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Renewed tensions surrounding Europe and the peripheral nations’ debt crisis combined with weak US economic data has helped to drive the dollar rally for the third week.
Last week’s dollar rally gained momentum following Fitch’s downgrade of Greece’s debt rating by three notches and included a negative outlook. While the resumption of the Greek debt crisis combined with elections in Spain were the main drivers in sending the EUR/USD close to its monthly lows, weak US economic data has drove much of the declines the across the majors.
Last week US data was released below expectations across various sectors. In housing data, US building permits declined from the previous month as did existing home sales. Foreign investors were seen moving out of long term US securities, possibly lending to fears of the oversized US budget deficit. Most startling was the sharp drop off in the Philly Fed Manufacturing Index. As US economic data begins to slow, stock prices should also decline in-line with the recent downturn in commodities. Lower US growth rates may cause global portfolio managers to reduce their exposures to higher yielding assets which would benefit the US dollar.
This week traders will be eyeing data releases from the US. In particular, Tuesday’s new home sales and Wednesday’s core durable goods orders for the month of April will give global investors an idea of the direction US GDP will take in Q2. Thursday will have preliminary Q1 GDP that could strengthen the dollar if any further decline is seen in US output.
The EUR/USD has weekly stochastics which continue to fall and monthly stochastics are beginning to turn as well. Similar to last Friday’s price action for the EUR/USD, one strategy may be to fade any potential dollar declines. Support for the EUR/USD comes in at the 100-day moving average near 1.3970. Below this level rests the 61.8% retracement from the January to May move at 1.3660. Resistance is found near Friday’s high and the 50-day moving average at 1.4340.
Global investors have an aversion to uncertainty and this weekend’s elections in Spain add that element. The incumbent Socialist Party failed to hold municipal and regional offices, suffering losses to the Popular Party by roughly 10 percentage points. The elections were accompanied by large street protests throughout the week leading up to the vote on Sunday.
The shift in power in Spain carries significant risks for euro bulls. Concerns that the incoming regional governments may hold back on possible austerity measures to reign in underfunded Spanish budgets, as well as uncover previously undeclared debts in local municipalities, thereby increasing the likelihood of a downgrade in the sovereign credit rating of Spain.
Until now European officials have succeeded in creating a fence around Spain as investors chose to focus on the underfunded debts of Greece, Ireland, and Portugal. However, Friday’s trading had yields on Spanish sovereign debt rising, as was the case in Greek bonds. Further tensions are building in the Greek drama as the ECB stated a restructuring of Greek sovereign debt would cause the ECB to reject Greek bonds in return for liquidity provisions.
Momentum is beginning to shift against the euro not only versus the dollar but in the crosses as well. The EUR/CHF fell below its lowest level in 5-months while the EUR/GBP is testing the lower border of its recent consolidation pattern. A break of 0.8660 and the EUR/GBP could unravel to the 0.8530 level.
The Bank of Japan expects the economy to decline following today’s negative economic assessment. The report for the month of May shows production has fallen and domestic private demand continues to weaken following the earthquake and tsunami on March 11. The report stated, “Japan’s economy faces strong downward pressure, mainly on the production side, due to the effects of the earthquake disaster.” One upside to the report showed optimism by the BoJ that the economy will return to grow at a moderate pace as supply-side constraint become less restrictive and production increases.
The Japanese economy contracted by 3.7% on an annualized basis in Q1 and on Friday the BoJ did not enact new monetary policies in order to stimulate growth following the earthquake. Despite the earthquake, the Q1 GDP data showed the Japanese economy was most likely headed for a recession.
The decline in growth has allowed for the yen to come off of its lows versus the dollar, something the BoJ and Ministry of Finance are most likely thankful for as this should aid any economic recovery. Further USD/JPY targets may be retracement levels from the April to May move at 82.50 followed by 83.25.
