Forex Volatility

So you've opened and funded a trading account. You've studied charts and understand different trading theories. You've got a strategy and a set of rules to trade by. You've even got your money management plan mapped out. But have been to a psychiatrist yet? Ok, I'm partly kidding but really, have you thought about how you are going to handle the wild emotional swings of trading? I ask because trading can be a roller coaster: you'll feel the highest of highs and the lowest of lows, often  in the same week or even the same day! I've felt a range of emotions through trading. One thing I've felt is the need to try and make up for losses as quickly as possible. I don't want to feel down for long, so why don't I just double down right quick and make up those losses really quick. Good idea? I think not.

So what do you do when you experience drawdown?

About six months into my trading career, I would stick with a strategy until it started to lose. Then I’d go on to the next strategy or trade idea. Sometimes this worked. Oftentimes it did not. So I needed to learn how to test strategies through backtests and live trading with small accounts to start. This way I could better know the types of swings that I may experience in the future. Understanding the intricacies of your strategy and how it behaves in different market cycles is essential. Then implementing the proper money management to ensure that we can withstand those drawdowns at our individualized risk tolerance levels. So going forward I know that I could safely stick my strategies and see the drawdown through because I don’t let emotions control my actions.

The idea behind a trading model is to gain an edge on the market.  In technical based trading we, as traders, have to stop trying to predict what will happen next.  Once traders start to try and predict where the market is going in the short term, generally it will affect the way we approach executing new positions, or the way we handle exiting existing positions.  Traders that try and outsmart the market and don't stick to their strategy oftentimes will experience a "profit gap", where they never experience their profit potential.  When trading in a drawdown, the trader has experienced negative trades resulting in low confidence in their trading system, and they feel betrayed by the market.  Many times traders cannot recover drawdown because they have not accepted the risks inherent to trading.  Trading while down, emotional discomfort and fear are present, which can affect the way we handle risk.  Completely accepting the risk that we are assuming during trading, without the slightest bit of emotional discomfort is paramount to trading successfully long-term and recovering from drawdowns.

This is why picking a solid strategy that performs in different market cycles with a decent risk/reward ratio and using smart money management are keys to smart long term trading results.

As an investor the same principles can ring true. So trading through a drawdown can be tough, sometimes downright exhausting. But we have to stick with our core trading principles and trading plans so that we can come out on top and become profitable once again. A good trader should not be measured by profitable trades, but by how he/she handles the losing trades.

One of the subject that’s come up in market discussion of late is the low level of the VIX, the so-called “fear index”. It has reached its lowest levels since back in the early days of the Financial Crisis in 2007. The chart below shows how the VIX has moved up and down since 1992.

The question which comes to my mind is whether we’re seeing a pattern similar to the one following the 1998-2003 period of elevated VIX value where the index retraces back to a lower level for a while as it did in the middle 1990s. The action in the markets in the early 2000s and the likes of Enron knocked a lot of individual investors out of stocks, just as recent developments have done. That makes a case for a similar kind of shift in volatility.

Just for the sake of comparison, I think it’s worth looking at volatility in other ways as well to see how things are playing out. The chart below shows the S&P 500 over the same time frame as the VIX chart. The two subplots show the relative width of the monthly Bollinger Bands (BWI) and a normalized 14-month reading of Average True Range (N-ATR). These give us a reading on how much movement there is in monthly closing prices and how wide the monthly ranges are respectively.

It is interesting to note that the Bollingers are back to being nearly as narrow as they were in the middle 2000s after working back from getting very wide back in 2009. As with the VIX, there is still some room to work lower to match prior lows, but we’re back into roughly the same range.

The N-ADR reading is a different story, though. In this case we’re nowhere near back to the lows of the middle 2000s and middle 1990s. In fact, N-ADR has been rising the last year! This tells us that while price changes from month to month may be getting smaller, the inter-month volatility remains elevated. Could this be a tip-off?

As a technical analyst I have a major concern with the way the S&P 500 made a lower low on the monthly chart back in 2009. That’s a big negative. Add to that the fact that momentum in the rally since then has backed off, as indicated by the lessening beats of prior highs for recent new highs, and you get reason for concern. If the market cannot overcome the 2007 highs on this rally, we could be in for quite a bit of a tumble. And when stocks tumble, volatility tends to rise quite dramatically. Generally speaking, before the top is put in the N-ATR reading is already on the rise. We’re seeing that now, so it’s definitely worth keeping that in mind, though given that we’re looking at monthly charts here, it may be a while yet before any sort of roll-over takes place.

