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Thursday, January 24, 2008
USD/JPY Mid-Day Outlook
USD/JPY Mid-Day Outlook Daily Pivots: (S1) 105.68; (P) 106.36; (R1) 107.10; More. USD/JPY's fall from 114.77 resumes by taking out 150.60 low in early US session and dives to as low as 104.96 so far. Further decline is still expected as long as 107.41 resistance holds. Next short term downside target will be 100% projection of 104.77 to 107.88 from 110.10 at 103.22. On the upside, though, above 107.41 will indicate that a short term low is in place, possibly with bullish convergence condition in 4 hours MACD and RSI. Further rebound could then be seen. But upside is expected to be limited by 110.10 resistance and bring fall resumption. In the bigger picture, whole medium term down trend from 124.13 remains in force towards key medium term support zone of 101.22/65 level. However, since the structure of the fall from 124.13 is not clearly impulsive yet, the fall from 124.13 might only be part of a wide range consolidation pattern only and 101.22/65 key support might hold. Much attention will be paid there on sign of reversal as USD/JPY approaches this key support zone. On the upside, though, above 110.10 will indicate that fall from 114.77 has already completed. Stronger rally could the be seen retest the trend line resistance (now at 113.66). But still, a decisive break of trend line resistance is needed to be the first signal that whole down trend fro 124.13 has completed. Otherwise, medium term outlook will remain bearish.
Yen Crosses: Risk Aversion is Back
Mid-Day Report: Yen Crosses Dive again as Risk Aversion is Back
The Japanese yen strengthens sharply in early US session, following a reversal in the European stock markets and the anticipation of a lower opening in the US stock markets. It seems that the markets have fully digested the surprised 75bps rate cut from Fed yesterday and is focusing back to the risk of recession in the US economy again. Technically speaking, as we've pointed out in various technical outlook report, some key resistance are still intact in most pairs despite yesterday's powerful sell off in both dollar and yen. After all, the short term outlook remained unchanged. Yen cross is set to lead the way in the the US session today which could be followed by further decline in Euro, Sterling and Aussie against the greenback.
BoE meeting minutes published today revealed that the decision to keep rates unchanged in Jan was by a 8-1 vote instead of market's expected 7-2 vote. Blanchflower was the only member who voted for a cut. The decision was supported by still solid growth in Q3 of 07 and upside risks to inflation, echoing what King said yesterday that inflation could rise above 3.0% this year. Q4 GDP in UK slowed sharply from 3.3% yoy to 2.9% but was slightly above expectation of 2.8%. Today's minutes and data raised some questions that the expected rate cut from BoE in Feb is still not a done deal and will very much depends on the upcoming development in the financial markets.
Said in a speech today, ECB Trichet emphasized again that he's committed to fight inflation as he said "particularly in demanding times of significant market correction and turbulence, it is the responsibility of the central bank to solidly anchor inflation expectations to avoid additional volatility." Nevertheless, markets were rather unmoved by the comments and continue to expect that ECB will soon follow Fed's path on policy easing, in particular after Services PMI dropped another 1.1 pt to 52 in Jan, even though manufacturing PMI was unchanged at 52.6.
The Japanese yen strengthens sharply in early US session, following a reversal in the European stock markets and the anticipation of a lower opening in the US stock markets. It seems that the markets have fully digested the surprised 75bps rate cut from Fed yesterday and is focusing back to the risk of recession in the US economy again. Technically speaking, as we've pointed out in various technical outlook report, some key resistance are still intact in most pairs despite yesterday's powerful sell off in both dollar and yen. After all, the short term outlook remained unchanged. Yen cross is set to lead the way in the the US session today which could be followed by further decline in Euro, Sterling and Aussie against the greenback.
BoE meeting minutes published today revealed that the decision to keep rates unchanged in Jan was by a 8-1 vote instead of market's expected 7-2 vote. Blanchflower was the only member who voted for a cut. The decision was supported by still solid growth in Q3 of 07 and upside risks to inflation, echoing what King said yesterday that inflation could rise above 3.0% this year. Q4 GDP in UK slowed sharply from 3.3% yoy to 2.9% but was slightly above expectation of 2.8%. Today's minutes and data raised some questions that the expected rate cut from BoE in Feb is still not a done deal and will very much depends on the upcoming development in the financial markets.
Said in a speech today, ECB Trichet emphasized again that he's committed to fight inflation as he said "particularly in demanding times of significant market correction and turbulence, it is the responsibility of the central bank to solidly anchor inflation expectations to avoid additional volatility." Nevertheless, markets were rather unmoved by the comments and continue to expect that ECB will soon follow Fed's path on policy easing, in particular after Services PMI dropped another 1.1 pt to 52 in Jan, even though manufacturing PMI was unchanged at 52.6.
