USDCAD breaks above the falling trend line from 1.0745 to 1.0413, suggesting lengthier consolidation of downtrend is underway. Bounce to test 1.0413 resistance is now in favor. As long as this level holds, we’d expect downtrend to resume and one more fall towards 1.0000 is still possible. However, a break above 1.0413 key resistance will indicate that the fall from 1.0745 has completed at 1.0224 level already, then the following uptrend could take price back to 1.0600 area.
By GCI Forex Research
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro depreciated sharply vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4260 level and was capped around the $1.4415 level. U.S. markets reopened after yesterday’s market holiday and liquidity returned to normal levels. Data released in the eurozone today saw the German January ZEW economic sentiment index slip to 47.2 from 50.4 in December, lower than forecast and the fourth consecutive decline in expectations. The common currency moved lower on these data as recent German economic data had been stronger-than-expected. German finance minister Schaeuble said the government will draft legislation to reform supervision, remuneration, and restructuring for the financial sector to help stabilize the financial markets. Dealers are still closely monitoring the fiscal crisis in Greece. Greek finance minister Papaconstantinou said eurozone finance ministers have welcomed Greece’s plans to sharply reduce its budget deficit. Moody’s reported Greece’s fiscal program addresses short-term challenges and is consistent with its current A2 rating but the outlook remains negative. Other data released in the eurozone today saw the EMU-16 January ZEW economic sentiment indicator fall to 46.4 from 48.0 in December while EMU-16 November construction output fell 1.1% m/m and 8% y/y. European Central Bank member Bini Smaghi reported “Bank lending…is subject to some risk. While subdued bank lending has so far reflected the weak state of the real economy, credit supply restrictions may become more binding when loan demand by enterprises picks up as the economy recovers.” In U.S. news, November long-term Treasury International Capital flows print at US$ 126.8 billion, up from a revised October print of US$ 19.3 billion. Also, November total net flows printed at US$ 26.6 billion, up from a downwardly revised –US$ 25.4 billion in October. Other data to be released in the U.S. today include the January NAHB housing market index. Traders are paying close attention to the U.S. earnings season with Citigroup having met analysts’ expectations with a sizable loss related to its TARP repayment. Euro bids are cited around the US$ 1.3885 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥91.05 level and was supported around the ¥90.30 level. Traders reacted to news that Japan Airlines will file for bankruptcy, a move that had been anticipated for weeks. Data released in Japan overnight saw December consumer confidence print at 37.6. Former Bank of Japan Policy Board member Hirano reported a weak yen is positive for Japan’s economy. Prime Minister Hatoyama, whose government is embroiled in a funds scandal, said the government and BoJ must cooperate in combating deflation. This scandal has been brewing for several months but some traders believe the problems are worsening and could prevent the government from enacting needed reforms and budget agreements. Data released in Japan yesterday saw November industrial production downwardly revised to +2.2% from +2.6% m/m. Yesterday, Bank of Japan lifted its economic assessment in four of Japan’s nine regions, noting the economy “picked up in all regions…many regions continued to point to the low level of economic activity.” BoJ Governor Shirakawa yesterday reported “The Bank of Japan recognized it is a crucial challenge for Japan’s economy to overcome deflation and return to a sustainable growth path with price stability. The central bank is aiming to maintain an extremely accommodative financial environment.” There is increasing speculation the central bank will extend its near-zero per cent interest rate policy and possibly ramp up fund injections into the economy. Group of Seven finance ministers are expected to discuss exchange rates in Canada when they convene on 5-6 February. The Nikkei 225 stock index lost 0.83% to close a ¥10,764.90. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥129.60 level and was capped around the ¥130.70 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥149.05 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥87.80 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8277 in the over-the-counter market, up from CNY 6.8268. People’s Bank of China guided its benchmark one-year bill yield to its highest level in fourteen months to moderate record loan growth and slow asset bubbles. PBoC sold bills at a rate of 1.9264% in open-market operations and this is the central bank’s latest signal that it is intent on tightening monetary policy this year. The State Administration for Foreign Exchange reported non-U.S. dollar reserves account for about 40% of China’s reserves now. China International Capital Corporation reported China attracted US$ 48.7 billion of “hot money” in December, the largest amount in eight months. Premier Wen said China will encounter inflationary expectations this year and said China must be prepared to deal with trade frictions. Also, Wen said proactive fiscal policies will help expand domestic demand
₤
The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6310 level and was capped around the $1.6455 level. Prime Minister Brown said the European Union must develop a new economic growth strategy when policymakers convene on 11 February. Data released in the U.K. today saw December consumer price inflation spike to 2.9% in December, well above Bank of England’s 2.0% target and expectations of a 2.5% print. This was up from 1.9% in November but most economists believe the upward spike will prove temporary. On the flip side, a sustained rise in CPI will precipitate a policy response from Bank of England. Cable bids are cited around the US$ 1.5730 level. The euro lost ground vis-à-vis the British pound as the single currency tested bids around the ₤0.8730 level and was capped around the ₤0.8810 level.