Have you been paying attention to the changing markets?

Once upon a time all the talk was about how stocks and the dollar traded in opposing directions. The chart below with weekly bars shows how that was definitely the case until the latter part of 2011 (S&P 500 left scale, blue plot; USD Index right scale, black plot). Since then, though, with the exception of a few months earlier this year, the two markets have been trending higher roughly in tandem.

That’s a bit of an illusion, though.

You see, the USD Index is very heavily weighted toward the euro. That means it trades very close to how EUR/USD trades. As a result, it doesn’t always provide a comprehensive view the way we’d normally expect from an index.

Here’s something a bit more representative. It’s the same weekly chart, but swaps out the USD Index and replaces it with AUD/USD. Here you can see a VERY close correlation between the two markets.

So why the difference?

Well, AUD/USD is a good proxy for the so-called commodity currencies. Other commodity-oriented pairs are NZD/USD, USD/CAD, and many of the emerging market pairs like USD/MXN and USD/BRL. These are economically sensitive currencies, so they have a strong link to the stock market. Thus the strong correlation.

The euro, on the other hand, has all sorts of stuff going on which influences its exchange rate. It’s not just a function of economic growth but also of monetary policy and general confidence. The same can be said about both the yen and the pound. Further, since the Swiss National Bank effectively has the franc pegged to the euro (it’s really a floor on EUR/CHF, but is acting like a peg), the CHF is basically trading the same as the EUR.

What this all means is that we can no longer just look at “the dollar” and its relationship to stocks, commodities, and interest rates. We have to account for the variance in the performance of different currencies depending on the influencing factors if our analysis can have any validity. We may get back to the point where EUR/USD and the S&P 500 close correlate as they have done in the past, but for now we need to focus on the likes of AUD/USD and USD/CAD in our inter-market analysis of stocks, commodities, and the greenback.

The forex market continues to make some folks nervous. While there are certainly reasons to be cautious when playing exchange rates, a considerable amount of the nervousness of the average person on the street comes from misinformation. Most notably, they all too often think of the forex market as being highly volatile. I addressed this issue before in Looking at Volatility Across Markets, but I think it’s worth revisiting.

I’ve collected 5 years of weekly values for a number of markets to look at just how volatile they are. Let me first look at the US Dollar Index. Between July 2007 and July 2012 the average weekly range for the USD Index was just 2%. I derived that by taking the distance between each week’s high and low and dividing it by the midpoint for that week [( High – Low)/( (High+Low)/2) ]. At the same time, the standard deviation of weekly closing prices (which gives us an idea of how choppy the market is) was only 4.9% (relative to the average close for the study period).

As you will see, that’s not a lot of volatility.

Let’s start by comparing the USD Index values to those from the major US stock indices.

DJIA: 4.0% average weekly range, 15.0% standard deviation
S&P 500: 4.4% average weekly range, 16.0% standard deviation
NASDAQ 100: 4.7% average weekly range, 20.2% standard deviation
Russell 2000: 5.6% average weekly range, 17.3% standard deviation

As you can see, the major stock indices show considerably more volatility than does the USD Index.

How about individual stocks?

JPM: 9.4% average weekly range, 15.0% standard deviation
IBM: 4.8% average weekly range, 24.6% standard deviation
GE: 7.4% average weekly range, 39.9% standard deviation
XOM: 5.1% average weekly range, 12.0% standard deviation
KO: 4.0% average weekly range, 15.3% standard deviation
AAPL: 7.2% average weekly range, 53.5% standard deviation
KO: 6.2% average weekly range, 18.0% standard deviation

No real surprise to see that individual stocks are pretty volatile by comparison.

Looking at commodities:

CRB Index: 3.9% average weekly range, 18.2% standard deviation
Gold: 4.6% average weekly range, 28.1% standard deviation
Crude Oil: 8.4% average weekly range, 24.2% standard deviation

Here again we see markets with a great deal more volatility than the USD Index. The one place where there is something of a contest is the bond market. The long-date Treasury note/bond ETF is TLT. Looking at its weekly figures I come up with a 3.2% average range and 10.6% standard deviation. That’s considerably less volatility than the other markets and securities shown above, but still not at low as what we have seen the last five years in the USD Index. We would likely have to move down to short-term Treasury securities (like 2yr Notes and T-Bills) to find lower values.

