Month: December 2010

By ForexYard

After slipping against the dollar in overnight trading, the euro has managed to recoup its losses throughout the morning and has gone on to make fairly substantial gains. The EUR/USD began the day right around the 1.3180 level after the pair fell around 50 pips last night. Analysts attributed that drop to prolonged euro-zone debt concerns. Since then however, the 16-nation single currency has spiked close to 100 against the greenback. It appears that investors have lost some confidence in the dollar, after rumors that the Fed will try and tame recent Treasury bond yields at the FOMC meeting set to take place tomorrow. With the EUR/USD currently trading around the 1.3270 level, further upward movement may take place during the evening session.

In other news, the price of crude oil has spiked throughout the morning session, as the combination of a recent OPEC meeting and heavy winter weather in the US have led to an increase in consumer demand. Since markets opened for the week, crude has jumped close to 150 pips, and is currently trading just above the 88.90 level. Traders will want to pay careful attention to oil. Should the bad weather continue to adversely affect the US, the commodity will likely continue to increase in value. Now may be a good time for traders to go into a buy position at a great entry price.

Forex Market Analysis provided by ForexYard.

© 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.

Last week attentions on the foreign exchange market were focused on the US.

Following President Barack Obama’s decision to introduce a $1 trillion stimulus package, investors were busy analysing the consequences for the US economy. They concluded that though the stimulus could boost the recovery in the short term, it leaves worrying questions about the long term US deficit.

This morning though attentions have already returned to the EMU. Following negotiations between EU Finance Ministers and the IMF in which German Chancellor Angela Merkel vetoed every method of support for indebted EMU members – including creating common EMU government bonds – the markets are anxious about the euro zone situation.

For instance at the close of last week the price of insuring government bonds – known as credit default swaps – rose in Portugal above already dangerous levels.

This week the markets will watch two events in the euro zone closely to see how the EMU is fairing.

The first is a routine (and ordinarily mundane) sale of bonds by the Spanish government. If investors are unwilling to purchase then this could indicate that Spain is in dire straits and catalyse a crisis. Portugal though completed one of these sales without event two weeks ago, and things are expected to go smoothly.

The second event is the beginning of a summit of EU leaders on Friday. Investors will expect officials there to take decisive action – either by increasing the EFSF rescue fund or some other means.

But given this uncertainty the common currency remains volatile for the moment.

In the UK meanwhile there has been some less than heartening news this morning. The mortgage group Rightmove has announced a 3.0% drop in house asking prices this month indicating that demand on the housing market is weak. Since the housing market is an important indicator of the state of the UK economy this bodes poorly.

Furthermore this morning The Bank of England has reported that the £1.45 trillion pounds held in consumer debt has not come down.

This is in spite of low interest rates that (ordinarily) would be reflected in lower credit card interest rates. Yet banks have in fact added almost 1% more on credit card interest as officials interest rates have fallen – reducing potential savings in consumer debt.

These announcements may explain why the GBPEUR exchange rate has slipped a little this morning – hovering at the 1.18-1.19 mark.

Finally in the US today is expected to be quiet. Economists expect the Fed to maintain its program of quantitative easing, and the dollar could rise against occurrences in the EMU.

By Peter Lavelle with foreign currency exchange specialists Pure FX.

Source: ForexYard

The main topic for this week’s trading session continues to be the European debt crisis. It is now broadly accepted that the Irish financial bailout has failed to calm markets and the possible debt contagion continues to out bearish pressure on the euro.

Economic News

USD – Dollar Rises amid Positive Economic Data

The U.S. dollar strengthened against most of its major currency rivals during last week’s trading session. The dollar gained over 200 pips vs. the euro, and the EUR/USD pair is now trading below the 1.3200 level. The dollar gained about 100 pips vs. the Japanese yen, and the USD/JPY pair is trading above the 84.00 level.

