Author Bio

The team here at Currensee towers was pleased to see  John Forman from Thomson Reuters IFR Markets writing on DailyForex this morning about yesterday’s Currensee blog post by Tim Mazanec.  Both wrote about volatility in the Forex market.  Tim was seeking a way to find a currency pair ready to break out of a narrow range, and he looked to the Community Historical Volatility widget for some clues.  John added some thoughts – and some charts – on using Bollinger Bands and Average True Range (ATR) to spot developing trades.

A look at the Historical Volatility widget for NZD/USD shows that the first support level (0.68918) and first resistance level (0.70118) are about 120 pips apart. That’s not quite so narrow as spread between the S3 and R3 levels Tim mentioned, but combined with the other volatility readings noted above, it definitely gives us something to think about.

Be sure to check out the full post over at DailyForex where you can also read a review of Currensee.  You can read more of John Forman’s Forex posts here, and more from Tim Mazanec here.  John’s blog is called The Essentials of Trading and Tim writes at HedgeForward.  Both Tim and John are members of Currensee.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Author Bio

A new trading week has begun and some great questions are being asked on the ‘Hot Topics’ discussion board on Currensee. Many of the questions allude to ‘ok, US Payroll gave a lift to risk-taking with the Yen being sold off and equities surging on Friday, but what will be the next big move and which currency pair should be traded’. This isn’t just currency traders too as one look at the sideways trade in equities on Monday shows that traders in multiple markets are asking that similar questions.

One thing I did on Monday to try and answer that question was to take a look at the ‘Community Historical Volatility’ widget on Currensee. This widget displays key levels based on points of historical volatility from within the Currensee community. My goal was to find a currency pair that has seen its volatility per the community diminish significantly. This could lead to a potential break-out if my assumption is right. You can then cross that pair with technical analysis to see if the charts agree and hopefully there would be a fundamental reason or economic release that serves as a catalyst for that break-out.

For example the first pair that I viewed was EURUSD and the corresponding 3rd level support and 3rd level resistance points enter at 1.3597 and 1.3667. That is only a 70 pip spread between the top and bottom support and resistance levels. Remember that these are weighted averages, but with such a small spread between so many resistance and support levels this is exactly what I am looking for. If those numbers were say 1.35 and 1.45 then I’d presume that the current trend is strong with a potential bias for maturation. With the 70 pip spread one look at the daily chart shows that EURUSD has been consolidating the last 2 weeks as the Greece saga rolls on. It may be Greece or it may be US retail sales that serves as a catalyst but to me this will be one pair to watch for a potential break-out over the coming days.

Another pair that shows a tight spread is AUDJPY. With 94% of the community Short AUDJPY (by volume) there are only support levels listed on the ‘Community Historical Volatility’ widget but the idea still holds true. The spread between the 3 support levels is only 20 pips, very tight. Compare this to USDJPY which has a 140 pip spread or EURJPY which has a 130 pip spread and that is only looking at resistance points. AUDJPY outperformed its peers last week as the RBA hiked to 4%. This week it may be the Australian employment report or even the neighboring RBNZ decision (potential for a surprise in the decision or the Statement) that could serve as a catalyst for an extended move in AUDJPY.

An example of a currency pair with large spreads that I’d probably not trade and expect consolidation this week would be EURGBP. The spread is just shy of 440 pips. Again Greece and all have helped put the ‘vol into this currency pair but last week’s outcomes by the Bank of England and European Central Bank were about as exciting as watching paint dry. Add to the fact that this is the most expensive currency pair and for my money this pair is ‘yours’.

My goal is here to find a currency pair that will break out of its narrow range and begin a new trend or renew a prior one. Whether you are a scalper or prefer trends have a look at the ‘Community Historical Volatility’ widget to help you maximize opportunities.