Tuesday, January 22, 2008
Canada Expected to Cut Interest Rates
Bank of Canada Expected to Cut Interest Rates
Carry trade liquidation, weaker economic data and softer commodity prices drove the Australian, New Zealand and Canadian dollars lower today. Wholesale sales growth slowed in the month of November which suggests that retail sales numbers for Canada, which are due for release tomorrow could be soft as well. The Bank of Canada will also be making an interest rate decision. They are expected to lower rates by 25bp tomorrow to 4.00 percent, putting Canadian rates below US rates temporarily. The Canadian economy has really taken a turn for the worst with growth in all sectors of the economy slowing. In Australia, inflationary pressures appear to be easing with producer prices rising only 0.6 percent last month. Although central bank Governor Stevens still believes that inflation will remain uncomfortably high in the near term, the drop in producer prices allows him to postpone any plans to raise interest rates. This flexibility comes in handy in the current environment when a rate hike would only exacerbate the losses in the Australian dollar and Australian stocks
Carry trade liquidation, weaker economic data and softer commodity prices drove the Australian, New Zealand and Canadian dollars lower today. Wholesale sales growth slowed in the month of November which suggests that retail sales numbers for Canada, which are due for release tomorrow could be soft as well. The Bank of Canada will also be making an interest rate decision. They are expected to lower rates by 25bp tomorrow to 4.00 percent, putting Canadian rates below US rates temporarily. The Canadian economy has really taken a turn for the worst with growth in all sectors of the economy slowing. In Australia, inflationary pressures appear to be easing with producer prices rising only 0.6 percent last month. Although central bank Governor Stevens still believes that inflation will remain uncomfortably high in the near term, the drop in producer prices allows him to postpone any plans to raise interest rates. This flexibility comes in handy in the current environment when a rate hike would only exacerbate the losses in the Australian dollar and Australian stocks
Carry Trades Plunge
Carry Trades Plunge as Volatility and Risk Aversion Rises
Carry trades live and die by 3 things; volatility, risk appetite and the direction of monetary policy. Unfortunately, in the current market environment, all 3 of these factors are not favoring carry trades. Volatility across the financial markets has surged. The VIX which is a measure of US equity market volatility closed last week not far from its 4 year high. Today, the VDAX-New Index which is a measure of European equity market volatility surged 39 percent, the largest rise since 2001. Risk appetite has plunged with equities selling off while central banks around the world are shifting from monetary tightening to monetary easing. Therefore it is not surprising that carry trades are coming close to reporting the biggest drawdown since the inception of the Euro. Even though the Bank of Japan has a monetary policy announcement tomorrow, it should be a non-event as traders focus on equities and whether they recover or extend Monday's sell-off.
Carry trades live and die by 3 things; volatility, risk appetite and the direction of monetary policy. Unfortunately, in the current market environment, all 3 of these factors are not favoring carry trades. Volatility across the financial markets has surged. The VIX which is a measure of US equity market volatility closed last week not far from its 4 year high. Today, the VDAX-New Index which is a measure of European equity market volatility surged 39 percent, the largest rise since 2001. Risk appetite has plunged with equities selling off while central banks around the world are shifting from monetary tightening to monetary easing. Therefore it is not surprising that carry trades are coming close to reporting the biggest drawdown since the inception of the Euro. Even though the Bank of Japan has a monetary policy announcement tomorrow, it should be a non-event as traders focus on equities and whether they recover or extend Monday's sell-off.
Tuesday could be Ugly for US Stocks
Dollar Surges but Tuesday could be Ugly for US Stocks
On Friday, we argued that the dollar may rally this week as traders reflect on whether it is realistic to expect the Federal Reserve to deliver an intermeeting rate cut or 75bp easing at the end of the month. As we predicted, the dollar has started off the week strongly, but for reasons other than the ones that we have proposed. Stock markets around the world have plunged. In fact, that's an understatement because the one day slides in many of the indexes are the worst since 9/11 of 2001. The UK's FTSE index is down over 5 percent, the German DAX is down over 7 percent and Hong Kong's Hang Seng Index fell more than 5 percent. Even though the US stock markets were closed for Martin Luther King's day,
On Friday, we argued that the dollar may rally this week as traders reflect on whether it is realistic to expect the Federal Reserve to deliver an intermeeting rate cut or 75bp easing at the end of the month. As we predicted, the dollar has started off the week strongly, but for reasons other than the ones that we have proposed. Stock markets around the world have plunged. In fact, that's an understatement because the one day slides in many of the indexes are the worst since 9/11 of 2001. The UK's FTSE index is down over 5 percent, the German DAX is down over 7 percent and Hong Kong's Hang Seng Index fell more than 5 percent. Even though the US stock markets were closed for Martin Luther King's day,
Dow futures fell 546 points or 4.5 percent. If the futures do not retrace materially before the market's open on Tuesday and the Dow closes the day down by the amount that the futures suggest, the index would see its fourth largest point loss ever. Such big moves in the equity markets certainly make an intermeeting rate cut by the Federal Reserve more likely. If stocks do not begin to recover anytime soon, the Fed will be forced to take measures to restore confidence in the US financial markets.