The dollar’s bullish trend came as a result of several economic releases, which indicated that the economic recovery is advancing. The weekly Unemployment Claims report showed that the number of Americans filing for their first week of unemployment benefits fell last week to 421,000, down 17,000 from a revised 438,000 claims filed the week before. In addition, the trade deficit in the U.S. shrank more than forecasted in October. The gap narrowed by 13% to $38.7 billion, well below the expected $43.5 billion deficit. The deficit reduced as exports were the strongest since August 2008 due to Mexican and Chinese record import amounts from the U.S.

Looking ahead to this week, the busiest trading day appears to be Tuesday, as several leading economic releases are scheduled. The U.S. Retail Sales reports, the Producer Price Indices and the Federal Funds Rate are expected, and are likely to initiate heavy volatility. Traders are also advised to follow the Consumer Price Indices and the Long-Term Purchases reports on Wednesday, and the Building Permits and the Philadelphian Manufacturing Index on Thursday, as they are likely to have a significant impact on the greenback as well.

EUR – Euro’s Fall Continues as Debt Woes Remain

The euro fell against most of the major currencies in last week’s trading. The euro dropped about 200 pips vs. the U.S. dollar, and the EUR/USD pair is currently trading near the 1.3180 level. The euro also fell about 150 pips against the British pound. The euro’s correction against the Japanese yen has also expired, and the EUR/JPY pair has reached as low as the 100.50 level.

The euro’s downfall proceeded last week due to ongoing concerns that the European debt crisis will worsen. The market fears from a possible spread of the debt contagion, which was meant to be contained by the financial bailout of Ireland. The greatest concern is that Portugal or even Spain will seek financial support as well, which could not be provided by the European Union.

Yesterday, Germany and France have pledged to take any action necessary in order to defend the currency. The German Chancellor Angela Markel and French President Nicola Sarkozy have stated that the euro’s survival is not negotiable. They have also ruled out joint bonds and have rejected any increase in the size of a rescue funds set up in May.

As for this week, traders are advised to follow every development regarding the European debt woes, as this issue is likely to dominate the market during the near future. Traders are also advised to follow the leading European economic releases, especially from Germany, as these will have a large impact on the euro as well.

JPY – Yen Closes a Bearish Weekly Session

The Japanese yen fell against most of its major counterparts during last week’s trading session. The yen fell about 100 against the U.S. dollar, and the USD/JPY pair is now trading near the 84.00 level. The yen also saw a 200 pip fall vs. the British pound, as the GBP/JPY cross reached as high as the 133.00 level.

The yen fell last week as positive indications from the U.S. economy have turned investors to look for risker assets, such as the British pound. It was reported last week that the American trade deficit surprisingly shrank during November. In addition, the amount of individuals in the U.S. that filed for unemployment benefits for the first time has also decreased during the past week. These have supported optimism that the U.S. economy is indeed recovering, and has reduced risk-aversion in the market.

As for the following week, traders are advised to follow the Tankan Manufacturing Index and the Tertiary Industry Activity report, as these are likely to have a large impact on yen’s trading. Traders should also follow the leading economic updates from the U.S. and to take under consideration that further positive results from the U.S. economy may weaken the yen further.

OIL – Crude Oil Drops Below $88.00 a Barrel

Crude oil saw a relatively calm trading session during the past week, yet by Friday crude dropped about 200 pips and reached as low as $87.10 a barrel. During most of the week crude oil was traded between $87.60-90.70 a barrel.

Crude oil fell on Friday after China raised bank reserve requirements to fight inflation. Chinese inflation rose to a 28-mont high of 5.1% in November, from 4.4% in October. In addition, OPEC has agreed to keep production targets unchanged, forecasting demand growth will slow.

Looking ahead to this week, traders are advised to follow the leading economic publications from the U.S. and the euro-zone, as these are likely to have a significant impact on crude oil trading. Traders should also follow the U.S. Crude Oil Inventories report on Wednesday, as this release usually has an instant impact on the market.

Technical News

EUR/USD

Ever since the pair rose to the 1.3410 level it has been dropping almost constantly, and is currently trading near the 1.3180 level. As the 4-hour chart’s RSI is reaching below the 30-line, the pair looks to drop further, with potential to reach the 1.3100 level.

