FOREX TRADING

There are many candlestick trend reversal and trend continuation patterns. These candlestick patterns can help you confirm a trend reversal or a trend continuation. Inverted Hammer Candlestick Pattern is an important trend reversal pattern that can give accurate signal on trend reversal. However, this pattern occurs rarely but when it does, it means that the trend will reverse itself soon.

The first day is a usual bearish candle in the downtrend. On the second day or what you call the signal day you find the inverted hammer something quite rare as the price action required to produce such a pattern seldom takes place.

An inverted hammer has a very small body at the bottom with a long wick at the top. As the high is way above the body, most of the trading took place near the small area close to the low. This low serves as the support for the upcoming days.

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Easy Fibonacci Trading Guide – 4 Simple Steps to Trading with Fibonacci

If you’re just like anybody else who’s got demanding lifestyle, I am sure you don’t want to spend most of your time sitting and waiting for the market to move for you. Years of experience has taught me some techniques that allowed me to cut my sitting and waiting time to a minimum. I found that I don’t need to watch the markets hour in hour out. Would you like to know these techniques so you can also do your trading in just a short period, leaving you time to do things that the money from trading allow you to do? Then, read on!

1. Keep your trading technique simple and understandable. It’s important for you to decide right away that you’re going to make trading work for you, not you working for the markets.

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U.S. Review

What if Sustainable is also Insufficient?

• Although the recovery continues to take shape and the pace of growth this year appears to be on trend, there is a growing realization that such growth is insufficient to significantly lower unemployment or generate enough public sector revenues to meet campaign promises.
• Moreover, there are also growing concerns that the applied stimulus to the economy today to reinvigorate growth may lead to lurching the economy in the direction of higher inflation and unsustainable deficits in the near future–from the frying pan into the fire?

When Good is Not Good Enough

Chairman Bernanke’s testimony this week stated the increasingly obvious reality of this recovery “Notwithstanding these positive signs, the job market remains quite weak, with the unemployment rate near 10 percent and job openings scarce.” Meanwhile, the Obama administration projected 9.8 percent unemployment at the end of this year. On the budget front the outlook for local, state and federal budgets is for significant deficits that will force local and state spending cuts while raising concerns about the long-run position of the federal debt. Therefore, in a year where economic growth is expected to come in at trend, the inability of the economy to deliver lower unemployment and more balanced public finances is worrisome. By the way this is also an election year. (more…)

USD Lower, GDP Revised Higher, Existing Homes Sale Drop

• USD: Lower, pressured by a recovery in global equity markets, Q4 GDP revised up, existing home sales drop
• JPY: Higher, factory output expands and retail sales jump, Yuan revaluation speculation
• EUR: Higher, inflation falls, gains in cross to GBP, short covering
• GBP: Lower, UK Q4 revised up, Q4 government spending higher than expected
• CAD and AUD: AUD & CAD higher, strong Australian credit demand, Canada’s C/A deficit narrows

Overview

The USD traded lower Friday pressured by a modest improvement in risk sentiment as equity markets rally in reaction to report of an upward revision in UK and US Q4 GDP, stronger industrial production and retail sales in Japan and strong private sector credit demand from Australia. USD was also pressured by Yuan revaluation speculation. Yuan forwards traded higher in reaction to a newspaper report that the Chinese government is assessing the potential impact of currency gains. US economic data was mixed with Q4 GDP revised higher, Chicago PMI came in higher than expected and Michigan sentiment was revised slightly lower. Existing home sales posted an unexpected sharp decline. Existing home sales are at a seven month low. USD remained on the defensive despite mixed US economic data as US equity markets trade both sides of settlement.

Focus turns to next week’s central bank policy meetings in Australia and Canada on Tuesday and the UK and EU on Thursday and Friday’s release of US February unemployment. The BOC is expected to maintain steady rate policy, the RBA is expected to hike rates 25 bps, the ECB is expected to remain on hold and there is uncertainty about whether the BOE will maintain its current level of asset purchases. US February unemployment is expected to post a modest rise with nonfarm payrolls unchanged from last month. (more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push lower yesterday, bottomed at 1.3451 but closed higher at 1.3549. On h1 chart below we can see that price has slipped above the minor trendline resistance (yellow) indicating potential upside correction testing the upper line of the minor bullish channel. The main scenario should remain bearish but the fact that price already in oversold area may produce some minor upside correction. Immediate resistance at 1.3625 area. Break above that area and violation to the minor bullish channel could trigger further upside momentum but note that overall the pair is still in a bearish mode. After Greek debt and financial problem, traders now concern about the potential economic problem in Spain which could continue to pressure the Euro in longer term. Initial support at 1.3500 area. Break below that area could trigger further bearish momentum testing 1.3400 region.

