Tuesday, 27 December 2011
Asian Option for forex 2012
Ask forex 2012
AUD/USD for forex 2012
Automated forex Trader 2012
Candlestick Chart 2012
Carry 2012 (Interest-Rate Carry)
Back Office 2012
Band 2012
How To Place Orders With A Forex Broker 2012
When you place orders with a forex broker, it is extremely important that you know how to place them appropriately. Orders should be placed according to how you are going to trade – that is, how you intend to enter and exit the market. Improper order placement can skew your entry and exit points. In this article, we’ll cover some of the most common forex order types. (For the latest news on currencies, check out Currency Market News at Forbes.com.)
Types of Orders:
Market Order
This is the most common type of order. A market order is used when you want to execute an order immediately at the market price, which is either the displayed bid or the ask price on your screen. You may use the market order to enter a new position (buy or sell) or to exit an existing position (buy or sell). (For more insight, see The Basics Of Order Entry and Understanding Order Execution.)
Stop Order
A stop order is an order that becomes a market order only once a specified price is reached. It can be used to enter a new position or to exit an existing one. A buy-stop order is an instruction to buy a currency pair at the market price once the market reaches your specified price or higher, which is higher than the current market price. A sell-stop order is an instruction to sell the currency pair at the market price once the market reaches your specified price or lower, which is lower than the current market price.
- Stop orders are commonly used to enter a market when you trade breakouts.
For example, suppose that USD/CHF is rallying toward a resistance level and, based on your analysis, you think that if it breaks above that resistance level, it will continue to advance higher. To trade this opinion, you can place a stop-buy order a few pips above the resistance level so that you can trade the potential upside breakout. If the price later reaches or surpasses your specified price, this will open your long position.
An entry stop order can also be used if you want to trade a downside breakout. Place a stop-sell order a few pips below the support level so that when the price reaches your specified price or goes below it, your short position will be opened.
- Stop orders are used to limit your losses.
Everyone has losses from time to time, but what really affects the bottom line is the size of your losses. Before you even enter a trade, you should already have an idea of where you are going to exit your position should the market turn against it. One of the most effective ways of limiting your losses is through a predetermined stop order, which is commonly referred to as a stop-loss.
If you have a long position on, say the USD/CHF, you will want to the pair to rise in value. In order to avoid the possibility of chalking up uncontrolled losses, you can place a stop-sell order at a certain price so that your position will automatically be closed out when that price is reached.
A short position will have a stop-buy order instead.
- Stop orders can be used to protect profits.
Once your trade becomes profitable, you may shift your stop-loss order in the profitable direction so as to protect some of your profit. For a long position that has become very profitable, you may move your stop-sell order from the loss to the profit zone to safeguard against the chance of realizing a loss in case your trade does not reach your specified profit objective, and the market turns against your trade. Similarly, for a short position that has become very profitable, you may move your stop-buy order from loss to the profit zone in order to protect your gain.
(To read more about setting stops, see Stop Hunting With The Big Players.)
Limit Order
A limit order is placed when you are only willing to enter a new position or to exit a current position at a specific price or better. The order will only be filled if the market trades at that price or better. A limit-buy order is an instruction to buy the currency pair at the market price once the market reaches your specified price or lower, and is lower than the current market price. A limit-sell order is an instruction to sell the currency pair at the market price once the market reaches your specified price or higher, and it is higher than the current market price.
- Limit orders are commonly used to enter a market when you fade breakouts.
You fade a breakout when you don’t expect the currency price to break successfully past a resistance or a support level. In other words, you expect that the currency price will bounce off the resistance to go lower, or bounce off the support to go higher.
For example, suppose that based on your analysis of the market, you think that USD/CHF’s current rally move is unlikely to break past a resistance successfully. Therefore, you think that it would be a good opportunity to short when USD/CHF rallies up to near that resistance. You can then place a limit-sell order a few pips below that resistance level so that your short order will be filled when the market moves up to that specified price or higher.
Besides using the limit order to go short near a resistance, you can also use this order to go long near a support level. For instance, if you think that there is a high probability that USD/CHF’s current decline will pause and reverse near a particular support level, you may want to take the opportunity to long when USD/CHF declines to near that support. In this case, you can place a limit-buy order a few pips above that support level so that your long order will be filled when the market moves down to that specified price or lower.
- Limit orders are used to set your profit objective.
Before placing your trade, you should already have an idea of where you want to take profits should the trade go your way. A limit order allows you to exit the market at your pre-set profit objective. If you long a currency pair, you will use the limit-sell order to place your profit objective. If you go short, the limit-buy order should be used to place your profit objective. Note that these orders will only accept prices in the profitable zone.
Execute the Correct Orders
Having a firm understanding of the different types of orders will enable you to use the right tools to achieve your intentions - how you want to enter the market (trade or fade), and how you are going to exit the market (profit and loss). While there may be other types of orders, market, stop and limit orders are the most common of them all. Be comfortable using them because improper execution of orders can cost you money.
source: investopedia
The Foreign Exchange Interbank Market 2012
According to an April 2007 report by the Bank for International Settlements, the foreign exchange market has an average daily volume of close to $3 trillion, making it the largest market in the world. Unlike most other exchanges such as the New York Stock Exchange or the Chicago Board of Trade, the FX market is not a centralized market. In a centralized market, each transaction is recorded by price dealt and volume traded. There is usually one central place back to which all trades can be traced and there is often one specialist or market maker. The currency market, however, is a decentralized market. There isn’t one “exchange” where every trade is recorded. Instead, each market maker records his or her own transactions and keeps it as proprietary information. The primary market makers who make bid and ask spreads in the currency market are the largest banks in the world. They deal with each other constantly either on behalf of themselves or their customers. This is why the market on which banks conduct transactions is called the interbank market.