This report is for your information only and does not constitute investment or business advice or an offer to buy or sell securities.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Author Bio

Although I primarily invest in equities and trade foreign exchange it is hard not to notice the recent bounce in Crude Oil. For me as soon as I log in to Currensee I have my Commodities Market widget right smack in the middle of the screen and Crude is right on top. The Commodities Market widget lists the prices of multiple oil prices, gasoline, heating oil, natural gas, coffee and coal to mention just a few.

I bring this up because it was just a few weeks back that crude was sub $70, equities were correcting and the dollar was making gains. Since then Crude has bounced back above $80 yet EUR/USD continues to hover around the 1.36 area. Of course the Canadian Dollar has been outperforming during this time, especially against the Euro where it has made tremendous strides this year. Still I’m alluding to the larger picture of global risk-taking and when many commodities rebound, including crude, then normally EUR/USD will rebound as well. Much of this stems from the US being an equity surplus country and the potential for leveraged equity returns elsewhere during times of risk-taking. When risk is on demand picks up and prices reflect that.

So why is crude higher and EUR/USD still hovering around 1.36 creating a correlation gap? Last week saw the surprise announcement from the Fed when they hiked the discount rate to 0.75%. The US Dollar reacted initially but since then it has given up much of those gains. Speculation is high that China will make an aggressive move with their Yuan policy; this should initially boost the Yen but then I would expect that the Euro would tumble on risk-aversion. This as the markets would try and gauge how this will impact corporate profits, equity prices and how often Yuan policy will change in the future as well.

That said we’ve heard about potential changes in Yuan policy now for years. We also know that the FOMC will be taking its time in returning policy towards normalization with an approximate 10% unemployment rate in the US. Trading on speculative moves by either central bank, especially speculation which may be months down the road, usually does not yield the most favorable of results.

Therefore from the currency side it appears as if there certainly is a gap in the correlation between Crude Oil and EUR/USD. This has not been lost on the Currensee community though. On the ‘Market Watch’ table 75% of traders are Long EUR/USD. This encompasses nearly 350 traders so it’s a nice sample indeed.

What are their targets? Are they short-term traders or long-term investors? There is only one way to find out which is by starting a discussion and asking them. On the Currensee Community Historical Volatility widget it shows support and resistance levels as determined by the community’s historical trade. There is a resistance level at 1.36159 at the time of writing. Will more traders become long if EUR/USD closes above starts to close the current gap with Crude Oil? Is there an opportunity right now in the foreign exchange market? That is for you to decide but the community will be watching.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Author Bio

Not everybody can – or would want to – sit in front of a computer all day, so it’s nice to be able to subscribe to a Forex Signal Service and get emails or text messages when trading opportunities arise.  For example, here’s a message I got last week from the SpotEuro Signal Service.  It came about an hour before the Australian Consumer Price Index announcement with a specific direction on the AUD/USD.

I took the short position around 7:30 that night and despite the temptation to reverse myself when things went a little bit the other way, I let the strategy run its course over night and exited the next morning for a tidy profit of over 40 pips.  Alex at SpotEuro would be the first to remind you that not every signal will pan out and not every trade will go your way, but you can see the chart for this one below, and you can befriend me on Currensee and see all my trades.

Earlier in January, I picked up an overnight signal on the USD/CHF – not a pair I usually trade – and even though I got in several hours late, the trade was still good for 57 pips.  Another time, an overnight signal on the USD/CAD turned out to be worth 11 pips while I slept.  Trading while you sleep is a good way to stick with your strategy, but it’s not for the nervous scalpers among us.

It’s important when selecting a signal service to find one that fits your trading style.  If it’s a poor fit – too many or too few trades, too much or too little risk, the wrong trading session – you’ll find yourself second-guessing the signals, which is stressful at best.

If you want to learn more about SpotEuro, you can tune in to tomorrow’s Non-Farm Payrolls Webinar for free, and Currensee members can subscribe to the SpotEuro Signal Service or the new Live! Trading Room and News! Trading Sessions services for as little as 25 Currensee bucks for the first month.