GBP/USD

The cable’s bullish correction seems to have reached its peak at the 1.5860 level. Both the daily chart’s Slow Stochastic and the 4-hour chart’s MACD have completed a bearish cross, indicating that a downtrend is impending. Going short might be the right choice today.

USD/JPY

Despite a mild bearish correction, the USD/JPY pair continues to rally, and is now trading above the 84.00 level. The next significant resistant level is located at the 84.40 level, if the pair will manage to breach through it, the USD/JPY might reach as high as the 85.50 level.

USD/CHF

The pair has been trading within a restricted range over the past week, between the 0.9725 and the 0.9910 levels. The pair is likely to proceed with volatile trading today and might test the 0.9910 level. If the pair will manage to breach the resistance level the pair might rise towards the 1.0000 level. Otherwise, it is likely to drop back towards the 0.9800 level.

The Wild Card

Gold

Gold has reached an all-time high of $1,431 an ounce last week, yet a technical correction wasn’t late to come, and gold is now trading near $1,385 an ounce. Currently, as the MACD on both the 4-hour and the 1-day charts is pointing down, it appears a bearish trend may proceed. This might be a good opportunity for forex traders to join a popular trend.

Forex Market Analysis provided by ForexYard.

© 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.

By Forex Signs, Inc.

In today’s trading session, the CADJPY pair opens at 83.06 price level. The pair had a bullish reversal when it broke resistance at 83.10. At present, it is trying to create another resistance, 10.7 pips higher than previous. The trend is foreseen to escalate at H1 chart. During the beginning of previous session, the pair moved sideways at H1 chart, then 9 candlesticks after it made a tremendous support level at 82.63 and resistance at 82.79. The pair looked bearish at 3 candlesticks, it tried to break resistance but failed. Then the fourth candlestick successfully broke resistance and it turned out to be a transition from bearish to bullish. Towards the end of the day, the pair consolidated at a bullish momentum. At the time of writing, the pair looks highly to pursue an upward trend throughout the day. Bill Williams’ Alligator at H1 chart corresponds since the jaw, teeth, and lips are laid out properly. The alligator had been eating at a bullish momentum since the reversal that occurred the previous session. It is likely to become full at the middle of today’s session to neutralize market yet there are chances that the mouth will reopen as it is hungry for more. Meanwhile, %R (14) at H1 chart is consolidating above -20. The signal has not yet reached the extreme 0 but it is expected to touch the level after 3-5 candlesticks. When it does, investors are probably going to sell the pair to calm the market. Further, there is a slight chance that when the pair hits the week-long resistance level at 83.40, it will have a minor bearish reversal.

American Session Outlook

Last Friday, chief currencies of North America avoided risk during the day’s trading session. The US dollar only gained 12 pips against euro while the Canadian dollar gained 27 pips. Their slight gains may have been caused by their report of narrowed trade deficit for the month of October. Meanwhile, the performances of Greenback and Loonie against yen were almost the same. They started bearish at the opening of trade then bounced upward at around 14:00, and settled at a bullish momentum. Again, this may be caused by good outcomes in their Trade Balance data.

For today’s American session, the Loonie is expected to move sideways against its opponents in the market. There is a chance that the currency may experience a little slow down as Canadian Finance Minister Jim Flaherty released his sentiments in an interview with Bloomberg Television, New York. Capitalists of the ForEx market are likely to react negatively on Flaherty’s statements since he strongly spoke about threats to Canada’s economic recovery. In his statement, he emphasized that slumping exports to the US hinder its recovery. Canada’s growth slowed to a 1 percent pace in the third quarter. The forecast of Flaherty is drawn from speculations that there will be a sharp increase in the acquisition of machinery and equipment because of the strength of the dollar.

Meanwhile, the US dollar may gain a bullish sentiment in the market today since the interview of Flaherty gave prominence on the strength of the Greenback. Also, investors are assumed to take advantage of the tax-cut deal as it will highly fire up the US economy.

About the Author

Forex Signs, Inc., Founded in 2006 in Wall Street, New York City, FSI relentlessly strives to be the premier Forex brokerage company in the industry by providing exclusive and unmatched trading and investment related services while constantly developing innovative solutions that cater to the vast requirements of both individual and institutional market participants.