While volatility has increased this month given the sharp declines at the start of May, spot crude oil prices continue to consolidate over the past two weeks with a bias to the downside as the European debt crisis reemerges. Spot crude oil prices are trading lower in the Asian session at $98.40 from an opening day price of $99.92.
Bias remains the downside as flair up in the European debt crisis threatens to weigh on global economic growth and investor sentiment. S&P’s move this weekend to lower Italy’s credit rating to negative from stable did little to boost traders’ confidence in the European economy. The war of words between ECB officials and Greek leaders has also hurt sentiment for the crude oil bulls.
Until a catalyst emerges in the crude oil markets or a resolution is finally reached in the European debt crisis, crude oil prices may continue to slide. Initial support for spot crude oil is found at $94.70. A breach here could trigger declines to $93.00. Resistance comes in at $101.40 followed by $104.70.
The EUR/USD has gone increasingly bearish in the past 2 days, and currently stands at the 1.4070 level. The daily chart’s Slow Stochastic supports this currency cross to fall further today. However, the 4-hour chart’s Stochastic Slow signals that a bullish reversal will take place today. Entering the pair when the signs are clearer seems to be the wise choice today.
The pair has been range-trading for a while now, with no specific direction. The daily chart’s Slow Stochastic is providing us with mixed signals. All oscillators on the 4 hour chart do not provide a clear direction as well. Waiting for a clearer sign on the hourlies might be a good strategy today.
The 4-hour chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the daily chart’s RSI is already floating in the overbought territory indicating that a bearish correction might take place in the nearest future. Going short with tight stops might be the right strategy today.
There is a bullish cross forming on the daily chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. The upward direction on the 2 hour chart’s Momentum oscillator also supports this notion. Going long with tight stops might be the right strategy today.
This pair’s sustained upward movement has finally pushed its price into the over-bought territory on the 4-hour chart’s Williams Percent Range. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic, pointing to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.
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By David Adams
While I would not discount oscillators and indicators as important parts of a e-mini trader’s arsenal, all the important action in my trading occurs on the chart graph. Price action is everything and the patterns of support and resistance formed by price action are the basis for my e-mini trading. Which is not to say that I am not interested in oscillators and indicators, only that I use these tools to confirm my potential setups gleaned from the price chart. Although often overlooked, the venerable Darvis box is also one of the neatest and most efficient indicators in my trading.
I wasn’t always interested in the Darvis box, and I have to give credit to a well-known trader named Hubert Centers for initiating me into the finer points of this trading method. As time has gone by I have learned to rely upon this diminutive indicator for a variety of purposes.
At its very simplest explanation, one need only observe the rising or falling of successive boxes to get an instant and in-depth view of where and how the market is moving. When each box is formed and upper boundary of that particular price movement is formed and vice versa for the lower boundary of the box. On the upside, a great long trade may be indicated when the price closes above the upper boundary of a given Darvis box. I often use several charts side-by-side on my screen and it is not coincidental that the upper and lower boundaries of Darvis boxes coincide with existing support and resistance. However, the success of climbing or descending of the block structure gives me a unique viewpoint on both price action and support and resistance. In short, the Darvis box is both a e-mini chart object and an indicator; better yet, it sits directly in the price action section of my charts so I can make quick and immediate decisions on potential setups.
How do you trade the Darvis box?
I trade Darvis box very similar to support and resistance and ignore price action as it bounces around inside the box as a consolidation period. In a trending market, the market takes frequent pauses to consolidate before continuing back in the direction of the trend. Of course, this is not to say that every Darvis box breakout will be successful; like all systems, there are false breakouts and a distinct probability of failure in every set up. For that reason, I prefer to use the Darvis box only in trending e-mini markets. I should note that Darvis himself only intended his methodology to be used in the stock market and its adaptation into the e-mini market is a distinct extension of his methodology. Of course, any e-mini trade you may consider that does not entail a breakout or breakdown in the box is likely to fail. However, there can be little doubt that regardless of the time frame the methodology holds great merit.
So why not just use support and resistance and not the Darvis box?