CHF
The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0350 level and was supported around the CHF 1.0225 level. Swiss National Bank President Hildebrand yesterday reported he will “resolutely prevent” an “excessive” strengthening of the franc. He also said SNB must “carefully and gradually” normalize its monetary policy. Data released in Switzerland last week saw December producer price inflation up 0.1% m/m and decline 2.5% y/y. The OECD today called on Switzerland to keep interest rates unchanged until the economic recovery takes hold. U.S. dollar offers are cited around the CHF 1.0420 level. The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.4780 level while the British pound gained ground vis-à-vis the Swiss franc and tested offers around the CHF 1.6915 level.
Forex Daily Market Commentary provided by GCI Financial Ltd.
GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.
DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.
By CountingPips.com
The US Dollar has been on the rise today in forex trading, gaining sharply against most of the other major currencies. The dollar has advanced today versus the euro, Australian dollar, New Zealand dollar, Canadian dollar, Swiss franc and the Japanese yen while edging slightly lower versus the British pound as of 2:33 pm EST in the afternoon of the US trading session. Yesterday, the dollar fell against all seven of these other major currencies in light holiday trading.
The US stock markets have also traded higher today with the Dow Jones gaining by over 90 points, the Nasdaq increasing over 20 points and the S&P 500 advancing by over 10 points at the time of writing. Oil has traded higher to $78.95 while gold has risen by $9.60 to trading around the $1,139.70 per ounce level.
U.S. Economic news releases today showed that foreign demand for long-term US securities increased in November by 
the highest since May 2007 to a total of $114.5 billion in net foreign acquisition of long-term securities according to the U.S. Treasury Department. This is a sharp rise from October’s report of a revised total of $6.9 billion in net foreign acquisition of long-term securities.
The closely watched monthly net TIC flows registered a total of $26.6 billion positive capital inflows following the revised outflow of $25.4 billion in capital in October. The monthly net TIC data is important to watch the difference in capital flows coming into and going out of the United States.
Today, the biggest mover of the Forex dollar majors has been the EUR/USD with a decline by over a 100 pips to trade under the 1.4300 level. The USD/CHF pair has climbed by approximately 80 pips, the USD/CAD has advanced by 70 pips while the USD/JPY has traded higher by 40 pips to level above the 91.10 threshold.
EUR/USD Hourly Chart – The Euro falling today versus the US Dollar in Forex Trading and touching its lowest level since December 23rd at the 1.4253 exchange rate. The EUR/USD is trading at the bottom of its declining price channel on the hourly chart. The pair has found support and is consolidating the around the 1.4295 price level.
By Sylvain Vervoort – In my opinion, one of the only tools that can give you an idea as to which direction the stock price will move next is Elliott wave analysis. With short, medium, and long-term Elliott wave trend analysis, you can have a pretty good indication if price has a better chance of going up or going down in these different time periods. As an added bonus, an Elliott wave can give you some price targets too. I think that your Elliott wave count does not have to be perfect. Most probably you will have to review counts regularly. What is important, though, is that price makes a move in the expected up or down direction.
