Month: March 2011

The Federal Reserve is planning to withdraw government oversight on some of the nation’s largest banks Friday, reports the Wall Street Journal. After two years of regulation following 2008’s crisis, the Fed will now allow financial institutions that have passed a January round of stress tests to operate as they did prior to industry’s near-collapse, restriction-free. Banks will now be able to raise dividends and initiate share buybacks, which was previously largely prohibited as an effort to preserve capital and a stipulation to receive government aid. Of the 19 banks tested, J.P. Morgan Chase (NYSE:JPM) is one of the bank expected to receive immediate approval for a dividend hike and share repurchases. The bank had slashed its quarterly dividend by 87% to $0.05 in February 2009 which gave JPM an additional $5 billion a year. Analysts also expect U.S. Bancorp (NYSE:USB), American Express Co. (NYSE:AXP) and Wells Fargo & Co. (NYSE:WFC) to be among the first institutions cleared from restrictions. Dividend increases are important factors of growth as they allow healthy companies to reward shareholders and employees while attracting investors.

There’s a well known phrase that is very relevant when it comes to forex trading. ‘If you FAIL to PLAN, then you PLAN to FAIL’. Every good professional forex trader has a trading plan that they develop early in their careers and always consult with before making any trading related decisions. A forex trading plan is something every trader should spend time making and adhere to.

Many traders often find themselves aimless trekking though the markets going in no clear direction chopping and changing their trading style when they encounter a few losing trades. A forex trading plan is key in helping the trader stay on the path to success.

A trading plan helps the trader eliminate emotionally charged decisions, provides them with a set of ‘rules’ to follow and stops them from making sloppy trading decisions.

The plan does not need to be complicated and should consist of a few simple rules that the trader will check before entering a trade.

In the forex market if things go wrong you have no one to blame but yourself. Many traders however look to blame someone or something else when the markets don’t go their way. These traders never have a trading plan and are aimlessly placing trades in the hope of ‘hitting the jackpot’ and becoming the next forex millionaire. A forex trading plan helps the trader outline and develop a trading method/strategy and greatly reduces the chances of ‘things going wrong’.

What makes up a trading plan?

Entry: Do you have a valid entry for your trade? Is there a pin bar / inside bar / candle pattern / support / resistance etc, supporting your entry price? It is recommended that there is more than one reason supporting your entry level. i.e. a pin bar at a support level.

Stop Loss: Where are you going to put your stop? Is your stop loss placed at a relevant level in the market? Is it at a support or resistance area? How far is your stop from your entry? Is it too far or too close?

Target: What level in the market are you going to target? Is your target the next level or support or resistance? What else supports the placement of your target area? Will you let the trade ‘run’ and decide later when to close?

Risk to Reward: Are you comfortable with the R:R ratio for your trade? Is your reward at least the same if not more than what you are risking?

Money Management: How much money are you going to risk on this trade? Does this trade fit in with your money management rules? Are you risking the same % as you risked on your last trade?

The 5 rules above are critical to stick to when placing trades. It is very important to have more than 1 confirmation when placing a trade. For example you may want to trade an inside bar pattern, however it is wise to only take the trade if there is something else supporting the inside bar pattern you’ve just noticed, i.e. the inside bar pattern has formed at a strong level of support.

You must remember to never adjust the size of your stop loss in order to meet a desired position size. Using good money management will make no difference to the number of pips you are risking on any given trade.

It is crucial to take proper note of your Risk to Reward ratio. You should never be risking more than what you are targeting. Ideally you want to be targeting at least 2x what you are risking.

Never be unrealistic in trading!! Although possible it is highly unlikely that a stop loss of 10pips will produce a target of 500pips. Being realistic in targets is very important and helps control emotions and keep them in tack.

Above is a forex trading plan for an actual trade. It’s a good idea to expand your plan to take into account the bigger picture. For example you may want to include a weekly or monthly target that you will be aiming for or the maximum amount of drawdown you will be prepared to endure before re-evaluating your trading strategy/method.