The competition between banks ensures tight spreads and fair pricing. For individual investors, this is the source of price quotes and is where forex brokers offset their positions. Most individuals are unable to access the pricing available on the interbank market because the customers at the interbank desks tend to include the largest mutual and hedge funds in the world as well as large multinational corporations who have millions (if not billions) of dollars. Despite this, it is important for individual investors to understand how the interbank market works because it is one the best ways to understand how retail spreads are priced, and to decide whether you are getting fair pricing from your broker. Read on to find out how this market works and how its inner workings can affect your investments.
Who makes the prices?
Trading in a decentralized market has its advantages and disadvantages. In a centralized market, you have the benefit of seeing volume in the market as a whole but at the same time, prices can easily be skewed to accommodate the interests of the specialist and not the trader. The international nature of the interbank market can make it difficult to regulate, however, with such important players in the market, self-regulation is sometimes even more effective than government regulations. For the individual investor, a forex broker must be registered with the Commodity Futures Trading Commission as a futures commission merchant and be a member of the National Futures Association (NFA). The CFTC regulates the broker and ensures that he or she meets strict financial standards. (For more insight on determining whether you’re getting a fair price from your broker, read Is Your Forex Broker A Scam? and Price Shading In The Forex Markets.)
Most of the total forex volume is transacted through about 10 banks. These banks are the brand names that we all know well, including Deutsche Bank (NYSE:DB), UBS (NYSE:UBS), Citigroup (NYSE:C) and HSBC (NYSE:HBC). Each bank is structured differently but most banks will have a separate group known as the Foreign Exchange Sales and Trading Department. This group is responsible for making prices for the bank’s clients and for offsetting that risk with other banks. Within the foreign exchange group, there is a sales and a trading desk. The sales desk is generally responsible for taking the orders from the client, getting a quote from the spot trader and relaying the quote to the client to see if they want to deal on it. This three-step process is quite common because even though online foreign exchange trading is available, many of the large clients who deal anywhere from $10 million to $100 million at a time (cash on cash), believe that they can get better pricing dealing over the phone than over the trading platform. This is because most platforms offered by banks will have a trading size limit because the dealer wants to make sure that it is able to offset the risk.
On a foreign exchange spot trading desk, there are generally one or two market makers responsible for each currency pair. That is, for the EUR/USD, there is only one primary dealer that will give quotes on the currency. He or she may have a secondary dealer that gives quotes on a smaller transaction size. This setup is mostly true for the four majors where the dealers see a lot of activity. For the commodity currencies, there may be one dealer responsible for all three commodity currencies or, depending upon how much volume the bank sees, there may be two dealers.
This is important because the bank wants to make sure that each dealer knows its currency well and understands the behavior of the other players in the market. Usually, the Australian dollar dealer is also responsible for the New Zealand dollar and there is often a separate dealer making quotes for the Canadian dollar. There usually isn’t a “crosses” dealer – the primary dealer responsible for the more liquid currency will make the quote. For example, the Japanese yen trader will make quotes on all yen crosses. Finally, there is one additional dealer that is responsible for the exotic currencies such as the Mexican peso and the South African rand. This setup is usually mimicked across three trading centers – London, New York and Tokyo. Each center passes the client orders and positions to another trading center at the end of the day to ensure that client orders are watched 24 hours a day. (To continue reading about currency crosses, see Make The Currency Cross Your Boss and Identifying Trending & Range-Bound Currencies.)
How do banks determine the price?
Bank dealers will determine their prices based upon a variety of factors including, the current market rate, how much volume is available at the current price level, their views on where the currency pair is headed and their inventory positions. If they think that the euro is headed higher, they may be willing to offer a more competitive rate for clients who want to sell euros because they believe that once they are given the euros, they can hold onto them for a few pips and offset at a better price. On the flip side, if they think that the euro is headed lower and the client is giving them euros, they may offer a lower price because they are not sure if they can sell the euro back to the market at the same level at which it was given to them. This is something that is unique to market makers that do not offer a fixed spread.
How does a bank offset risk?
Similar to the way we see prices on an electronic forex broker’s platform, there are two primary platforms that interbank traders use: one is offered by Reuters Dealing and the other is offered by the Electronic Brokerage Service (EBS). The interbank market is a credit-approved system in which banks trade based solely on the credit relationships they have established with one another. All of the banks can see the best market rates currently available; however, each bank must have a specific credit relationship with another bank in order to trade at the rates being offered. The bigger the banks, the more credit relationships they can have and the better pricing they will be able access. The same is true for clients such as retail forex brokers. The larger the retail forex broker in terms of capital available, the more favorable pricing it can get from the interbank market. If a client or even a bank is small, it is restricted to dealing with only a select number of larger banks and tends to get less favorable pricing.
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Both the EBS and Reuters Dealing systems offer trading in the major currency pairs, but certain currency pairs are more liquid and are traded more frequently over either EBS or Reuters Dealing. These two companies are continually trying to capture each other’s market shares, but as a guide, the following is the breakdown where each currency pair is primarily traded:
| EBS | Reuters |
| EUR/USD | GBP/USD |
| USD/JPY | EUR/GBP |
| EUR/JPY | USD/CAD |
| EUR/CHF | AUD/USD |
| USD/CHF | NZD/USD |
Cross currency pairs are generally not quoted on either platform, but are calculated based on the rates of the major currency pairs and then offset through the legs. For example, if an interbank trader had a client who wanted to go long EUR/CAD, the trader would most likely buy EUR/USD over the EBS system and buy USD/CAD over the Reuters platform. The trader then would multiply these rates and provide the client with the respective EUR/CAD rate. The two-currency-pair transaction is the reason why the spread for currency crosses, such as the EUR/CAD, tends to be wider than the spread for the EUR/USD.