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Be sure to read the full risk disclosure before trading Forex.  Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Author Bio

One of the things that I’ve noticed of late on the “Hot Topic” discussion board on Currensee is the passion and enthusiasm that members of Currensee have towards trading foreign exchange.  That is fantastic.  To hear people discuss anything with passion, besides sports, now-a-days can be hard to come by.

There are obvious reasons for this as well.  Greece, Spain, Italy and others are making headlines because of their budget woes.  The unemployment rate for the youth in Spain is 40%!  There are just too few young and old people utilizing a craft or a skill out there ‘pounding the pavement’ to get others to listen and buy into there message.  I remember when a friend of mine (about 20 years ago) would not stop talking about the merits of the information super highway.  She worked at AOL.  I was too focused on losing sports teams to take time and buy into her message.  Others did though and we all know how AOL blazed a trail that set the stage in the technology sector for other young passionate technology gurus to follow.

What group should have the most passion towards trading FX?  Professionals, right?  If your next paycheck depends upon either producing returns for investors or trading for yourself then I’d assume that you would be well versed in all news forex and be utilizing a time-tested strategy to produce those returns.

How did these professionals do last year?  Per the Barclay Currency Traders Index the average return of 124 currency programs was +0.63% last year.  If you ask me that is basically benign performance.  I mean stocks in 2009 fell excessively and then rebounded maybe even more excessively and volatility is what excites traders.

Well how about pre 2009 when forex programs were not able to sit on the sidelines and root for 0% returns as stocks and bonds were performing better?  In the 2007 and 2008 the average return was 2.59% and 3.5% respectively.  Not bad.  Without seeing all the stats you can gather that the standard deviation of returns throughout the year was much lower than what was going on in the stock market.  Still those aren’t great returns right?  A blindfolded dart thrower might be able to do better just by  buying or selling EUR/USD and not paying attention for a few weeks.

Looking back further though will yield different results.  In fact since 2000 the average FX program yielded an accumulated 32.3% return for the decade.  Now that is better than the perennial 10k in the Dow Jones!  In the ‘90s the average FX program yielded an accumulated return of over 108% and in the ‘80s the average return was over 17% per year (the index started in 1987).

Are those returns gone forever in forex?  I humbly suggest that they are absolutely not gone forever.  There are just too many PIIGS (Portugal, Italy, Ireland, Greece and Spain), emerging markets and other worries to believe that we’ll be in a low-vol forex environment forever.  Are those handsome returns coming back tomorrow?  I certainly don’t know but one thing is for sure is that there are passionate forex traders that will certainly be looking for returns on Currensee.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Author Bio

Well it didn’t take long for the first Monday in 2010 to kick off the week with a very strong slant towards risk-taking. Equities opened up strong, Commodities were flying and some higher-yielding currencies, such as Aussie, had strong performances as well. We saw this pattern quite often towards the end of 2009 where risk-taking would outperform on Monday before the remainder of the week would be chronicled by sideways or a risk-averse environment. Hopefully that is where the resemblance to 2009 ends right?

In many respects 2009 will be remembered for the global recession, the exceedingly accommodative monetary policy stances taken by the old industrialized leaders and the 4.1m jobs lost in the US. For those keeping track that is 1m more jobs lost than in 2008.

There is good news though and there have been plenty of opportunities to trade during this period of high volatility. We all know about the seismic shifts in the Dow Jones, Crude and currencies, such as the GBP, over the past year or two. Hopefully the worst of the economic crises is behind us but for no reason does that suggest that the moves in our securities are about to stop. If anything the opposite holds true.

For example, in Currensee if you go to the Economic Calendar and click over to this Friday, January 8th you’ll see that the markets are awaiting the December US Non-Farm Payroll (NFP) report. Early expectations are for a Zero reading, or essentially unchanged from the -11k reading in November. Now should we really expect the same reading in back to back months when the US has been losing 300k jobs on average for the past 23 months? I don’t think so.