The point of all this is that anyone avoiding the currency market because of the perception that it’s super volatile is operating on a false belief. The figures just don’t back that up.

 

Investors who obeyed the old stock market maxim, “Sell in May and go away,” have side-stepped the vicious downturn in equity prices through the summer and early-autumn.  Indeed, global stock market indices peaked on the first trading day of May and subsequently dropped by almost 20 per cent, as a sharp slowdown in economic activity across the developed world, alongside the never-ending euro-zone sovereign debt crisis, shook investors’ bullishness.

The major market indices have already endured a near bear market decline, as a seemingly relentless stream of disappointing news has been digested, so it is reasonable to ask whether it is safe to reverse course and establish long positions.  Indeed, the trusted market adage advises investors to throw caution to the wind and, “come back on St. Leger day,” the date of the world’s oldest classic horse race.  The St. Leger Stakes was run at Doncaster last Saturday but, the historical evidence – coupled with reliable leading indicators – suggests that investors may well be better-served to remain on the sidelines for now.

The month of September has typically proved difficult for investors and, it is the only month to have generated a negative mean return through time.  The mean return has been minus 0.25 per cent since 1802, and the seasonal effect has shown little sign of becoming less pronounced in the recent past.  Indeed, one dollar invested in the stock market only in the month of September since 1971, would be worth less than 70 cents today or just 12 cents in real terms.

The historical record demonstrates that the economy and financial markets have been particularly crisis-prone this time of year, such that cash has typically generated higher returns than the stock market across the months of September and October.

Historical crises that struck this time of year include the Panic of 1819, the first major financial crisis in the United States, the Panic of 1857, which was triggered by the failure of the Ohio Life Insurance and Trust Company, the Panic of 1873 that followed the collapse of Jay Cooke Company, the run on the Knickerbocker Trust and the subsequent Panic of 1907, not to mention the Great Crash of 1929.

More recent episodes include Black Monday in 1987, the United Airlines mini-crash of 1989, the 1997 attack on the Hong Kong dollar, the terrorist strikes on the World Trade Centre and the Pentagon in 2001, and of course, the Lehman Bros bankruptcy in 2008.

Those of a bullish persuasion will undoubtedly argue that the historical record is purely coincidence and thus, of little value to tactical decision-making.  That may well be true but, it is important to stress that recent market action has been accompanied by a whole host of indicators that give pause for thought.

First, both 10-year Treasuries and German bunds are trading at record-low yields below two per cent, which is simply not consistent with continued growth in the developed world.  The respective yield curves may well have a positive slope but, is important to recognise that the spread between short-term and long-term interest rates loses its usefulness as a leading economic indicator when short-term rates are close to the zero-bound.  The actual level of yields, at a five- to ten-year horizon, suggests that a recession in the euro-zone and the U.S. is imminent.

Second, the cost of corporate credit is rising and the recent widening of high-yield bond spreads from an average of 440 basis points in April to more than 730 basis points in recent weeks, warns of an impending downturn.  Indeed, a recession typically follows whenever the spread is sustained above 700 basis points.  This indicator did send a false signal in the latter of half of 2002 as an economic downturn did not subsequently materialise.  However, this did not protect equity investors who endured a devastating decline in stock prices.

Third, leading economic indicators such as copper prices are in the process of breaking down, while the demand for safe haven assets such as gold, the Japanese Yen, the Swiss franc, and even the U.S. dollar, is strong.  Furthermore, bank share prices are crumbling across the globe and funding costs are under pressure.  It is clear that stress is building throughout the financial markets and tail-risk is rising.

Mark Twain, the celebrated American author, quipped in his 1894 novel, Pudd’nhead Wilson that “October…is one of the peculiarly dangerous months to speculate in stocks.”  The truth of the matter is that both September and October have proved to be notoriously tricky for equity investors and, early indications are that the seasonal pattern looks set to be no different this year.  Tail-risk is rising as economic growth falters and the euro-zone sovereign debt crisis moves closer to the end-game.  Caution is warranted for now.

