What is fundamental analysis?
Fundamental analysis in Forex is a type of market analysis which involves studying of the economic situation of countries to trade currencies more effectively.
It gives information on how the big political and economical events influence currency market. Figures and statements given in speeches by important politicians and economists are known among the traders as economical announcements that have great impact on currency market moves. In particular, announcements related to United States economy and politics are the primary to keep an eye on.
What is economic calendar?
Economic calendar is created by economists where they predict different economics figures and values according to previous months. It contains next data:
Date — Time — Currency — Data Released — Actual — Forecast — Previous
For example: If the forecast is better than the previous figure, then US dollar usually is going to strengthen against other currencies.
But when news are due, traders have to check the actual data.
If to look at oil prices, a rising price will result in weakening of currencies for countries which depend on huge oil import, e.g. America, Japan.
A good example of detailed economic calendar can be found here: Forex Economic Calendar
How to read Forex Economic Calendar?
Whose speeches to keep an eye on?
Chairman of the Federal Reserve Bank of USA, Secretary of the Treasury, President of the Federal Reserve Bank of San Francisco and so on. Speeches of those prominent people are watched closely by traders.
What are the most powerful figures that move Forex market?
Interest rate
Traditionally, if a country raises its interest rates, its currency will strengthen because investors will shift their assets to that country to gain higher returns.
Employment situation
Decreases in the payroll employment are considered as signs of a weak economic activity that could eventually lead to lower interest rates, which has negative impact on the currency.
Trade balance, budget and treasury budget
A country that has a significant Trade Balance deficit will generally have a weak currency as there will be continuous commercial sellings of its currency.
Gross Domestic Product (GDP)
GDP is reported quarterly and is followed very closely as it is a primary indicator of the strength of economic activity.
A high GDP figure is usually followed by expectations of higher interest rates, which is mostly positive for the currency.
Less powefull economic indicators are:
Retail sales
It is the first real indicator of the strength of consumer expenditure.
Durable goods
Rising Durable Goods Orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates, which is usually supportive for a currency.
How do traders use all this?
There are few useful tips that can be followed:
1. Keep an economic calendar on hand. Watch for the events when data are due to be released.
2. Know what indicator is gaining the most of attention at any given time as it becomes a catalyst for future price moves. For example, when the U.S. dollar is weak traders will watch closely the inflation indicator.
3. When the difference between the expectations and real results occur, watch for corrections in the market price moves.
4. Pay attention to news revisions if any, the situation on the market can change quickly.
Another important thing to consider — your Forex Broker!
Because of the high volume of trades made at the time of important economic announcements some brokers may block or slow down the execution of new trading orders.
For traders it means they should enter the trade before the "major action" begins and, what is more important, they must always have their protective stops placed. Being not able to access the trade desk to close your losing position in time is the most frustrating thing traders should always try to avoid.
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FOREX ADVICE 3
Tip 16. Choose the right day to trade.
This recomendation is often wrongly taken as an optional thing, because everyone knows that Forex market is open 24 hours a day 7 days a week. Yet, choosing the time to trade can make a difference between successful and hopeless trading. It's proved and highly recommended not to trade on Mondays, when the market has recently awaken and is making first "probation steps" to form a new or confirm a current trend; and on Fridays afternoon, during the huge volume of closing trades. The best days to trade are Tuesdays, Wednesdays and Thursdays.
Tip 17. Learn about Fibonacci levels and how to use them for trading.
Fibonacci can be very helpful in trading, even partially using the study, for example, to determine the best exit, can bring traders to a new edge of trading.
Tip 18. Always ensure that a signaling bar/candle on the chart is fully formed and closed before you enter a trade.
A golden rule of trading: "Always trade what you see, not what you would like to see" is the best explanation here.
Tip 19. If you ask for someone else's advice as about how and when to trade
in other words, choose to rely on live trading signals from other traders, make sure you do it for your benefit, not for disaster. If you use such signals to discover how other traders do analysis and study on the price — you are on the right track and soon you'll be able to do analysis yourself.
But if you're just blindly following recommendations and your only task is to push the correct button... think again.
Tip 20. Using a highly leveraged account comes at a cost.
It will, of course, give a trader more financial gear to trade, but for inexperienced traders high leverage, and, in fact, any Forex leverage can be disastrous. When a trader signs up for a high leverage without knowing how to accurately use it to own advantage, he simply signs up for additional risks that multiply with higher leverage in a tight "friendly" proportion.
Tip 21. Learn to measure trading success by the end of the day, week and then month and year.
Do not judge about your trading success on a single trade. To be successful traders don't need to win every trade, they also don't become rich in one trade — they need to be profitable in a long run.
Tip 22. There is no such thing as a secret approach to understanding the market.
Take the time to develop a solid trading system and find out that the secret to trading success lies in hard work and constant learning.
Read more...
This recomendation is often wrongly taken as an optional thing, because everyone knows that Forex market is open 24 hours a day 7 days a week. Yet, choosing the time to trade can make a difference between successful and hopeless trading. It's proved and highly recommended not to trade on Mondays, when the market has recently awaken and is making first "probation steps" to form a new or confirm a current trend; and on Fridays afternoon, during the huge volume of closing trades. The best days to trade are Tuesdays, Wednesdays and Thursdays.