The minimum transaction size of each unit that can be dealt on either platform tends to one million of the base currency. The average one-ticket transaction size tends to five million of the base currency. This is why individual investors can’t access the interbank market – what would be an extremely large trading amount (remember this is unleveraged) is the bare minimum quote that banks are willing to give – and this is only for clients that trade between $10 million and $100 million and just need to clear up some loose change on their books. (To learn more, see Wading Into The Currency Market.)
Conclusion
Individual clients then rely on online market makers for pricing. The forex brokers use their own capital to gain credit with the banks that trade on the interbank market. The more well capitalized the market makers, the more credit relationships they can establish and the more competitive pricing they can access for themselves as well as their clients. This also means that when markets are volatile, the banks are more obligated to give their good clients continuously competitive pricing. Therefore, if a forex retail broker is not well capitalized, how they can access more competitive pricing than a well capitalized market maker remains questionable. The structure of the market makes it extremely difficult for this to be the case. As a result, it is extremely important for individual investors to do extensive due diligence on the forex broker with which they choose to trade.
source: investopedia
The Carry Trade 2012 : How to Trade Using Interest Rates
1.Large interest rate differentials:
For example, the British Pound has a 4.50% interest rate and the Japanese Yen has a 0.50% interest rate. That is an interest rate differential of 4%. This means if you borrow Japanese Yen at 0.50% interest rate and invest it in the British Pound at a 4.50% interest rate, you will make 4% in interest on those borrowed funds.
2.Healthy Economy of the Higher Interest Rate Currency
In general, a country with a high interest rate should attract more foreign capital as investors seek the highest returns on their investments. The health of the economy should also be taken into consideration. For England, inflation above normal at 3% indicates interest rates may rise in the near future, which is typically good for the British Pound. High inflation isn’t always good, especially in the case of Zimbabwe. The interest rate in Zimbabwe as of October 2008 is 8500.00%. A carry traders deam? Absolutely not, with inflation topping 231,150,888.87% year over year in October, investing in this currency would be a very risky move
Popular Carry Trade Set-Ups
Because Japanese interest rates have been so low in the recent past, a disproportionate number of carry trades in the forex market have involved the yen. So, let’s use the GBP/JPY for a basic example. Let’s say you know for a fact that the yen and the British Pound are going to maintain a parity over the coming year with 0.5% interest for the JPY and 4.5% interest for the British Pound. Taking $10,000 and leveraging it 10:1 to buy100,000 units GBP/JPY you will earn roughly with 11GBP per day on that investment, or 4000GBP per year. With the GBP/USD at an average price of 1.75, you would make roughly $7000 on your investment of $70,000 without a single pip move in your favor. In an ideal situation, like the chart below, investor capital will also flow in the direction of the higher yielding currency and the trader will profit on that as well, but that is not the main goal of the carry trade.
Of course, the main danger with carry trading is the same with other types of longer-term forex strategies – the currency you are holding might depreciate against your home currency as is occurring in the chart below. If you suspect that this is going to happen, it is time for you to get out. Many carry traders will set their stops on long term carry trades at their trades entry point. This locks in carry profits and stops the trade before it takes position losses. Keep in mind that carry trading is a long term strategy and should be treated as such, so don’t stress out on intraday profits and losses.
source: onlineforextrading
The Elliott Wave Principle 2012
In the 1930s, Ralph Nelson Elliott, a corporate accountant by profession, studied price movements in the financial markets and observed that certain patterns repeat themselves. He offered proof of his discovery by making astonishingly accurate stock market forecasts. What appears random and unrelated, Elliott said, will actually trace out a recognizable pattern once you learn what to look for. Elliott called his discovery “The Elliott Wave Principle,” and its implications were huge. He had identified the common link that drives the trends in human affairs, from financial markets to fashion, from politics to popular culture.
Robert Prechter, Jr., president of Elliott Wave International, resurrected the Wave Principle from near obscurity in 1976 when he discovered the complete body of R.N. Elliott’s work in the New York Library. Robert Prechter, Jr. and A.J. Frost published Elliott Wave Principle in 1978. The book received enthusiastic reviews and became a Wall Street bestseller. In Elliott Wave Principle, Prechter and Frost’s forecast called for a roaring bull market in the 1980s, to be followed by a record bear market. Needless to say, knowledge of the Wave Principle among private and professional investors grew dramatically in the 1980s.
When investors and traders first discover the Elliott Wave Principle, there are several reactions:
- Disbelief – that markets are patterned and largely predictable by technical analysis alone
- Joyous “irrational exuberance” – at having found a “crystal ball” to foretell the future
- And finally the correct, and useful response – “Wow, here is a valuable new tool I should learn to use.”
Just like any system or structure found in nature, the closer you look at wave patterns, the more structured complexity you see. It is structured, because nature’s patterns build on themselves, creating similar forms at progressively larger sizes. You can see these fractal patterns in botany, geography, physiology, and the things humans create, like roads, residential subdivisions… and – as recent discoveries have confirmed – in market prices.
Natural systems, including Elliott wave patterns in market charts, “grow” through time, and their forms are defined by interruptions to that growth.
Here’s what is meant by that. When your hands formed in the womb, they first looked like round paddles growing equally in all directions. Then, in the places between your fingers, cells ceased growing or died, and growth was directed to the five digits. This structured progress and regress is essential to all forms of growth. That this “punctuated growth” appears in market data is only natural – as Robert Prechter, Jr., the world’s foremost Elliott wave expert and president of Elliott Wave International, says, “Everything that thrives must have setbacks.”
Impulse waves are composed of five sub-waves and move in the same direction as the trend of the next larger size (labeled as 1, 2, 3, 4, 5). Impulse waves are called so because they powerfully impel the market.
A corrective wave follows, composed of three sub-waves, and it moves against the trend of the next larger size (labeled as a, b, c). Corrective waves accomplish only a partial retracement, or “correction,” of the progress achieved by any preceding impulse wave.
