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

There is a sense of déjà vu with regard to Payroll this month as exactly the same arguments that I posted last month are true again this. Both the ISM Manufacturing and Non Manufacturing employment numbers were extremely strong, posting even larger gains that the previous all time best levels since 2004 and 2008. Yet, once again this failed to feed through into the Payroll data. This time the widely touted excuse is the poor weather, especially in the North East. For me, this seems a weak argument as I thought only the British economy came to a standstill whenever half an inch of the “wrong type” of snow fell, and having been in New York in February, it seemed as busy as ever. Certainly the weather had a limited impact to my eyes. My other concern is the strength of some of the retail sales numbers for individual stores such as Macy and Dillard’s, which were much stronger than analyst’s predictions, with headlines stating how the snow did not have an effect. Well, if shoppers ignored the snow, why didn’t employers? Certainly for Payroll they can be no excuses next month and they must be much stronger, with further upward revisions on previous months. The impact of census hiring should begin to take effect as well.

In the last month only the Pound has displayed any real weakness and Canada strength as other major’s moves against the Dollar have largely been muted. This means from a technical prospective that the Dollar Index remains well bid as it sits at the top of the current trend. However, it needs to reassert itself now and restart its trend. Moves below 0.7930 would be negative and would likely coincide with breaks above 1.3840 on the Euro/dollar.

A quick mention on the Pound, which is seeing values last seen against the Canadian Dollar back in 1985, when Cable was almost 1 to 1 with the U.S. Dollar. Technically on the Pound Cross Rates I am getting major signals of an oversold situation on daily data, which suggests that for now, the major part of the downtrend has occurred. This opens up the possibility of a period of sideways, with the risk of short lived vicious short covering bounces as the situation is unwound. Certainly, any new lows need to be treated with caution in the short term and played with tight trailing stops.

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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

If you happen to be keeping a journal on foreign exchange and are about to label this past February you may only be using one word, Greece. Not many would argue with you either. It seemed that it was a ‘Greece this’ and ‘Greece that’ type of month. The correction in the Euro is because of Greece and any rebound was hope that a neighboring country would come to Greece’s rescue.

There were other events though including the FOMC’s discount rate hike which was followed a week later by Chairman Bernanke promise to have policy remain accommodative foe an extended period.

All these events in the Euro Zone and the US and yet two currencies that saw some of the biggest moves this past month were the CAD and the GBP. Hung Parliament in the UK, Olympic Gold and an employment report showing part-time job creation in Canada. Not exactly the interest-rate sensitive headlines that one would expect to cause sizable moves in the Pound and the Loonie.

Everyone is probably familiar with the US and Greek headlines but how many profited on them? If so congratulations. Looking at the Market Watch table on Currensee shows that traders are currently (as of March 1st) having the highest percentage of success in Yen pairs. That is being short AUDJPY, CADJPY and CHFJPY. What happened in Japan and/or the Far East this past month? Lunar New Year celebration, Toyota recalls and traders anticipating their fiscal year-end which normally entails a perception that the Yen should weaken.

Thus to mark February down purely as the month that was dominated by Greece may not tell the full story. Trading the headlines may have yielded some trading income but understanding which currencies would benefit the most during periods of risk-aversion in FX would have yielded better returns.

February turned into the reverse of the carry trade. The carry trade was easy in hindsight as risk was put on globally which forced the Yen to weaken with their 0% interest rates. Last month saw just the opposite as the Yen made steady gains on risk aversion. CHFJPY enjoyed a nice downward move as investors flocked to safe-havens while AUDJPY and CADJPY saw more cyclicality. Your favorite indicators may have helped catch some of these swings too. MACD in EURJPY would have produced a sell signal in mid-January at 130 and a take-profit signal at 124.

Missed those moves? No reason to worry, one of the beauties of foreign exchange is that there are so many pairs to trade and so many hours to trade them. Find the right strategy that works for you and develop a plan to succeed. Speaking of news events and how will they impact the markets, what are you expectations for the upcoming employment report in the US? Do they match the consensus (see the Economic Calendar on Currensee) or do you expect a stronger report that will force the Yen to back-peddle once again? Not to mention, will the initial move after the release be the right move or will waiting provide better opportunities to enter a trade? Finally will the US Dollar be the currency that moves the most after the release or will another currency see a greater reaction and be the currency to trade in March, 2010?

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

Today has seen a collapse in the value of Sterling as the chilling reality of something even worse than a hung Parliament looms after the weekend’s polls. Whilst it is clear that the financial world shivers in dread at such a thought, it is worth using today’s falls as an instruction into how the misuse of certain indicators can lead to traders forgetting that the trend is your friend, and lead to the move not only being missed, but the damaging realisation that trading against the trend at such times as it perceived to be “Oversold” creates big losses. The chief culprits and most commonly abused are the Slow Stochastic and RSI. There inherent flaw is obvious when you think about it, as they both have limits of scale between 0 and 100, whereas the price that it is being calculated on can go anywhere. When this happens, the indicators show extreme readings, and it only takes a relatively minor reversal (especially in the Stochastic that looks at the relationship between the close and the high and low), to say that the market should reverse.

