Monday, November 23, 2009

Weekly 23rd Nov Forecast


Weekly Trend direction: Bearish

Weekly trend reversal level:1.5050

Key G7 resistance levels: 1.4950/60, 1.5000, 1.5050

Counter-trend opportunities:

Strategy: Whilst below the weekly trend reversal level sell rallies to resistance levels after an entry signal.


Today's trade suggestion:

Another day – another dollar for range traders as the euro has been stuck in the 1.4800-1.5000 range since the beginning of the month. This really could break out eitherway(as it eventually will) but there are signs that the 1.5000/5050 barrier is going to be tough to break. Notice on the hourly chart that we have the makings of a “descending triangle” with lower highs each time the rally to near the range top takes place. We are currently butting up against the downward top of the triangle as I write, and I’ll be watching and waiting for signs of reversal on the hourly chart. Target for short trades is the range bottom around 1.4800 and, on a successful break lower, 1.4650.



Sell rallies to 1.4950/60 or at higher resistance levels, target 1.4800 and then 1.4650


Weekly Trend direction: Bearish

Weekly trend reversal level 1.6880

Key G7 resistance levels:

1.6600/20, 1.6680, 1.6720

Counter-trend opportunities:

Strategy: Whilst below the weekly trend reversal level sell rallies to resistance levels after an entry signal


Today's trade suggestion:

A big bearish engulfing candle last week means that we are going to look to sell the pound into rallies this week.There is little doubt that the markets are struggling with the levels they are at presently, and this is causing a lot of quite volatile (and often unexpected) intra-day movement. This makes trading tricky and one needs to be patient and wait for the clear setups before leaping into trade positions. Resistance on the pound lies quite some distance above at 1.6600/20 and above, so we’ll have to wait for some decent counter-trend rallies before

selling. Don’t rush this process. It may be tempting to sell with out a clear signal or at lower levels, but this would be a strategic mistake!



Sell rallies to 1.6600/20 (or higher up if this fails) Target 1.6500 and then 1.6250.

Wednesday, November 11, 2009

How To Choose The Best Forex System For You…‏

Here is a list of things you should do:

1 - When you're looking for a Forex system, course, ebook or software, use your good sense.

2 - If you're planning on buying some Forex product, choose one that has a guarantee or a free trial offer.

3 - Check a reviews website in order to know what other traders are saying about the product you're thinking of buying.

4 - Read the entire sales page of the product and if you have any question, contact the owner.

5 - Before you use the product on a real account, test it deeply on a demo account.

These simple advices might save you a lot of money and time.

There is an ideal mindset, character, and mental attitude that traders need to acquire. I say "acquire" because few people have the innate personality that makes this mindset "natural". With respect to your trading, this involves being free of anxiety, fear, despair or regret. It also involves being able to remain calm, confident, focused and disciplined in the face of adverse trading outcomes.

Here is a list of 6 advices:

1 - Trade with a Disciplined Plan:

The problem with many traders is that they take shopping more seriously than trading. The average shopper would not spend $500 without serious research and examination of the product he/she is about to purchase, yet the average trader would make a trade that could easily cost him/her $500 based on little more than a feeling or hunch.

The plan must include stop and limit levels for the trade, as your analysis should encompass the expected downside as well as the expected upside. Be sure that you have a plan in place before you start to trade.

2 - Don't Trade Based On Emotions:

This is the worst thing you can do. If you're with some kind of problem in your head that just don't let you think straight, take the day off. It's better not to make any money than losing it.

It may also happen that you just lived a losing strike. You're jut furious and you just can't wait to show that you're in charge... Don't! Stop! Take a deep breath, calm down and try to ignore what you just went through. Follow your system rules and ignore everything else.

But this isn't the only case. You might just be on a winning strike. Well, you're winning, you're the man... Stop! You're not the man. You're a trader that is being successful. If you want to keep trading well, put those emotions aside...

3 - Good Execution Good Anticipation:

Everybody knows that trading is a number game. I mean, our success is not dependent on the outcome of the next trade; our success is dependent on the overall profitability of many trades. So, while we are trading, whether the last trade we did was profitable or not is definitely not important. There is no point drawing conclusions on the outcome of just one -or even a few-trades. We can only access our anticipation skills when we have made a reasonable number of trades and see the longer-term result of our action. It is so important that when we are trading, our goal should be focus on executing our trades with ruthless efficiency and to judge only that. If you consider the ways that you lose money trading, you will find that it is down to poor execution, rather than poor anticipation.