Originally posted on www.charliefell.com

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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

If you've ever watched the 70's sitcom, The Odd Couple, you know that Oscar and Felix had their issues. Oscar, the disheveled, divorced, sportwriter, was the more socially-ept, carefree and witty character, while Felix was uptight, neurotic and of "the sky-is-falling" mentality. The two very different characters combined for a unique type of relationship: in the face of adversity they were somehow able to learn from each other and create opportunity.

The volatility we've seen in the markets over the past few months is what I'm coining: The Finance Odd Couple. On one hand, we have the Dow plunging 500 points in one day, countries in economic ruin and the U.S. credit rating experiencing the first downgrade in history. On the other hand, you have emerging economies rising, bullish analyst opinions on the US Dollar and opportunities to find the silver-lining in the market's volatility.

Because I am a glass-half-full kind of girl, I much prefer to see opportunity where everyone else sees doom and gloom. Case in point - the hot topic of this month's webinar called The Volatility Myth: Uncovering Opportunities in Turbulent Markets. John Forman, senior foreign exchange analyst, has some pretty interesting data to share with us on where the opportunities are for traders and investors alike. John has pulled this data together just for us and we want to share it with you. Wondering how volatile the markets really are? Curious as to where the opportunities lie? Want to ask some questions of your own?

I'll be hosting this month's webinar this coming Wednesday, August 24th at 12pm New York Time. Attendance is free and, by attending, we'll send you an exclusive copy of our nifty new eBook The Smarties' Guide to Alternative Investing in the Foreign Exchange Market. So, bring your questions, your opinions and your friends and join us for what promises to be an informative discussion and unique learning experience you can apply directly to your trading and investing. Register here.

See you at the webinar!

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

Just about every time someone in the news media talks about the forex market – unless they are specifically familiar with it – they seem to do so with some kind of descriptor phrase related to how risky and volatile it is. I've written before on the subject of comparing volatility across markets. I think, though, it's worth taking a look at recent market action and see how things stack up.

Take a look at this chart, which compares the daily % range of the S&P 500, the Dollar Index, 10yr Treasury Note yields, Gold, and Oil. It provides a good look at what's been going on in the markets since the beginning of July (though not including today's action – August 18, 2011).

What the chart plots is the daily price range for each market. It's expressed as the day range as a percentage of the day's mid point [(H-C)/((H+L)/2)].

The most striking feature of this chart is how volatile the 10yr Note yield has been. Now, this is looking at yields, not price, so probably overstates the volatility seen in those instruments somewhat, but still we would expect a fixed income market to be on the lower end of the volatility scale. The S&P downgrade of the US is clearly seen on the chart in the big spike, but we can see that yields were quite volatile even without taking that period into consideration.

It won't be much of a surprise to see Oil as the next most volatile market.

Take a look at what market is consistently at or very near the bottom every day, though. The pink line is the Dollar Index. That means the Index consistently has low daily prices ranges compared to the rest of the markets.

Just to confirm all of this, take a look at this second chart looking at daily changes rather than ranges.

This chart plots the absolute value of each day's change (open to close), meaning all values are plotted as positives. The pattern is pretty similar to the first chart. Rate volatility has been high, with the Oil market often not far behind, along with stocks. The USD Index, meanwhile, holds to the lower end of the range, very rarely venturing beyond a 1% change for a given day.

As I noted in my post last week, a lot of what’s going on in the markets right now is fundamentally driven. There is an element of the risk aversion pattern, but it’s not as simple as it was previously. As they always do, the markets are constantly shifting and changing. Gold is being driven by the massive amount of liquidity in the financial markets due to central bank activity (and/or the expectation thereof). Stocks and oil are reacting to retrenchment in the global economic situation. The currency markets have a lot of different influencing factors, not the least of which is the prospect of central bank intervention from Japan and Switzerland. And for now, at least, the dollar is not the singular safe haven in the currency markets, making it less prone to big swings than in the past.

These sorts of situations are the ones which tend to separate the trading wheat from the chaff. Those who can adapt to the new market conditions will survive and maybe even thrive. Those who cannot, will fall by the wayside, just like all those folks who developed trading strategies based on low volatility did when things changed in 2007.

