly disappointing German IFO in stride, and we are back to being glued to the S&P500 for determining a direction for the USD. Also watch the G-20 for developments of interest, which may be few and far between. Note that the end of the month here could be seeing some window dressing by performance chasers, who are looking to close the gap with their benchmarks. So market activity may shift gears as the new month arrives.

US data review
US Initial jobless claims were out at the lowest level on a seasonally adjusted basis since a brief spike in July – but for perspective, we are entering the key season for job losses, and the non-seasonally adjusted number is 5% higher than the number for last week, and some 35k higher than the jobless claims for the same week last year. Hard to believe that in this “recovery” that more people are firing initial claims now than then. We should probably expect strong Existing Home Sales numbers for today, with the Fed buying 80% of mortgages and in the dying months of the first time home buyers tax credit program. It will be nice to analyze a real economy some day rather than one propped up by endless public spending…..what are equity buyers thinking?

Chart: USDJPY
The battleground at 90.00 beckons once again as the end of the half year approaches. This will be an interesting area to watch – and USDJPY is one of the few currency pairs actually seeing a rise in volatility of late.

Active Trader Breakout Signals for Gold, Silver and Oil

by Chris Vermeulen

Gold, Silver and Oil breaks out to new multi week highs and shows signs of more strength to come. The charts below show both weekly and daily trading analysis pointing to higher prices for these commodities.

Weekly Gold ETF Trading

Gold closed on Friday at a 5 week high, breaking above its resistance trend line on the weekly chart. Weekly chart pattern breakouts carry much more momentum behind a move, than daily charts. This chart of gold (GLD fund) clearly shows a weekly breakout in the price of gold.

Also, I have drawn what appears to be a very large reverse Head & Shoulders pattern. It is this pattern, which is pointing to a much higher price for gold. The measured move for this pattern is the distance from the Bottom (head) to the top (neckline), which is about $300 per ounce. If we see this chart break above the neckline over the next few months, then most technical traders will be buying gold up to $1300 per ounce, which would be the next major price target.

Weekly Gold ETF Trading – GLD ETF Fund – Price of Gold

Daily Gold ETF Trading

The daily chart breaks down the price action even more, allowing us to see the price movement for each day. This chart looks to be very strong, generating a buy signal for gold.

The $HUI:GLD indicator shows gold stocks are out performing the price of gold, which is very positive. The MACD and stochastic indicators are currently on a buy signals as well. When we combine these indicators with current price action, trend lines and risk management, we can find low risk entry points for trading in and out of gold.

Daily Gold ETF Trading – GLD ETF Fund – Price of Gold

Weekly Silver ETF Trading

Silver has much of the same price action as gold. Both are considered a safe haven and seem poised to move higher over the intermediate term. The weekly chart below shows silver breaking above its resistance trend line and surging higher in price.

Sometimes I see silver as a leading indicator for the price of gold. Gold only moved higher by 3.5% on Friday while silver surged over 12%. I expect to see gold catch up over the next week as new traders/investors see these clear breakouts.

Weekly ETF Trading – SLV ETF Fund – Price of Silver

Daily Silver ETF Trading

The daily chart for silver looks strong as well, but could be a little ahead of its self. We may see is pause for a day or two before continuing its move higher.

Daily Silver ETF Trading – SLV ETF Fund – Price of Silver

Crude Oil Trading

The last week in oil was exciting with prices breaking out and starting to run higher.  The cup & handle pattern for oil can be seen best looking at the daily chart. The measured move for the price of oil looks to be around the $75 level and then $85 after that. The cup & handle pattern is one of most powerful bottoming patterns and I expect oil will trade higher for some time.

Weekly Oil Trading – How to Trade Oil (USO, USL) – Price of Oil

Daily Oil Trading

The daily chart shows a clear picture of the cup & handle pattern. During this pattern, we have had two buy signals. I like to wait for low risk entry points when risk is under 3% and currently downside risk for trading oil at this level, is around 8%.