As the figure to the right shows, one complete Elliott wave consists of eight waves and two phases: five-wave impulse phase, whose sub-waves are denoted by numbers, and the three-wave corrective phase, whose sub-waves are denoted by letters.
What R.N. Elliott set out to describe using the Elliott Wave Principle was how the market actually behaves. There are a number of specific variations on the underlying theme, which Elliott meticulously described and illustrated. He also noted the important fact that each pattern has identifiable requirements as well as tendencies. From these observations, he was able to formulate numerous rules and guidelines for proper wave identification. A thorough knowledge of such details is necessary to understand what the markets can do, and at least as important, what it does not do.
You have only just begun to learn the power and complexity of the Elliott Wave Principle. So, don’t let your Elliott wave education end here. Join Elliott Wave International’s free Club EWI and access the Basic Tutorial: 10 lessons on The Elliott Wave Principle and learn how to use this valuable tool in your own trading and investing.
source: onlineforextrading
Forex Options Basics 2012
Understanding Options
Options are usually associated with the stock market, but the foreign exchange market also uses these derivatives in trading. It gives traders the opportunity to make money at a risk he has set for himself. To understand this concept better, let us use the example of purchasing a car.
If you hold a contract that requires you can buy a certain car on May 1st at a price of $1,500, you have an option to buy the car. This option ensures that if the value of the car increases at the predetermined time of purchase (in this case on May 1st), then you will profit from it because you can sell the car to another person for more than the amount you originally paid for.
Types of Forex Options
Traditional Option
The traditional call/put option works very much like the stock option. It gives the buyer the right (but not the obligation) to buy from the option seller at a specified time and price. For example, a trader can purchase the option to buy four lots of EUR/USD at 1.4000 for a certain month (this contract is called a EUR call/USD put). Remember that in the options market, you buy a call and a put at the same time. If the price of the EUR/USD goes below 1.4000, then the buyer loses the premium. But if the EUR/USD increases to 1.6000, then the buyer can use the option and gain the four lots for the agreed upon amount and sell it at a profit.
The Forex option are traded over-the counter. Because of this, Forex traders can easily choose the price and date of their preferred option. They will receive a quote regarding the premium they need to pay in order to get the option. There are two kinds of traditional options available today:
American Style Option
Can be used at any point until the expiration date
European Style Option
Can only be used at the point of expiration
Probably the main advantage of traditional call/put option over its counterpart is the fact that it requires lower premium. In addition, because the American-style option allows it to be traded even before expiration, forex traders gain more flexibility. On the downside, traditional options are requires more work to set and execute compared to SPOT options.
Single Payment Options Trading (SPOT)
SPOT options have almost the same concept as traditional options. The main difference is that the forex trader will first give a scenario (UER/USD will break 1.4000 in 2 weeks), gets a premium, and then receive cash if his scenario occurs. SPOT trading converts the option to cash automatically if your trade is successful. This type of option is very easy to trade because it only requires you to enter a scenario and then wait for the results.
Essentially, if your scenario plays out, you receive cash. But if it is incorrect, you will shoulder the loss of the premium. Another advantage of the SPOT option is it allows a wide variety of choices for the trader. He can choose the exact scenario that he thinks will play out. The main downside of the SPOT premium is that it is higher. In general, it costs significantly more than its counterpart.
Benefits and Downsides of SPOT Options
Benefits:
There are a lot of reasons why SPOT options appeal to a lot of investors and forex traders. Among its many benefits include:
- Financial risks is limited to the premium (the payment to buy the option)
- Infinite profit potential
- The trader sets the price and the date
- Requires less money up-front compared to the spot Forex position
- The option can hedge against cash positions and limit risks
- Options give the opportunity to trade on predictions about future market movements without the risk of losing a lot of capital
- SPOT options provide a lot of choices including standard options, one-touch SPOT, No-touch SPOT, Digital SPOT, Double one-touch SPOT, and Double no-touch SPOT.
Downsides:
But if options have all these benefits, why isn’t everyone into this type of forex trading? It is important to recognize that it does have its downsides as well.
- Premium varies depending on the date of the option and strike price. Because of this, the risk/reward ratio fluctuates as well
- SPOT options are not allowed to be traded. Once you buy it, you can’t sell it
- It is difficult to predict when and at what price the market will move
What Determines the Option Price?
As was mentioned earlier, the premium price can vary because of several factors. This is why the risk/reward ratio of forex options trading varies. Some of the factors that determine the price are:
Intrinsic Value
This is the current price of the option if it was used. The position of this price against the strike price can be described in three ways such as “in the money” (when the strike price is higher than the current value), “out of money” (the strike price is lower than the current value), and “at the money” (the strike price and the current value are at the same level).
Time Value
This reflects the uncertainty of market movements over time. In general, the longer the time period of the option, the higher the price you have to pay.
Interest Rate Differential
A change in the interest rates has an impact on the relationship between the strike price and the current market value. This differential is often included in the premium as part of the time value.
Volatility
High volatility increases the probability that the market price will hit the strike price in a certain timeframe. Volatility is often included as part of the time value. Usually, volatile currencies require higher premiums.
4x Options Conclusion
source: onlineforextrading
Dollar Weakens Ahead Of Non-Farm Payrolls 2012
The U.S. dollar fell against most of the major currencies during yesterday’s trading session. The dollar’s most notable depreciation took place versus the Japanese yen. As a result the USD/JPY pair is now trading at the 82.30 level, near a 15 year low.