Tip 17. Learn about Fibonacci levels and how to use them for trading.
Fibonacci can be very helpful in trading, even partially using the study, for example, to determine the best exit, can bring traders to a new edge of trading.
Tip 18. Always ensure that a signaling bar/candle on the chart is fully formed and closed before you enter a trade.
A golden rule of trading: "Always trade what you see, not what you would like to see" is the best explanation here.
Tip 19. If you ask for someone else's advice as about how and when to trade
in other words, choose to rely on live trading signals from other traders, make sure you do it for your benefit, not for disaster. If you use such signals to discover how other traders do analysis and study on the price — you are on the right track and soon you'll be able to do analysis yourself.
But if you're just blindly following recommendations and your only task is to push the correct button... think again.
Tip 20. Using a highly leveraged account comes at a cost.
It will, of course, give a trader more financial gear to trade, but for inexperienced traders high leverage, and, in fact, any Forex leverage can be disastrous. When a trader signs up for a high leverage without knowing how to accurately use it to own advantage, he simply signs up for additional risks that multiply with higher leverage in a tight "friendly" proportion.
Tip 21. Learn to measure trading success by the end of the day, week and then month and year.
Do not judge about your trading success on a single trade. To be successful traders don't need to win every trade, they also don't become rich in one trade — they need to be profitable in a long run.
Tip 22. There is no such thing as a secret approach to understanding the market.
Take the time to develop a solid trading system and find out that the secret to trading success lies in hard work and constant learning.
Read more...
FOREX ADVICE 2
Tip 8. Not trading or standing aside is a position.
When in doubt — stay out. If it is not clear where the market will move — don't trade. In this case saving present capital is and absolutely better choice than risking and losing money.
Tip 9. Learn to use protective stops. Respect them and don't move.
Hoping that market will turn in your direction is a very delusive hope. By moving a stop loss further a trader increases his chances to end up with much bigger loss.
When holding to a losing trade too long, and even if funds permit, traders as a rule are very reluctant to accept big losses, thus often continue "hoping for best". In the mean time invested money is stuck in the open trade for unknown period of time (weeks and even months) and cannot be used for opening new positions. Not working money — dead money. Also this will result in constant interest payments for holding open positions.
Tip 10. "Keep it simple, stupid" — applies to indicators, signals and trading strategies.
Too much information will create a controversial picture of when to trade and when not to. To avoid lots of confusion create a simple but working method of trading Forex.
Tip 11. Think about risk/reward ratio before entering each trade.
How much money can you lose in this trade? How much can you gain? Now, make a decision if the trade is worth entering.
Example: if trader is looking for possible 35 pips gain and possible 25 pips of loss, such conditions are not worth trading. Compare it with the situation when a trader has 100-120 pips of potential gain and only 10-20 pips of possible loss. This is the trade to open!
Tip 12. Never add positions to a losing trade. Do add positions when the trade has proven to be profitable.
Don't allow a couple of losing trades in a row become a snowball of losing trades. When it is obviously not a good day, turn the monitor off. Often not trading for one day can help to break a chain of consecutive losses. Trying to get revenge can often make things worse.
Tip 13. Let your profits run.
Let your position be open for as long as the market wishes to reward you. Of course, for this traders need a good exit strategy, otherwise they risk to give all profits back...
Running two or more open trades gives an option to close some positions earlier and keep others running for higher profits.
Tip 14. Cut your losses short.
It's better to finish unprofitable trade quickly than wait for the situation to get worse. Don't put a stop loss too far — it's your money you risk. Better calculate the best spot to enter when a potential loss would be minimized. Again: respect your stop and don't move it "cherishing hopes".
Tip 15. Trade currency pairs in respect to their active market hours.
Learn about overlapping market hours: when two markets are open and highest volume of trades is conducted.
For example, Australian and Japanese trading sessions are overlapped from 8pm to 1 am EST. At that time trader can successfully trade AUD/JPY currency pair.
Read more...
When in doubt — stay out. If it is not clear where the market will move — don't trade. In this case saving present capital is and absolutely better choice than risking and losing money.
Tip 9. Learn to use protective stops. Respect them and don't move.
Hoping that market will turn in your direction is a very delusive hope. By moving a stop loss further a trader increases his chances to end up with much bigger loss.
When holding to a losing trade too long, and even if funds permit, traders as a rule are very reluctant to accept big losses, thus often continue "hoping for best". In the mean time invested money is stuck in the open trade for unknown period of time (weeks and even months) and cannot be used for opening new positions. Not working money — dead money. Also this will result in constant interest payments for holding open positions.
Tip 10. "Keep it simple, stupid" — applies to indicators, signals and trading strategies.
Too much information will create a controversial picture of when to trade and when not to. To avoid lots of confusion create a simple but working method of trading Forex.
Tip 11. Think about risk/reward ratio before entering each trade.
How much money can you lose in this trade? How much can you gain? Now, make a decision if the trade is worth entering.