Waiting for low risk entry points with clear exit points is critical for trading commodities. Every one can buy gold, silver and oil but most don’t know when to cut losses, take profits or when to add to a winning position. That is what I focus on when trading these volatile commodities.

Daily Oil Trading – How to Trade Oil (USO, USL) – Price of Oil

TheGoldAndOilGuy’s Trading Conclusion:

The commodities market has been extra volatile the past 9 months making it difficult to have low risk setups. We have been getting several buy signals but not as many setups to actually put money to work because risk has been over 3%.

I think these commodities gold, silver, and oil are poised for a nice move higher. I just want to mention I am not a gold or silver bug always thinking they will rally to ridiculous prices like $8000, which several forecasters are shouting out. I like to follow the price one – two moves at a time then review the current situation.

That being said, with the global economy not looking to hot, it puts gold and silver in a great situation. Countries, and private investors and traders are accumulating precious metals, as protection from falling currencies and will most likely continue doing this for some time, which will continue to push gold and silver higher.

If the broad equities market rolls over, I expect to see gold move higher with money moving into these safe havens. So, I think the odds are good for prices to rise over the next 4-8 weeks.

Oil appears to be in a similar situation. If oil prices continue to climb, I expect it will put a damper on the equities market, which will help push gold and silver higher.

While I would like to see prices move higher for all investment types, it’s important that traders and investors protect themselves from substantial loses. I focus on following price action, volume, momentum, risk management (Low Risk Setups), portfolio allocation and some fundamental data, but in my opinion most fundaments have gone out the window

Broader Market Technical Analysis Update

by Roy Martens

The big picture hasn’t changed much this past month. The most surprising news, at least for the ones in the dark, was that China is hoarding Gold. Their reserves have risen a lot and they intend to expand their stockpile even further. Although this is very good news for Gold in the long run it didn’t really have a big impact on the Gold price last month, which is kind of surprising.

Such news is huge because the monetary reserves of China are enormous and although they say they will not shift their reserves into Gold at this time, I wonder if they will still hold that position if the dollar should tank.

Most likely this positive news was put aside by the announcement that the IMF intends to sell a lot of its Gold in order to raise cash and support the various countries that are in trouble, which should have a negative impact. We, however, have to look past this negative force for Gold because once the Gold reserves of the IMF (and other Central Banks) are gone there is nothing left to cap the price of Gold!

Due to the selling of the IMF ,Gold could suffer in the short term but it is my opinion that this fall (should it happen) will be a very good entry level for people that don’t already own the yellow metal.

As the Gold chart will show from a technical point of view, Gold is currently at an important stage and this upcoming month could be the set up for a rise to the highs or a fall to retest the $700 level (Impact of IMF selling Gold).

Whatever the outcome, Gold bulls are certain that Gold will reclaim its power further down the road. Will China be the only one to see the light? I don’t think so, there will be many other countries that will follow in China’s footsteps and I wouldn’t be surprised if a few of them, for example the other BRIC (Brazil, Russia, India) countries are already doing the same as China.

All charts are courtesy of Stockcharts.com

GOLD

The picture for Gold hasn’t changed much this last month. The flag pattern is still intact.

However, this pattern can’t continue for much longer because it will get too big to remain a valid flag, rather, it will then change into a channel. For now the blue lines are the most important ones to watch. They have to support Gold together with the 34 w. MA at $859.

If this level fails we can brace ourselves for a big fall, because the $700 will then be the next target again. As long as the $850 holds we expect Gold to break out of the flag pattern and start a new run at the highs.

SILVER

The Silver chart remains fairly positive. The flag pattern is still intact and completion doesn’t seem that far off.

The current correction wave could be a wave 2 but it is still too early to tell so this EW count isn’t valid yet. The chart is improving further with the 24 w. MA starting to curl up in support of an upcoming move. This move could be the wave 3 higher triggered by a breakout from the pattern.

