FOREX TRADING

USD Higher, Jobless Claims Post a Sharp Drop

• USD: Higher, jobless claims post an unexpected sharp decline, few details on Greek bailout
• JPY: Higher, Japanese markets closed for holiday
• EUR: Lower, pressured by lack of details of EU Greek support plan
• GBP: Higher, supported by gains in cross trade to the EUR
• CAD and AUD: AUD & CAD higher, stronger Australian employment growth, Chinese inflation slows

Overview

USD traded mixed Thursday with the EUR pressured by report of a vague promise from the EU to help Greece and the AUD surging in reaction to report of much stronger than expected Australian employment data. According to EU officials the EU is working on a plan to help Greece avoid debt default but the details of the plan have not been released. Australia’s unemployment rate declined and jobs growth was three times stronger than expected in January. The combination of the Greek support plan and the Australian employment report contributed to improving risk appetite along with a report that China’s January consumer prices rose at a slower than expected pace. China’s January CPI rose by 1.5% the trade had expected a 2% rise. Slower inflation growth in China reduces fear of the need for aggressive tightening from China. China’s central bank signaled that it plans to maintain accommodative monetary policy. The improvement in risk sentiment was somewhat dampened by the fact that China also reported that lending was the third highest on record in January and the US Congressional oversight panel warned that 3k US banks may have to curtail retail lending because of exposure to commercial real estate loan risk. Growing risk of commercial real estate loan default may be the next looming crisis for the financial markets. US economic data was positive with jobless claims posting a sharp drop. A Bloomberg survey of economists finds that the majority of economists surveyed believe that US employment rate has peaked at 10.1% will fall to 9.5% per year end. The White House forecasts that nonfarm payrolls growth will be 95k a month in 2010 with unemployment averaging 10%. The White House expects payroll growth to accelerate by 190k per month in 2011, 251k in 2012 and 274k in 2013 with unemployment falling back to 5.5% by 2016. The USD continued to gain versus the EUR after the release of the US jobless claims report and in reaction to the statement that the German Free Democratic Party has yet to consent to the Greek bailout. EUR traded to the day’s lows in reaction to a statement from an EU official that they will deal with Greece in March. (more…)

Daily Technical Analysis

EURUSD

The EURUSD had volatile but unclear movement yesterday. Price attempted to push lower, bottomed at 1.3676 but closed higher at 1.3734 and keep moving higher around 1.3770 at the time I wrote this comment. On h4 chart below we can see that price still move inside the minor bullish channel indicating the bullish correction scenario targeting 1.3850 in nearest term remains intact. Immediate support at 1.3650 area. Break below that area should trigger further bearish momentum re-testing 1.3550 region.

While technical view is unclear, on fundamental side, traders will focus on the EU plan for a rescue package for Greece in Brussels summit today. As reported by Bloomberg, Luxembourg Prime Minister Jean-Claude Juncker said that ‘I am having several discussions at the moment so that we can come up with an answer that will satisfy the markets,’ If the summit able to provide such answer, Euro is likely to continue its bullish correction. But if not, Euro should suffer further losses

(more…)

USD Higher, Trade Deficit and Bernanke Pressure Stocks

• USD: Higher, risk aversion re-emerges, uncertainty about EU Greek bailout plans, trade deficit widens
• JPY: Mixed, machinery orders and corporate good prices turn higher, CAPEX spending improves
• EUR: Lower, concern Greek rescue plans may slow the EU recovery
• GBP: Lower, BOE cuts UK inflation and growth forecast, King says the bank may consider expanding QE
• CAD and AUD: AUD & CAD lower, China’s trade surplus narrows, risk aversion re-emerges