In my trading the Darvis box gives me both support and resistance information along with market directionality. This means I can glance at a chart and ascertain a wealth of information that would take several minutes to understand on a traditional candlestick chart. As any futures trader knows, there are times when quick decisions are required and nothing in my trading system can match the Darvis box for quantifying those decisions. Further, I often change time frames when using the Darvis method to get a different look at price movement and consolidation patterns in a trend. Normally, these patterns can be very difficult to pick out of a bar chart or a candlestick chart, but the Darvis method handles these duties with ease.
In summary, I have spoken to some about how I use the Darvis box in a manner similar to support and resistance. We have discussed the market tendency to consolidate and bounce around inside an individual Darvis box and then finally break out in a trending market. These breakouts and breakdowns are potential setups for e-mini trades and should be evaluated as such. In short, Nicholas Darvis developed a wonderful system to see the market at a glance and make solid and sound trading decisions.
Real Live Trading Doesn’t Lie. Spend several days in my trading room and see if you can benefit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here
By Cedric Welsch
The wide availability of forex trading hours is one of the things that make the industry so compelling to so many people. The forex trading hours begin on Sunday evening at 5 PM Eastern Standard Time and continue until Friday at 5 PM Eastern Standard Time. That allows people to work any time of the day or night except for Friday evenings, Saturdays, and Sunday mornings.
The reason that the markets are open so long is because they mimic the opening times of the world’s major trading markets. As a general rule, most of the markets are open from 8 AM to 5 PM local time. London, for instance, opens at 8 AM Greenwich Mean Time and closes at 5 PM GMT. These times correspond to 3 AM EST to 12 PM EST. When the markets from Tokyo, Hong Kong, Sydney and other cities are added to the schedule it results in forex trading hours that are almost constantly open.
However, simply because the markets are open does not mean that it is a lucrative time to work. Forex traders will generally make the most money when other trades are happening. Therefore, if you are sitting in front of your laptop between midnight and two in the morning EST when only the Asian and Pacific markets are open, trading may seem slow. On the other hand, if you try to work between 8:00 AM and noon EST, trading will be fast paced and more likely to be profitable because both Europe and the United States are open.
Forex investing and trading is a fun and easy way for a beginning investor to work from home. Although the hours referenced above may be optimal, you should not be afraid to get your feet wet at other times of day. If you have a day job and would like to try this on the side, you can attempt it in the middle of the night and focus on trades between the Australian dollar and the Yen or other trades involving Asian currencies.
As you can see forex trading hours offer many people the most flexible job hours that they have ever had. Whether you want to attempt forex trades as a hobby, a part-time job, or a full-time career, you will certainly be able to find hours that work for you. Once you start, make sure that you devote a bit of time each day to reading about forex trades. Any additional knowledge that you have will be an asset to you.
The very systematic publishing of relevant forex news trading is a lifeline for traders. Do not deny that you need forex scam opinions from other traders so you can avoid scam.
By David Adams
It’s not often that a ballroom dancer becomes a famous investing author and end develops a trading system that has lasted more than 50 years; but this is the case with Nicolas Darvis. It would be an understatement to say that the Darvis box remains popular and effective in the current investment world. Many of today’s finest investors in investment educators espouse the Darvis box method is one of the most effective methodologies for trading e-mini contracts.
Darvis originally only traded the Darvis box method for long trades; but today, his methodology has been refined for both short and long trading. Further, Darvis used is methodology for long-term trading, usually a year or more. Adapting his series to short-term trading, especially day trading the e-mini contracts, has not lessened the effectiveness of his original investing thesis; which is to say that the ideas he developed in the early 1950s are effective when trading intraday e-mini contracts in present times. On a side note, it is often claimed that Darvis was able to invest $36,000 into $2 million over a three-year period. That claim alone makes this somewhat obscure trading methodology worthy of study.