Example: if trader is looking for possible 35 pips gain and possible 25 pips of loss, such conditions are not worth trading. Compare it with the situation when a trader has 100-120 pips of potential gain and only 10-20 pips of possible loss. This is the trade to open!
Tip 12. Never add positions to a losing trade. Do add positions when the trade has proven to be profitable.
Don't allow a couple of losing trades in a row become a snowball of losing trades. When it is obviously not a good day, turn the monitor off. Often not trading for one day can help to break a chain of consecutive losses. Trying to get revenge can often make things worse.
Tip 13. Let your profits run.
Let your position be open for as long as the market wishes to reward you. Of course, for this traders need a good exit strategy, otherwise they risk to give all profits back...
Running two or more open trades gives an option to close some positions earlier and keep others running for higher profits.
Tip 14. Cut your losses short.
It's better to finish unprofitable trade quickly than wait for the situation to get worse. Don't put a stop loss too far — it's your money you risk. Better calculate the best spot to enter when a potential loss would be minimized. Again: respect your stop and don't move it "cherishing hopes".
Tip 15. Trade currency pairs in respect to their active market hours.
Learn about overlapping market hours: when two markets are open and highest volume of trades is conducted.
For example, Australian and Japanese trading sessions are overlapped from 8pm to 1 am EST. At that time trader can successfully trade AUD/JPY currency pair.
Read more...
FOREX ADVICE 1
Tip 1. Gamblers go to casino. All unproved, spontaneous actions in Forex trading — are a part of pure gambling.
Any attempt to trade without analysis and studying the market is equal to a game. Game is fun except when you are losing real money...
Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account!
Allow at least 2 month for demo trading. Consider this: 90% of beginners fail to succeed in the real money market only because of lack of knowledge, practice and discipline. Those remaining 10% of successful traders had been sharpening and shaping their skills on demo accounts for years before entering the real market.
A good demo account to start practicing with could be, for example, FXGame from Oanda.
Tip 3. Go with the trend!
Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won't "kill" a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals.
Tip 4. Always take a look at the time frame bigger than the one you've chosen to trade in.
It gives the bigger picture of market price movements and so helps to clearly define the trend. For example, when trading in 15 minute time frame, take a look at 1 hour chart; trading hourly would require obtaining a picture of daily, weekly price movements.
If a trend is hard to spot — choose a bigger time frame. Up and down market patterns are always present. Always make sure you know the dominant trend, unless you are a scalper. Scalpers have no need to spend their time studying big trends, what's happening in the market here and now (during 5-10 minute time frame) should be of only importance to a Forex scalper.
Tip 5. Never risk more than 2-3% of the total trading account.
One important difference between a successful and an unsuccessful trader is that the first is able to survive under unfavorable conditions on the market, while an unsuccessful trader will blow up his account after 5-10 unprofitable trades in the row.
Even with the same trading system 2 traders can get opposite results in the long run. The difference will be again in the money management approach. To introduce you to money management, let's get one fact: losing 50% of total account requires making 100% return from the rest of money just to restore the original balance.
Tip 6. Put emotions down. Trade calm.
Don't try to revenge after losing the trade. Don't be greedy by adding lots of positions when winning.
Overreaction blocks clear thinking and as a result will cost you money. Overtrading can shake your money management and dramatically increase trading risks.
Tip 7. Choose the time frame that is right for you.
Choosing wise means that you are comfortable and have time enough to analyze the market, place and close orders etc. Some people can't wait for hours for the price to make a move, they like action and therefore prefer smaller time frames. On the contrary, for others 10-15 minutes is a hustle to be able to make the right decision.
Read more...
Any attempt to trade without analysis and studying the market is equal to a game. Game is fun except when you are losing real money...
Tip 2. Never invest money into a real Forex account until you practice on a Forex Demo account!
Allow at least 2 month for demo trading. Consider this: 90% of beginners fail to succeed in the real money market only because of lack of knowledge, practice and discipline. Those remaining 10% of successful traders had been sharpening and shaping their skills on demo accounts for years before entering the real market.
A good demo account to start practicing with could be, for example, FXGame from Oanda.
Tip 3. Go with the trend!
Trend is your friend. Trade with the trend to maximize your chances to succeed. Trading against the trend won't "kill" a trader, but will definitely require more attention, nerves and sharp skills to rich trading goals.
Tip 4. Always take a look at the time frame bigger than the one you've chosen to trade in.
It gives the bigger picture of market price movements and so helps to clearly define the trend. For example, when trading in 15 minute time frame, take a look at 1 hour chart; trading hourly would require obtaining a picture of daily, weekly price movements.
If a trend is hard to spot — choose a bigger time frame. Up and down market patterns are always present. Always make sure you know the dominant trend, unless you are a scalper. Scalpers have no need to spend their time studying big trends, what's happening in the market here and now (during 5-10 minute time frame) should be of only importance to a Forex scalper.
Tip 5. Never risk more than 2-3% of the total trading account.
One important difference between a successful and an unsuccessful trader is that the first is able to survive under unfavorable conditions on the market, while an unsuccessful trader will blow up his account after 5-10 unprofitable trades in the row.