Overview

USD traded firmer Wednesday supported by uncertainty about a potential Greek rescue plan, weaker than expected trade data from China and Bernanke’s testimony on withdrawing liquidity. The EU is expected to release the details of a plan to support Greece but there is concern that whatever plans emerge that EU sovereign debt risk and the need for austerity measures present a threat to the EU and the global recovery. According to a Bloomberg survey, optimism about the USD is at a 15 month high with the USD supported by concern that sovereign debt risk in Europe will hurt the EU and global recovery. China’s trade balance for January unexpectedly narrowed to 14.2bln, a reading 19.5bln was expected. Narrowing of China’s trade surplus generates concern about the strength of the global recovery. Bernanke laid out the Feds plans for withdrawing liquidity as the economy recovers in testimony before Congress today. He said that the timing of exit will be data dependent and the Fed may soon consider raising the discount rate. He went on to say the Fed can use the interest-rate paid on reserves, selling of Fed security holdings, reverse repos or offering of term deposits to depository institutions as ways to guide monetary policy. Bernanke said the Fed will eventually have to raise rates. The US trade balance widened by a much more than expected 10%. Widening of the trade balance was due to a 4.8% increase and imports in the impact of recent USD strength. The widening of the trade deficit and Bernanke’s rate hike talk pressured US equities and supported the USD. The trade awaits the outcome of Thursday’s EU summit for details of what the EU plans for Greece. According to a German official Greek aid is not on Thursday’s agenda. FX price movement has been volatile with risk appetite supported by optimism about Greek rescue plan and risk aversion re-emerging on uncertainty about the implications of the rescue plan for the EU recovery. Some analysts warn of a moral hazard if EU bails Greece out, but the EU may have little choice. (more…)

Potential Eurozone Assistance for Greece Gives Risk a Boost

Forex News and Events:

Markets were very busy yesterday pricing in speculation and conjecture. The day started with rumors that ECB’s Trichet had left a meeting of central bankers prematurely to head to Brussels to address the Greek situation. Then, later in the day, a German official was cited in say that the Eurozone governments have decided to ‘take significant steps’ to support Greece. This buzz sent traders scrambling out of their safe haven hiding spots. The EURUSD traded up from 1.3700 to nearly 1.3840, while AUDJPY climbed to 0.8800. The rapid move also caught the markets that were considerably short EUR off guard, and the ensuing short squeeze gave the move a frantic feel. Later and through today, German officials are continuing to adamantly deny that any decision on aid for Greece has been made. The Maastricht treaty is vague in this unexplored area, but it seemingly forbids guaranteed loans from the ECB or member states (assuming “liabilities of other member states”) and discrediting today’s WSJ article. However, support could come directly from unguaranteed loans from member states. Hence, the constant mention of Germany. It’s really just a gut feeling the current rhetoric was aimed to relieve pressure and buy time (halting “contagion” speculation). We do believe some sort of stability or bailout program is imminent, but in this rushed, manic fashion. Overshadowed by the gossiping (potential teleconference between EZ ministers this afternoon) UK released Industrial production data and Inflation reports. The Industrial production climbed to m/m 0.5% vs. 0.2% exp, while the inflation forecast on the two year time horizon was revised slightly down. For tomorrow, markets are expecting the Riksbank to leave interest rates on hold at 0.25% this month and also look for the central bank to upgrade its forecasts for employment, growth and inflation. For now, policymakers continue to affirm that they will raise rates in the Autumn of 2010, citing uncertainties to the Swedish economic recovery as the basis for their cautious approach. Nevertheless, if the fundamental rebound in Nordic economy is faster than expected, markets could start bringing forward their timeline for the first hike to July. (more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD had a significant bullish momentum yesterday, break above 1.3750, topped at 1.3838 and closed at 1.3795. Technically, the bullish correction scenario indicated the hammer candlestick formation is now confirmed targeting at least 1.3850 before testing 1.4030 area. The bias is bullish in nearest term but note that longer term bearish scenario remains intact as long as price still move inside the bearish channel. Another movement back below 1.3750 today could be a threat to the bullish correction scenario testing 1.3650 – 1.3585 support area.

On fundamental side, Euro rally against the Dollar was trigger by hope that Greece will get some help from the EU as rescue package is being prepared. However, how long will this positive sentiment support the Euro is not easy to measure. Another negative news on Greece or the Euro zone could bring the Euro down again, back to its bearish scenario, which is remains intact in longer term outlook.