Today, the low timeframe charts entered oversold territory just when the trend was beginning at 1.5150 and in the Stochastic’s case it made its absolute low value when price was at 1.5050. Price then collapsed 270 points as the indicator actually edged up in value.

So what is the answer? Firstly to realise that the relationship between price and the study is flawed. Armed with that knowledge there are two solutions. Use oscillators that have no limits of scale, or more usefully, track trend via a Moving Linear Regression Average. This will track trend however shallow or steep, but also maintain sensitivity without lag. When the line changes direction the move is over. Alternatively I look for true measure of support and resistance based on points of time and no time. As my weekend report notes, due to the swift rally in Cable last Year in May, what rallied quickly could also fall quickly. This meant that once price broke 1.5176, there was no support until 1.4760. Price stopped just short of this point this morning.

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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

A momentous week for Forex as the market was shocked by the Fed’s move to raise rates in the Discount window. This is the rate with which funds can be traded with the Fed, and it was the first time I can remember that this rate was shifted and the Fed Funds rate did not move at the same time. This caused the Dollar to surge and that is not surprising. History tells us that once a change in trend in interest rates begins it is a long time before it shifts back the other way. America now joins Australia in a tightening bias and for the former this has some important underlying dynamics.

For some time now the Dollar has been the primary beneficiary of what is called the Carry trade. This involves borrowing money cheaply here and using it to buy assets elsewhere. This is fine as long as the currency borrowed does not significantly appreciate. We now have the situation where the outlook for cheap borrowing can shift and provides two arguments for further Dollar strength. Firstly, if the carry continues it is more likely that traders will look to hedge the risk of Dollar appreciation by buying Dollars on the forward market, thus creating a powerful underlying bid. Secondly, any further strength opens up the possibility that existing carries can be unwound, or further hedging is needed in order to continue to hold the position. It is also worth noting that the Dollar has been rallying in spite of other news that showed that China was a net seller of U.S Treasuries in November. Whilst this is some way back in history it will become very instructive to the size of the Dollar bid if this trend continued in December and January and is something I will watch closely.

Technically the Dollar slumped alarmingly late on Friday and highlights another market dynamic I look at closely. Moves right at the end of the week are always treated with suspicion due to thin conditions and day traders being forced to exit. This means that Monday’s price action will be very instructive in whether the move was true or false. Compounding the importance is the fact that the EUR/USD settled directly at the point of most time in its downtrend that began is January. When price ends the week at the ultimate point of fair value, it dictates that the market is at a pivotal time and must make a decision on its next trend. It means watching 1.3840 on the upside and 1.3559 on the downside.

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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

This week is an abbreviated trading week as the North America holidays curtail forex volatility at the outset of the week. When the markets do get back into swing the top focus looks to still be on Greece and if they are willing to accept the fiscal measures that will appease the markets. Greece is in no position to bargain so I would expect that we’ll see Greece saying all the right things this week. Those headlines will be scrolling on the ‘Feeds’ section on Currensee.

The immediate reaction in the markets I’d expect will be one of relief. Relief that Greece, for now, is still using the Euro as its currency of choice and not a weakened Drachma. In this situation the Euro should gain. It might be about time as well as it was just 2 months ago that Euro was trading above 1.50 versus the US Dollar.

I could be wrong though. Greece may say something this week that surprises us all. If that is the case and the markets are back at full strength then there will certainly be a reaction. Will we see a move to 1.35, 1.33 or even sub 1.30? It could happen as the markets will be looking past Greece and worrying about the other European (PIIGS) countries with the same problems who have been in the passenger seat up until this point.

These headlines will be scrolling down the ‘Feeds’ section on Currensee but what if you are away from the trading desk? You may be in Australia sleeping, or in Belgium working or in the ‘States out buying a coffee. All could happen. If you are Long Euro’s on the expectation that Greece will say the right thing but they surprise the markets then watch out. Are you protected? Well you should be.

I bring this up because the last time a nation withdrew from the Euro zone currency the markets witnessed a phenomenal move. Of course I’m referring to 1992 and the UK’s withdraw from the ERM. The British Pound went from above 2.00 to less than 1.55 to the US Dollar in a short time. You might suggest that times have changed and this could never happen again, well think again and remind yourself what occurred in 2008.

We’d all have loved to be on the right side of those trades and maybe you were in 2008. George Soros was in 1992 and became a financial sensation ‘overnight’. Successful traders usually have targeted areas that they expect to take profit and utilize stop-loss levels when their expectations prove to be wrong. The last thing that you want to have happen is to have one bad trade wipe your account out or ruin a string of profitable trades. Utilize a stop-loss to protect yourself.