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USD Higher, Jobs Claims Rise, Durable Goods Strong

• USD: Higher, concern about Greek debt troubles and weaker US jobs data fuels risk aversion
• JPY: Higher, supported by safe haven demand and gains in cross trade
• EUR: Lower, S & P may downgrade the Greek debt rating, Greek rescue may be at risk
• GBP: Lower, UK Q4 business investment dropped sharply
• CAD and AUD: AUD & CAD lower, pressured by a spike in risk aversion, RBA rate hike speculation ignored

Overview

The USD traded higher and the JPY surged supported by a spike in risk aversion sparked by report of a sharp rise in US jobless claims and fresh concern about the Greek debt crisis. Wednesday the US reported that January new home sales fell to a record low. The decline in home sales follows Tuesday’s release of a sharp drop in US consumer confidence consumer confidence. These reports and today’s jobs claims report generate concern about the outlook for the US recovery. A report in the UK telegraph that the Greek rescue plan may be in jeopardy because of comments made by the Greek Deputy PM about Germany’s Nazi war atrocities coupled with increased risk of a downgrade of the Greek debt rating sent European currencies lower. The JPY traded at a one-year high versus the EUR. GBP traded at a nine month low versus the USD pressured by concern about UK debt and report a sharp drop in UK Q4 businesses investment. Commodity currencies traded lower pressured by a spike in risk aversion sparked by weaker equity market trade. AUD weakened despite RBA rate hike speculation. RBA watcher McCrann says there’s nothing standing in the way of a 25bps rate hike next Tuesday. US economic data was mixed with jobless claims posting a sharp rise. Jobless claims are at their highest level since last November. Durable goods came in almost 3 times as strong as expected. The jump in durable gods reflects a sharp increase in civilian aircraft orders. USD extended its gains and the JPY traded at a new high for the day after the release of the unexpected spike in US jobless claims. Fed Chairman Bernanke suggested that weather may be impacting the jobs report but his comments had limited impact and stocks traded sharply lower in reaction to jobless claims report. (more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push higher yesterday, topped at 1.3625 as a temporary reaction after The Fed decided to keep the interest rate low but further bullish momentum was rejected as price closed lower at 1.3539. This fact should keep the bearish scenario intact. On h4 chart below we can see price is now testing the minor trendline support (yellow). Break below that trendline should trigger further bearish momentum testing 1.3444 – 1.3400 area. Immediate resistance at 1.3580 area. Break above that area could trigger further bullish correction but overall I still prefer a bearish scenario with sell on rallies strategy.

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USD Lower, Bernanke Says Rates to Stay Low, Stocks Rally

• USD: Lower, new home sales declined by 11.2%, Bernanke says rates to stay low for an extended period
• JPY: Higher, exports rise, safe haven demand as Asian equities decline
• EUR: Higher, EU industrial orders rise,ECB’s Gonzalez-Paramo downplays risk of contagion from Greece
• GBP: Mixed, BOE’s Posen said he expects UK inflation to remain subdued, QE will be expanded if needed
• CAD and AUD: AUD & CAD higher, China tells commercial lenders to restrict lending to local governments

Overview

The USD traded mixed to lower Wednesday with the EUR rebounding supported by report of better than expected EU industrial orders and speculation that Bernanke will signal that US interest rates will remain at zero for some time. The GBP continues to underperform pressured by a dovish statement from the BOE’s Posen. Posen said that the BOE will expand quantitative ease if necessary. Commodity currencies opened lower pressured by weaker Asian equity market trade and report that China took action to curb lending. China’s regulators told its commercial banks to restrict lending to local governments. Commodity currencies turned higher in US trade, tracking a rally in US equities sparked by Bernanke’s testimony. JPY traded higher for the fourth day in a row supported by report of a jump in Japan’s January exports. In his testimony before Congress Fed Chairman Bernanke said the economy still needs help, a sustained recovery remains in question and interest rates will stay low for an “extended period.” Bernanke went on to say the Fed will have to tighten at some point to prevent inflationary conditions but he gave no clue when that point might be. Bernanke’s testimony was seen a bit more dovish than expected as he confirmed the Fed extend period language. Some analysts have suggested that the Fed’s discount rate hike last week would be a prelude to the Fed dropping the extended period language from its next communiqué. This seems less likely after today’s testimony. The Fed’s Bullard said rates may stay near zero for all of 2010 and the USD trades lower as stocks rally. US economic data was weak with new home sales reported down by a record 11.2%. (more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push higher yesterday, topped at 1.3691 but further upside correction was rejected as price whipsawed to the downside, violated the minor bullish channel, bottomed at 1.3496 and closed at 1.3506. I see this fact as an ending to the bullish corrective movement at this phase and continue the bearish scenario with nearest technical target around 1.3400 – 1.3340 area. Immediate resistance at 1.3550/70 area. Break above that area should lead us into no trading zone but the main trend should remain bearish and I prefer sell on rallies strategy.