Even with the same trading system 2 traders can get opposite results in the long run. The difference will be again in the money management approach. To introduce you to money management, let's get one fact: losing 50% of total account requires making 100% return from the rest of money just to restore the original balance.
Tip 6. Put emotions down. Trade calm.
Don't try to revenge after losing the trade. Don't be greedy by adding lots of positions when winning.
Overreaction blocks clear thinking and as a result will cost you money. Overtrading can shake your money management and dramatically increase trading risks.
Tip 7. Choose the time frame that is right for you.
Choosing wise means that you are comfortable and have time enough to analyze the market, place and close orders etc. Some people can't wait for hours for the price to make a move, they like action and therefore prefer smaller time frames. On the contrary, for others 10-15 minutes is a hustle to be able to make the right decision.
Read more...
Rules for Scalping
In order to scalp the markets effectively, you must apply certain rules which do not necessarily apply to other forms of Day Trading. You will need to know and observe these rules carefully and consistently if you plan to become a successful scalper:
1. To compensate for the relatively small size of moves which you will attempt to be capturing as a scalper, you will need to trade considerably larger positions.
2. If you are not willing to accept the risk of trading larger positions, then you cannot scalp the markets in a fashion, which makes trading worth your while. After all, if you plan to scalp bonds for one or two ticks at a time three or four times a day, and if you are unsuccessful in your efforts one or two times a day, then the bottom line of your trading on a one-contract basis may only be one tick. Subtracting from this commission costs, your Scalping will prove to be a losing proposition or a minimally profitable venture, above and beyond what you have lost in terms of time. Therefore, it is necessary for you to make a commitment to larger positions, perhaps 5 or 10 contracts at a time, and to increase your position size once you have mastered the various Scalping techniques.
3. To be a successful scalper, you will need to take your losses as well as your profits very quickly. If, for example, you are long T-bonds at $105.20 expecting a move to $105.22, then you must enter orders to sell at $105.22, since you have set yourself a two-tick target. To expect $105.23 or $105.24 would not be consistent with your Scalping goals. The idea is to take numerous small profits of several ticks on large positions throughout the day. Only by following this goal will you achieve success as a scalper.
4. You must pay close attention to the market you are trading at all times. This means that you will be able to trade only one market at a time, since you will need to be at the screen watching every tick. If you have a multiple screen monitor, it may be possible to scalp more than one market at a time; however, I think that pragmatically this would be difficult. In addition to these rules, which are more operational rather than methodological, important techniques are explained in the next section.
Read more...
1. To compensate for the relatively small size of moves which you will attempt to be capturing as a scalper, you will need to trade considerably larger positions.
2. If you are not willing to accept the risk of trading larger positions, then you cannot scalp the markets in a fashion, which makes trading worth your while. After all, if you plan to scalp bonds for one or two ticks at a time three or four times a day, and if you are unsuccessful in your efforts one or two times a day, then the bottom line of your trading on a one-contract basis may only be one tick. Subtracting from this commission costs, your Scalping will prove to be a losing proposition or a minimally profitable venture, above and beyond what you have lost in terms of time. Therefore, it is necessary for you to make a commitment to larger positions, perhaps 5 or 10 contracts at a time, and to increase your position size once you have mastered the various Scalping techniques.
3. To be a successful scalper, you will need to take your losses as well as your profits very quickly. If, for example, you are long T-bonds at $105.20 expecting a move to $105.22, then you must enter orders to sell at $105.22, since you have set yourself a two-tick target. To expect $105.23 or $105.24 would not be consistent with your Scalping goals. The idea is to take numerous small profits of several ticks on large positions throughout the day. Only by following this goal will you achieve success as a scalper.
4. You must pay close attention to the market you are trading at all times. This means that you will be able to trade only one market at a time, since you will need to be at the screen watching every tick. If you have a multiple screen monitor, it may be possible to scalp more than one market at a time; however, I think that pragmatically this would be difficult. In addition to these rules, which are more operational rather than methodological, important techniques are explained in the next section.
Read more...
What is Scalping?
Although the term scalping most likely originated in the heritage of the wild, wild American West, the contemporary trend for outrage at the mere mention of ethnic issues prompts me to side-step the derivation of this term. Simply stated, the scalper attempts to trade futures markets for only several ticks, taking advantage of fairly narrow trading ranges in order to "buy the bid and sell the offer".
The scalper, who is usually a floor trader, attempts to capitalize on relatively quiet times in the markets, buying at the prevailing price (the bid price) or hopefully at one or two ticks below the anticipated fair price and selling at a slightly higher price or what is called the offer price. The best way I can drive home the point of what it is that scalpers do is to state succinctly that scalpers attempt to buy at wholesale and sell at retail.
As you can understand, the price markup from wholesale to retail, although very high in some businesses, is not too high in the scalping business. Frequently, the markup amounts to only one or two price ticks. However, at $30 or more per price tick in Treasury bond futures, the prospects for profitable scalping are considerable. If the trader is paying very small commissions ($14 or lower per trade), then a good portion of each price tick per contract is profit.