The dollar continued its bearish trend against the major currencies today due to speculations that the Federal Reserve will debase the greenback by advancing purchases of government debt to in order to support the economic recovery. Later on the dollar erased some of its losses following better than expected employment data from the U.S. The weekly Unemployment Claims report showed that applications for U.S. unemployment insurance unexpectedly dropped last week to its lowest level in three months. Jobless claims fell to 445,000, beating expectations for 454,000 claims for unemployment benefits. In general it appears that as long as speculations regarding further stimulus from the Fed take place, the dollar has potential to drop even further, especially against the euro and the yen.
As for today, the most exciting trading day of the month is expected as the U.S. Non-Farm Payrolls release is scheduled for 12:30 GMT. This report measures the change in the number of employed people during September. In normal times this report has an unusual effect on the market due to its early release. However, considering the fragile condition of the U.S. labor sector, today’s release is likely to have an enhanced impact on the national currency.
forexyard.com
EUR/USD Weekly Outlook
EUR/USD Weekly Outlook
EUR/USD soared to as high as 1.4028, just inch below mentioned target of 100% projection of 1.1875 to 1.3330 from 1.2587 at 1.4042. A temporary top is in place and initial bias is neutral for some consolidations first this week. But downside is expected to be contained by 1.3636 support and bring another rise. Above 1.4028 will target medium term trend line resistance at 1.4585.
In the bigger picture, price actions from 1.6039 is a correction to long term rally from 0.8223 and could have finished with three waves down to 1.1875 already. Short term outlook will remain bullish as long as 1.3330 resistance turned support holds and further rally should be seen to upper trend line resistance (1.6039, 1.5143, now at 1.4585) next. Break there will target a new high above 1.6039.
In the long term picture, considering the five wave impulsive structure of the long term up trend from 2000 low of 0.8223 to 2008 high of 1.6039, price actions from 1.6039 are viewed as a correction only. Hence, we’d expect another high above 1.6039 eventually, after correction from 1.6039 is confirmed to be finished.
source actionforex
USD/JPY Weekly Outlook 2012
USD/JPY Weekly Outlook
USD/JPY broke intervention low of 82.86 to resume recent down trend and reached as low as 81.71 so far. Initial bias remains on the downside this week with 82.55 minor resistance intact. Current fall should now target 61.8% projection of 92.87 to 82.86 from 85.92 at 79.73, which is close to 79.75 low. On the upside, above 82.55 minor resistance will turn intraday bias neutral first. But break of 83.15 resistance is needed to be first signal of bottoming. Otherwise, outlook will remain bearish.
In the bigger picture, the break of 82.86 support indicates that USD/JPY has not bottomed yet. Whole decline from 124.13 is still in progress and should now target 1995 low of 79.75. Also, considering that monthly MACD has crossed below signal line again, suggesting that USD/JPY is rebuilding downside momentum. 79.75 low would probably be taken out. Though, note that Japan could intervene any time to slow of USD/JPY’s fall and hence, the path would likely be very choppy. In any case, break of 85.92 resistance is needed to be the first sign of medium term bottoming while break of 94.97 is needed to confirm reversal. Otherwise, outlook will remain bearish.
In the long term picture, there is no indication of trend reversal yet and USD/JPY’s long term down trend could still extend further to 1995 low of 79.75. We’d anticipate some strong support from 79.75 initially to bring rebound. Focus will be on whether 79.75 would hold or USD/JPY is indeed resuming the multi decade decline that started back in the 80′s.
Source actionforex
ECN broker 2012
Take Profits 2012
candlestick chart 2012
A form of Japanese charting that has become popular in the West. A narrow line (shadow) shows the day’s price range. A wider body marks the area between the open and the close. If the close is above the open, the body is white (not filled); if the close is below the open, the body is black (filled).
carry 2012 [interest-rate carry]
central bank 2012
chartist
China Wen: Can Keep Inflation At Reasonable Level
Wen also said he’s confident to curb China’s property prices to reasonable levels and the country will build more houses for low-income earners, according to the radio.
Beijing has introduced a series of measures since April to curb rising housing prices, including asking banks in September to stop issuing mortgages to home buyers that already own two or more properties.
-Wang Ming contributed to this article, Dow Jones Newswires; (86-21) 6120-1200; ming.wang@dowjones.com
ASIA MARKETS: Asia Watching For Japan Data Next Week
On Tuesday, Japan will unleash a pack of economic data, including November consumer inflation and the unemployment rate. Neither numbers from the previous month had good news: Japan’s October core consumer-price index lost 0.6%, despite the inflationary effects from a new cigarette tax that month, while the jobless rate surprised economists by rising to 5.1% from 5.0%.
Still, the Japanese government is at least expecting improvement in 2011. A Cabinet Office report released this past week forecast core CPI to be flat for the fiscal year beginning April 1, 2011, in line with the government’s goal of ending deflation next year. Unemployment was also tipped to ease, with the Cabinet Office projecting the jobless rate to fall to 4.7%.
Thursday will see the other main piece of data for the week, as HSBC releases its monthly China manufacturing survey.
Last month’s HSBC Manufacturing Purchasing Managers Index rose to 55.3, up from the October survey’s 54.8, prompting concern that China could soon tighten its monetary and fiscal policy to prevent the economy from overheating. Any large gain in next week’s PMI results could spark similar concerns, with the stock market then likely to take a hit.
The coming week will also feature two central-bank decisions on Thursday.
According to separate reports by The Wall Street Journal and Reuters, Taiwan’s monetary chiefs are widely expected to hike their policy rate by 12.5 basis points (0.125 percentage point) to 1.625%, amid concerns of a real-estate bubble and other inflationary worries. But since the move is more or less priced in, it would be unlikely to affect stocks or currencies.
The Philippines’ Bangko Sentral also has a scheduled decision, but any policy change looks doubtful. A survey reported by Dow Jones Newswires cited all 10 economists questioned as seeing no rate hike at the coming meeting, due to a benign inflation outlook. Most of the economists expected the first increase to come as a quarter-point hike in the middle of 2011.
