Month: May 2011

There are two major factors driving the value of the euro; interest rate differentials and the European debt crisis. At this stage, only the debt crisis is having an impact on forex trading.

Since January gains in the euro have largely been driven by interest rate differentials between Europe and the US with Europe in the process of moving European rates higher. At the same time the US was in the process of easing monetary policy via its second quantitative easing program. As markets increased expectations of higher ECB rates the value of the euro increased accordingly. With US monetary policy forecasted to remain in a state of providing the market with high levels of liquidity the EUR/USD reached a 16-month high. After the ECB signaled it will not raise interest rates as quickly as markets expected the EUR/USD came off of this high.

One way to view the different interest rate differentials is to track the yield difference between the 2-year German Bund and the 2-year US Treasury. At one point the Bund was trading at a difference of 130 bps. As of this morning the difference has shrunk to 118 bps. This data point drives home the previous factor that was supporting the euro since January, interest rate differentials.

A new, yet familiar theme is now the leading factor in the movement of the EUR/USD; the European debt crisis. Tensions are building as Greece’s sovereign credit rating was cut multiple levels by Fitch. Greece looks to be unable to reach its proposed budget deficit target of 7.5% of GDP. Reportedly Greece only has enough cash on hand to prevent a default until mid-July. This makes it the utmost importance that the indebted nation receives additional funding from previously negotiated agreements with the EU/IMF.

Speaking last week, ECB executive board member Jürgen Stark said the ECB would cease to accept Greek bonds as collateral for loans to Greek banks should Greece choose to restructure its sovereign debt. Stark was quoted as saying, “Sovereign-debt restructuring would undermine the eligibility of Greek government bonds.” Earlier comments last week from EU officials warned a restructuring would be detrimental to the Greek banking system. The ECB is rumored to have 40-50B euros worth of Greek debentures on its books. Recently Junker proposed a re-profiling of Greek debt that would extend Greek maturities based on a mutually agreed extension.

Concurrently Italy and Belgium were hit with a series of ratings downgrades, adding a string of negative sentiment to the euro zone. Elections in Spain have also brought the market’s attention back towards one of the larger European economies.

The risk for the euro is a failure of EU authorities to contain the Greek debt crisis while avoiding a contagion effect and a downturn in investor sentiment. Such a scenario would bring a sell-off of the euro in forex trading as well as European fixed income instruments.

Read more forex trading news on our forex blog.

AUDUSD broke below 1.0505 support and reached as low as 1.0478, suggesting that the downtrend from 1.1011 has resumed. Further fall could be seen in next several days, and next target would be at 1.0300 area. Resistance remains at the downtrend line from 1.1011 to 1.0888, only break above the trend line resistance could indicate that the fall from 1.1011 is complete.

Forex Signals

By Cedric Welsch

With the forex market being the largest in the world, many people participate in forex trading in an effort to increase their income. Foreign exchange trading is not easy, nor is it a way to get rich quick. However, there is money to be made if you know what you are doing. This forex trading help will get you started in the right direction.

The first thing an individual should do when considering getting into the forex market is educate yourself with all of the terms, strategies and trends. Knowing what the market actually is and how it works before you begin is vital. It is easy to educate yourself simply be reading articles online, and there are courses that you can take to further your education.

Also of great importance is choosing the right broker. Reading reviews of specific brokers online is a great place to start. Look for a broker that offers availability, and does not charge large fees. No, cheapest is not always best, but there are good brokers that are quite affordable.

Practice doesn’t always make perfect, but it certainly does help. Open a practice account and see how you do. This is a no cost way to see if what you have learned is working. This allows you the chance to tweak your strategies before any real money changes hands.

When you are ready to move on, open a mini account. Most brokerages offer these. This will allow you to trade in units of as small as 1,000. Use these smaller amounts to see how your trades are performing before moving on to larger amounts.

Once you are ready to increase your trading amount, it is best to stick to only one or two open positions at any given time. Trying to do more will set you up for loss, as it is too difficult to monitor and manage more than that.

While it is perfectly normal to be elated when you profit, and dejected when you lose money, try to keep emotion out of the equation. Emotion can cause you to make rash decisions that are not in your best interest. If you find yourself becoming too emotional, walk away for as long as it takes to get your bearings before making any other moves.

Forex trading help is available at any time. No matter if you are a novice or consider yourself an expert, do not be afraid to use it, as it will help get you where you want to be.

About the Author

Enormous investment profits are being gained each hour through the forex marketplace.
Wildly enthused currency trading business individuals are glued at their computers for hours.

EUR/CHF Breakout Or Trend Reversal?

EUR/CHF has made fresh intra-day lows and is now close to the daily opening level.

1.2400 is a key support level and traders will no doubt be positioned accordingly, in light of current events regarding euro debt,  which will add significant order flow.