During an illness in the mid-1930s, Ralph Nelson Elliott discovered the correlation between human emotion and trend patterns contained within price charts. Elliott discovered different patterns that repeated themselves in form but not necessarily in size or length of time; these patterns could always be subdivided into smaller waves within the framework of certain rules. He called this phenomenon the “wave principle.”
There are two basic waves in the Elliott wave theory: a five-wave impulse pattern in the direction of the main trend and a three-wave correction pattern against the main trend. In a later stage, Elliott used Fibonacci numbers together with the waves to predict price targets. A trend signals the main direction in which prices are moving; corrections move either against the main trend or sideways. In Elliott wave terminology, these are called impulse waves and correction waves. The correction wave consists of three waves: A, B, and C.
Impulse waves are identified by numbers; correction waves are identified by letters. Impulse waves 1, 3, and 5 move in the direction of the trend and therefore, consist of another impulse wave of a lower degree. Impulse waves 2 and 4 move against the trend and are as such correction waves of a lower degree.
We know already that the up trending or down trending correction wave has three waves. Waves A and C point in the direction of the correction trend; wave B is moving against this direction. Waves A and C in a correction wave moving in the direction of the correction trend are therefore impulse waves, consisting of five waves. Note that waves 2 and 4 in an impulse wave are also correction waves.
Another possible correction pattern is a triangle correction. A triangle correction consists of five correction waves. IMPORTANT! A triangle correction is always part of an ABC correction wave.
Any impulse wave can be interpreted as a correction wave, but it is, of course, wrong to do this because the Elliot wave count will be completely wrong. Respecting all the rules is therefore utmost important.
An impulse wave and a correction wave together make a cycle. An example indication could be: The biggest wave:[1] to [2] consist of 1 + 1 = 2 waves The biggest subdivision: (1) to (C) consist of 5 + 3 = 8 waves The next subdivision:1 to capital C consist of 21 + 13 = 34 waves The following subdivision:Roman I to small c consist of 89 + 55 = 144 waves This subdivision is not limited.
A typical up impulse wave [1] to [5], with an extension of a lower degree wave (1) to (5) in wave [3] can have for example another extension of a lower degree with waves 1 to 5. From the start of the main impulse wave [3] up, you could look for a long trade and stay in the trade based on the Elliott wave count until wave [5] is confirmed above the wave [3]. Nice profits can be obtained thanks to the fact that you stay in the trade based on the Elliott wave count.
With a top [5] confirmed, which is actually a new longer term wave 1 of a higher degree, you are expecting a correction wave 2 for this longer term up move. Most probably an ideal moment to start a short position while expecting a medium term ABC zigzag correction. This correction wave can also be a double zigzag correction with waves WXY, with lower degree ABC waves in the W and Y waves.
This is the end of my introduction to Elliott waves. Next article we will look at the basic impulse wave’s rules and price targets.
About the Author
Want to learn everything about technical analysis? You can find free information at my website: http://stocata.org/. Sylvain Vervoort is a trader and the author of a new book “Capturing Profit with Technical Analysis” and a regular contributor to Stocks & Commodities magazine.
By CountingPips.com
The Bank of Canada held its interest rate today at the all-time low of 0.25 percent as widely expected by economic forecasts. The bank reiterated its intention to hold the rate at this level through the second quarter of 2010, conditional on the inflation outlook and also said that the country’s currency rise could stifle its economic recovery.
The BOC statement said the “global economic recovery is under way” but that the recovery “continues to 
depend on exceptional monetary and fiscal stimulus, as well as extraordinary measures taken to support financial systems.”
Canadian economic growth, according the Bank, “resumed in the third quarter of 2009 and is expected to have picked up further in the fourth quarter. Total CPI inflation turned positive in the fourth quarter and the core rate of inflation has been slightly higher than expected in recent months.”