4 - Cut Your Losses Early and Let Your Profits Run:

This simple concept is one of the most difficult to implement and is the cause of most traders' demise. Most traders violate their predetermined plan and take their profits before reaching their profit target because they feel uncomfortable sitting on a profitable position.

These same people will easily sit on losing positions, allowing the market to move against them for hundreds of pips in hopes that the market will come back.

In addition, traders who have had their stops hit a few times only to see the market go back in their favor once they are out, are quick to remove stops from their trading on the belief that this will always be the case. Stops are there to be hit, and to stop you from losing more than a predetermined amount. You simply allow your profits on the winners to run and make sure that your losses are minimal. What is it about cutting a loss that is so hard?

5 - Do Not Over Trade:

One of the most common mistakes that traders make is leveraging their account too high by trading much larger sizes than their account should prudently trade. Leverage is a double-edged sword. Just because one lot of currency only requires $1000 as a minimum margin deposit, it does not mean that a trader with $5000 in his account should be able to trade 5 lots. One lot is $100,000 and should be treated as a $100,000 investment and not the $1000 put up as margin.

Most traders analyze the charts correctly and place sensible trades, yet they tend to over leverage themselves. As a consequence of this, they are often forced to exit a position at the wrong time. A good rule of thumb is to never use more than 5% of your account at any given time.

6 - Do Not Marry Your Trades:

The reason trading with a plan is the #1 tip is because most objective analysis is done before the trade is executed. Once a trader is in a position, he tends to analyze the market differently in the hopes that the market will move in a favorable direction rather than objectively looking at the changing factors that may have turned against your original analysis. This is especially true for losses. Traders with a losing position tend to marry their position, which causes them to disregard the fact that all signs point towards continued losses.

Well, that's it.

Sunday, November 8, 2009

Weekly Forecast Ahead

Risk assets are levitating a la Wile E. Coyote

News that the US unemployment rate rose to a 26-year high of 10.2% failed to dent risk appetites as seen in stocks, at least in the immediate aftermath on Friday (more on the data below). Commodities, however, did register the pain of rising unemployment and the implicit hit to demand, with the CRB index dropping to its lowest level this month, and now down about 5% from the Oct 21 high. JPY-crosses also responded appropriately to the downbeat labor market news, erasing most of the week's gains. The USD, however, failed to see much strength overall. In a sense, that's to be expected after the Fed reaffirmed its commitment to maintain exceptionally low rates for an extended period of time, a decision which was reinforced by the soft jobs news. But there's also the 'risk on/risk off' correlation, and while stocks managed to rebound, the USD remained under pressure.

In a scene reminiscent of the Wile E. Coyote/ Roadrunner cartoons, stocks seem to have run off a cliff, but are hanging in mid-air until they stop, take a look down and then plunge into the canyon. We view this past week's rebound in stocks and accompanying set-back in the USD as a correction after the larger reversal seen in the last week of Oct. The S&P 500 is holding below the broken trend line that guided the move higher since March, currently at 1070/71, along with the 21-day sma. A re-test of a technical break point is normal and we think that's the case with this past week's price action. EUR/USD followed shares higher after basing out above key trend line support, basically the equivalent of the S&P trend line, at 1.4600/20. The euro effectively retraced 61.8% of the decline from the 1.5060 high to 1.4620 low, another very normal corrective movement. We think a combination of excessive USD-short positioning, increasing risk aversion in light of the weak US data, and possibly some verbal support are likely to return to weigh on risk assets and support the USD.

G20 and Eurozone Fin. Min.'s may lend USD verbal support vs. the EUR in the approach to Nov MPC

The G20 is gathering in St. Andrew's Scotland on Friday and Saturday and a communique is expected to be released before noon EST on Saturday. The main topic of the meeting is to orchestrate so-called exit strategies, with the main message likely to be a slower withdrawal of stimulus. On FX, the Chinese will be pressed to allow the Yuan to strengthen, but comments from PBOC head Zhou on Friday suggest the pleas will fall on deaf ears. The Europeans are also expected to press the US Treasury to step up its defense of the USD, and there is minor potential for a revision to the wording of the US strong dollar mantra. In terms of the communique, we think the standard language on currency volatility being undesirable for global growth will be retained. Any bolder comments on USD weakness, EUR strength, or currency volatility are most likely to come from individual participants. On Monday, Eurozone finance ministers will gather for a regular monthly meeting, which will continue on Tuesday, and comments on FX could be heard beginning Monday evening European time. The Europeans are the most concerned about USD weakness/EUR strength as it may undermine their export competitiveness, which is the key to their nascent recovery.

