By forex-fxtrader.com
I have had quite a few of my mentor group members asking me to explain what is going on in the currency markets at the moment. The simple answer is indecision. Nobody seems able to decide which currencies economy is in the bigger mess, so in the meantime the herd swings wildly up one day & down the next. The slightest hint of a rumour and we lurch off in another direction.
I warned a couple of days ago that I was going into “wait and see mode”. Why? Many pundits were predicting a big $US recovery & I showed how big daily & monthly trend lines were being broken, but I was not convinced. A member sent me a quotation to the effect that a change of direction in the currency market was similar to an aircraft carrier doing a 360º turn, i.e. very slow and steady.
Its not helped by the fact that world finance ministers are trying to resolve the crisis by methods that have never been seen before on a global scale, namely the largest economies are simply printing more money.
The Blind Leading the Blind?
All of this does lead one to question the logic of our leaders.
“Dr. Bernanke unfortunately does not understand economics, he does not understand currencies, he does not understand finance. All he understands is printing money…. His whole intellectual career has been based on the study of printing money. Give the guy a printing press, he’s going to run it as fast as he can,” said hedge fund legend Jim Rogers.
“The low price Gordon Brown (then British Chancellor/Finance Minister) got for selling our gold wasn’t caused by bad luck. It was a staggering display of economic incompetence that has landed taxpayers with a £7 billion black hole.” In brief, Brown warned in advance that he was going to sell the UK’s gold reserves. The gold market was in the doldrums anyway & where did his announcement of a huge increase in the supply take price? You guessed it!
To see the full article on the staggering incompetence of this sale click here: Daily Telegraph
Thankfully this charmless politician who presided over the economic boom years in the UK with the catch phrase “prudence” has now left office. This is not intended to be a political statement on my behalf, I admit to voting for Tony Blair before I emigrated from the UK. Something my ex-business partner reminds me almost daily, 13 years later
It does make you wonder though as to the calibre of our “leaders” who are supposed to be steering us through this economic mayhem. There is a video clip thats been doing the rounds this week on YouTube where one explanation of quantitive easing is offered.
I have not posted it here as there is some mild profanity and I do not under any circumstances want you to think I am making political statements, BUT if its true about Goldman Sachs involvement in the sale of treasury bonds, back to the treasury, then its difficult to wonder what is going on in the world!
If you wish to view the video go to YouTube and type in “quantitative easing explained”
The Forex Traders Week Ahead
In recent weeks we have had some incredibly small moves on many pairs. Last weeks Euro/$ opened and closed within 20 pips, as did the Aud and the Cad has done the same on the monthly so far! So how can we possibly calculate the direction of price in the coming days? With great difficulty.
My best advice for the week ahead is that we concentrate on daily charts & smaller. However there is a mixture of big scheduled news, e.g. FOMC, big non scheduled: The Irish crisis, Portugal and possibly Spain, plus Japanese Bank Holiday on Tuesday – and the slight matter of Thanksgiving long weekend for many which starts on Thursday.
As a result we will have to try and steer our way around these announcements & definitely do not be in more than one Euro trade at any one time.
Markets never stay like this long term, learn to wait for more predictable ones to return. As I point out in the video, you are going to have to use your own discretion on most pairs this week.
The best potential I can see is that there are quite a few daily triangle break outs developing as I show in the video below.
| Pair: | Comments and Analysis: |
| Gbp/$ | Price continues to move through 1.6000 and teasingly closed below there on Friday. I am now more interested in possible triangle break out as shown in the video. 1.5850 is critical for me. Either look for bounces off again (it’s a daily trend line, 61.8% weekly fib & daily 55ema) or if it breaks look for an M2 break out pullback for a short. |
| Euro/$ | What ever you do, make sure you are not in any Euro Trade around 16.00 hours London time when Mr Trichet delivers an important speech. Almost impossible to predict at the moment due to the fact that the Irish Government could make an announcement at any time. Its hard enough to try steer around scheduled news but this could be dynamite & we can only guess which is not trading but gambling. |
| Chf/$ | For the last 4 weeks price has bounced between 0.9920 & 1.000 either look for bounces here OR wait for standard M2 break out/pullbacks. A break above 1.000 means you need to wait for a candle to close (4 hour or daily) then wait for a pullback with a view to long. |
| $/Yen | Has bounced off 83.60 for the last 4 days. A break & close above there would be my favoured trade, M2 pullback. If it starts to go back down it needs to close below the daily 55ema |
| Aud/$ | Keep watching gold for clues. Has bounced between 0.9910 & 0.9720 in recent days, so either look for the same again or break outs and pullbacks. 0.9720 area looks tempting for a long. |
| Aud/jpy | Bouncing between 82.85 & 81.35. Personally would be most interested if price broke and closed above 83.00 for a long |
| Euro/Gbp | I would like to short at 0.8600 but the risk reward is not good enough as explained in the video. Instead I will be looking for a bounce back down from 0.8900 if it gets there later in the week or break out/pullbacks of the triangle, see video. |
| Euro/Yen | Possible 5700 pip triangle break on the monthly is back in play! We have been watching this for 6 months now, it does look as though it is going to break this time. From the monthly we need to wait until next week, BUT a pullback to 113.40 tomorrow would be good for me to long. Possibly for one of Deans “Do Nothing” long term trades. |
| Cad | Its all over the place and some wicked spikes. Only area of interest is 1.0300. Only interested in a short |