Month: February 2010

The Wave Principle identifies trend, countertrend, maturity of a trend — and more.

By Editorial Staff

The following article is an excerpt from Elliott Wave International’s Trader’s Classroom Collection.

Every trader, every analyst and every technician has favorite techniques to use when trading. But where traditional technical studies fall short, the Wave Principle kicks in to show high probability price targets and, just as importantly, how to distinguish high probability trade setups from the ones that traders should ignore.

Where Technical Studies Fall Short
There are three categories of technical studies: trend-following indicators, oscillators and sentiment indicators. Trend-following indicators include moving averages, Moving Average Convergence-Divergence (MACD) and Directional Movement Index (ADX). A few of the more popular oscillators many traders use today are Stochastics, Rate-of-Change and the Commodity Channel Index (CCI). Sentiment indicators include Put-Call ratios and Commitment of Traders report data.

Technical studies like these do a good job of illuminating the way for traders, yet they each fall short for one major reason: they limit the scope of a trader’s understanding of current price action and how it relates to the overall picture of a market. For example, let’s say the MACD reading in XYZ stock is positive, indicating the trend is up. That’s useful information, but wouldn’t it be more useful if it could also help to answer these questions: Is this a new trend or an old trend? If the trend is up, how far will it go? Most technical studies simply don’t reveal pertinent information such as the maturity of a trend and a definable price target — but the Wave Principle does.

How Does the Wave Principle Improve Trading?
Here are five ways the Wave Principle improves trading:

1. Identifies Trend – The Wave Principle identifies the direction of the dominant trend. A five-wave advance identifies the overall trend as up. Conversely, a five-wave decline determines that the larger trend is down. Why is this information important? Because it is easier to trade in the direction of the overriding trend, since it is the path of least resistance and undoubtedly explains the saying, “the trend is your friend.” Simply put, the probability of a successful commodity trade is much greater if a trader is long Soybeans when the other grains are rallying.

2. Identifies Countertrend – The Wave Principle also identifies countertrend moves. The three-wave pattern is a corrective response to the preceding impulse wave. Knowing that a recent move in price is merely a correction within a larger trending market is especially important for traders, because corrections are opportunities for traders to position themselves in the direction of the larger trend of a market.

3. Determines Maturity of a Trend – As Elliott observed, wave patterns form larger and smaller versions of themselves. This repetition in form means that price activity is fractal, as illustrated in Figure 1. Wave (1) subdivides into five small waves, yet is part of a larger five-wave pattern. How is this information useful? It helps traders recognize the maturity of a trend. If prices are advancing in wave 5 of a five-wave advance for example, and wave 5 has already completed three or four smaller waves, a trader knows this is not the time to add long positions. Instead, it may be time to take profits or at least to raise protective stops.

Since the Wave Principle identifies trend, countertrend, and the maturity of a trend, it’s no surprise that the Wave Principle also signals the return of the dominant trend. Once a countertrend move unfolds in three waves (A-B-C), this structure can signal the point where the dominant trend has resumed, namely, once price action exceeds the extreme of wave B. Knowing precisely when a trend has resumed brings an added benefit: It increases the probability of a successful trade, which is further enhanced when accompanied by traditional technical studies.

By GCI Forex Research

Fundamental Outlook at 1500 GMT (EDT + 0500)