Bank of England set to revise up near-term inflation forecasts

The Bank of England has already warned that "inflation is likely to rise sharply to above the 2% target in the near term, reflecting higher petrol price inflation and the reversal of last year's reduction in VAT". The revision to BoE inflation forecasts can be expected in the Bank's Quarterly Inflation Report due on November 11 but crucially upward revisions to inflation are unlikely to have any significant impact on expectation for BoE interest rate policy. Over the past couple of months the BoE have taken every opportunity to warn of the forthcoming rise in near-term inflation forecasts. At the same time the Bank has continued to stress that excess capacity will continue to bear down on price pressures over the medium-term. Despite signs of improvement in the UK economy, GDP failed to turn positive in Q3 suggesting the recovery in the UK economy is lagging that of most other G10 nations. While this year's rise in oil prices has shown up in the 2.6% m/m rise in Oct PPI input, the lagging impact of last year fall in oil is still having an impact; PPI y/y remains subdued. Even if the weaker pound vs the EUR and higher oil prices push input costs higher, the weakness of the consumer sector suggests that producers/retailers have little pricing power. UK interest rates are likely to remain at their 0.5% low at least until the latter half of 2010.

QE could be phased out by February

Low expectations for medium term inflation in the UK combined with disappointing growth in money supply meant that many proponents of quantitative easing were disappointed that the BoE opted for a relatively conservative allocation of GBP25 bln in November. While QE has no doubt played an important part in helping the financial system move away from crisis, the lack of response in either money supply or inflation indices could be illustrating that it is a policy unable to lend significant support to the real economy. By opting for GBP25 bln this month rather than GBP 50 bln, the BoE was probably hedging its bets but it seems likely this will be the last extension of the plan meaning that QE could be phased out by February.

While the change in the BoE's inflation forecasts this week is unlikely to bring forward rate hikes, the news could lead some short-term support and encourage cable back towards the USD1.6680 recent high. Significant upside in cable could be difficult, however, failing a break by EUR/GBP below 0.8900. The 0.8920/00 area is likely to continue providing solid support for EUR/GBP.

Somber US employment report makes for ominous outlook

US nonfarm payrolls slipped a touch more than expected in October, falling -190K on the month. The real shock was the jump in the unemployment rate to an eye-popping 10.2% from a prior 9.8%. This will make for some bold headlines over the weekend and should weigh on consumer confidence further in the short-term. The details of the report also suggest that the labor market has still not bottomed and we retain our cautious view with regards to risk assets and short-term constructive view on the USD and JPY specifically.

The surprise in the unemployment rate will without a doubt lead to a ratcheting up in forecasts for where that number will peak. Indeed, that we will eventually surpass the 11% mark sometime next year now looks like a foregone conclusion. The leading indicators of the employment market (mainly jobless claims and hours) have yet to show any marked improvement. For all the talk of the downturn in the trend of initial jobless claims, continuing claims remains near all-time highs. Indeed, those folks in state and federal programs still total around 9 million and this metric has merely moved sideways in recent weeks.

The monthly drop in aggregate hours worked is also ominous. Historically, the annual rate of hours has bottomed and bounced sharply as the recession comes to an end. This data point remains well in negative terrain on an annual basis and has shown little improvement on a sequential basis to boot. We know much has been made about the increase in temp employment but this is only a good leading indicator of employment activity if the pace of job declines in other sectors slows significantly - something that has yet to happen.

Fundamentally weak labor markets in the US suggest a market that will trade in choppy fashion into year-end at best, and much lower at worst. Keeping in mind recent inter-market correlations that are unlikely to break over the next couple of months, a major stock market correction would still favor USD and JPY the most. This also makes for a sideways USD/JPY market so selling other yen crosses on rallies makes more sense.

Key data and events to watch next week

The United States calendar is on the light side in the week ahead. The NFIB business optimism index and the IBD/TIPP consumer sentiment indicator kick things off on Tuesday. The usual initial jobless claims, oil inventory numbers and monthly budget statement are on deck Thursday while Friday rounds out the week with the trade balance and the University of Michigan sentiment index.

It is not terribly busy in the Eurozone either. Monday starts the action with French business confidence, German trade and German industrial production. The German ZEW economic sentiment survey, French industrial production, German consumer prices, and the Eurozone ZEW survey are all up on Tuesday. Friday closes out the week with Eurozone GDP reports. Look for the Eurozone Finance Ministers meeting starting Monday evening CET and continuing on Tuesday - remarks on currencies are always possible.