Looking forward, the BOC projects that the Canadian economy will expand by 2.9 percent in 2010 and by 3.5 percent in 2011 following a decline of 2.5 percent in 2009.
The BOC warned that the Canadian loonie’s “persistent strength” may work against its economic growth as the Canadian currency could be “a significant further drag on growth and put additional downward pressure on inflation.” The Canadian currency, with its steady gains versus the U.S. dollar, has made its exports more expensive to the United States which purchases approximately 80 percent of Canada’s exports.
Canada’s Leading Indicators increase more than expected in December.
A separate report from Statistics Canada showed that the Leading Indicators index increased for the seventh straight month in December. The Leading Indicator Index, which measures future economic activity, surged by 1.5 percent in December following an increase of 1.3 percent in November. The December rise marked the largest one month gain since September 1958 and beat market forecasts looking for an increase of 1.0 percent.
All ten of the measured sectors that make up the leading indicator index showed increases for the second straight month. Durable goods orders and the housing index index were leading sectors for the month with gains of 8.1 percent and 3.0 percent, respectively. The stock market index rose by 1.7 percent in December while other durable goods sales gained by 1.4 percent in December. Other notable gains were the US Conference Board indicator which rose by 0.8 percent and business & personal services employment which also advanced by 0.8 percent for the month.
Canadian dollar mixed in forex trading.
The Canadian dollar has been mixed today in the currency markets after the interest rate announcement and leading indicator release in the North American trading session. The U.S. dollar has advanced versus the Canadian “loonie” dollar as the USD/CAD has increased from today’s opening exchange rate of 1.0251 at 00:00 GMT to trading at 1.0320 this afternoon at 1:28pm EST. The euro, meanwhile, has fallen verses the loonie in trading today as the EUR/CAD currency pair has declined from 1.4767 to trading at 1.4741. The loonie has edged lower against the Japanese yen as the CAD/JPY has dipped from 88.47 yen per loonie to trading at 88.29. The Australian dollar has gained ground versus the loonie as the AUD/CAD has advanced from 0.9505 to trading at 0.9537 while the New Zealand dollar has also gained with the NZD/CAD rising from 0.7593 to trading at 0.7622.
By David Adams – I think the most important fact, yes I said fact, regarding pivots points is they are a prediction of future support and resistance levels. The key word in the previous sentence is “prediction” and traders should keep that in mind when trading pivot point systems. I have always been conflicted as to why pivot points (PP) become important throughout the course of the day. Most traders begin their day by plotting pivot points onto their chart. With so many people using similar formulas to plot PP it is little surprise that the market stops at the calculated support and resistance levels. Do the support levels and resistance levels occur because everyone is using a similar system or are they part of the natural function of the market?
It doesn’t matter.
As a trader I am only interested in what the market does, not why it exhibits certain tendencies. I realize that is a bit of an obtuse answer, but it is one I have learned to live with comfortably. Of course, it is often discussed among traders and each day trader has his opinion, but to trade the markets it is not necessarily important why this phenomena occurs.
On the other hand, some days the market pays absolutely no attention to pivot points and goes along its merry way without stopping at any particular point on the chart. More often than not, though, the market will stop at the pivot points, or pause , or reverse right at the plotted lines. My point is a simple one; pivots are very useful, except when they are not useful. Whether the market will adhere to the predicted support and resistance is something that you must glean from watching the price action for a bit. I typically don’t initiate my first trade of the day based on pivot points.
The formula for calculating the days support, resistance, and pivot point is as follows:
R2 = P + (H – L) = P + (R1 – S1) R1 = (P x 2) – L P = (H + L + C) / 3 S1 = (P x 2) – H S2 = P – (H – L) = P – (R1 – S1)
S=support levels R=resistance levels H=hi L=low C=close
As you might have surmised, the formula plots five lines on your trading chart. These lines are commonly referred to as S1, S2, PP, R1, and R2. S1 and R1 are the first lines of potential support/resistance on your chart. The pivot point is the primary line of support and/or resistance.