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The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3545 level and was supported around the $1.3440 level.  The Federal Reserve raised the discount rate yesterday by 50bps to 0.75%, citing “continued improvements in financial market conditions” and said this move represents a “a further normalization of the Federal Reserve’s lending facilities.”  The Fed also announced that the maximum maturity for primary credit loans will be shortened to overnight effective 18 March and added its Term Auction Facility (TAF) program will end on 8 March 2010.  The Fed clearly wanted to show that the economy is improving without disrupting the financial markets too much. Many Fed-watchers see the move as largely symbolic, especially given the fact that there is only around US$ 14.7 billion outstanding at the Fed’s discount window.  Federal Reserve Bank of New York President Dudley today said “Think of this as the last adjustment tied to the end of all the liquidity facilities.  Think of this as the last piece of that package, rather than the first piece of the new package.” Speaking about the economy, Dudley added “Monetary policy is about the economy.  We need to see solid growth and job creation.  Today we got an inflation report that showed there’s no inflation pressure.  So our focus needs to be on growth and jobs.” Data released in the U.S. today saw the January headline consumer price index climb 0.2% m/m and 2.6% y/y while the ex-food and energy CPI rate was off 0.1% m/m and up 1.6% y/y.  These data were a contrast with yesterday’s producer price inflation data that came in stronger-than-expected and today’s CPI data suggest that retailers are finding it difficult to pass on price increases to consumers.  Other data released today saw Q4 mortgage delinquencies decline to 9.47% from the prior reading of 9.64%.  Some economits believe the Fed may raise the federal funds target rate by the end of the year while others do not foresee any change this year.  In eurozone news, Germany and Greece continue to exchange insults as Greece tries to restore itself to fiscal health.  Many German politicians continue to oppose a financial bailout of Greece.  European Central Bank member Gonzalez-Paramo said there is no risk of “losing access to liquidity.”  He also added the ECB will progressively phase out measures.  Spanish Prime Minister Zapatero said his country “will cut its deficit once the economy recovers.”  Data released in the eurozone today saw the December EMU-16 current account surplus print at €1.9 billion.  Also, German January producer price inflation was up 0.8% m/m and off 3.4% y/y, the highest monthly level since July 2008.  Euro bids are cited around the US$ 1.3335 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥92.10 level and was supported around the ¥91.60 level.  Bank of Japan today reported the economic recovery is continuing but added “there is not yet sufficient momentum to support a self-sustaining recovery in domestic private demand.”  BoJ also noted exports and production will continue to improve and regarding deflation, the BoJ added “the year-on-year pace of decline in consumer prices…to remain more or less unchanged for the time being, and then moderate as the aggregate supply and demand balance improves gradually.” As expected, Bank of Japan voted yesterday to unanimously to maintain its overnight call rate at 0.1%, the same official target level it has been at since December 2008.  BoJ Governor Shirakawa reported “the key to putting Japan out of deflation” is “improving productivity.”  He also noted the central bank will monitor the impact of Toyota’s massive vehicle recall on overall Japanese production and the impact of Europe’s debt crisis.  The government had been pushing the BoJ to expand policy further to counter strong deflationary pressures.  Finance minister Kan today said “the Bank of Japan and government are basically pointing in the same direction.  The government will do its part with fiscal and tax policy, while the central bank will use monetary tools.”  The Nikkei 225 stock index lost 2.05% to close at ¥10,123.58. 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 ¥123.55 level and was capped around the ¥124.35 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥140.85 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥84.30 level. In Chinese news, the U.S. dollar remained steady vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8333 in the over-the-counter market.  Chinese financial markets were closed for the Chinese New Year holiday.  Last week, People’s Bank of China reconfirmed it will “gradually guide monetary conditions back to normal levels from the counter-crisis mode” but then the central bank lifted reserve requirements by 0.5%, effective 25 February. The central bank is clearly trying to contain inflationary pressures and avert asset bubbles.  Some China-watchers believe the central bank could allow the yuan to appreciate some 5% in the coming months.

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The British pound moved sharply lower vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5350 level and was capped around the $1

By Nico Isaac

Everywhere you look, the mainstream financial experts are pinning on their “WIN 2” buttons in a show of solidarity against what they see as the number one threat to the U.S. economy: Whip Inflation Now.

There’s just one problem: They’re primed to fight the wrong enemy. Fact is, despite ten rate cuts by the Federal Reserve Board to record low levels plus $13 trillion (and counting) in government bailout money over the past three years — the Demand For and Availability Of credit is plunging. Without a borrower or lender, the massive supply of debt LOSES value, bringing down every exposed investment like one long, toppling row of dominoes.

This is the condition known as Deflation.