What the scalper may give up in the way of price movement, he or she can compensate for in terms of position size. From the scalpers point of view, a trade of two ticks profit on 500 contracts works out to 1000 ticks-1000 ticks after approximately $15 in costs (which is a very high cost for the floor trader) works out to roughly $16,000 profit. Assuming a commission rate of $8 and often much, much lower for the floor trader, the profits are even more substantial.
It is now possible for traders who are not on the floor of the various exchanges to trade in a fashion very similar to what floor traders do when they scalp the markets. Using some of the techniques discussed in this book, the average trader who is willing to sit at the computer screen and watch the market tick-by-tick all day long can scalp in a fashion similar to floor traders. During the last few years, many floor traders, realizing that scalping is possible without being on the floor of the exchange, have left to become upstairs traders. An upstairs trades as if he or she were on the floor but is, in actuality, trading from an office, usually located in the exchange building.
Read more...
The scalper, who is usually a floor trader, attempts to capitalize on relatively quiet times in the markets, buying at the prevailing price (the bid price) or hopefully at one or two ticks below the anticipated fair price and selling at a slightly higher price or what is called the offer price. The best way I can drive home the point of what it is that scalpers do is to state succinctly that scalpers attempt to buy at wholesale and sell at retail.
As you can understand, the price markup from wholesale to retail, although very high in some businesses, is not too high in the scalping business. Frequently, the markup amounts to only one or two price ticks. However, at $30 or more per price tick in Treasury bond futures, the prospects for profitable scalping are considerable. If the trader is paying very small commissions ($14 or lower per trade), then a good portion of each price tick per contract is profit.
What the scalper may give up in the way of price movement, he or she can compensate for in terms of position size. From the scalpers point of view, a trade of two ticks profit on 500 contracts works out to 1000 ticks-1000 ticks after approximately $15 in costs (which is a very high cost for the floor trader) works out to roughly $16,000 profit. Assuming a commission rate of $8 and often much, much lower for the floor trader, the profits are even more substantial.
It is now possible for traders who are not on the floor of the various exchanges to trade in a fashion very similar to what floor traders do when they scalp the markets. Using some of the techniques discussed in this book, the average trader who is willing to sit at the computer screen and watch the market tick-by-tick all day long can scalp in a fashion similar to floor traders. During the last few years, many floor traders, realizing that scalping is possible without being on the floor of the exchange, have left to become upstairs traders. An upstairs trades as if he or she were on the floor but is, in actuality, trading from an office, usually located in the exchange building.
Read more...
U.S. Dollar Short-term Bounce Before Next Leg Lower
GBP continues to trade higher with high prints at 1.4628 and holding the highs at the start of New York; low prints at 1.4460 also attracting buyers.
USD/JPY continues to firm better than the other pairs suggesting that the bulls are still buying the correction. High prints at 96.80 likely to be attracting exporters in New York with the lows at 95.39 opening with a bid tone in Asia. If the push higher is still corrective then the 96.80 area is likely to draw sellers as the stop-driven break last week started in this area.
USD/CHF low prints overnight at 1.1169 were again under the 200 day MA and attracting buyers but the rate remains under pressure in early New York; high prints at 1.1278 are continuing to attract sellers with stops likely around the 1.1320 area now building. Traders continue to remain wary of SNB intervention but so far no hints at all of support for the CHF.
USD/CAD is lower after high prints at 1.2404 again failed to hold above the 1.2420 area; low prints at 1.2297 with the rate holding under 1.2320 in early New York. In my view, the USD is continuing to correct from the recent three-year highs and another leg lower is likely as the key technical support areas in most pairs are under threat again to start the week. If the majors can continue to advance in solid two-way action then it is a fair bet the USD buyers are thinking the dip is a buying opportunity and the bears are pressing their advantage.
Short-term traders likely will be looking for a bounce in the Greenback and will likely have stops in-range making for potential whipsaw. Larger stops are likely building on both sides of the market as longer-term players continue to work the market from the short side in my view. Look for more two-way action today and tomorrow as the economic calendar is lighter until later in the week. The majors will likely cover the same ground twice but longer-term traders can hold longs if you have them; I don�t see the USD recovering easily before another leg lower near-term.
GBP/USD Daily
Resistance 3: 1.4730, Resistance 2: 1.4700/10, Resistance 1: 1.4650
Latest New York: 1.4620, Support 1: 1.3860, Support 2: 1.3780, Support 3: 1.3720
Comments
Rate firms again overnight; upside extends to new weekly highs. Overhead resistance now at 1.4650 with the 1.4700 handle likely to trade the next 24 hours. Traders report stops likely over the 1.4710/30 area. The door is open to a rally back to the 1.5000 area. Some in-range stops driving some trade over the 1.4500 area. Lows likely remain secure. The volume needs to come up and I think the shorts have yet to bail as a group; that may be starting in earnest now. Traders report stops in-range adding for two-way action. Long-term tech resistance now at 1.5000 area likely to cap near term. Two-way action continues suggesting that shorts are aggressively adding and longs are trying to find a bottom. Next upside target is 1.4800 area, downside is near support at 1.4250 area
Data due Tuesday: All times EASTERN (-4 GMT)
5:30am GBP CPI y/y
5:30am GBP BBA Mortgage Approvals
5:30am GBP Core CPI y/y
5:30am GBP RPI y/y
5:45am GBP Inflation Report Hearings
11:30am GBP BOE Gov King Speaks
2:30pm GBP MPC Member Blanchflower Speaks
EUR/USD Daily
Resistance 3: 1.3980, Resistance 2: 1.3820, Resistance 1: 1.3740
Latest New York: 1.3646, Support 1: 1.3400, Support 2: 1.3350, Support 3: 1.3300
Comments
Rate follows GBP in two-way action and holds gains but is not advancing as aggressively yet. Stops likely building above the 1.3740 area. Upside stops likely cleared in size and if the rate can close above 1.3650 area more upside is likely. Overhead resistance above 1.3350 area negated so a pullback to there would also be a strong buy. Traders note big names on the buy side on dips overnight; semi-officials and model accounts buying above 1.3400. Russians seen on the offer overnight in Europe. Bulls are likely in control of the market and any significant pullback is a buying opportunity in my view. Expect two-way action.