EUR/USD has bounced off the 1.4000 level but is still well down on the day.

The Swiss Franc has been one of the strongest currencies recently and a safe haven in these troubled times as can be seen with the strong USD/CHF down trend.

The relative strength correlation charts favour a breakout, as can be seen below with 4hr, daily and weekly timeframe showing Swiss Franc strength over the Euro.

For further updates www.forex-fx-4x.com brings you forex technical analysis

By Robert Folsom

“Panic selling” is easy to understand and recognize: Investors rush to sell from the fear of loss. No more explanation necessary.

On the other hand, “panic buying” is not easy to see for what it is. The phrase seems to clash with itself. People commonly assume that “buying” involves rational choices by investors, who assess risk, calculate entry points, establish stops, etc.

None of that happens in a panic. So how can you have “panic buying”?

For starters, you have it when fear actually motivates investors to buy. Whereas fear of loss motivates panic selling, investors get in a buying panic when they’re afraid of missing out on the profits they see everyone else making.

Such as, for example, panic buying in the silver market from late January through late April of this year. Buyers drove prices from $26.40 per oz. (Jan. 28) to $49.80 (April 25), a gain of more than 80 percent in under three months.

You probably have a good idea of what followed in the first week of May: more than half those gains vanished in four trading sessions. The direction changed, but the emotion did not. Fear inflated and deflated the same bubble.

This excerpt from Elliott Wave International’s free issue of Global Market Perspective depicts that panic.

The chart below shows that daily trading volume in the exchange-traded fund, the iShares Silver Trust (SLV), surged to a record 189 million shares on April 25, days prior to silver’s peak. Then, just a few days after the peak, on May 5, it reached nearly 300 million shares, another record. The first record was on buying fever, the second on a selling panic. As shown on the chart, both levels far surpass the daily trading volume in the S&P 500 SPDR (SPY), which is generally the most heavily traded fund in the world.

Through Wednesday, seven out of the past nine days have seen the daily volume in SLV outpace that of SPY. This is unprecedented behavior. “Day traders are going crazy,” says the head of trading at one brokerage firm. “Investors who felt they may have missed the boat with gold have jumped into silver because it has a better price point,” said a precious metals analyst. A Bloomberg story attributes the rise in SLV’s volume to “worries about inflation and the weakness in the U.S. Dollar.” But the real reason, in our view, is simply the same old mania story. Higher prices in silver got people more excited about the prospects of even higher prices, as they always do. The excitement hit a speculative crescendo when SLV reached a new high of 48.35 on April 28, unconfirmed by the price of the metal itself.

May 23 (Bloomberg) — Geoffrey Yu, a currency strategist at UBS AG, talks about the outlook for the dollar and Federal Reserve monetary policy.¶¶ He also discusses the impact of the European debt crisis on the euro and his top trade. Yu speaks with Bloomberg’s Oliver Joy.

Investors are fearing a recurrence of the events leading to a fear of a douple dip last year. But the current weakening is temporary says the Senior Strategist Ib Fredslund Madsen.

Legal information

Video courtesy of en.jyskebank.tv

This week’s trading got off to a fast start with the euro and global equities trading broadly lower following a string of sovereign credit downgrades that began on Friday. The dollar was the main beneficiary of the negative euro environment.

The euro has not recovered following Friday’s downgrade of Greece’s credit rating by Fitch. Compounding on the negative data flow was this weekend’s move by S&P to view the Italian sovereign debt outlook as negative from stable.

Reports are running through the wires listing Greek requests for further funding needs from the EU/IMF. Should Greece fail to obtain the funding from prior pledges, estimates are for a potential Greek default as early July.

Economic data did little to support higher yielding assets as both euro zone and Chinese PMI reports were well below market expectations. German flash manufacturing was off at 54.8 from a previous reading of 58.0 on expectations of 57.6. This was the lowest flash manufacturing data from Germany in 6-months.

A combination of the European debt crisis coming to a head and weak economic data pushed the euro, global equities and crude oil lower early in the Asian trading session only to have the selling increase during European trade. Both the FTSE 100 and the Nikkei are down by 1.50%. Crude oil has again slipped below the $100 a barrel mark and is trading lower at $97.50.

The euro sold off across the board as the EUR/USD plunged as low as 1.3969, a level that coincides with the 100-day moving average. The pair has since come off its lows to trade at 1.4035 but momentum remains to the downside. The next major levels that come into play are between 1.3910 and 1.3860. The former is the 50% retracement level from the January to May move. The latter is a previous support level.

The 17-nation currency is also down sharply in the crosses with the EUR/CHF falling to a new low while the EUR/GBP moved below its recent consolidation pattern before regaining some lost ground. There is a lack of economic data on the calendar this afternoon and this may leave the euro vulnerable to further declines in the New York trading session.

Read more forex trading news on our forex blog.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.