Where you place that stop is a whole different story. One mistake that I made last month was moving my stop-loss around. For example I placed a slew of Yen trades on and nearly all the trades started out in the direction that I expected. I became comfortable and ignored the zig-zag of the market and moved my stop-loss essentially right on top of my entry price. Fast forward 8 hours later and the price level was where I expected the Yen to be but I was stopped out of most of my trades. Lesson, use a stop-loss but put it far enough away so your trade won’t be derailed but you will be protected if the markets go against your expectations so that you can live to trade another day.

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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

This Friday we’re pleased as punch to be able to host professional trader Alex Kazmarck of SpotEuro for another live Forex trading webinar as the January Non-Farm Payrolls number is announced.  This key economic indicator has global implications on the exchange rate of the USD with any other currency.  We’ll start at 8am ET and Alex will give some background info, and then at 8:30, when the number is announced, we’ll watch as Alex trades live based on his strategy and experience.  We hope you can join us!

Friday, February 5, at 8:00am ET: Trading the Non-Farm Payrolls Data Live with Alex Kazmarck of SpotEuro

Currensee and SpotEuro have partnered up to provide real-time analysis and commentary during the release of this very important economic indicator. Don’t miss out on a great opportunity to learn how to trade this economic report and ask questions while the market is moving!

• EUR/USD will be emphasized
• Learn how to trade during news events.
• See how technical analysis is applied to live market charts.
• Support and Resistance levels will be determined before the release
• Ask questions while the market is moving.

This session is free to attend although space is limited, and all registrants will get a special offer from SpotEuro.

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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

Last week’s comment circled around the outlook for the Dollar and saw how various macro events were negative for Canada, Australia and the Euro, whilst being positive for the Dollar and Yen.  Pretty much all of this has panned out so far, but what was the key point last week and what is the focus for the coming week? For me, the highlight was the minutes from the FOMC (Federal Open Market Committee) meeting, where inexplicably all reference to the woes of the housing market were completely removed. This, in a week when the stats from Case Shiller Home Price Index continued to drift lower and the 4 week average of mortgage applications made fresh lows since the downturn began. The key to any economic recovery is personal spending and consumption, and with a jobless recovery combining with falling wage growth, it is difficult to see how recovery can accelerate. The huge stimulus can be likened to pushing on a piece of string, and any hint of removal can lead to an overreaction in negative sentiment. It seems that the Fed’s statement was more of a political than an economic one, and was duly punished with equity weakness once the statement had been digested the following day. Whilst the GDP numbers appeared strong, a large percentage of that increase was due to a rise in inventories, which simply don’t correlate to the business inventories for October and November (December still has be released). The rise shown in the 4th quarter inventories implies a complete reversal of the previous 4 quarters’ decline, which seems unlikely.

After sharp falls, equity markets find themselves at a critical juncture with support weak and distant across many indices, meaning that the new month needs to see a swift recovery that overcomes the huge blocks of time that are above.

For currencies it has been a relatively subdued week with the trends hinted at last week slowly continuing. In fact, the lack of volatility has been surprising with Cable the notable exception. It has been pushed up and down by weak GDP numbers one day, a BOE member saying they were not a true reflection on the U.K’s economic outlook the following day, whilst it was rumoured that much of the strength was due to the conclusion of the Kraft takeover of Cadbury’s, which injected 7 Billion into the market.

For the week ahead, the early focus will be on the Aussie Dollar as there is employment data and an interest rate decision. Regardless of how the market interprets the data, the currency technically remains weak with support distant at 0.8742. Falls could be swift, especially if equities resume their slide. 0.9038 needs to cap any bounce to maintain the negativity.  From there focus will inevitably shift to Non-Farm Payrolls once again, but ahead of that the major support in the Eurodollar at 1.3830 to 10 should cause at least a temporary bounce, such is its power.

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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

Forex analyst Tim Mazanec posted yesterday on Forex Crunch about risk and reversal in the EUR/USD.  Starting with a dip into commodities (sugar??), Tim quickly moves on to the heart of the matter:

“To me EURUSD is the ultimate gauge of global risk-taking and if stocks are reversing then shouldn’t EURUSD be trading lower as well?”

He points out that the COT (Commitment of Traders) report, while extremely valuable, is also delayed by three days, an eternity in spot Forex.  Mazanec shows us how to use Currensee’s Market Watch widget so see investor positioning in real time.

“The beauty of Currensee is that the MarketWatch table shows the positioning of traders and investors in real-time.  If you go from Long to Short you will see the change right away, not 3 days later.  There is also more than one way to view the MarketWatch data.  One way is to view the currency pair and positioning by positioning volume.  For instance, as of writing at midday on Monday (Jan. 25,  2010) 75% of traders had moved to Long in EURUSD.  Another way is to view the nominal amount of traders with a position at stake in a currency pair.  In this case it is almost evenly split with the amount of traders Long EURUSD vs. traders Short EURUSD.”

This screenshot of the Market Watch Widget is almost 24 hours after Tim wrote his post and you can see how much things have moved already:

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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.