Meanwhile, if the past week is anything to go by, trading volumes will be light for the final week of the year, with many markets on break.
Australian and New Zealand bourses are scheduled to close Monday and Tuesday, with Hong Kong and the Philippines also closed Monday.
On Friday, holiday market closures are planned for Japan, South Korea, Indonesia, Thailand and the Philippines.
Kan Seeks To Show Vision For Fiscal Reconstruction In 2011
“Regarding fiscal consolidation, I don’t think it is anywhere near enough,” Kan said in a group interview with major media outlets after his Cabinet approved a record-high draft budget of 92.41 trillion yen for the next fiscal year.
“On such issues, I want to explain many things to the public after the turn of the year while setting the direction by putting the next two and three years into perspective,” he said, when asked about how he hopes to restore the country’s finances and the possibility of raising the consumption tax rate.
Kan said he may touch on part of his new vision when he holds his first news conference of 2011 on Jan. 4.
Kan, however, defended the Cabinet’s endorsement of the largest-ever budget for the year starting April, saying it was needed to revitalize Japan’s economy and society.
He called on opposition parties, which now control the upper chamber of parliament, to cooperate for the early passage of the budget during the regular Diet session due to begin in January.
On the diplomatic front, Kan reiterated his resolve to relocate the U.S. Marine Corps’s Futenma Air Station within Okinawa Prefecture in line with an accord struck in late May with Washington.
But he said Japan won’t put a deadline on settling the relocation issue as strong opposition persists in Okinawa.
“The U.S. side fully understands about this point,” Kan said, arguing that settlement of the issue will not be a prerequisite for his planned visit to the United States around next spring to release a joint statement with U.S. President Barack Obama on the two countries’ longstanding security alliance.
Kan also said he has yet to decide whether to replace Japan’s ambassador to Russia soon.
Government sources said Thursday that Japan is considering replacing Ambassador to Russia Masaharu Kono as early as January following his failure to obtain the right information beforehand on Russian President Dmitry Medvedev’s visit to a disputed island off Hokkaido in November.
Japan Government Approves FY2011 Budget At Record Y92.412 Trillion
The government’s initial budget for the fiscal year beginning April 2011 contains Y92.412 trillion in total spending, exceeding the previous record of Y92.299 trillion for the current fiscal year due to increased debt-servicing costs, the government said.
Yet Prime Minister Naoto Kan’s cabinet kept the amount of new debt issuance at Y44.298 trillion, below this fiscal year’s Y44.303 trillion. It also held its main spending—or the sum of policy outlays and financial aid for local governments–at Y70.863 trillion, below this year’s Y70.932 trillion.
The government now faces the challenge of passing the budget through parliament by the March 31 end of this fiscal year.
The budget means that the government has satisfied the first-year requirement of a new fiscal overhaul plan created earlier this year that aims to balance the nation’s main budget over the coming decade. Although Japan’s fiscal state remains perilous, with the amount of planned debt issuance expected to exceed tax revenue for the third straight year, signs of the government’s commitment to fiscal overhaul may reassure investors in Japanese government bonds.
Japanese officials find it increasingly important to rein in the nation’s ballooning debt, which is now roughly twice Japan’s annual economic output. Europe’s deepening debt crisis has boosted their discomfort over their country’s still-growing liabilities.
While the ruling Democratic Party of Japan and its coalition partners can pass the main budget bill because of their dominance in the lower chamber, other budget-related legislation requires approval from the upper chamber, which is controlled by increasingly combative opposition parties.
The budget estimates the next fiscal year’s tax revenue at Y40.927 trillion, compared with an estimated Y39.643 trillion for the current fiscal year.
The government plans to use Y7.187 trillion in non-tax revenue, including one-time sources of revenue from separately managed government accounts as well as gains on the nation’s $1.1 trillion foreign reserves. Its heavy reliance on those sources has already raised concerns over the long-term feasibility of the fiscal reform plan.
The primary balance, a measure of how reliant Japan is on borrowing to pay for its policy spending, is Y22.7 trillion in deficit under the fiscal 2011 budget, the government said.
Few economists expect the Japanese economy to get much boost from the budget, in which debt-servicing costs and social security spending make up about 55% of total spending. Aid for local governments accounts for another 18.2%, and the rest is divided among various policy measures such as defense, public works projects, education and technology.
In the meantime, the government plans to boost the Ministry of Finance’s accumulated funding limit for currency-market intervention by Y5 trillion to Y150 trillion.
But government officials told Dow Jones Newswires that the move is mostly technical and doesn’t necessarily mean that more intervention is on the card. It is partly to make up for Y2 trillion spent by the government for a Sept. 15 yen-selling intervention, one of them said.
-By Takashi Nakamichi, Dow Jones Newswires; +81-3-6269-2781; takashi.nakamichi@dowjones.com
Banks Cut Use Of ECB Overnight Facilities Ahead Of Christmas
At the same time, banks borrowed sharply less from the ECB’s emergency 1.75% marginal lending facility, following the ECB’s special 13-day refinancing operation Thursday, the data showed.
Financial institutions across the 16-nation euro zone parked EUR43.619 billion overnight with the ECB at 0.25%, a rate that is below the overnight market rate, currently at 0.40%. The amount deposited with the ECB was down about EUR22.0 billion from the previous day.
However, the usage of the ultra-safe deposit facility is high compared with levels recorded last week, as banks are hoarding liquidity ahead of the Christmas holiday. If markets are functioning properly, banks use the ultra-safe facility to the tune of only a few hundred million euros.
ECB data also showed Friday that banks sharply lowed their use of the ECB’s emergency 1.75% marginal lending facility. Banks borrowed EUR229 million overnight from the ECB Thursday–an amount within the normal ranges–after requesting almost EUR3.5 billion Wednesday.