Although part of today's volatility could be attributed to the fear of a US recession and the lack of liquidity, the move began in Asia and was sparked by speculation that the Bank of China could be forced to write-off a fourth of its $8 billion subprime exposure. The announcement by the Chinese Bank would indicate that the mortgage mess has spread from the US to Europe and now into Asia. The world may be able to deal with a slowdown in the US economy, but the combination of a material slowdown in both US and China would be too much for everyone to handle.
The lack of economic data on the US calendar this week will allow the equity markets to drive currency movements. Should Tuesday come anywhere close to being a record breaking day in US stocks, we expect to see the biggest drawdown in carry trades since the inception of the Euro. This will in turn lead to more dollar strength against everything except for the Japanese Yen which will decouple from the rest of the dollar pairs due to its carry trade status.
Wednesday, January 16, 2008
EUR/USD Mid-Day Outlook
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.4795; (P) 1.4854; (R1) 1.4928; More
After initial pull back today, EUR/USD's rally from 1.4309 resumes in early US session following broad based weakness of dollar and took out prior high of 1.4914. Further rally is expected to be seen to retest 1.4966 record high and then mentioned 1.5 key medium term resistance. On the downside, below 1.4830 will indicate that an intraday top is in place and bring pull back, probably to 4 hours 55 EMA (now at 1.4741). But still, in any case, short term outlook will remain bullish as long as 1.4638 support holds.
In the bigger picture, with 1.3581 resistance turned support remains intact, medium term up trend from 1.1639 is still in force. Regardless of internal structure, it is treated as resumption of long term up trend from 0.8223 (00 low) to 1.3668 (04 high) and has just failed 61.8% projection of 0.8223 to 1.3668 from 1.1639 at 1.5004 target which overlaps with 1.5 psychological resistance. With subsequent correction completed with three waves down to 1.4309, rise from there is tentatively treated as resumption of such up trend. Sustained trading above 1.5 key resistance will confirm this case and bring rally to next projection target of 100% projection at 1.7048.
On the downside, below 1.4638 support will firstly indicate that rise from 1.4309 has made a top already. Secondly, it will argue that current rise from 1.4309 is probably just part of the consolidation pattern that started at 1.4966, which will extend further with another fall to retest 1.4309 low before completion.
Daily Pivots: (S1) 1.4795; (P) 1.4854; (R1) 1.4928; More
After initial pull back today, EUR/USD's rally from 1.4309 resumes in early US session following broad based weakness of dollar and took out prior high of 1.4914. Further rally is expected to be seen to retest 1.4966 record high and then mentioned 1.5 key medium term resistance. On the downside, below 1.4830 will indicate that an intraday top is in place and bring pull back, probably to 4 hours 55 EMA (now at 1.4741). But still, in any case, short term outlook will remain bullish as long as 1.4638 support holds.
In the bigger picture, with 1.3581 resistance turned support remains intact, medium term up trend from 1.1639 is still in force. Regardless of internal structure, it is treated as resumption of long term up trend from 0.8223 (00 low) to 1.3668 (04 high) and has just failed 61.8% projection of 0.8223 to 1.3668 from 1.1639 at 1.5004 target which overlaps with 1.5 psychological resistance. With subsequent correction completed with three waves down to 1.4309, rise from there is tentatively treated as resumption of such up trend. Sustained trading above 1.5 key resistance will confirm this case and bring rally to next projection target of 100% projection at 1.7048.
On the downside, below 1.4638 support will firstly indicate that rise from 1.4309 has made a top already. Secondly, it will argue that current rise from 1.4309 is probably just part of the consolidation pattern that started at 1.4966, which will extend further with another fall to retest 1.4309 low before completion.
Long Term Forex Forecasts
Long Term Forex Forecasts
It's important to look at the big picture no matter what markets, and what time frame you are trading. There's no difference in trading Forex. Sometimes, one may wonder why a short term trend halts and reverses at a certain level before knowing that it's an important long term support/resistance, or a projection level in play. On the other hand, forex traders are always advised to pay attention to fundamentals like inflation forecasts, growth and monetary policy in medium to longer terms.