The RSI and MACD are in perfect position to move higher and a new buy signal in the DMI (cross of buying power over selling power) will follow quickly if Silver moves higher from here on.

OIL

Oil is taking a breather after the first breakout attempt failed. It successfully re-tested the

17 w. MA for support and is moving higher again towards the resistance zone and the 34 w. MA.

The 17 w. MA is rising and should support Oil in the upcoming attempt to break the heavy resistance zone. If Oil succeeds it will trigger a huge buy signal because it will automatically mean a break above the 34 w. MA, a new LT buy signal. The first target after a breakout will be the $80 level ($78 is a 38.2% monthly fibo level shown in last month’s chart).

The technical conditions are improving slowly but are still in negative territory (RSI, MACD) while the selling power remains in charge, meaning that the current move higher is still ‘just’ a correction in the ruling downtrend.

USD

The Bulls are doing a good job supporting the USD. They have manage dto keep it above the 34 w. MA and the uptrend is still very much intact.

The downward pressure is still there and keeps building so the bulls aren’t out of the woods yet. As long as the 34 w. MA holds firm the bulls remain in the driver seat, but once it is taken out we will see a big sell signal and a trigger for a huge fall towards the 72 level.

The technical conditions are still positive but this can change very quickly. The RSI is a whisker away from triggering a sell signal and the MACD is on its way towards the 0 line. This upcoming month will be very interesting to watch.

COPPER

The chart for Copper is coming along as expected and the presented EW count fits nicely into the monthly chart that was shown last month.

The technical conditions have improved further and are in perfect position to get this wave 5 underway. The RSI is back above the 50 level and should start rising from here, the buying power in the DMI is trying to take over and the MACD is steadily rising towards the 0 line and the magenta resistance line.

If copper breaks above the resistance zone the indicators all turn positive at once and could trigger a very big move higher. The $300 level could then come within reach very fast.

Deciding Great Forex Time Frame To Trade With

Deciding to venture into trading the Forex is a big decision, and it requires you to make some very important decisions about what kind of trader you are and what your goals are for trading the Forex. That’s because trading the Forex is unlike trading any other market. The main difference in Forex vs. all other markets is that the Forex market is never closed, except on weekends. It trades 24 hours a day, 5 days a week. If you like fast-moving action, the Forex is definitely the market for you.One of the first things you must decide as a Forex trader is what time-frame you are going to trade. All this really means is are you going to trade tick charts, 1-minute, 5-minute, 15-minute, 1-hour, daily, weekly, monthly, or yearly charts? The type of chart you trade will have a huge impact on what kind of trading you will do. The kind of trading you SHOULD do is whatever is suited to your personality. This is something you may not have thought about before, but you should definitely give it some thought before you get too far into your Forex career.

The two main types of trading are day-trading and position-trading. The definition of “day” varies in Forex trading as opposed to other markets, because the Forex trader’s day could happen anytime during the 24-hour period. This is great news for traders in countries not located in the US or Europe, since they no longer have to keep opposite hours from the rest of their family just to be able to trade – since many of the World’s major markets are located in the US or Europe. The Forex gives them the unique opportunity to unleash themselves from the restrictions of someone else’s time zone.

A day trader typically starts each day with no trades left open from the day before. He will start the day by looking at the day’s news and announcements and then examine his charts for whatever activity has been going on overnight and how that activity may have affected what how he was trading the day before. A day-trader will usually trade with shorter time frames, such as 1, 5, or 15 minute charts, since he’s only trying to capture whatever moves happen during the day so he can exit all of his positions by the time his day is over. An hourly chart is probably about as large of a span as a day trader will need to pay attention to. However, most traders will probably keep tabs on the weekly and daily charts in order to know what the major underlying trends currently are.