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USD Higher, Consumer Confidence Tanks

• USD: Higher, house prices fall less than expected, consumer confidence falls sharply, stocks decline
• JPY: Higher, supported by spike in risk aversion and gains in cross trade
• EUR: Lower, IFO unexpectedly declines, German growth may have contracted in Q1, Greek bank downgrade
• GBP: Lower, weak mortgage approvals, BOE’s King says QE may be expanded
• CAD and AUD: AUD & CAD lower, crude oil prices drop, hawkish comments from the RBA deputy governor

Overview

The USD traded higher Tuesday in reaction to weaker economic data from Europe and a sharp drop in US consumer confidence. The EUR was pressured by report of an unexpected drop in German IFO and ongoing concern about the outlook for sovereign debt risk in Greece. EUR was also pressured by report that Fitch has downgraded Greek banks. GBP was pressured by report of weaker than expected UK mortgage lending and comments from a number of BOE officials which suggest that the BOE may have to expand quantitative ease if the UK economic outlook weakens. There was active trade in the EUR/CHF cross with the CHF trading near two week low versus the EUR pressured by rumors of SNB intervention. Commodity currencies traded lower in reaction to a sharp drop in the price of crude and weaker equity market trade. AUD downside was limited by hawkish comments from the RBA deputy governor that strong AUD is helping contain inflation. US economic data was mixed with the Case Shiller home price index coming in near market expectation and consumer confidence posted a sharp decline. USD and JPY rallied to the day’s highs after the release of the weak US consumer confidence supported by weaker equity market trade and a spike in risk aversion. Focus turns to Fed Chairman Bernanke’s testimony before Congress Wednesday and the release of US home sales. The trade expects Bernanke to downplay the risk of an imminent tightening by the Fed. Late Monday the Fed’s Yellen said the US economy still needs low interest rates. New home sales are expected to post a modest gain. (more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD didn’t make significant movement yesterday. The main trend remains bearish but as you can see on my h1 char below price still move inside the minor bullish channel indicating the bullish corrective movement actually still intact with technical target around 1.3750 area but we need a consistent move above 1.3650 to continue the upside corrective movement. The bias is neutral in nearest term but I still prefer a bearish scenario as traders’ sentiment for Euro zone fundamental situation remains negative. A violation to the minor bullish channel should be seen as a serious threat to the bullish correction scenario and continue the bearish momentum testing 1.3530 area before aim for 1.3400.

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USD Higher, Recovery Hope Versus Rate Outlook

• USD: Higher, Greek debt troubles, optimism about US economy, NABE upgrades US GDP forecast
• JPY: Higher, S&P says there is a low chance of Japan being downgraded this year
• EUR: Lower, German finance Minister denies that the EU plans a 25bln aid plan for Greece
• CHF: Lower, SNB’s Jordan ready to act on excessive CHF strength
• GBP: Lower, UK election polls point to the risk of a hung parliament
• CAD and AUD: AUD & CAD lower, Australian vehicle sales decline, commodity prices mixed

Overview

The USD traded mixed to slightly firmer Monday as focus returns to Greece and the NABE upgrades its US 2010 GDP forecast to 3.2%. There was a report in overseas trade that the EU had agreed to a 25bln aid plan for Greece. The German finance minister denied the report and the USD rebounded from early overseas lows. The NABE upgrade of its US GDP forecast and outlook for continued improvement in the housing market and jobs growth generates optimism about the US recovery. There were no major US economic reports scheduled for release today. Focus turns to Tuesday’s release of US home prices and consumer confidence with durable goods and Q4 GDP to be released later in the week. The trade will also be closely monitoring Fed Chairman Bernanke’s testimony before Congress on Wednesday and Thursday. The trade will be looking for clues to the Fed’s decision last week to hike the discount rate. Fed officials indicate that the rate hike was primarily a technical measure and not an indication of a change in policy. The USD traded lower in early overseas trade pressured by diminished Fed rate hike speculation sparked by weaker than expected US CPI report Friday and the Feds assurance that the discount rate hike was not a sign of imminent tightening of Fed policy. USD price direction is caught between recovery hopes and interest rate outlook. (more…)

Soros Questions the Euros Survival & Bernanke’s Testimony in Focus

Forex News and Events:

Issues surrounding Greece are still the key driver of FX pricing and given the outlook, it will keep the EUR under pressure. This weekend, the German magazine “Spiegel” suggested that a eur25bn bailout was being negotiated, which gave the single currency and risk correlated trades a slight boost, but optimism was quickly grounded when the German Finance Minister denied the rumour. But more eye-opening was a very lucid piece in the FT by G. Soros. Soros states that the EUR “construction is patently flawed” and that “The crash of 2008 revealed the flaw in its construction, when members had to rescue their banking systems independently. The Greek debt crisis brought matters to a climax. If member countries cannot take the next steps forward, the euro may fall apart.” While the arguments outlined in this article are well understood by most market professionals, this piece will clearly bring the EUR situation mainstream. While the EURUSD was able to regain most of its lost ground after the knee jerk selloff prompted by the Fed decision to hike the discount rate (Friday), we believe as participants begin to view the current problem as less of a funding issue and more of a structural problem, the EUR will continue to be sold heavily on rallies. In the near term, the issue of funding cost will be highly debated and scrutinized. (more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push lower on Friday, bottomed at 1.3444 but whipsawed to the upside, closed higher at 1.3594 and keep moving higher around 1.3625 at the time I wrote this comment. On h1 chart below we can see that the minor bearish channel has been violated to the upside indicating potential bullish correction momentum targeting 1.3750 area. However note that the major trend should remain bearish. Immediate support at 1.3585/30 area. Break below that area should cancel the bullish correction scenario and continue its major trend re-testing 1.3400 area.

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Weekly Economic and Financial Commentary

U.S. Review

The Fed Moves to End its Extraordinary Policy Ease

• Regional manufacturing surveys showed a stronger rebound in orders and production than had been expected. Industrial production also rose solidly.
• January’s inflation data were mixed, with import prices and pipeline inflation up sharply and the Consumer Price Index rising slightly less than expected.
• The Federal Reserve raised the discount rate by a quarter percentage point late Thursday afternoon.

When Ben Bernanke Talks, People Listen

Sometimes Ben Bernanke does not even have to speak. Just one week after the Fed Chairman released his testimony, in which he stated that “‘before long” the Fed would raise the discount rate and return it to the spread over the federal funds that existed before the crisis, the Fed acted. We now know the meaning of “before long,” at least as it relates to Fed policy.

Our initial read from the Fed’s move is that it intends to stay very close to the script Ben Bernanke laid out to reverse the extraordinary actions it put in place to fight the financial crisis. Those actions contributed to an enormous expansion of the Fed’s balance sheet and heightened concerns about whether the Fed could adequately contain or reverse this extraordinary stimulus without putting the recovery at risk or creating an environment, in which inflation might accelerate.

Bernanke noted that returning the discount rate back to its normal relationship to the federal funds rate should not be seen as a tightening move but rather a return to a more normal monetary policy. Maybe that is why the Fed chose to announce its move along with the regular weekly release of the monetary aggregates, whose influence the Fed has also traditionally downplayed. Specifically the Fed noted its policy actions were “not expected to lead to tighter financial conditions for households or businesses and do not signal any change in the outlook for the economy or monetary policy.” Monetary policy is still extremely easy, with the federal funds rate close to zero. All that has changed is that the era of extremely cheap money is beginning to end.

There was a pretty full set of economic reports released this week, including a number of reports on the manufacturing sector. Most of the regional manufacturing surveys, including the New York Fed’s Empire Manufacturing Survey and the Philadelphia Fed survey, came in stronger than expected. The Empire Survey rose nearly nine points to 24.9. The employment component rose for the second month in a row and is now solidly positive at 5.56. Manufacturers also seem to have a better handle on inventories.

Industrial production rose 0.9 percent in January, with solid gains across most categories. Output in the manufacturing sector rose 1.0 percent, with output of consumer goods and business equipment rising solidly. Production of IT equipment remains a notable bright spot, with production climbing 1.7 percent. Utility output, which surged in December, rose a much more moderate 0.7 percent in January. February’s cold temperatures should send output even higher in next month’s report.

The inflation data were clearly mixed. Import prices continue to rebound off last year’s sharp declines. The overall index jumped 1.4 percent in January, while prices excluding petroleum rose 0.6 percent. The Producer Price Index also registered a larger-than-expected gain, climbing 1.4 percent. The Consumer Price Index was much tamer, however, rising just 0.2 percent overall and falling 0.1 percent after excluding food and energy items. Sharply lower prices for hotels and lodging accounted for the smaller-than-expected overall rise and most of the drop in the core. (more…)