Forex trading plans help keep you on the track to success. It’s recommended that you write your plan and keep it next to your computer while trading. If your plan is ‘somewhere in your head’ it will soon get lost or disregarded. If it is printed out in black and white next to your computer it will encourage you to STICK TO YOUR PLAN!!

http://www.vantage-fx.com

March 18 (Bloomberg) — Trevor Williams, chief economist at Lloyds TSB Corporate Markets, talks about the effect of the Group of Seven intervention in the foreign exchange market for the first time in more than a decade. He speaks with Francine Lacqua on Bloomberg Television’s “On The Move.”

March 18 (Bloomberg) — Naomi Fink, a Japan strategist at Jefferies & Co., discusses the Group of Seven’s agreement to jointly intervene in the foreign exchange market for the first time in more than a decade after Japan’s currency soared, threatening its recovery from the March 11 earthquake. She speaks with Linzie Janis on Bloomberg Television’s “Global Connection.”

March 18 (Bloomberg) — Mitul Kotecha, global head of foreign-exchange strategy at Credit Agricole CIB, discusses the Group of Seven’s agreement to jointly intervene in the foreign exchange market for the first time in more than a decade after Japan’s currency soared, threatening its recovery from the March 11 earthquake. Kotecha speaks with Mark Barton on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

AUD/USD 18 March 2011

For much of this year the Aussie has been hovering around and bouncing off parity producing a very choppy market. Using late Decembers highs with early Januarys lows we can see a triangle pattern has formed on the pair. The market finally broke out of this 2 ½ month triangle to the low side earlier this week, also breaking though parity quite comfortably making new 2011 lows. We’re starting to pull back and would expect resistance to show itself at parity or the lower trend line of the triangle.

Although some distance away a break below November 2010 lows would suggest the bears are back in control of this market. It is more likely we see a pull back towards parity before any push lower.

Lower timeframes are showing little price action.

We can see the triangle pattern has also formed very well on the weekly charts supporting the daily chart outlook.

http://www.vantage-fx.com

Trading of the yen was significantly less volatile in the European trading session versus this morning as the price of the yen held relatively firm following a coordinated intervention by the G7 nations helped to stabilize the price of the yen.

At lunch time during the European trading session, the USD/JPY was trading lower with significantly less volatility at 81.44 after opening the day at 81.81.

Yesterday the yen received coordinated support from the G7 finance ministers in both words and in action as the United States, the United Kingdom, Canada, and the European Central Bank all pledged to support the yen on the open market. The joint effort to sell the yen via the central banks’ operation desks comes on the heels of the worst disaster in Japan since WWII.

Thursday the USD/JPY rose from 78.80 to a high of 81.98. This is in contrast to Wednesday’s low of 76.41 after speculators attacked the yen following a breach of the 80 yen level and a lack of a response by the Japanese government.

It remains to be seen if the intervention will have a significant impact on the yen given that the previous intervention by the Japanese Ministry of Finance on September 15th had only a short term impact on the value off the yen with the price of the USD/JPY rising 300 pips over three days before the pair resumed its sharp downtrend.

Traders should note that following yesterday’s intervention, the USD/JPY came off of its low for the day and rose 375 pips before beginning to decline once again.

Seniorstrategist Ib Fredslund Madsen comment on the two big newsstories friday: The joint G7 yen-interventiona and the UN agreed no flight zone over Lybia.

Legal information

Video courtesy of  en.jyskebank.tv

By GCI Forex Research

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)