ECB website: http://www.ecb.int
-By Nina Koeppen, Dow Jones Newswires; +49 171 569 4340; nina.koeppen@dowjones.com
The FXDD Weekend Technical Forex Commentary
The currency pairs covered in the report (in the order of review) include:
EURUSD
GBPUSD
USDJPY
USDCHF
USDCAD and
AUDUSD
If there is a pair that you would like for me to review, please send me an email at greg@fxdd.com
Thanks for your support and commitment to FXDD and have a safe and happy weekend,
Greg Michalowski
Trading Course Lesson 3 Greg and Shawn Feb 15
Have a great weekend,
Greg Michalowski
USDCHF moves toward next resistance levels
The USDCHF broke above the 100 day MA today. If the price can close above this level today (0.9685), this will be the first close above the MA level since June 25th 2010. That is signficant and the price action has reacted accordingly today with prices moving steadily higher.
Of coures, breaks higher (or lower) still have levels to get through in order to keep the bullish momentum in tact. The next target level for the USDCHF is the 0.9773 level. This is the 61.8% of the December 2010 high to the low reached at the end of December. Above that is the high from December at the 0.9783 level. A break of these levels should lead to further bullish momentum for the pair.
Looking longer term, the pair has been depressed for some time and therefore has some room to run. Catalyst include a stronger global/US economy that takes the pressure off the safe haven flows into the CHF. This ultimately could lead to more significant upside potential. The 0.9807 level is another upside level to get through (see daily chart below) and 0.9964 (50% of the move down from the Aug 2010 high) is another target. The 200 day MA is all the way up at the 1.0200 level.
Intraday, if the price can stay above the 0.9739 to 0.9747 level, the pair could sustain the upside momentum from an intraday perspective (38.2% of the last surge higher). Please see the chart below.
Gold falls (a little) on Mubarek resignation
With Mabarek’s resignation, a reversal in Gold would be expected on the idea of less tension should lead to less demand for safe haven assets like gold.
The price has indeed fallen, but the price remains above the 100 hour MA at the 1359.50 level. As a result, the technicals are still fighting between the 100 hour MA and resistance above on the daily chart (see below) against a series of resistance levels including the 100 day MA, the 50% retracement of the move down from the January 2011 high to the 2011 low, and the underside of the trendline (see chart below).
So although the there is some minor selling, the market remains contained with neither bulls or bears taking control.
GBPUSD tests key resistance at the 1.6015-18 level
On the downside a move below the 1.5995 level, would please the bears (see chart below). The trendline off the low on the same chart below comes in at the 1.5982 level. This will also be a key level for the pair today.
Today’s Call: EURJPY – Cautiously bullish above 114.72
An unchanged trading day and small range has left signals once again without any strong directional bias. Intraday trading is being highlighted by a continued loss of positive momentum at levels above 115.00 since Friday. However overall momentum for the week is still improving and prices are supported by a trend of rising lows. Against this background this morning’s forecast is for sentiment to remain cautiously bullish above 114.72. Targets are for gains through 115.38 to attract renewed investors’ enthusiasm to target 116.00 then 116.30. Exact risk to this forecast is not clear but most likely selling through 114.72, yesterday afternoon’s low, would be a bearish signal that once again investors’ enthusiasm has stalled above 115.00 and a further deterioration is likely to 114.55, the week’s low, then 113.97, a 50% pullback to the gains since last week’s low (111.95 – 116.00).
source from: tradingfloor
Macro Europe: German steamroller powers on
Germany steps into the spotlight for a second consecutive day with the release of its February industrial production report, which is expected to be quite good. Germany is joined today by the U.K., which releases its monthly trade data. Analysts look for another large deficit.
German steamroller powers on
As we argued in yesterday’s post the German growth machine continues at an unabated pace with factory orders rising 2.9 percent month-on-month in January (16 percent year-on-year) against consensus expectations for growth of 2.5 percent. In particular, intermediate goods and durable consumer goods were on fire suggesting that capital expenditure continues to aid economic activity (GDP).
Today we take one step further down that track- from orders to output – as Germany releases its report on industrial production. Unsurprisingly, consensus is expecting output to more or less follow orders forecasting a montlhy change of 1.7 percent; 11.1 percent year-on-year. The two are understandably quite correlated, and with other manufacturing reports – including PMI Manufacturing – also pointing to continued strength industrial production should remain high in the coming months.
U.K. trade balance still firmly in the red
The surprise decline in U.K. economic activity in the fourth quarter of 2010 was partly driven by a negative contribution from net exports, as exports grew 2.3 percent quarter-on-quarter while imports rose 3 percent; and this happened despite a decline of 2 percent in the GBP trade-weighted index.
The U.K. has been running a trade deficit for more than a decade (the last nominal trade surplus was in January 1998), which has widened as the economy improved from an average deficit of GBP 2.47 billion in 2009 to 3.85 billion last year. The markets are looking for the U.K. to add to the long line of deficits with today’s report for January expected to show a trade balance of GBP -4 billion. The anticipated improvement over the last five months of 2010 (all of which had deficits larger than GBP 4 billion) is partly attributable to the austerity measures, which pulled demand for foreign products forward into 4Q2010 from the current quarter causing a 3.5 percent surge in imports while exports only grew 1.5 percent.
Stay tuned for our Macro US ahead of the U.S. opening.
source from: tradingfloor
Equity Kickoff: Crude oil retreats and German industrial production hammers on
The FTSE 100 index futures are currently up 0.1 percent ahead of the opening. Today the most watched European economic figure is German industrial production (11:00 GMT) expected to come in at 1.7 percent and 11.1 percent on month-over-month and year-over-year respectively. With Brent crude oil prices having retreated to around USD 112 per barrel, today’s German industrial production figures might get more attention and set the direction in Europe.