Most traders have their own set-up to trade pivots, and I have three that are favorites of mine. One is a break out through a resistance/support level.
Break outs often time occur when the market is in a consolidating mode and forms a horizontal channel, with the price banging off the top and bottom of the channel, especially if the channel is on a support/resistance line, as is often the case.. After this price action continues for two, maybe three cycles, I will set a sell a point below the channel and a buy a point above the channel. (I am referring to the ES contract here) Generally the price action will break out of the channel and continue in the direction of the break out and you pick up the trade as it blasts through the channel parameters. This is a pretty good strategy and can be very profitable.
Breakdowns are also a great way to use your pivots. This trade is especially good if the market has been hitting a support/resistance line and stopping. As the price action approaches the support/resistance line, I will set a buy one point below the line in hopes of picking up the trade as it pierces the line. This trade can be a bit dodgy, especially if the market has been bouncing off the lines all day because the earlier bounces were usually followed a move in the other direction. Your hope is that the move does not go through the line a bit (as it often does), pick up your trade and change directions. Again, here you can set your order lower, maybe 1.5 points below the line if you are uncomfortable.
Finally, you trade the pullbacks from R and S. Let’s say the market pierces S1 and heads straight to S2 and stops and reverses. Often times the change in direction will go straight to S1 again, retracing it’s move down in the opposite direction. Once it reaches S1 I will set a trade 1 point below S1. More often than not, the trade will hit S1 and reverse field to the short side, and if it continues upward you stayed out of the trade by virtue of setting your sell 1 point below S1. This probably my favorite pivot point trade, and comes with a higher degree of safety than most. Of course, no specific trade works every time. If I am stopped out twice on a pivot point trade, I forget pivot points for the rest of the day.
In summary, we learned that pivot points are predictors of future activity. Further, as predictors they may or may not be effective on a given day of trading. Your power of observation is key to understanding the effectiveness of a pivot point every trading day. We reviewed three basic trades that I use; the breakout, breakdown and pullback. If you learn to combine your trades with an oscillator or a tick chart, you will develop and even higher degree of activity in your trading. Remember to check yourself when trading pivot points, never trade without stop-loss orders in place.
About the Author
You can learn to trade from a 15 year veteran trader, not a salesmen. This program comes with a lifetime mentoring program and an educational package that is second to none. Additionally, the trading system is time tested and has been in use more than ten years. You can get your free emini starter pack (valued at $500) by going to Click here for your free trading pack at Trading Concepts, Inc
By Anton Eljwizat
Below is the daily chart of the EUR/SEK currency pair.
• The technical indicators used are the Slow Stochastic, Relative Strength Index (RSI) and MACD.
• Point 1: there is a “doji” candlestick that has formed on the chart, indicating that a reversal should take place.
• Point 2: The Slow Stochastic indicates a bullish cross, signaling that the next move maybe in an upward direction.
• Point 3: Point 3: The MACD indicates an impending bullish cross, which may signal an upward movement is going to occur in the near future.
• Point 4: The Relative Strength Index (RSI) signals further bullishness for the pair, which in turn indicates further upward pressure to occur anytime soon.
• Forex traders can take advantage of this impending movement by having their Entry Orders in place to capture this reversal.
EUR/SEK Daily Chart
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
Source: ForexYard
Following a report that U.S. based Kraft Foods Inc. may be merging with British incorporated Cadbury, the Pound saw major gains across the market spectrum. The Euro dropped to a four month low against Sterling, while GBP rose to its highest level in more then a month against the greenback.
Following rumors of an impending merger between Kraft Foods and Cadbury, the Pound made some serious gains against the Dollar with the pair currently trading around the 1.6405 level. EUR/USD trading was relatively stable on Monday largely due to the Martin Luther King Holiday. Currently the pair is trading around the 1.4385 level.
Today, traders will want to pay attention to the TIC Long-Term Purchases report, due at 14:00 GMT. The report measures the difference in foreign investment in the U.S. and U.S. domestic investment abroad. The report is a key indicator of American economic health, as it is a direct indicator of how foreign investors view the U.S. economy.