And, in a special, expanded November 19, 2009 Elliott Wave Theorist, Bob Prechter uncovered more than a dozen “value depreciating” developments underway in the U.S. economy as the two main engines of credit expansion sputter: Banks and Consumers. Off the top of the Theorist’s watch list are these “Continuing and Looming Deflationary Forces”:

• A riveting chart of Treasury Holdings as a Percentage of US Chartered Bank Assets since 1952 shows how “safe” bank deposits really are. In short: today’s banks are about 95% invested in mortgages via the purchase of federal agency securities. Unlike Treasuries, IOU’s with homes as collateral have “tremendous potential” to fall in dollar value.
• Loan Availability to Small Businesses has fallen to the lowest level since the interest rate crises of 1980. In Bob Prechter’s own words: “The means of debt repayment [via business growth] are evaporating, which implies further deflationary pressure within the banking system.”
• An all-inclusive close-up of the Number Of Banks Tightening Their Lending Standards since 1997 has this message to impart: Since peaking in October 2008, lending restrictions have soared, thereby significantly reducing the overall credit supply.
• Both residential and commercial mortgages are plummeting as home/business owners walk away from their leases at an increasing rate.
• The major sources of bank revenue — consumer credit and state taxes — are plunging as more people opt to pay DOWN their debt. Also, a compelling chart of leveraged buyouts since 1995 shows a third catalyst for the credit binge — private equity — on the decline.

All that is just the beginning. The November 2009 Elliott Wave Theorist includes 13 pages of commentary, riveting charts, and unparalleled insight that make it impossible to ignore the deflationary shift underway in the financial landscape. For that reason, we have compiled the most timely insights from the entire, two-part Theorist in a special article for Club EWI members. In our opinion, this bundle of exclusive Theorist excerpts are “the most important investment report you’ll read in 2010.”

Elliott Wave International’s latest free report puts 2010 into perspective like no other. The Most Important Investment Report You’ll Read in 2010 is a must-read for all independent-minded investors. The 13-page report is available for free download now. Learn more here.

By Fast Brokers – The AUD/USD has recovered from yesterday’s pullback by bouncing off our 2nd tier uptrend line and the psychological .89 level.  The Dollar experienced another large broad-based rally as investors remained concerned about EU debt.  Furthermore, the Fed shocked markets after hours by announcing it is raising the discount rate by 25 basis points.  Hence, the Fed is sending a message that the emergency window is shutting and possibly serves as the first move for the central bank’s exit strategy.  Investors bought up the Dollar in reaction and the Aussie participated, though to a lesser extent.  The AUD/USD remains the strongest out of most major Dollar pairs since the RBA has the tightest monetary stance among developed nations.  The possibility of another rate hike from the RBA should economic fundamentals improve has created a relative strength for the Aussie as uncertainty increases in the EU and UK.  However, should conditions in the EU, UK and U.S. deteriorate while China tightens the RBA may be discouraged again from tightening itself.  Therefore, investors should keep an eye on global econ data as it rolls in.  Speaking of which, although Australia will be relatively quiet on the data wire next week, investors will continue to receive key data points from the U.S. and Europe.

Technically speaking, the Aussie has multiple uptrend lines serving as technical cushions along with intraday 2/15, and 2/12 lows.  As for the topside, the Aussie has multiple downtrend line serving as technical barriers along with the highly psychological .90 level.  Furthermore, 1/28 and 2/17 highs could serve as technical obstacles should they be reached.

Price: .8935

Resistances:   .8949, .8964, .8984, .9005, .9026, .9045

Supports: .8917, .8903, .8884, .8859, .8842, .8823

Psychological: .90, .89

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The USD/JPY popped higher amid a broad-based Dollar rally in reaction to the Fed’s surprise decision to raise the rate at the discount window by 25 basis points.  The Fed’s announcement signals that the emergency window may be shutting.  Though a small movement, investors are taking it as the first step in the process of soaking up loose liquidity.  Such mentality has led investors to buy up the USD/JPY since the BoJ remains concerned about deflationary pressures in Japan.  Hence, it is becoming apparent that the Fed may tighten before the BoJ, making the Dollar a solid buy over the Yen.  However, although U.S. manufacturing is picking up, unemployment is still a big problem and today’s data shows that this week’s rise in PPI didn’t translate into higher consumer prices.  Hence, the Fed is likely to bring along its exit strategy slowly, tempering excitement in the USD/JPY.  Japan will kick off next week with the release of the BoJ’s monetary policy minutes.  Investors will be digging into the central bank’s outlook on Japan’s economy and inflation.  However, the ball will likely remain in America’s court with consumer confidence data due Monday while investors remain concerned about debt issues in the EU.