(more…)

USD Lower on Rumor of a €20 Billion Greek Bailout Plan

• USD: Lower, equities and commodities rally, risk appetite improves on Greek rescue rumors
• JPY: Lower, tracking equities and selling in cross trade
• EUR: Higher, Greek rescue speculation and technical bounce on record net spec short on the IMM
• GBP: Higher, trade balance widens, retail sales decline, house prices rise
• CAD and AUD: AUD & CAD higher, improving risk sentiment, reduced Australian budget deficit forecast

Overview

USD traded lower Tuesday pressured by Greek rescue speculation. A report that ECB President Trichet would return one day early from a BIS meeting in Australia to attend an EU Council Meeting fueled speculation that a Greek bailout plan may be soon announced. The EUR traded at an eight-month low versus the USD late last week pressured by concern of sovereign debt default risk in Greece. Today’s speculation of Greek rescue plan sparked an improvement in risk appetite, rebound in equities and commodities prices and selling of the USD. The latest rumor is that a €20bln Greek bailout plan may be soon announced. EUR gains were limited by a statement from the ECBs Nowotny that ECB can’t bailout Greece because bailout of governments is not part of the ECB charter. The USD decline may also reflect technical factors which include last week’s CFTC commitment of trader’s report which said that spec short EUR position on the IMM was at a record high. This may be an indication that investors were getting too bearish the EUR and the EUR may have reached oversold technical conditions. In reaction to the sharp increase in EUR short positions economist Stiglitz called on Europe to teach speculators a lesson. Short covering was the main driving factor for today’s EUR trade. GBP traded higher but underperformed in reaction to report a weaker UK retail sales and new election polls which suggest the risk of a hung parliament. Commodity currencies traded higher tracking the improvement in risk appetite and higher commodity prices. AUD was supported by report that Australia’s fiscal budget deficit for 2009/10 may be 15bln less because of stronger than expected growth and hawkish comments from RBA Governor Stevens. Stevens warned that keeping rates to low for too long may make it harder to prevent asset bubbles. JPY traded lower pressured by improving risk appetite. US economic data was mixed with wholesale sales rising and inventories falling. Focus turns to Wednesday’s testimony by Fed Chairman Bernanke before the House on unwinding of liquidity measures. The WSJ reported Monday that Bernanke will lay out a plan to raise rates as the economy improves with the first focus on the interest rate on excess reserves. Main focus for FX trade remains risk sentiment and debt default risks in peripheral European countries, Greece, Spain, Portugal, and Ireland. (more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD made indecisive movement yesterday. Price attempted to push higher, topped at 1.3713 but closed lower at 1.3647. We have nothing significant so far and the market seems consolidating but still in a bearish scenario. However the hammer candlestick pattern I showed yesterday, remains indicating potential upside correction testing 1.3750 key resistance area and only a break below 1.3585 could cancel the bullish correction scenario, continue the bearish momentum targeting 1.3490 – 1.3400 area this week. On the upside, break above 1.3750 should trigger further bullish correction towards 1.3850 – 1.4030 area

(more…)

USD Lower, CRB Rebounds, Geithner Sees Slow Recovery

• USD: Lower, Giethner predicts slow US recovery, Greek debt worries ease slightly
• JPY: Mixed, tracking equities, service sector sentiment improves
• EUR: Higher, Greek and Spanish credit default spreads narrow as EU says it will monitor Greek debt
• CHF: Higher, Swiss retails sales rise, gains in cross trade to the EUR
• GBP: Lower, election polls increase the risk of a hung parliament, fresh concern about UK debt rating
• CAD and AUD: AUD & CAD higher, Australian coal deal with China, Canadian housing starts rise 5.8%

Overview

USD traded mixed Monday with the main focus on sovereign debt risks in Europe. EUR experienced a modest recovery as EU officials and central bankers from the G7 said they were confident that Greece will be able to cut its deficits. Greek and Spanish default swap spreads narrowed a bit in reaction to the EU and G-7 pledge to monitor Greece’s deficit reduction plans. EUR gains were limited by report of a larger than expected decline in EU Sentix index. CHF traded higher supported by report of a sharp rise in Swiss retail sales. GBP continued to underperform pressured by concern about its UK AAA sovereign debt rating as UK polls released over the weekend suggest neither the Conservative or Liberal party will win a majority in parliament. Threat of a hung UK Parliament will increase the risk to UK sovereign debt rating. JPY traded mixed to firm supported by weaker equity market trade. Commodity currencies traded higher in reaction to a rally in gold and higher crude prices. AUD was supported by report that Australia has secured a huge coal deal with China. There was limited reaction to a statement from US Treasury Secretary Geithner that he does not see the risk of a double dip recession but he predicts a slow recovery for the US economy. Geithner went on to say that the US will never lose its AAA debt rating and that the US deficit will shrink. US December Employment Trend Index rose to 93.2 from 92.3 last month. The trade will continue to watch developments in regard to the fiscal outlook in peripheral European nations. (more…)