This sections provides long term forecasts reports written by selected external contributors around the world. A wide range of topics will be covered, including global economy and monetary policies. In addition, some reports also contains long term technical analysis of specific forex pairs. The long term forecasts reports are usually "longer" in length comparing to dailies and weeklies. But they definitely worth the read!
Click here to see Details: Long Term Forecasts
It's important to look at the big picture no matter what markets, and what time frame you are trading. There's no difference in trading Forex. Sometimes, one may wonder why a short term trend halts and reverses at a certain level before knowing that it's an important long term support/resistance, or a projection level in play. On the other hand, forex traders are always advised to pay attention to fundamentals like inflation forecasts, growth and monetary policy in medium to longer terms.
This sections provides long term forecasts reports written by selected external contributors around the world. A wide range of topics will be covered, including global economy and monetary policies. In addition, some reports also contains long term technical analysis of specific forex pairs. The long term forecasts reports are usually "longer" in length comparing to dailies and weeklies. But they definitely worth the read!
Click here to see Details: Long Term Forecasts
Saturday, January 12, 2008
Why have a Trading Plan?
Uh oh! You’ve learned so much and have come so far in your education, and yet you're still haven't graduated high school. No, you’re not dumb, BUT you didn’t have a trading plan.
Our point is that you can fill your mind with plenty of information, but without a good trading plan and the discipline to stick to it, you will NEVER be profitable.
Think of your trading plan as your map to success. It will be a constant reminder of how you will make money in this market. Of course it’s not required, and if you can make your living by trading without a plan, we will bow down and hail you as the Market Zeus of the Forex.
So you CAN trade without a plan if you want, but before you make that decision, let us give you a few reasons WHY you should have one.
Why Have a Trading Plan?
Reason 1: It keeps you in the right direction
Consistency is very important to have in your trading routine because it allows you to truly measure how successful you are as a trader. If you have a sound trading system but always break your rules, how can you ever really know how good your system really is? Your trading plan will keep you on target. Read it every day and stick to it.
Reason 2: Trading is a business and successful businesses ALWAYS have plans
I have never seen a successful business not start out with a plan. Do you honestly think Walmart was just created on a whim and then magically became successful? Or what about McDonalds? I’m sure almost anyone can make a better hamburger than McDonalds, but the difference between them and the individual is that they have a successful business plan that guides them to success.
In the same way, you can relate the McDonald’s story to your trading career. Whether it’s by luck or experience, everyone can make money in the forex. However, the difference between a losing trader and a successful trader is the PLAN. If you have a good trading plan and you are disciplined enough to stick to it, you will be successful!
Now you know why you should have a trading plan. Let's find out what makes up a trading plan...
Reason 3: Coming Soon....
Our point is that you can fill your mind with plenty of information, but without a good trading plan and the discipline to stick to it, you will NEVER be profitable.
Think of your trading plan as your map to success. It will be a constant reminder of how you will make money in this market. Of course it’s not required, and if you can make your living by trading without a plan, we will bow down and hail you as the Market Zeus of the Forex.
So you CAN trade without a plan if you want, but before you make that decision, let us give you a few reasons WHY you should have one.
Why Have a Trading Plan?
Reason 1: It keeps you in the right direction
Consistency is very important to have in your trading routine because it allows you to truly measure how successful you are as a trader. If you have a sound trading system but always break your rules, how can you ever really know how good your system really is? Your trading plan will keep you on target. Read it every day and stick to it.
Reason 2: Trading is a business and successful businesses ALWAYS have plans
I have never seen a successful business not start out with a plan. Do you honestly think Walmart was just created on a whim and then magically became successful? Or what about McDonalds? I’m sure almost anyone can make a better hamburger than McDonalds, but the difference between them and the individual is that they have a successful business plan that guides them to success.
In the same way, you can relate the McDonald’s story to your trading career. Whether it’s by luck or experience, everyone can make money in the forex. However, the difference between a losing trader and a successful trader is the PLAN. If you have a good trading plan and you are disciplined enough to stick to it, you will be successful!
Now you know why you should have a trading plan. Let's find out what makes up a trading plan...
Reason 3: Coming Soon....
Currency Trader Magazine 2007
Currency Trader Magazine 2007, brings you the best strategies, analysis, news and Trading resources for the global forex market. Among the features covered in every issue.
Trading Strategy articles discuss both the why and the how - the logic behind a trading approach, not just the rules to execute it. Strategies are spelled out so you can research and test them yourself, with programming code for top analytical software platforms provided when applicable.