Technically speaking, the USD/JPY has multiple downtrend lines serving as technical barriers along with intraday highs.  Our 3rd tier downtrend line serves as a key barrier since it runs through January highs.  Hence, an eclipse of our 3rd tier could signal a continuation in the rally towards the 93 area.  As for the downside, the USD/JPY has multiple uptrend lines serving as technical cushions along with intraday lows.  Furthermore, the highly psychological 90 level becomes a technical cushion should it be retested.

Present Price: 91.76

Resistances: 91.81, 91.89, 92.03, 92.15, 91.25, 92.35

Supports: 91.66, 91.54, 91.41, 91.31, 91.22, 91.12

Psychological: 90, February highs

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The Cable has undergone an intense selloff in the midst of a broad-based Dollar rally following the Fed’s surprise decision to raise the rate at the discount window by 25 basis points.  Although 25 basis points may not be a large figure, the move led to a shift in investor mentality by signaling that the emergency window may be closing.  Hence, yesterday was a statement that the Fed is truly gaining confidence in the economic recovery.  The Dollar shot up in reaction and the Cable has endured heavy losses as a result.  Additionally, UK Retail Sales disappointed by printed 7 basis points below analyst expectations (-1.2% vs. -0.5%E).  The re-issuance of the VAT and adverse weather conditions likely weighed on consumption.  However, the number is still discouraging because it’s the largest decline since March 2009.  The Pound gave way in reaction and a large pop in the EUR/GBP highlights the currency’s relative weakness.  Meanwhile, uncertainty continues to surround the EU amid worry about other countries and their deteriorating fiscal situations.  America’s unemployment claims continue to hover at uncomfortably lofty levels and today’s EU PMI data set printed mixed.  Hence, the economic recovery appears to be cooling around the globe, leading investors to the Dollar for safety.  The Cable has been caught in the headwinds of the onslaught over the past 24 hours, likely because the Pound was holding up relatively well before.  The UK will kick off next week with Nationwide HPI data and attention will be focused on the inflation report hearings.  Although King has reiterated that this month’s sharp rise in prices was merely a blip, investors will be paying close attention to see whether the BoE shifts its stance at all.

Technically speaking, the Cable has multiple downtrend lines serving as technical barriers along with intraday highs and the highly psychological 1.55 level should it be reached.  As for the downside, the Cable has multiple uptrend lines serving as technical cushions (off screen) along with intraday lows.

Present Price: 1.5393

Resistances: 1.5414, 1.5444, 1.5470, 1.5520, 1.5541, 1.5585

Supports: 1.5360, 1.5317, 1.5290, 1.5263, 1.5226, 1.5195

Psychological: February lows, 1.55, 1.53

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The Selloff in the EUR/USD and the risk trade continued yesterday.  Investors are still concerned about the ability for Greece to enact its fiscal austerity along with debt worries in other Mediterranean nations.  Additionally, the Fed shocked markets by raising its discount rate by 25 basis points, signaling that the emergency window may be closing.  Investors reacted by buying up the Dollar across the board, sending the Euro below its highly psychological 1.35 level.  However, the Euro is bouncing from intraday lows after the EU Flash PMI data set printed mix.  Although services production slipped across the board and France slowed altogether, manufacturing in Germany shot up from 53.7 to 57.1, eclipsing analyst estimates of 54.1.  Additionally, Germany’s PPI grew the most since August 2008 while the EU’s Account Balance rose for only the 2nd time since the inception of the economic crisis.  Hence, it seems demand for German manufactured goods is climbing, leading to an increase in exports and consequently a positive Current Account.  Although today’s data does show the EU’s economic recovery is slowing, Germany provided a silver lining and is giving investors a reason to support the Euro after heavy declines.  The change in sentiment is reflected in a large move higher by the EUR/GBP as investors react to discouraging UK Retail Sales data.  Meanwhile, investors are awaiting U.S. CPI data.  We’ve seen prices rise across the globe and it wouldn’t be surprising if U.S. consumer prices also outpaced expectations.  In fact, the Fed could have raised rates at the discount window in advance of such a turn of events, but we will have to see.  Investors should also keep an eye on how U.S. equities react to the Fed’s decision to lift the discount rate since it occurred after the close yesterday.