Sterling Falls To A Nine Month Low As The Euro Zone’s Debt Worries Investors

The British pound fell to nine month low against the dollar as concerns over euro zone sovereign debt problems boosted the appeal of the greenback as a safe haven currency. Worries about debt problems in the euro zone have extended beyond Greece to Spain and Portugal, hitting riskier assets, with sterling falling in tandem with the euro against the greenback. Last week producer prices data showed further upward pressure on UK inflation, with British manufacturers raw material costs up more than expected last month and continuing to rise at their sharpest annual rate since October 2008. Traders said position adjustment ahead of the weekend accelerated selling of the pound, which has lost close to 2 percent against the dollar this week. The GBP/USD is currently trading at $1.5570 as of 7:14am, GMT, with a bullish trend.

The euro continued to fall this week against the dollar on speculation widening budget deficits in European nations such as Greece and Portugal will deter investors from buying the region’s assets. ‘As sovereign risks spread in the euro-zone, risk aversion will continue in the market,’ said Susumu Kato, chief economist in Tokyo at Credit Agricole Securities, a unit of France’s Credit Agricole SA. ‘Implications of the financial issues remain unclear, which has weighed heavily on the euro.’ (more…)

Daily Technical Analysis

EURUSD Outlook

The EURUSD attempted to push lower on Friday, bottomed at 1.3585 but closed higher at 1.3664, formed a hammer candlestick formation on daily chart indicating potential upside correction testing 1.3750 resistance area, but overall the bearish scenario should remains intact as long as price move inside the bearish channel and I still prefer to sell on rallies. Break above 1.3750 area could trigger further bullish correction back towards 1.3850 even 1.4030 area. Initial support at 1.3585 (Friday’s low). Break below that area should trigger further bearish momentum with technical target around 1.3490 – 1.3400 area this week.

(more…)

By Malika Sharma

Swing Trading indicators are what the professional traders use. Indicators support the professional traders on their decision making technique. The banks and the professional traders use the indicators to the maximum achieving better results. The stock charts need to be well described through the use of indicators. Generally, an indicator perfectly complements the stock charts. Try to be careful while placing a large number of indicators on a single stock chart as it might result into complicated charts to read and analyse. Some of the indicators which are usually used by the traders are namely moving averages, stochastic indicator, and relative strength indicator.

Moving averages are considered to be the most traditional and widely accepted type of an indicator. They are preferred as they easily help in identifying the trends. The professionals of the trading industry want to have a view of the trends for the long terms. This could be best viewed by using 150 and 200 moving averages. These type of moving averages are normally used when you are about to place an indicator on the stock chart. Identifying the trends is one of the purposes of the moving averages while the other reason is to have a brief knowledge about support and resistance areas.

(more…)

The dollar rose on Friday for a third consecutive day, pressuring stocks and commodity prices for a third day. US nonfarm payrolls declined a modest 20K in January with the unemployment rate falling to 9.7%. The S&P 500 gained 3.08 to 1,066.19 and erased earlier large losses as US consumer credit declined less than forecast and support at 1050 held. The yen fell versus the dollar but rose against most other key currencies on carry trade unwinding. The euro declined amid ongoing concerns about the fiscal stability in the PIGS countries and concern that efforts by Greece, Portugal and Spain to reduce their deficits will hurt the fragile economic recovery. Sterling fell despite higher-than-expected producer-price inflation. The oversold Australian and Canadian dollars rose. The Canadian dollar was supported by an unexpected drop in Canada’s unemployment rate and stronger-than-expected employment growth. The Swiss National Bank reportedly intervened in the FX market to prevent the Swiss franc from further appreciation against the euro after the EUR/CHF fell to the lowest level since October 2008.

The dollar index rose for a third straight day and touched the highest level since July 9. The appreciating dollar is increasing deflationary pressures, depreciating risky assets and may end the US/global fragile economic recovery. The dollar index rose about 9% since the beginning of December. There are support in the 79-area and important resistance at the 81 area. We expect a consolidation between the support and resistance.