Heavy volatility among USD pairs usually follows this report. With a forecasted figure of 30.3B, today’s long-term purchase figures could mark a significant increase over last month’s. If this is indeed the case, the greenback could see some major gains, particularly against the weak Euro. On the other hand, any figure below the predicted outcome would likely see USD take further losses, especially against the strong British Pound.
Worries over the Greek economy caused the Euro to take some heavy losses in trading on Monday. The EUR/GBP pair dropped significantly and is currently trading around 0.8765. Against the Yen, the Euro has fallen some 40 pips over the last few hours and is currently trading around the 130.20 level. All being said, recent comments expressing confidence in Greece by the European Central Bank, helped the Euro keep its losses relatively modest.
Today, traders should carefully watch the German ZEW Economic Sentiment report, set to be released at 10:00 GMT. The report is a key indicator of German economic health and typically creates serious volatility.
Last month, the report caused the Euro to take some heavy losses, especially against the Dollar. With analysts predicting a similar figure this month, it is possible that the currency will continue its downward trajectory in trading today. On the other hand, if the report comes in better then expected, the Euro might be able to recoup some of it recent losses.
A resurgent Yen has made some significant gains on both the U.S. Dollar and Euro in recent trading, largely due to poor economic news from the later currencies. That being said, most analysts do not foresee the Yen remaining strong for much longer. Japan currently exports more then it imports, meaning that a strong Yen generally hurts the export industry. This could play a large role in how the Japanese government shapes its economic policy.
Today, traders should expect the Yen to either gain or loose depending on economic indicators from the Euro-Zone and England. Good economic news for either the Euro or Pound is likely to entice risk taking among investors, which would hurt the Yen. On the other hand, any negative European news could give the Yen’s safe haven status a boost.
With most Oil trading sidelined on Monday due to the Martin Luther King holiday, Crude was able to post modest gains largely due to low liquidity. In addition, European indices helped prop Crude prices in trading yesterday. Crude is currently trading at around 78.60 a barrel.
Traders hoping that Oil prices will continue to increase may be in for a disappointment. Fresh rumors that OPEC is considering upping its output has tempered investor confidence for a dramatic rise in Crude prices. Furthermore, temperatures across the U.S. have increased recently, creating less demand for Oil across the country.
The 8 hour RSI is heading into the oversold territory while an impending bullish cross is evident on the 4 hour MACD and a fresh bullish cross is evident on the daily chart’s Slow Stochastic. Going long for the day may be a good choice.
The pair may see a correction to its recent bullish run today as the hourly, 2 hour and 8 hour RSI are floating in the overbought territory and with the daily and 2 hour charts’ Slow Stochastic are exhibiting a bearish cross. Going short for the day may be advised.
Some bullishness may be expected for the pair today as the 8 hour and daily charts’ Slow Stochastic is exhibiting a bullish cross and as the 2 hour and 8 hour RSI are floating near the oversold territory. Going long for the day may be a good option.
The 2 hour RSI is floating in the oversold territory while the 4 hour chart’s Slow Stochastic is exhibiting a fresh bullish cross. Furthermore, there is an impending bullish cross on the hourly MACD. Going long for the day may be advised.
The pair’s recent bullish run may see some correction today as the hourly and 8 hour RSI are floating in the overbought territory and the daily, 2 hour and hourly charts’ Slow Stochastic are exhibiting bearish crosses. Forex traders may be advised to go short for today.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
FX Market Movers
In the UK the better than expected housing data added to the growing notion among investors that the worst is over for the kingdom and most importantly that all the gloom and doom is already priced in the battered Cable. As the BoE minuets are due this week, investors expect the BoE to announce a pause in the QE program. QE is effectively printing money and injecting it to the credit markets a pause in that process means less supply of Sterling which is Sterling Bullish. Indeed the cable was not too late to react to the growing confidence rallying across the board and trading under a key support against the Euro. At the day’s end the Sterling closed at 1.633 against the Dollar and closed at the 0.88 critical support against the Euro.