S&P is out saying it sees more sovereign rating downgrades for European countries in the near future. Sovereign credit markets in peripheral Europe are still under huge pressure and Greece’s 10-year bond yields hit a record 12.8 percent. It all indicates that Europe is still facing some serious issues which could be amplified if the European Central Bank begins to raise rates in April. In U.S. credit markets small signs of looming risk are also evident with the issuance of municipal bonds at the lowest levels in 11 years
source from: tradingfloor
FX Update: How long can USD keep head of steam?
The USD followed through on its smart little technical reversal yesterday with follow-up strength today, but will the currency follow through to the strong side here, or is this simply another modest consolidation that will fade to yield further gains for the greenback like all previous attempts by the currency to make a stand?
UK BRC Sales
The UK Like-for-Like sales number for February were very weak (though overall sales did rise +1.1% YoY) and suggests rather weak end demand from consumer. This makes sense in light of the austerity descending on the British population since the first of the year. The weak demand wasn’t as evident in January due to pent up demand from historically disruptive winter weather that kept people pinned up in their homes in December. Continued weak demand will be an interesting possible theme for the UK in coming months.
Riksbank
The Swedish Krona caught a bit of a bid today despite generally souring risk markets and despite dovish talk from the Riksbank Deputy Governor Svensson. He was out arguing for a “lower repo rate path” and for a focus on employment as well as inflation. Sounds like Mr. Svensson needs to join the Bernanke Fed. Another Riksbank member is out speaking later today.
Chart: EURUSD
EURUSD is reversing after its extensive grind higher all the way from the . So far, we can only speak of an orderly consolidation. The key is whether the sell-off cuts deeply through the 1.3860 area support provided by the previous high, a move that would weaken the uptrend. Note that the recent test above 1.40 just barely took out a falling trendline – a tease that proved a false break. Round numbers have often been important in EURUSD’s history and that 1.40 level remains the key upside resistance for now as we inch close to the EU summit later this month.
Chart: AUDUSD
The technical situation in AUDUSD is becoming a farce, with an ever-shrinking range between 1.02 and higher and higher lows. The nominal technical formation is an ascending triangle, normally considered a bullish formation, but the longer the pair dallies, ironically, the weaker the formation becomes as an indicator of future direction. Parity is the key downside support beyond the tactical 1.0075 level.
Chart: AUDNZD
A large scale reversal in AUDNZD, which shows the most significant crack in the uptrend in over a month. This may be the beginning of the end of the uptrend – as valuation here is extreme and there is only so much an earthquake can do to a country’s currency. Longer term fair value lies closer to 1.30 if not 1.25 for the pair.
Looking ahead
The USD has followed through a bit stronger today, a development presaged by yesterday’s neat technical reversal in key USD crosses. The question now is whether we follow through and move back through more strategic resistance levels for the greenback. To take three USD pairs, that would be on the order of 1.3860 in EURUSD, parity in AUDUSD and 1.6000 in GBPUSD. Certainly from a contrarian perspective, there are grounds for further USD strength as USD shorts are out there in record swarms by some measures. Again (as we discussed yesterday), a continued rally in fixed income (which should tend to favor the USD in interest rate spreads), a easing off of crude oil prices and another couple of percent of downside for equities could prove powerful medicine for the greenback in coming days.
For USDJPY, we await today’s 3-year auction with interest. Expectations are relatively low after last month saw a very anemic auction despite relatively high yields (if you can call 1.25% a high yield – but that was higher than the 0.45% the 3-year debt was yielding around the time of Bernanke’s official QE2 announcement). The 3-year debt is yielding about the same now as it was at last month’s auction – so this will be an interesting one to see whether recent events and disruptions in equity markets see a stronger bid coming into the market.
The rest of the week’s calendar is fairly heavy for Australia, with Consumer Confidence and Home loan data tonight, and the employment report tomorrow night. Seems like by this time next week, we are either trading above 1.0200 or below parity.
source from: tradingfloor
Equity Update: Economic data battles sovereign debt concerns
Germany is doing all it can to lift the rest of the Eurozone as another report released earlier today shows that factory orders grew 2.9 percent month-on-month in January, beating the 2.5 percent consensus forecast. Axel Weber also provided more fuel for the risk bulls as he delivered a rather upbeat speech in Frankfurt. The former frontrunner for the ECB presidency said “Germany’s strong cyclical recovery will continue in 2011, albeit at a somewhat slower pace”. He expects the growth drivers not just being limited to capital expenditure, but also sees consumer spending picking up on the back of the strong German labour market.
All is not well in the Eurozone, though, as emphasised by today’s development in the Greek 10-year government bond, which is now at the highest rate ever since Greece joined the Eurozone. The 10-year yield is at 12.8 percent, up 47bps alone today, following Moody’s downgrade of the country’s debt yesterday which sent European indices down. This is killing the EUR in the process with EURUSD down 66 pips.
With economic data, including company announcements, expected to have little influence for the rest of the day we look for stocks to range trade around the current levels.
source from: tradingfloor
Grains – let the battle begin!
The U.S. Department of Agriculture will release its long awaited report today about U.S. farmers’ planting intentions for the 2011/12 crop season. Given the current tightness in supply, in especially corn and soybeans, this report could set the tone for price developments over the next couple of months until weather becomes the sole focus ahead of the autumn harvest.
Below are the current consensus estimates and previous results. Total acreage is expected to increase by almost 9 million acres, or 4%, to 239 million acres. Some commentators have argued that such an increase would be very difficult to achieve and this increases the uncertainty ahead of the release.
With stocks to use at historically tight levels, an increase of this magnitude is required to avoid prices moving higher. Alternatively, prices will have to move even higher, especially on soybeans and corn, in order to ration demand.
More will follow later once the report is out.
source from: tradingfloor