USD

In a surprise development, the Fed, the ECB, the Bank of England, and the Bank of Canada agreed to engage in “concerted intervention” with the Bank of Japan “on March 18, 2011″. The communique explained that the decision to intervene was taken “in response to recent movements in the exchange rate of the yen associated with the tragic events in Japan”. The text also repeated the G7′s concern over “excess volatility and disorderly movements in exchange rates”. Speaking later, Japan Finance Minister Noda made it clear that the BoJ would be active in USDJPY, but he was not sure in which pairs the other banks would intervene. The yen weakened v sharply on the announcement, and USDJPY continued to grind higher during the Asia session. EURUSD traded 1.3981-1.4088, USDJPY 78.83-81.89. Elsewhere, WTI crude jumped about $2/bbl on news that the UN security council authorised a no-fly zone over Libya, and approved “all necessary measures” to protect Libyan civilians. US data offered some positives for the dollar, though market participants continue to largely overlook releases. Initial jobless claims fell as expected and continue to signal an improving labor market. CPI rose as expected while core was stronger. Our analysts noted that core CPI on a y/y basis should put pressure on the Fed to reconsider their assessment mentioned in the March 15 FOMC statement that “underlying” inflation is “subdued”, especially with a strengthening labor market.

EUR

The euro held onto its early-European session gains stemming from the strong Spanish bond auction. The Spanish bond auction was considered to be strong as the bid to cover ratio for the 10-year came in at 1.81x vs. 1.54x prior. Considering the state of the market the periphery bond market is faring quite well, but we believe the market is struggling to absorb all the event risk at this stage so price action may be delayed.
ECB President Trichet speaks in Frankfurt around 1600GMT and he may wish to address the decision to embark on a round of joint intervention. On the monetary policy front, given recent comments from the ECB’s Liikanen who still pointed to an April rate hike, we would not expect too much of a departure from the last time we heard Trichet speak.

CHF

The SNB kept its 3m LIBOR target unchanged at 0.25%, though we judge the SNB statement to be more dovish, which is negative for the franc. The longer-term trajectory of the inflation forecast was largely kept unchanged but even so, inflation is only expected to hit 2% in 2013 which is well beyond the necessities of short-term action. The SNB expressed particular concern about other global developments and its impact on Swiss markets, and this will likely remain the driving theme within the policymaking community.
SNB Chairman Hildebrand later said the strong Swiss franc remains a burden for the economy and could lead to a slowdown throughout the year through exports.

TECHNICAL OUTLOOK
EURUSD 1.4282 key resistance.
EURUSD BULLISH Rise above 1.4086 has exposed 1.4282 key high from Nov 4. Initial support lies at 1.3855.
USDJPY BEARISH Recovery targets 82.01 with scope for 82.45 next, while support is at 78.83 intraday low.
GBPUSD BEARISH Look for a break below 1.5964, which would confirm the bear trend and open the way to 1.5845. Near-term resistance lies at 1.6200.
USDCHF BEARISH The pair found support at 0.8852 ahead of 0.8795. Initial resistance is at 0.9198.
AUDUSD BEARISH As long as resistance at 0.9963 is intact, a break below 0.9706 would expose 0.9625.
USDCAD BULLISH While support at 0.9735 holds, look for gains towards 0.9974 and 1.0011/58 resistance area.
EURCHF BEARISH Bounce off through 1.2706 exposes 1.2854. Near-term support lies at 1.2571 ahead of 1.2433/02 support zone.
EURGBP BULLISH Focus is on 0.8787 Fibonacci level, break of this would expose 0.8818. Near-term support is at 0.8626.
EURJPY BEARISH Resistance at 116.00/68 area, while support is at 110.54 intraday low.

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 GCI Forex Research

EURUSD Movement

For the 24 hours to 23:00GMT, EUR rose 0.66% against the USD and closed at 1.4013.

In the EU, construction output rose by 1.8% (M-o-M) in January following a 2.0% decline in December. In the US, consumer price index (CPI) rose to 0.5% (M-o-M) following a 0.4% increase in January. Additionally, the Philly Fed index rose to 43.4 in March, following a score of 35.9 posted in February.

In the Asian session, at 4:00GMT, the EURUSD is trading at 1.4070, 0.41% higher from the levels yesterday at 23:00GMT.

The pair has its first short term resistance at 1.4135, followed by the next resistance at 1.4201. The first support is at 1.3957, with the subsequent support at 1.3845.

With a series of EU economic releases today, including current account and trade balance, trading in the pair is expected to be influenced by the resulting cues from these releases.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

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.