There was a time when it was essential to hand draw the boxes on daily investment graphs, but the world of computers has changed all that; most investing platforms include the Darvis box as one of the indicators that an investor can include on his or her chart.
So what is a Darvis box?
This methodology combines aspects of technical trading and fundamental trading. As much as anything, Darvis was interested in a volume and price in his assessment of potential profitable stocks in which to invest. The boxes that are formed through observed highs and lows and a specified trading cycle identified the methodology is a trend following system, though I much prefer classifying the Darvis system is a momentum system as this definition more clearly defines the exact methodology, in a definitional context, than a simple trend following system. Darvis himself identified a series of “states” in a normal stock growth trend, and identifying and exploiting those “states” is better suited for an entire book rather than a short article, Darvis identified highs, lows and consolidating patterns on a stock chart and integrated the highs and lows to form a square box. And typically, these boxes can be observed to be rising or falling in accordance with the current movement of the equity under study. Each box serves an important purpose, as the bottom portion of the box (in a long trade) or top portion of the box space (in a short trade) form specific stop-loss targets traders can utilize to minimize their losses and maximize their gains.
Most modern day traders use Darvis boxes as they are formed in a manner that is very similar to support and resistance theory. A close with confirmation above or below the top of an existing box can indicate a breakout or breakdown and hence, the potential for a profitable trade. I especially like the Darvis box method because I am quite partial to breakout and breakdown trades as they are often among the most powerful and profitable trades available to intraday investors. Darvis boxes provide an excellent methodology to identify breakdowns and breakdowns in trending markets. Conversely, Darvis boxes are also very effective at identifying consolidating markets where breakouts and breakdowns often form then fail. One of my favorite trades is to fade a failed breakout or breakdown as it returns to the original channel, or centerline of a Darvis box. To fully understand Nicolas Darvis and his trading methodology I highly recommend further study before trying to implement it into your trading. There is little doubt that this training method has great merit and is used by many influential investors.
In summary, we have identified Nicolas Darvis, a well-known ballroom dancer, is the inventor of Darvis box theory and briefly describe how Darvis boxes are formed, along with some of the practical applications, especially in setting stop – loss targets and identifying breakouts and breakdowns. I think it’s important to spend time with this older investment theory and become acquainted with its many possibilities.
Real Live Trading Doesn’t Lie. Spend several days in my trading room and see if you can benefit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here
By CountingPips.com
Economic News Releases
05:00 Japan Leading Index
07:00 Eurozone French purchasing managers index
07:30 Eurozone German purchasing managers index
08:00 Eurozone purchasing managers index
12:30 United States fed national activity index
GBPUSD stays in a trading range between 1.6105 and 1.6302. As long as 1.6302 resistance holds, the price action in the range is treated as consolidation of downtrend from 1.6745, and another fall towards 1.6000 is still possible. On the other side, a break above 1.6302 will indicate that the fall from 1.6745 had completed at 1.6105 already, then the upward movement could bring price back to 1.6400-1.6500 area.
By CountingPips.com
The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators trimmed their long positions of the Euro against the US dollar for a second straight week while continuing to raise bets for the Japanese yen. Non-commercial futures positions, those taken by hedge funds and large speculators, added to their long positions for the Japanese yen while decreasing their bets for the euro, British pound sterling, Swiss franc, Canadian dollar, Australian dollar, New Zealand dollar and the Mexican peso, according to data on May 17th.
This week’s notable changes were British pound sterling positions fell over to the short side for the first time since March while Australian dollar positions fell for a sixth straight week.
EuroFx: Currency speculators decreased their net long positions for the euro against the U.S. dollar for a second consecutive week as of May 17th. Euro futures positions declined to a total of 41,645 long contracts following a total of 61,447 long positions on May 10th. Euro positions had marked the highest level since July 2007 on May 11th with 99,516.
The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.
GBP: British pound sterling positions edged lower for a third straight week as of May 17th and fell over to the short side for the first time since March 15th. Pound contracts fell to a total of 928 net short positions. This follows a decline the week before to a total of 18,118 long contracts on May 10.