Data due Tuesday: All times EASTERN (-4 GMT)
4:30am EUR German Flash Manufacturing PMI
4:30am EUR German Flash Services PMI
5:00am EUR Current Account
5:00am EUR Flash Manufacturing PMI
5:00am EUR Flash Services PMI
10:00am EUR Belgium NBB Business Climate
Read more...
USD/JPY continues to firm better than the other pairs suggesting that the bulls are still buying the correction. High prints at 96.80 likely to be attracting exporters in New York with the lows at 95.39 opening with a bid tone in Asia. If the push higher is still corrective then the 96.80 area is likely to draw sellers as the stop-driven break last week started in this area.
USD/CHF low prints overnight at 1.1169 were again under the 200 day MA and attracting buyers but the rate remains under pressure in early New York; high prints at 1.1278 are continuing to attract sellers with stops likely around the 1.1320 area now building. Traders continue to remain wary of SNB intervention but so far no hints at all of support for the CHF.
USD/CAD is lower after high prints at 1.2404 again failed to hold above the 1.2420 area; low prints at 1.2297 with the rate holding under 1.2320 in early New York. In my view, the USD is continuing to correct from the recent three-year highs and another leg lower is likely as the key technical support areas in most pairs are under threat again to start the week. If the majors can continue to advance in solid two-way action then it is a fair bet the USD buyers are thinking the dip is a buying opportunity and the bears are pressing their advantage.
Short-term traders likely will be looking for a bounce in the Greenback and will likely have stops in-range making for potential whipsaw. Larger stops are likely building on both sides of the market as longer-term players continue to work the market from the short side in my view. Look for more two-way action today and tomorrow as the economic calendar is lighter until later in the week. The majors will likely cover the same ground twice but longer-term traders can hold longs if you have them; I don�t see the USD recovering easily before another leg lower near-term.
GBP/USD Daily
Resistance 3: 1.4730, Resistance 2: 1.4700/10, Resistance 1: 1.4650
Latest New York: 1.4620, Support 1: 1.3860, Support 2: 1.3780, Support 3: 1.3720
Comments
Rate firms again overnight; upside extends to new weekly highs. Overhead resistance now at 1.4650 with the 1.4700 handle likely to trade the next 24 hours. Traders report stops likely over the 1.4710/30 area. The door is open to a rally back to the 1.5000 area. Some in-range stops driving some trade over the 1.4500 area. Lows likely remain secure. The volume needs to come up and I think the shorts have yet to bail as a group; that may be starting in earnest now. Traders report stops in-range adding for two-way action. Long-term tech resistance now at 1.5000 area likely to cap near term. Two-way action continues suggesting that shorts are aggressively adding and longs are trying to find a bottom. Next upside target is 1.4800 area, downside is near support at 1.4250 area
Data due Tuesday: All times EASTERN (-4 GMT)
5:30am GBP CPI y/y
5:30am GBP BBA Mortgage Approvals
5:30am GBP Core CPI y/y
5:30am GBP RPI y/y
5:45am GBP Inflation Report Hearings
11:30am GBP BOE Gov King Speaks
2:30pm GBP MPC Member Blanchflower Speaks
EUR/USD Daily
Resistance 3: 1.3980, Resistance 2: 1.3820, Resistance 1: 1.3740
Latest New York: 1.3646, Support 1: 1.3400, Support 2: 1.3350, Support 3: 1.3300
Comments
Rate follows GBP in two-way action and holds gains but is not advancing as aggressively yet. Stops likely building above the 1.3740 area. Upside stops likely cleared in size and if the rate can close above 1.3650 area more upside is likely. Overhead resistance above 1.3350 area negated so a pullback to there would also be a strong buy. Traders note big names on the buy side on dips overnight; semi-officials and model accounts buying above 1.3400. Russians seen on the offer overnight in Europe. Bulls are likely in control of the market and any significant pullback is a buying opportunity in my view. Expect two-way action.