Special strategy articles ("Currency Characteristics") statistically explore behavioral characteristics and tendencies in different currencies and the relationships between currencies and economic data. This type of analysis can provide excellent ideas for trading strategies and systems, and many more....
Trading Strategy articles discuss both the why and the how - the logic behind a trading approach, not just the rules to execute it. Strategies are spelled out so you can research and test them yourself, with programming code for top analytical software platforms provided when applicable.
Special strategy articles ("Currency Characteristics") statistically explore behavioral characteristics and tendencies in different currencies and the relationships between currencies and economic data. This type of analysis can provide excellent ideas for trading strategies and systems, and many more....
Canadian Dollar Tumbles
Mid-Day Report: Canadian Dollar Tumbles on Unexpected Fall in Employment
Canadian dollar tumbles in early US session after the release of an unexpectedly weak employment report. Even though unemployment rate remained unchanged at 5.9% in Dec, total employment unexpectedly dropped by -18.7k, first drop in eight months. The report prompted speculations that, following the rate cut last Dec, more is to come. Better than expected trade surplus of 3.7b offered little support to the Loonie.
Canadian dollar tumbles in early US session after the release of an unexpectedly weak employment report. Even though unemployment rate remained unchanged at 5.9% in Dec, total employment unexpectedly dropped by -18.7k, first drop in eight months. The report prompted speculations that, following the rate cut last Dec, more is to come. Better than expected trade surplus of 3.7b offered little support to the Loonie.
Thursday, January 10, 2008
Sterling/dollar Update
Sterling/dollar
Sterling/dollar sank to a new low for the downtrend. Cable should remain under pressure, but a bounce on profit taking is likely if the BoE keeps rates unchanged.
Below 1.9555, strong support comes at 1.9475. This is followed by 1.9340.
Initial resistance is now at 1.9660. This is followed by 1.9770.
Oscillators are sliding.
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bearish
LONG-TERM: Mixed
Sterling/dollar sank to a new low for the downtrend. Cable should remain under pressure, but a bounce on profit taking is likely if the BoE keeps rates unchanged.
Below 1.9555, strong support comes at 1.9475. This is followed by 1.9340.
Initial resistance is now at 1.9660. This is followed by 1.9770.
Oscillators are sliding.
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bearish
LONG-TERM: Mixed
Euro/dollar Updates
Daily Forex Market Commentary
The dollar rallied unexpectedly on Wednesday as the market decided to actually focus on the currency's oversold status. If the stocks manage to pad their gains today, the dollar should follow suit.
Euro/dollar
Euro/dollar broke out of inside range on its way to a one-week low. A break below 1.4635 would warrant more weakness.
So, support remains at 1.4635. This is followed by 1.4570 and 1.4520. A break below 1.4470 would infer a test of the distant support at 1.4390.
Initial resistance is now seen at 1.4710. Above 1.4780, the next level is 1.4825. Distant resistance follows at 1.4885.
Oscillators are rising.
NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish
The dollar rallied unexpectedly on Wednesday as the market decided to actually focus on the currency's oversold status. If the stocks manage to pad their gains today, the dollar should follow suit.
Euro/dollar
Euro/dollar broke out of inside range on its way to a one-week low. A break below 1.4635 would warrant more weakness.
So, support remains at 1.4635. This is followed by 1.4570 and 1.4520. A break below 1.4470 would infer a test of the distant support at 1.4390.
Initial resistance is now seen at 1.4710. Above 1.4780, the next level is 1.4825. Distant resistance follows at 1.4885.
Oscillators are rising.
NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish
Wednesday, January 9, 2008
Sterling Selloff on Rate Cut:
Another Sterling Selloff on Rate Cut Speculation: Sterling tumbles again today and made another record low against Euro on increased speculation for rate cut from BoE tomorrow. UK rate futures tilted toward pricing around 60% change of a rate cut, up from 50%, after Marks & Spencer, the countries largest clothing retailer, reported a 2.2% falling like-for-like sales. Technically speaking, GBP/USD is now pressing an important support zone of 1.9550/600 level and seems to be regaining downside momentum
Elliot Wave Theory
A complete Strategy and Educational article about Elliot Wave Theory is Posted right after the Economic Calender, You can have Image access too with the text so make my visitors easy to understand what this Theory actually says.
Best Regards,
Pip-Machine!
Who Wants to be a Millionaire?
The new article "Who wants to be a Millionaire?" is now added: Do read it all you"ll find it as a moral of anything best read on the internet and worth a good future after implementing it, reading its Blue colored words would make you read it till the end.
Best Regards,
Pip-Machine
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