(more…)

By D Bennett

A trading plan gives a day trader points of reference as market action unfolds quickly in real time. It enables them to always know what to do next, and how to do it. Specifically the plan should answer four key questions.

1. When should a trade by opened?

You must specify some trigger which will signal you to take a trade, for example: (i) Buy if price moves down to a key support level or penetrates a resistance level. (ii) Sell if a "fast" moving average crosses below a "slower" one. (iii) Buy if an expected news item meets some specific criterion. The trigger must be clear, unambiguous and easily determined in the heat of battle. When the trigger is detected, you act.

2. How large should the trade be?

A signal to buy or sell is not enough unless you also know what size investment to make. In futures trading, this means knowing how many contracts to buy or sell. There are various strategies you might choose. For example: (i) Always trade the same number of contracts. (ii) Identify where the initial stop loss order is placed, calculate the level of risk per contract, and divide this into the highest level of acceptable risk per trade to find the number of contracts to trade.

It is very easy to get this wrong and find yourself carrying too much risk, or missing opportunities by being in too small a position. Trading with the right position size is possible the factor which makes the greatest contribution to the ultimate success or failure of the trader.

(more…)

USD Higher, US Unemployment Rate Drops to 9.7%

• USD: Higher, unemployment rate posts an unexpected decline, nonfarm payrolls below expectation
• JPY: Lower, Toyotas CEO says the company is in crisis, risk recovers on better US employment report
• EUR: Lower, concern about EU fiscal troubles
• GBP: Lower, producer prices rise more than expected
• CAD and AUD: AUD lower & CAD higher, Canada’s unemployment rate drops jobs, growth rises by 43k

Overview

US January headline unemployment posted an unexpected decline to 9.7% from 10% last month and nonfarm payrolls dropped by 20k. The average workweek increased to 33.3 hours from 33.2. 8.4mln jobs have been lost since the start of the recession in December 2007 compared to the 7.2mln originally reported by the Labor Department. The number of long-term unemployed rose to 6.3mln. December nonfarm payrolls were revised to -150k from -85k, October nonfarm payrolls revised to -224k from -127 and November nonfarm payrolls were revised up 64k from up 4k. The US economy continues to shed goods producing and construction jobs with jobs increasing in services and retail.  Government hiring down slightly.  The USD initially pared overseas gains and the JPY traded lower after the release of better than expected US headline unemployment. USD resumed its rally as US equities traded lower and the unemployment report failed to lift market gloom. Despite the drop in headline unemployment the US still shed 20,000 jobs last month and the data failed to boost risk appetite.

Ahead of today’s release of US January unemployment the USD traded higher with the EUR trading at an eight month low. USD is supported by a spike in risk aversion sparked by concern about debt troubles in Europe and worries about the global recovery. European credit default spreads continued to widen. Expanding EU budget deficits are seen as a threat to the European recovery. Recent tightening of lending conditions in China generates concern about the global recovery. Risk aversion is the major driving factor for the financial markets and Forex trade. Report of a sharp decline in German industrial output adds to negative sentiment towards the EUR. EUR down side was limited by report of SNB intervention. The SNB is rumored to have intervened as the EUR/CHF cross traded at a 15 month low. GBP traded lower with downside limited by report of higher than expected producer prices in January. Commodity currencies traded mixed pressured by the spike in risk aversion with CAD downside was limited by report of an unexpected drop in Canada’s unemployment rate and stronger than expected jobs growth for Canada in January. The trade will continue to monitor the direction of equities to gauge risk sentiment with focus on EU response to the debt crisis. (more…)

Daily Technical Analysis

EURUSD

The EURUSD had a significant bearish momentum yesterday, break below 1.3750 key support area, bottomed and closed at 1.3723. This fact should lead us to further bearish scenario towards 1.3490 area. The bias is bearish in nearest term targeting 1.3580 area. Immediate resistance at 1.3750 – 1.3800 area. Break above that area should lead us into no trading zone but I prefer a bearish scenario at this phase with sell on rallies strategy as the bearish momentum seems very strong at this phase.

On fundamental side, we will have US NFP data today, which is expected at 10K. If the actual number is at least the same or even better than expected, the Euro should keep under heavy pressure. On the other hand, a worse than expected result may give some support to the Euro but overall the Dollar should still has the advantage as risk aversion seems to increase as stocks and gold are heading lower while Greenback strengthen

(more…)