By Forex Signs, Inc.

CADJPY is relatively quiet for now, consolidating between immediate support level 82.633 and immediate resistance level 82.940 and forming a minor bearish channel. This however is predicted only as a correction until it tests 82.481, but a break below this line may confirm bearish correction testing the major bullish channel’s bottom line. A break below the major bullish channel’s bottom line may put in danger my bullish position for themed term and long term. If price breaks above the immediate resistance level testing 83.190 a minor bullish trend is expected. If price continues to break above going to 83.444 the bullish trend is expected to continue for the long term. RSI (14) for the mid term shows price is within neutral and a breakout is possible to happen.

Yen Trying to Pull Back

The Japanese yen is expected to move downward today against euro as it tries to push an overseas project. Japan Bank for International Cooperation (JBIC) is eyeing to help Japanese firms to land infrastructure projects abroad. JBIC says that the key pillar of the government’s new growth strategy is to export social infrastructure. In accordance to this, Japan is expected to make amendments to lower the value of yen against other legal tenders. Despite euro’s constant downfall this past few trades, they seem to advance against yen since the latter is pushing very hard to control their progress. This strategy is for them to attract foreign partners for their export projects.

Further, Japanese bonds advances today due to reports that state that manufacturers turn pessimistic. Today, The 1.2 percent security due December 2020 rose 0.488 yen to 99.91 yen, the most since Nov. 19. The yield climbed to 1.27 percent yesterday, the highest level since June 4.

However, there is still a possibility that yen will regain its strength as it trades against euro since concerns on Europe’s debt crisis is worsening. Ireland’s credit rating was cut three levels by Fitch Ratings to the lowest of any of the major rating companies after the country sought international assistance last month to rescue its banks.

To conclude, there is a chance that the Euppy will just play sideways as yen is trying to pull back while euro is involuntarily being pulled back. For the meantime, it is best to buy euro since it is putting much effort in gaining investors’ confidence while yen is doing otherwise.

About the Author

Forex Signs, Inc., Founded in 2006 in Wall Street, New York City, FSI relentlessly strives to be the premier Forex brokerage company in the industry by providing exclusive and unmatched trading and investment related services while constantly developing innovative solutions that cater to the vast requirements of both individual and institutional market participants.

By Taro Hideyoshi

The very first question traders should ask themselves before enter a trade is “Where is my stop loss point?” Find your stop loss and evaluate your risk. If the stop is too far away from the entry point or it is further from the entry than the target point, do not enter the trade!

There are many different approaches to set stop loss. Seek for one that most suit for your trading style and your capital, then stick with it. In this article we will discuss about some options for placing stop loss points in short-term trading.

1) When you swing trade, place stop loss few ticks under the low of the entry’s day

2) Do not risk more than two percent of your trading capital.

For example let’s say if you account total is $10,000. Two percent is equal to $200. So, if you buy 100 shares of XYZ stock at &42, you can lose only two points from this trade. Hence, the stop loss for your trade is $40.

With this approach, if you buy more shares the stop level will move closer to entry point while it will move further from entry point if you buy fewer shares.

3) Some traders place their stop point according to the cost of purchased stock.

For example, if you buy XYZ at $40, you may place stop at $38 which is 5 percent of your trading cost, if you place the stop at 10 percent it means you place the stop at $36.

4) Also use “trailing stop“. The trailing stop is the stop loss that moves along behind the price.

For example, if you enter a trade at $40 and place initial stop loss at $36. A while later, if the price rise to $45, you may raise your stop level to $40 to get rid of losing chances. Then if the price continues to rise to $50, you may move your stop to $45 to lock your profit.

One proper option for placing trailing stop is to place the trailing stop few ticks below the closest support (if you go long) level.

The most important thing about stops is once you enter a trade, you have to place a stop immediately. Do not enter a trade without proper stop loss.

Do not enter a trade if it is too risky, place a tight stop to minimize your risk. Use trailing stop to lock your profits.