Turn on the TV, listen to the radio or read any web page and you can’t seem to escape the pessimism, doom and gloom surrounding the economic crises happening across the globe. Whether it’s Friday’s historic downgrade of the U.S. economy’s credit rating by Standard & Poor’s or the actions of the European Central Bank to intervene in the plight of the PIIGS (Portugal, Italy, Ireland, Greece and Spain) or the debt ceiling debacle happening here in the U.S., one thing is clear: it’s a tough time to be an investor.

Source: www.psfk.com

Investors everywhere are struggling with the same issue: how to combat a down market. Investor confidence has been rattled, and they are looking for answers. Not answers that plummet into the toilet as the price of gold skyrockets or as another Wall Street scandal is uncovered, but real opportunities to succeed as an investor.

My grandmother would tell stories of hiding money in jars - sometimes in the backyard and other times under the mattress. To her, it was the only way to keep a dollar a dollar. But in these uncertain times, investors are looking to more than keep their dollar whole – they are looking for ways to invest and still buy that retirement condo in Florida or take that trip to Spain or put two kids through college. Staying whole isn’t enough in today’s shaky economy, and investors don’t have much in the way of new options.

Sure, there are hedge funds, mutual funds, ETFs, managed accounts and the like. Not too much new here. Most of these instruments invest in the same blue-chip stocks or 20-year T Bill. So much for diversification. So, how do investors go beyond the same old, same old and find exciting new ways to invest?

Personal finance reporter at SmartMoney, Sarah Morgan, recently covered the foreign exchange (Forex) investing opportunity. She wrote, “New research suggests that retail foreign exchange traders – who now account for $4 trillion in daily trades – can dramatically increase their odds of winning by simply copying the moves of more successful traders, and several new currency-trading sites now allow traders to do just that.”

Sarah’s article, “New Tool For Currency Traders: Mimicry,” examines the opportunities to take advantage of the Forex market, well-known for its complexity on one hand and profit potential on the other. The challenge has always been how to take advantage of this asset class if you’re not a trader. Making money as a retail Forex trader is tough business. Less than 30 percent of Forex traders are profitable and most churn and burn in less than three months, which doesn’t sound too promising, and we’re back to doom and gloom. But, what about a way to follow and take the trades of the experts? Call it mirror trading, auto trading, copy-cat trading or mimicry. It’s about leveraging the success of top Forex traders and making it your own. A new way to create a portfolio of people – professional Forex traders who know the ins and outs of the market, follow rigorous risk management practices and tested investment strategies all aimed at driving alpha.

Now, as Sarah points out in her article, not all Forex investing programs are created equal. Investors need to review their options carefully to ensure they are picking the right program for their investment needs. In any mirror trading program, the program is only as good as the expert traders. Sarah says, “Javier Paz, senior analyst at Aite Research Group, recommends Currensee, which he says is easy to navigate and sets a higher bar for its ‘expert’ traders than other services. To become a so-called expert that others can follow, traders must demonstrate at least three straight profitable months and use appropriate risk management techniques. Plus, the firm pays these successful traders for their performance, so their interests are aligned with their followers, he says.”

As we all know, there is no magic bullet in the world of investing. Sadly, the Magic 8 ball that sits on my desk can do no better than tell me that “all signs point to yes.” Well, being an eternal optimist, I’ll take it.

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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. Investor returns may vary from Trade Leader returns based on slippage, fees, broker spreads, volatility or other market conditions.

There's a lot of talk these days about inflation and the impact of Fed policy on the dollar and the extension through the weaker dollar into higher commodity prices. Those looking to flame the Fed for its quantitative easing (QE) and generally loose monetary policy point to the falling dollar as the cause for oil going up above $100 and gold crossing $1500. While it's certainly true that the greenback is lower (the USD Index has been as much as about 12% off it's January peak), is the weak dollar really to blame for things like the rising cost of gasoline at the pump? Let's take a look at what the charts have to say about it all.

First is a comparative chart of oil prices in dollars and oil priced in euros. The chart below covers the last year's trading. The red line is the dollar value of a barrel of oil, referencing the left scale. The black line is the euro price of a barrel off oil (using front month futures), with that price on the right scale. Both scales are logarithmic so they express similar percentage moves between noted levels.

Now, the chart above doesn't show relative % gains for oil in the two currencies. Those are +31.3% in USD terms and +22.6% in EUR terms. This is about what we'd expected given the relative performance of EUR/USD over that time. The point of the chart is that aside from wiggles where oil has done better in one currency than the other for a period of time, the pattern of the two lines is consistent. Oil has been moving higher in roughly the same pattern, regardless of what currency we're talking about.