Data due Tuesday: All times EASTERN (-4 GMT)
4:30am EUR German Flash Manufacturing PMI
4:30am EUR German Flash Services PMI
5:00am EUR Current Account
5:00am EUR Flash Manufacturing PMI
5:00am EUR Flash Services PMI
10:00am EUR Belgium NBB Business Climate
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Euro Forecast to Gain Against US Dollar, but Doubts Remain
Euro forecasts against the US Dollar saw noticeable improvement on the week, as the USD suddenly finds itself at a clear disadvantage against key counterparts. The US Federal Reserve sparked a massive dollar tumble when it announced aggressive quantitative easing measures through its most recent meeting. The EUR/USD subsequently posted a record single-day gain, and momentum clearly remains in the European currency’s favor. Global investors have suddenly lost interest in the US Dollar as a safe-haven store of value, and the abrupt shift implies that the Euro could appreciate further at the US Dollar’s expense.
The coming week promises a steady string of European economic data, and any major surprises could alter short-term outlook for the domestic currency. First on the ledger, Germany and the broader Euro Zone will release key Purchasing Managers Index results for manufacturing and services indices. PMI releases have not necessarily forced noteworthy Euro/US Dollar volatility in the past, but they remain important leading indicators on the relative health of economic activity. Medium to long-term outlook for domestic economies and the euro itself could potentially shift on major shocks. Any surprises in subsequent German IFO, Consumer Confidence, and Consumer Price Index releases could have similarly noteworthy effects on medium-term Euro/US Dollar outlook.
Recent US Fed announcements leave the Euro at relative advantage versus the US Dollar, but we remain mindful that the Euro Zone offers comparable structural risks for the EMU currency. The Fed announced that it bought an almost-unimaginable $1.25 trillion dollars in US Treasuries and Mortgage-Backed Securities—tantamount to running the printing presses on the US currency. Yet Euro Zone structural deficiencies offer palpable political risks that cannot be ignored.
Traders will have to decide whether real risks of US Dollar devaluation outweigh those of EMU instability. For now it seems that markets are far more concerned with excessive US Dollar supply and that it has lost its status as a safe-haven store of value. Yet sentiment could just as easily shift on deterioration in EU relations. We believe that the euro could continue to gain against the US Dollar through the near term, but it is critical to note the danger of an abrupt destabilization in EMU country dynamics. - DR
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The coming week promises a steady string of European economic data, and any major surprises could alter short-term outlook for the domestic currency. First on the ledger, Germany and the broader Euro Zone will release key Purchasing Managers Index results for manufacturing and services indices. PMI releases have not necessarily forced noteworthy Euro/US Dollar volatility in the past, but they remain important leading indicators on the relative health of economic activity. Medium to long-term outlook for domestic economies and the euro itself could potentially shift on major shocks. Any surprises in subsequent German IFO, Consumer Confidence, and Consumer Price Index releases could have similarly noteworthy effects on medium-term Euro/US Dollar outlook.
Recent US Fed announcements leave the Euro at relative advantage versus the US Dollar, but we remain mindful that the Euro Zone offers comparable structural risks for the EMU currency. The Fed announced that it bought an almost-unimaginable $1.25 trillion dollars in US Treasuries and Mortgage-Backed Securities—tantamount to running the printing presses on the US currency. Yet Euro Zone structural deficiencies offer palpable political risks that cannot be ignored.
Traders will have to decide whether real risks of US Dollar devaluation outweigh those of EMU instability. For now it seems that markets are far more concerned with excessive US Dollar supply and that it has lost its status as a safe-haven store of value. Yet sentiment could just as easily shift on deterioration in EU relations. We believe that the euro could continue to gain against the US Dollar through the near term, but it is critical to note the danger of an abrupt destabilization in EMU country dynamics. - DR
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US Dollar Losing Its Economic, Safety And Reserve Advantages
The US dollar was put through the ringer this past week as market participants were left to wonder where the currency would find strength as its primary, fundamental pillars started to give way. There is no better gauge for the health of the greenback than price action itself. The dollar index suffered a 345-pip decline through Friday’s close – the biggest weekly drop in years. And, though the retrenchment of the past two weeks has unwound a significant share of the previous eight months’ of bullish trending; the pull back may not stop there. As fear settles and global policy officials attempt to stabilize the financial and economic crises, the market will grow increasingly critical of the stalwart dollar. With a clear field of view, traders will take weight of the United States position in the recession curve; the unit’s status as a safe haven; and more importantly, its role as the world’s reserve currency.
Of these three critical themes, the threat to the dollar’s standing as the world’s primary store of wealth is the most elemental. One of the primary reasons (aside from being backed by the largest economy in the world) the greenback has dominated as the world’s most liquid and actively traded currency is the fact that nearly ever central bank and financial player transacts through it. With this standardization, the dollar lines reserves, is used to purchase commodities and is used as a benchmark for currency pegs among other things. This is why suggestions that the Commission of Experts on International Financial Reform panel will recommend to the UN that the dollar be abandoned as the world’s currency reserve carry’s so incendiary. This is not the first time an official or group has called for such a move; but the argument has not been made under the level of stress the markets are currently experience. With so many ‘too-big-to-fail’ market structures and participants having succumbed to this crisis, there is little reason why such an out-dated norm will not be reconsidered. In fact, the argument for a basket of currencies taking the place of sole dollar is so persuasive that the topic will also come up at the G-20 summit on April 2nd – where anything official will likely take place.