The economic calendar in the UK is heavily weighted to early in the week. Tuesday has the BRC retail sales monitor and the trade balance on tap while Wednesday brings the employment report and the Bank of England's quarterly inflation report.

Japan has a characteristically light week. The trade balance will be important to watch on Monday while machine tool orders are the highlight Tuesday. Friday rounds out the week with industrial production and consumer confidence.

Canada also has a limited amount of events lined up. Housing starts are due on Monday while new home prices are up on Thursday. International trade and new motor vehicle sales close things out on Friday.

It is pretty busy down under. In Australia we'll see home loans on Monday, business conditions and consumer confidence on Tuesday, and inflation expectations and the employment report on Thursday. New Zealand has credit card spending on Monday and retail sales on Wednesday

Thursday, November 5, 2009


Watch the 200K Mark in ADP

The Oct ADP survey on private payrolls (13:15 GMT) is expected at -190K after -254K and -277K in Sep and Aug respectively. Markets may watch whether the ADP decline falls below the 200K would dampen current gains in US equity futures.

That could especially be the case in the event that the
Oct services ISM (15:00 GMT) falls short of the expected 51.5 figure, following 50.9 and 48.4 in Sep and Aug respectively. Said differently, risk currencies and equities may resume their Wednesday rebound in case of an ADP reading better than -200K and ISM above 51.5. Also watch the new orders andemployment components of the ISM, both of which improved in Sept to 54.2 and 44.3 respectively. A rise in the employment component coupled with a sub -200K reading in ADP could be especially positive for GBP, CAD and EUR.

“Exceptionally low … for extended period”

Markets may also scrutinize whether today’s FOMC statement maintains “exceptionally low levels of the federal funds rate for an extended period”. Any adjustment in the “timing” element of this phrase could be interpreted as a signal towards earlier exit strategy, which appears unlikely at this time.

We may see minor adjustments regarding the economic assessment but notable change in the reference to the program of agency MBS purchases appears unlikely. Recognizing the stabilization in the housing sector and financial markets may once again be offset by a more constrained outlook with regards to jobs, credit and income growth. With regards to
inflation, the FOMC seems to have no reason to depart from its current outlook on price growth being “subdued” and cost pressures dampened.

GBPUSD rallies past the $1.6530s after UK services PMI surged to a 26-month high in Sep at 56.9 from 55.3. Markets appear split between whether the BoE will expand QE by an additional £25 bln or £50 bln. The reason some expect £25 bln is partly related to avoiding excessive sterling weakness, especially with major central banks seeking to adopt gradual steps towards policy normalization, the BoE might not want to push further into the extreme side of the easing spectrum.

GBPUSD may test the $1.6575-80 resistance in the event of appetite-friendly US data. Any additional gains may become capped at $1.66 on market cautiousness ahead of tomorrow’s BoE decision.

seems to require positive US data for risk appetite to lift it above $1.4800, but the $1.4835-40 resistance may impose itself as long as the FOMC does the unlikely action of extending its asset purchase program. Some appear sceptical with the euros’ recent price action, especially as it has not closed above $1.4770 since last week. Any disappointment from US data could trigger further downside towards the $1.4680 support, with a 60% chance probability for seeing $1.4550 before week’s end./

Aussie lags behind after an unexpected monthly decline in Australian retail sales (-0.2% from +0.9%). Considering yesterday’s “dovish rate hike” from the RBA, AUDUSD and AUDJPY could become the primary losers from any recurring wave of risk aversion. AUDUSD faces interim resistance at 0.9130, followed by 0.9220, with downside support standing at 0.8950. We still call attention to a looming potential break of the 2-month trend line support at 0.8930, after which emerges 0.8850 and 0.8680.
AUDJPY attempts a recovery above 83.00 but any emerging gains appear capped at 83.30, while support holds at 81.00.

Monday, November 2, 2009

Price-Oscillator Divergences Explained

Bearish Regular Divergence – price makes a higher high while the oscillator makes a lower high. This is a warning or indication of a potential impending bearish reversal after an uptrend.

Bearish Regular Divergence


Bullish Regular Divergence – price makes a lower low while the oscillator makes a higher low. This is a warning or indication of a potential impending bullish reversal after a downtrend.

Bullish Regular Divergence


Bearish Hidden Divergence – price makes a lower high while the oscillator makes a higher high. This is a warning or indication of a potential downtrend continuation.

Bearish Hidden Divergence


Bullish Hidden Divergence – price makes a higher low while the oscillator makes a lower low. This is a warning or indication of a potential uptrend continuation.

Bullish Hidden Divergence