About the Author

Taro is an experience trader who trades in stocks, futures, forex. He strongly focuses on technical analysis, trading systems and money management.

If you would like to find more articles on MetaStock Tutorials, MetaStock Formulas, Trading Systems and Money Management. Please go to MetaStock Trading System.

By Indy – The trading of currencies on the currency exchange is what is known as forex trading. To a good number people, currency trading is pretty tricky to take in at the start. Fortunately, forex trading is a uncomplicated procedure with mechanics that are easily understood.

The foreign exchange market is the worlds biggest trading market. This market sees the exchange of some 2 trillion dollars per day.

The currency market is a international market rather than centralized. All the worlds currencies are traded here. Some general trading platforms include metatrader 4 as well as an assortment of java based trading platforms.

The forex market is open twenty four hours a day for trading. Although it should be noted that trading is not permissible on Saturdays and Sundays.

The value of a country’s currency depends on economic as well as political factors. Since stability plays such a big role in the forex markets, the top traded countries come from stable countries such as America and Europe.

The idea, like most markets, is to sell high and buy low. The sort of trades taken also differ depending on the speciality of the trader. Many traders enjoy the high risk strategy of scalping the market while others prefer to lay back and relax with long term trades.

Forex trading has the possibility for big profits. Leverages of up to 250:1 are enjoyed through their forex brokers. Leverages are important because they determine how much a trader can borrow when opening a trade.

The forex market can be very volatile. Big profits are possible with small amounts of investment. There are no commissions charged, you pay what is recognized as the spread. The currency pair is the determining factor in the spread paid. Highly fickle currencies usually have higher spreads and vice versa.

While a lot of money can be made in the forex market, there are also risks involved, usually high risk. There are several trading strategies and money management techniques one can make use of to reduce these risks. Months of demo trading is needed before one truly understands the nuances of the forex trading market.

About the Author

Indy operates a finance based portal www.forextrading.my , as well as being a real estate agent for 15 years now, but his my true passion lies in marine aquariums.

His website deals with many forms of investment such a the bonds market, stock trading, forex trading and mutual funds.

By Sourav Sharma

Geographical peripheries are no longer obstacles to business activities. Today international business is a common aspect for many traders including big entrepreneurs. The currencies differ from nation to nation and for international business, the trader should be well equipped with the knowledge of different currencies including currency exchange rates. Trillions of dollars are dealt with everyday in the name of currency exchange; the amount transacted makes the currency trading business one of the biggest financial businesses. Trading of currencies is facilitated by financial institutions, banks and governments.

International travelers traveling frequently should also know the exchange rates. To know the current exchange rates, you can calculate the same in a currency converter. Money needs to be converted if you travel to an overseas destination. For example, if you are going to the USA, you will have to use the dollar there; the Indian rupee cannot be used. Getting informed about the present exchange rates will help you get the right exchange rates. A number of currency conversion companies exist at the national and international level. You need to pay a certain amount as commission or fees to get the amount of money converted. And if you convert a bulk amount, you will have to pay an equally huge amount as commission too. Hence, getting updated with currency exchange news will keep you in the safe path and you won’t get duped.

Trading of foreign currencies is one of the most popular businesses today. With the Internet influencing businesses, currency trading online is not left far behind. A novice trader can also enter into currency business just like stock investment. Brokers handle the transactions related to stocks; similar is the case with currency trading too. Your currency trading will be handled by your broker. You are thus free from the hassles involved.

The exchange rates differ depending on money market conditions; so ensure that you get the most updated exchange rates. If you watch currency exchange news regularly, you will get to know the latest on the changing rates. The value of a currency fluctuates almost every minute. What you view at the moment may either go down or go up the very next moment. Forex traders have specialized softwares installed in their systems, i.e., specialized currency converters that help them get the most recent currency exchange rates instantly once the details are filled.

About the Author

Sourav Sharma is freelance market analyst and is writing reviews articles on Currency Exchange Rates, Currency Exchange News and Stock Market.

By Taro Hideyoshi

What is the oscillator?