Just an off-hand look at the last 7 or 8 years shows that there is a 100k or so difference between Nov. and Dec. readings thus expecting a minimal change in employment over the holidays might not be the way to be positioned. In forecasting the NFP figure I analyze the jobless claims and they have been improving quite significantly over the last 2 months. Thus I’ll be expecting a positive job figure for December, to the tune of over 100k, but regardless of what I think, with the markets expecting an Unchanged reading for December then the hurdle for volatility due to moves in interest rates, stocks and currencies should be very low.

Is this the only economic release where expectations may be set up for a surprise? Nope and if you move back to this Wednesday you’ll see that Australian retail sales came in at +0.3% m/m in the prior month and the October reading is also expecting a +0.3% m/m reading. The last few monthly readings in Australian Retail sales have been +0.3%, -0.2%, +0.7% & -0.9%. More of a zig-zag fashion that a trend. If you look back though you’ll notice that the expectations are expecting more of a trend at +0.4%, +0.5%, +0.6%, +0.6%…

Certainly those making the predictions and those trading off the actual numbers have different interests it seems. If you look at the Market Watch on Currensee you’ll notice that 85% of the trader volume in AUD/USD is Long. This is a currency that has gone from approximately form 0.60 to 0.90 over the past year thus one can be certain that a few economic surprises will have this currency on the move again.

Which way? Well here is to hoping for fresh trading moves in 2010 and an Not economic repeat of 2009.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.

Author Bio

For some traders December 18^th, 2008 may have been their best trading day ever.  For others it could have been their worst.  If you remember this day you know exactly what I mean.  In case you don’t recall last December was fairly wild.  EURUSD opened the month at 1.26 and it peaked on Thursday, December 18^th.  In one of the more volatile days of the last few years EURUSD would open Dec. 18^th at 1.4417 before topping out at 1.4717.  It wasn’t done though as by day’s end EURUSD would go ahead and collapse and close at 1.4248.  The ultimate swing in a currency pair.

Why do I bring this up?  It’s not to reflect on the events of that day but the pattern that led into that day and the potential for history to repeat itself again.  The chart below compares EURUSD in December in 2008 to the inverse of EURUSD in December in 2009.  Thus far it is quite a match.

Why the resemblance?  Are we witnessing just another December that is dominated by position squaring?  Or is the Dollar recouping some losses because risk-taking is being pared on the 2010 economic outlook and/or the reduction of the USD carry trade?  It may be too early to answer those questions but certainly one cannot dismiss the resemblance of the EURUSD moves this year versus last year.

Back to December 18^th of last year.  Will we see a repeat of that day?  I do not know if we’re going to see the same volatility or price action but if it does I hope that you are on the correct side of that trade.  History, as I’ve stated once or twice, does tend to repeat itself.

We have had some volatility this December but nothing in comparison to last year.  Still the price action on an inverse basis looks quite similar to last year.  Even if we don’t have a repeat of December 18^th, 2008 again where might we expect EURUSD to head?  Taking a look at the Community Historical Volatility widget on Currensee the first level of support is at 1.4311.  Per Currensee this “widget helps to identify specific price points that historically have been proven to be key contention points…as well as the average entry points for traders”.  That is still a 2 cent move from the time of writing thus using 1.4311 as a target would still offer significant dollar gains ahead.

On the flip side, it just so happens that the first resistance area in the Community Historical Volatility widget is at 1.4721 in EURUSD (4 pips higher than the high from last Dec. 18).

As we move into next week and close in on the New Year  expectations will be for lower volatility and trading volumes.  Ranges may narrow and trends will slow.  We saw this last year and in many years prior.  Post Dec. 18^th last year the market settled in between 1.39 and 1.4360, most days EURUSD traded in a tight 2 cent range.

Just for curiosity sake let’s consider if we continue to replicate last year’s inverse price action in EURUSD for the remainder of the month.  What should we expect in January?  Of course we certainly cannot promise anything but at the very least January should be a favorable month for trends to renew in the forex market.  This past January saw just over an 11 cent move, which equates to about 2 days worth of Dec. 18^th, 2008.

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Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results.