For the Euro however sentiment was rather different with Greece’s swelling debt problem that refuses to fade. Investors fear that the EU will have no choice but to inject funds into Greece but fear even more possibility that Greece is not the last EU member to get into a debt spiral. In addition negative news from Germany also weighed on the Euro with Bundesbank lowering its growth forecast for Germany (the EU largest economy) as it expects German exports of automobiles and consumer goods to slow. At the day’s end although the Euro managed to gain against the Dollar the Currency lost ground against the Sterling. The Euro closed at 1.4385 against the Dollar, at 1.4744 against the Swiss Franc and 130.55 against the Yen.
Commodities
Gold ended the Day on the green side as the Dollar move south pushed the metal to gain 6$ an ounce. Gold however failed to break the 1,140$ an ounce and topped out around 1,139$ before settling lower at the 1,137 zone.
Oil gained slightly due to a weaker Dollar closing above 78$.
The Day Ahead
In the London session the UK CPI figures will gather much attention. Consensus pulls point to an expected 2.6% rise YoY for the month of December. After the upbeat housing data a day before investors will be especially sensitive to the inflation figures. A higher than expected figure could confirm investors bets on a UK recovery and provide further support for the Sterling. While a disappointment from the CPI figures could signal investors optimism was premature. In Germany and the EU the ZEW economic sentiment will gather attention as always. Coming after the negative outlook from the Bundesbank and Greece’s credit wows any disappointment could push the Euro back into red territory. In the New York session market will focus on the BoC rate decision with investors expecting the benchmark rate to be left unchanged at 0.25%.Investors will look for a positive outlook coming from the BoC. The Concluding data for the day will US net capital flows and US Housing Market Index. Both indicators could affect sentiment for the Greenback especially the Housing Market Index however most of the focus in the FX arena is expected to be on the European continent with the Greek debt story in the eye of the storm.
Daily Forex Market Analysis provided by eToro
Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.
A Margin Call is a possible event in which a trader possesses losing positions that put him on the verge of entering a negative balance in his Forex account. In order to prevent such a turn of events, a margin call occurs. This is where all of the trader’s open positions are being automatically closed, thus preventing him from entering into debt.
Let’s try to understand it a little bit better. When a trader uses brokerage services to enter the foreign exchange (Forex) market, he gets the opportunity to leverage his funds using a loan he receives from his forex company, called margin. By utilizing margin, traders are increasing their purchasing power so that they can own more lots without fully paying for it.
In ForexYard, for example, a trader can leverage his funds up to 1:200, meaning that a trader who opened an account with the sum of $10,000 can open new positions up to the amount of $2,000,000!
However, using such high leverage will expose you to harsh risks, and may rapidly end your investing experience. Always remember that having the opportunity to gain 200 times larger profits will likewise endanger you with the risk of losing just as much.
ForexYard recognizes that its traders are using leverage and that the foreign exchange market tends to greatly fluctuate. Therefore, there is a very important safety feature embedded in the system that prevents clients from losing more money than they have in their accounts. Should the account equity, meaning the total floating value of the account, fall below the margin requirement of approximately 20% of the used margin, the dealing desk will close all positions. This protects the trader from losing more than the funds he deposited into the trading account.
In short, Margin Calls pop up when a trader’s equity reaches dangerous lows in order to protect them from entering a negative balance, or debt, with their broker. The margin call allows traders to trade peacefully without being concerned about getting into debt.
To calculate what it means when I say “20% of the used margin” let us do a sample trade:
If you open 5 lots of EUR/USD, Buy; the margin required to open this position is $250 ($50 per lot – this amount is identical across all currency pairs).
Once your Equity (which is your balance plus/minus your profits/losses) reaches 20% of the $250 used to open the position, the position will be closed.
Mathematically: 20% of $250 = $50. once your Equity falls to $50, your positions will be automatically closed. This is a Margin Call.