Technically speaking, we’ve formed some new uptrend lines for the EUR/USD and the 1.35 area could serve as a technical cushion for the time being.  As for the topside, the currency pair faces multiple downtrend lines along with 2/12 lows and 2/18 highs should they be reached.  That being said, the EUR/USD is in blue territory due to the lack of near-term activity in this area to serve as technical levels.  Hence, the EUR/USD could continue to fluctuate wildly until establishing a new range.

Present Price: 1.3517

Resistances: 1.3532, 1.3543, 1.3559, 1.3570, 1.3582, 1.3592

Supports:  1.3509, 1.3486, 1.3473, 1.3456, 1.3440

Psychological: February lows, 1.35

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Anton Eljwizat – In the last 3 weeks of trading, the GBP/CAD experienced much bearishness, as it now stands at 1.6170. However; it seems that this trend may be coming to an end. I will illustrate below that the GBP/CAD may very well be heading for a reversal. Forex traders have the opportunity to wait for the upward breach on the hourlies and go long in order to ride out the impending wave.

• Below is the daily chart of the GBP/CAD currency pair.

• The technical indicators that are used are the William Percent Range, Relative Strength Index (RSI), and MACD.

• Point 1: The Relative Strength Index (RSI) indicates that the price of this cross currently floats in the oversold territory, signaling upward pressure.

• Point 2: The MACD indicates an impending bullish cross, signaling that the next move may be in an upward direction.

• Point 3: The Williams Percent Range has peaked near at the -100 marker, which means that there may actually be a strong level of upward pressure.

GBP/CAD 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

The Dollar surged in value versus the euro after the Federal Reserve surprised the forex market late yesterday by raising a key interest rate. This may be the first stage in rolling back its stimulus packages enacted during the financial crisis.

Economic News

USD – Dollar Soars after Fed Interest Rate Change

Just after the close of New York trading, the Federal Reserve released a statement saying it would increase the discount rate it charges banks to 0.75% from 0.50%. This is a key interest rate the Fed uses for overnight lending to banks. Also included in the statement was the Fed’s position that this change should not affect interest rates and financial conditions for households and businesses and is not a change in the outlook for the economy or for monetary policy.

Immediately after the release of the Fed’s statement the markets reacted strongly as traders bid up the Dollar. The EUR/USD fell to a low of 1.3444 from 1.3568 for a 1-day drop of 0.9%.

Market analysts were expecting the move to be made by the Fed, but the interest rate increase was not expected to come so soon. Despite pledges by the Fed to maintain the key Fed Funds Rate at a significantly low level for a considerable time period, the market showed its regard for the rate increase by buying the Dollar.

We may not see a rate increase in the Fed Funds rate for some time as was noted in the statement. However, this shows the Fed is paving the way for a hike in interest rates and the tightening of monetary policy. Just like the Dollar’s sharp rise yesterday, we may expect the Dollar to continue to rise on the assumption of higher future interest rates.

EUR – More Debt Problems for the Euro-Zone

Prior to the release of the Fed’s interest rate increase, the EUR was trading lower versus the Dollar. Further bad news was released yesterday in the Euro-Zone economy. A warning from Italy’s Audit Court signaled that derivative contracts used by Italian municipal governments could multiply their debts over time.

This report comes at a time when the European Union is already facing headwinds due to the fiscal crisis in Greece. The report has garnered more attention due to swap contracts used by Greece which may hide future monetary obligations from their reported financial statements.

It appears that one bad story after another is coming from the EU. If it is not Greece one day then it is Portugal. If today it is Spain, then it will be Ireland tomorrow. This group of nations has come to be known under the abbreviation as PIGS. The countries appear to be the hardest hit from the global recession and the most fiscally troubled. Now Italy may also be added to this prestigious group. What will we call them now; PGS II?

JPY – USD/JPY Rises on Fed Interest Rate Increase

The Dollar continued to climb against the Yen, reaching a one-month high after the Federal Reserve raised the interest rate it charges banks on overnight loans to 0.75% from 0.50%. The Fed signaled the higher interest rate was not the beginning of tightening of the monetary policy, but the market reacted otherwise.