A position trader, on the other hand, doesn’t worry as much about the short time frame charts because he is looking at the longer time frames such as daily, weekly, monthly, or yearly charts. The position trader might pay attention to the hourly charts in order to find the best entry and exit points, but will not usually trade based on the hourly charts’ movements.

The position trader will almost always be carrying his positions overnight from one day to the next, often for weeks at a time as he waits for the longer-term trends to move him along. The only caveat is that you need to have large stops and fairly deep pockets to keep from getting stopped out due to daily price swings. . If you can absorb the up and down swings that occur on a daily basis, then this is probably the best way of profiting from the Forex, since the Forex tends to trend so well over long time frames. As long as your stops are set fairly far away from the daily price action you will be most likely be able to profit quite handsomely from this type of trading.

So basically, it sums up like this: The day trader can trade with a smaller account because he uses tighter stops and watches the market almost constantly during the day. This can be hectic and stressful, but many traders thrive on the adrenaline rush that this type of trading provides. If your personality is right for this type of trading, then you will probably not be satisfied with slower pace of the position trader.

Position trading is best suited for those who either don’t care for the stress that accompanies day trading, or for those who have deep trading pockets, or both. The position trader also must be able to feel comfortable about whatever positions he has left overnight, since he know the market will be doing things while he is off work or sleeping. For some, especially for day traders, the stress of leaving positions unwatched and unprotected overnight is more stressful than the stress of watching the markets during the day.

Knowing your personality type will help you decide what time frame you will be best suited for trading. If you aren’t sure, then try each one until you decide what suits you best. Just be sure you don’t burn out on the wrong style before you decide, because it would be a shame to miss out on the profitable opportunities of trading the Forex.

 By Seun Oluwaseun

What is Forex ?

The foreign exchange market (Currency, Forex, or FX) is where currency trading takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. Forex transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1970s when world over countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1971.

Today, the Forex market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements. Since then, the market has continued to grow. According to Euromoney’s annual Forex Poll, volumes grew a further 41% between 2007 and 2008.

Forex Turnover

The purpose of Forex market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, Yen, etc., and the need for trading in such currencies. Since you aren’t buying anything physical this kind of trading can be confusing. When buying a currency think of it as buying a part in that particular country’s economy because the currency rate reflects the economical situation of the country when compared to others.

Currencies
Forex used to be a closed market because only the “big boys” because you needed between 10 and 50 million $ to open an account. But today, with the development of internet, online Forex brokers have the possibility to offer their services to “little” traders. All you need to start is a computer, fast internet connection and information which you can find on this page also.

This enormous market is like the dangerous sea where you can meet lots of sharks and dangerous waters but at the same time it is the only one where two weeks of trading can hypothetically bring you $1,000,000 out of $1,000 of initial investment.

This is certainly hypothetically because a lot of newbie traders deal with their trades as gambling, that surely bring them to having nothing in the end. You should always keep the phrase “be careful!” in your mind. This market would give you its profit possibilities only if you learn the basic things hard and make lots of demo trading.

This market is a platform for banks, transnational corporations and individual traders to change the currencies they possess into other ones. This is the spot Forex market. At this market you can trade with up to 1:50 leverage which means you can trade with the $50,000 sum having invested $1,000 onto your account.

Forex is unique among other world markets because in any time of day and night, somewhere in the world, a financial centre is open for business, banks and corporations exchange currency all the time, with a little lower frequency during the weekend.
Why to trade on Forex?

1. There is no commission fee for trading at Forex.
2. There is no intermediary, you can trade directly at Forex.
3. Forex is open 24-hours a day.
4. Nobody can influence the market for a longer period.
5. High liquidity.
6. Free demo accounts, analysis and charts.
7. Small accounts that allow everyone to try out his luck.

Hope this has answered a lot of questions you were asking yourself about Forex and that you can now start trading. Also make sure that you check out other articles on this blog which can help you earn your fortune.

Experience the Forex Markets with freedom of a Tricom Trader demo account.