An oscillator is a technical indicator that tells at a glance whether a security currently trades in an “overbought” or “oversold” condition.

What are the meaning of “overbought” and “oversold”?

Overbought means the security is trading at the upper extreme of its current price range and may be vulnerable to a correction.

Oversold means the security that scraps the bottom of its current price range and is due for a bounce up.

Relative Strength Index (RSI)

A load of oscillators is available for study and use in trading, each has its pros and cons. However, the one we will discuss in this article is a basic and most popular one. It is available in every charting software, the Relative Strength Index (RSI).

The RSI was introduced by Welles Wilder in his book “New Concepts in Technical Trading Systems“. It measures a particular security’s current relative strength by comparing to its own price history.

The features of the RSI are as follows.

– The RSI also forms the same chart patterns as price, e.g. head & shoulder, double top, double bottom.
– The RSI can be use to indicate support and resistance to confirm price pattern.
– Like many indicators, the RSI supports buy/sell decision when divergence occurs.

General rules of RSI that trigger entering trade:

– Buy a stock while its RSI is in oversold zone and hooking up from 30
– Buy a stock when RSI is hooking up from below 50 with an uptrend (you can draw a trend line for RSI just like draw it for price)
– Buy a stock when it’s forming a bullish divergence.
– Just reverse the rules if you want to sell instead of buy

Typically, the default time period of RSI in most charting software is 14-day. As you gain more experience, you can tweak the time period to a faster or slower that suit your trading style. The shorter time period, the more volatile the RSI become.

An important drawback of oscillators, including RSI, is when the security traded in a strong trend for an extended period of time. The oscillator will rise/fall and stay glued in the overbought/oversold zone while the trend continues.

As I have mentioned, they are many oscillators. They have their own advantages and disadvantages. Novice traders limit their oscillator to only one. While Professional traders keep learning to get sense of alternative benefits each one offers. They do not afraid of replacing one with the better.

About the Author

Taro is an experience trader who trades in stocks, futures, forex. He strongly focuses on technical analysis, trading systems and money management.

If you would like to find more articles on MetaStock Tutorials, MetaStock Formulas, Trading Systems and Money Management. Please go to MetaStock Trading System.

By Pima Laga – The forex trading business sees forex traders analyzing the markets through a myriad of ways and steps.

These are usually :-

* Fundamental Analysis
* Technical Analysis
* Both steps combined

While all 3 techniques boast their good points, a forex trader that has a stellar understanding about both technical plus fundamental analysis philosophy usually is able to secure a enhanced representation from the forex markets.

Fundamental analysis is dealing with the aspects that impact a particular currency. Driving aspects of the currency markets can be connected with economic as well as political aspects of the specific countries involved.

This is the prime basis of why the forex markets respond to economic news for example the retail sales, unemployment rates as well as non farm payrolls.

Whilst the economic state of affairs of a country really affects the performance of a particular currency, the domestic political situation is able to move currencies with good effect.

Aspects such as floods, disease as well as political change are all looked to as a driving weight for currency movement.

The trouble with fundamental analysis is simple. This type of analysis requires a good grasp of both micro and macroeconomics and market reaction to properly profit from it.

Decisions made by individual central banks and the monetary policies they come out with also drives the currency market greatly. How the markets react to such policies is normally alike despite of what central bank you are concerned with.

Decisions are made by fundamental traders based on these data. Key aspects such as interest rates and international trade are scrutinized carefully.

Price can move exceedingly quickly if the economic data released had a big impact on the specific currency. Volatile currencies such as the pound/yen can experiences spikes upwards of 100 pips if the data had a big impact.

Occasionally the markets can spike on both directions on after another.

A 100 pip movement both ways has occurred in the past. Particularly on volatile pairs like the Pound/Yen.

This is a basic overview on fundamental analysis as the topic is too big to cover in a single guide.

Needless to say, understanding about how markets react to economic aspects would further hone the forex traders skill set in this section. It also pays to observe future economic news releases as critical releases would certainly influence the forex markets.

About the Author

For further information on Fundamental Analysis along with Technical Analysis, please visit Pima’s forex trading website.