The USD/JPY rose to a high of 92.08 from an opening price of 90.94. The EUR/JPY also climbed in yesterday’s trading to 124.44 from an earlier price of 123.41.

The rally in the Dollar shows traders what might happen when the Fed does decide to increase the Fed Funds interest rate. We could see another Dollar rally across the board, much as we experienced yesterday. If this is any indication of the future price movements in the major Dollar pairs, it looks as though being long on the Dollar could be the right move.

Crude Oil – Spot Crude Oil Prices Rise despite Fed Rate Increase

Despite the Fed rate increase, spot Crude Oil prices rose to a five-week high during yesterday’s trading. This price increase also came after a rise in Crude Oil inventory numbers. The weekly Crude Oil inventory data released by the Energy Information Agency showed a 3.1M barrel increase in the amount of crude the U.S. holds, significantly higher than the 1.8M barrel market expectation. However, the key data in the report showed distillate stocks fell by 2.9M barrels. The market expected only a 1.5M barrel reduction. The data helped to increase the price of spot crude oil to a high of $79.61 from an opening price of $77.25.

Spot Crude Oil trading should be impacted by the release of two economic data releases due out today. The first report will be Britain’s monthly retail sales numbers. The data release is a key economic indicator for the British economy and shows consumer spending along with overall sentiment of the British consumer. The second key economic data is due out from the U.S. Last month’s core CPI numbers are expected to be a minute 0.2%. Should the actual number be greater than expected, this could hurt Crude Oil prices, sending them lower to their next support level of $77.99.

Technical News

EUR/USD

Some correction to the pair’s recent downward trend may be expected today. A fresh bullish cross is evident on the 2 hour and 8 hour charts’ Slow Stochastic with the 4 hour and hourly RSI floating in the oversold territory signaling an impending upward movement. Going long with tight stops may be advised for today.

GBP/USD

The hourly, 2 hour and 4 hour RSI are floating in the oversold territory while a breach of the lower Bollinger Band is evident on the 4 hour and 8 hour charts. Furthermore, a bullish cross is evident on the 2 hour and 8 hour charts’ Slow Stochastic. Going long for the day may be advised.

USD/JPY

The 4 hour, 8 hour and daily RSI are floating in the overbought territory with a bearish cross evident on the daily and 4 hour charts’ Slow Stochastic signaling an impending downward movement. Furthermore, a breach of the upper Bollinger Band is evident on the 8 hour and daily charts. Going short for the day may be advised.

USD/CHF

The hourly and 4 hour RSI are floating in the overbought territory with a bearish cross evident on the 2 hour and 8 hour charts’ Slow Stochastic. A breach of the upper Bollinger Band is evident on the 8 hour chart. Going short for the day may be a good choice.

The Wild Card

GBP/AUD

The 2 hour, 4 hour, 8 hour and daily RSI are floating in the oversold territory with a bullish cross evident on the daily and 4 hour charts’ Slow Stochastic indicating an imminent upward movement. Forex traders may be advised to go long for the day.

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.

eToro News

Friday, February 19, 2010

The Federal reserve surprised the market by raising its discount lending rate to banks from 0.5% to 0.75% thus effectively raising the spread on Fed funding to 0.5%(Discount rate less Benchmark rate).The Fed chairman already announced in his statement earlier this week that the Fed will move very soon to tighten the discount rate as part of a grander scheme to move out of emergency measures and in to normalization. However markets have not been expecting the move to be so quick and were caught by surprise. Although the Fed in its decision went out of its way to outline this is only a move towards normalization rather than a tightening move investors thought differently. The fact that the fed has raised its discount rate for the first time in 3 years was preserved by the Foreign exchange players as a preliminary step towards an eventual tightening by the Fed. The reaction in the Forex arena was rather strong with the Dollar pushed to its highest point in more than 3 quarters against the Euro trading under the 1.35 mark just 20 pips shy of the 1.34 mark. The Dollar appreciated against other currencies as well trading above 1.08 against the Swiss Franc and teasing the 92 level against the Yen in what that could be best described as a broad Dollar rally.

Euro Dollar after the Fed statement

EUR/USD fell close to 200 pips in 3 hours

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.

© 2009 eToro Blog.