In the meantime, fundamental traders will focus their attentions on the greenback’s fading appeal as a key safe haven currency. It was the height of the panic back in October that really cemented the currency’s place as a harbor for the world’s money. Fear left investors with one concern; and that was capital preservation. Offering the deepest pool of liquidity and the backing of the world’s largest government, US Treasuries (and by proxy, the dollar) was bought at a furious pace. However, in the months that have past, the market has cooled off. Traders and money managers are still worried about protecting their funds; but they are doing so with a mind for potential return and the long-term viability of their investments. Over the past weeks, the US has had to inflate its balance sheet, take up the reins of quantitative easing, take over two corporate credit unions and battle a deepening recession. This is not the laundry list of a safe, long-term investment.
And, when these two major market dynamics are not in play, dollar traders will fall back on the now-ubiquitous recession contest. Negative growth is universal problem; but there are nonetheless leaders and laggards in this race. After the first, aggressive round of policy action from US officials, market participants were ready to believe that the US was perhaps ahead of the recession curve. However, as the economy nears depression levels and promising alternatives emerged (like Australia), this notion began to fade.
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Of these three critical themes, the threat to the dollar’s standing as the world’s primary store of wealth is the most elemental. One of the primary reasons (aside from being backed by the largest economy in the world) the greenback has dominated as the world’s most liquid and actively traded currency is the fact that nearly ever central bank and financial player transacts through it. With this standardization, the dollar lines reserves, is used to purchase commodities and is used as a benchmark for currency pegs among other things. This is why suggestions that the Commission of Experts on International Financial Reform panel will recommend to the UN that the dollar be abandoned as the world’s currency reserve carry’s so incendiary. This is not the first time an official or group has called for such a move; but the argument has not been made under the level of stress the markets are currently experience. With so many ‘too-big-to-fail’ market structures and participants having succumbed to this crisis, there is little reason why such an out-dated norm will not be reconsidered. In fact, the argument for a basket of currencies taking the place of sole dollar is so persuasive that the topic will also come up at the G-20 summit on April 2nd – where anything official will likely take place.
In the meantime, fundamental traders will focus their attentions on the greenback’s fading appeal as a key safe haven currency. It was the height of the panic back in October that really cemented the currency’s place as a harbor for the world’s money. Fear left investors with one concern; and that was capital preservation. Offering the deepest pool of liquidity and the backing of the world’s largest government, US Treasuries (and by proxy, the dollar) was bought at a furious pace. However, in the months that have past, the market has cooled off. Traders and money managers are still worried about protecting their funds; but they are doing so with a mind for potential return and the long-term viability of their investments. Over the past weeks, the US has had to inflate its balance sheet, take up the reins of quantitative easing, take over two corporate credit unions and battle a deepening recession. This is not the laundry list of a safe, long-term investment.
And, when these two major market dynamics are not in play, dollar traders will fall back on the now-ubiquitous recession contest. Negative growth is universal problem; but there are nonetheless leaders and laggards in this race. After the first, aggressive round of policy action from US officials, market participants were ready to believe that the US was perhaps ahead of the recession curve. However, as the economy nears depression levels and promising alternatives emerged (like Australia), this notion began to fade.
Read more...
Forex trading - The scalping method in a Forex trading
The scalping method in a Forex trading:
In Forex, scalping trading is performed over much shorter periods than other forms of trading and income is often generated even from relatively small fluctuations in a currencies price.
The main reason people trade via scalping is often that due to the quick nature of the method, profits can be built up fairly quickly. What’s more it also makes market movements far less likely to cause a large differential in the buy and sell prices.
The scalping method is usually based on three factors:
Liquidity – The more liquidity in a market then the more attractive it becomes to a Forex scalper as they can make more profitable trades in any given period.
Volatility – Only the most stable of markets are attractive to scalpers as a big movement is not what they are looking for. A stable market offers the chance to gain lots of small profits from many many trades
Time – A successful Forex scalper will not always begin trading at the start of a day. True, the longer they have to trade then the more they can make but patience is the key since it is pointless trying to scalp the Forex if market conditions are not right, for example in a period of large economic uncertainty.
Read more...
In Forex, scalping trading is performed over much shorter periods than other forms of trading and income is often generated even from relatively small fluctuations in a currencies price.
The main reason people trade via scalping is often that due to the quick nature of the method, profits can be built up fairly quickly. What’s more it also makes market movements far less likely to cause a large differential in the buy and sell prices.
The scalping method is usually based on three factors:
Liquidity – The more liquidity in a market then the more attractive it becomes to a Forex scalper as they can make more profitable trades in any given period.
Volatility – Only the most stable of markets are attractive to scalpers as a big movement is not what they are looking for. A stable market offers the chance to gain lots of small profits from many many trades
Time – A successful Forex scalper will not always begin trading at the start of a day. True, the longer they have to trade then the more they can make but patience is the key since it is pointless trying to scalp the Forex if market conditions are not right, for example in a period of large economic uncertainty.
Read more...
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