Now let's take a look at gold (again front month futures). Once more, the red line is in dollar terms and references the left scale, and the black line is euro terms referencing the right scale.

In this case, gold is up 29.6% against the USD and 19.4% in EUR terms. Again, that difference can be explained by the change in EUR/USD over the last year, which is as it should be. Here, though, we see a lot more variation in performance. In dollar terms gold has been in a fairly steady uptrend with only two relatively minor retracements. In euro terms, however, the ride has been much more dramatic. Those periods when the EUR line diverges considerably from the USD line are periods when EUR/USD was selling off.

The chart below highlights the variation between how gold and oil trade relative to the dollar. It shows EUR/USD on the top with the correlation between EUR/USD and gold plotted in red and the one with oil plotted in green.

Notice how much choppier the green line is than the red. That means the correlation between oil and EUR/USD is much more fickle than the one between EUR/USD and gold. That said, however, oil has spent more time with a positive correlation (meaning rising oil with rising EUR/USD and falling oil with falling EUR/USD). The gold correlation has been much more balanced. In particular, the gold correlation has been more negative when EUR/USD is falling.

Now, correlation does not mean causality. It just shows how similar the movement patterns are without looking at why that might be. The way I would tend to read the above, however, is to say that rising gold is more a factor of what's happening in the currency arena than rising oil prices. If you think about the implications of increasing money supply (which is what loose monetary policy is), then it makes sense. Gold is something with what could essentially be called a near fixed supply (very slowly increasing), so the more dollars there are the higher the value of gold per dollar (or any other currency). Oil has a different dynamic which is must more closely tied to economic considerations and geopolitics.

This past Monday a financial channel was discussing the currency markets. They were running a bearish story on the euro and highlighted how one particular fund manager was expecting EUR/USD to start heading towards parity. One manager alone doesn’t stand out in the largest market in the world, but the thrust of the report was focused on the challenges that the Euro Zone was going to face and had to be considered bearish.

On Tuesday, that same financial channel ran another story on the currency markets. This time they catered to the euro bulls, stating that most currency traders were expecting the US dollar to stem its gains and start to reverse course. Did this financial channel bother listening to their report on Monday? One of their reports has to be right, right?

This is no way to enter a trading day. Certainly markets will zigzag throughout a trading day, leading to counter-trend trades but understanding the underlying market trend should prove to be helpful as you enter each day. Conflicting information will often times lead to poor decision making.

Let’s return back to Tuesday morning: there was a story on the wires that the Confidence Board revised lowered their April economic reading for China. This is no small deal; in fact, didn’t China just come back from the G-20 meetings touting their strong growth strategies? The Shanghai Composite lost 4.3% on Tuesday and global equities all followed lower. It seems as if Tuesday had turned into thought-reversal day.

Wait though, because there was yet more to come on Tuesday. A meeting with the boss should be no big deal. A meeting with the boss who proclaims afterwards that things are OK is a worrying sign. Apparently President Obama receives a daily update from Ben Bernanke on the state of the US economy. But on Tuesday, after the meeting President Obama, found it necessary to state that things are OK in front of the microphones. Just making sure that we all heard him in case you missed the FOMC or G-20 meetings last week, where both individuals were telling us how good things are right now.

This also happened to be approximately 72 hours before the US NFP report is to be released. Expectations are still for a loss of 110k jobs. The last time the president spoke ahead of a NFP report, he stated how “strong” it would be and then we were all left with crumbs – the creation of forty one thousand private sector jobs to be precise. If I can read between the lines here, it seems as if the president received the jobs number on Tuesday (the BLS takes the surveys in the week of the 12th each month and tabulates the figures in the days that follow) and it was not good.

Americans do not agree that the US economy is OK right now. This was evident in the June Consumer Confidence reading that came out on Tuesday. The Present Index fell to a miserable 25.5 reading. Not good.

Nobody said that currency trading would be easy, especially when you hear flip-flopping information on economies of China and the US, not to mention that the financial channels delivering the news are anything but consistent as well. Understanding the underlying trend will help you become a more consistent currency trader. After all, we need someone to be consistent around here.

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.