JPY: The Japanese yen net contracts improved for the fourth consecutive week as yen positions increased to a total of 15,373 net long contracts reported on May 17th following a total of 13,054 net long contracts on May 10th.
CHF: Swiss franc long positions edged lower for a second consecutive week. Franc positions fell to a total of 15,661 net long contracts following a net of 16,336 long contracts on May 10.
CAD: The Canadian dollar positions declined lower for a fourth consecutive week to a total of 26,291 contracts as of May 17th. CAD net contracts had fallen to a total of 37,203 net long contracts on May 10.
AUD: The Australian dollar long positions declined for the sixth straight week to a total net amount of 50,919 long contracts as of May 17th. AUD positions had totaled 60,321 net long contracts on May 10th.
NZD: New Zealand dollar futures positions declined after eight straight weeks of increases. NZD contracts decreased to a total of 12,624 long positions as of May 17th from a total of 13,714 long contracts on May 10.
MXN: Mexican peso long contracts dipped for a fourth week after reaching the highest level in at least a year on April 19th. MXN contracts fell to 104,912 net long contracts as of May 17th from a total of 118,065 long contracts as of May 10th.
COT Data Summary as of May 17, 2011
Large Speculators Net Positions vs. the US Dollar
EUR: +41,645
GBP: -928
JPY: +15,373
CHF: +15,661
CAD: +26,291
AUD: +50,919
NZD: +12,624
MXN: +104,912
EUR/USD – Weekly Analysis 22/5/11
Last week the EUR/USD bulls pushed price higher until a decisive 214 pip drop came on Friday and eclipsed most of the week’s gains.
Fridays drop has formed a BEB (bearish engulfing bar) which would typically have my attention, with a view to trading short, but the proximity with the highlighted swing low does not give any trade enough space to run before support is encountered.
There is a reasonable posibility of price moving below this BEB, in this instance, and subsequently breaking through the swing low but selling into range lows is not a favoured long term strategy.
Any bounce off the 1.4000 area back up to 1.4500 would potentially be seen by the investing masses as a preferred short zone for Euro bears with more room to run before support was hit.
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By Cedric Welsch
Before jumping into actual forex trading, it is essential to practice first with a forex trading demo account. Currency trading is a huge risk for a beginner who does not know what he is doing. In every type of trading, knowledge and skills are highly important. Without developing quality trading skills, you risk losing a big amount of money doing trades.
The forex market offers a huge potential to make money, but it also provides a huge risk of losing money for people who are not skilled or knowledgeable enough about trading. With the growing popularity of online trading, anyone can participate in selling or buying currencies anywhere around the world. In fact, you do not need a broker to do the trading for you. All you need is to create an account and use a forex trading platform.
Luckily, FX trading websites provide free information on how to use their platform and how to trade successfully. Most trading websites also provide a free demo account especially made for beginners. The demo account does not require any initial deposit. You will be trading with a practice account that uses Internet money that does not have any real value. Before practicing with the account, it is essential to learn about forex in-depth. Learn how the platform works, how the currencies are traded, and how the graphs and charts can be analyzed to your advantage.
Buying and selling currencies are always done in currency pairs. The value of each currency in the pair is used to determine whether it is time to either buy or sell. Essentially, a currency is bought while its value is low. After a certain period of time, the value of the selected currency either goes up or down. If the value goes lower than the buying price, you can stop the loss or leave it be until it goes up again. If the value goes higher than the buying price, it provides a potential to make profit.
If the value of the currency is high, it provides an opportunity to gain profit by selling it. Keep in mind that profit can be made by buying a currency at a low price and selling it at a high price. Nevertheless, understand that you will not win every time so you have to be careful in analyzing currency charts. After you have enough practice with the forex trading demo account, you can switch to a real account and make money.
The explosive popularity of the forex trading game has captivated millions of investors.
A number of these forex trading investors are earning millions of dollars in investments.
