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Bank of Canada on tap today - cut or no cut? AUD under pressure once again on weak Retail Sales

2007-12-04T19:19:00.001+07:00

04 December 2007

Bank of Canada on tap today - cut or no cut? AUD under pressure once again on weak Retail Sales.

Bank of Canada may cut rate rates to prevent another round of scary appreciation of the loonie.

MAJOR HEADLINES – PREVIOUS SESSION

Overnight developments:

*

UK Nov. BRC Retail Sales monitor says Retail Sales rose 3.1% YoY, as discounting increased revenues.
*

Australia Oct. Retail Sales out at 0.2% vs. 0.6% expected
*

Australia Oct. Building Approvals out at -2.8% vs. -2.0% exp., but Sep. approvals revised up 1.8%

THEMES TO WATCH – UPCOMING SESSION

Key event risks today (all times GMT):

* Norway PMI (0800)
* UK Construction PMI (0930)
* EuroZone Oct. PPI (1000)
* Bank of Canada announces rates (1400)
* US ABC Weekly Consumer Confidence (2200)
* Australia RBA Cash Target (2230)
* Australia AiG Performance of Service Industries (2230)
* Australia Q3 GDP (0030)

Market Comments

Plenty of market focus on the Bank of Canada today. As we mentioned yesterday, the market is almost exactly 50/50 on whether we'll see a 25 bp cut from the BoC. The data has been a bit mixed of late, but a very weak recent Retail Sales number and low inflation data from Canada may be enough of a green light for a cut. The BoC clearly wants to avoid another round of extreme appreciation of the loonie. In any case, one would suspect plenty of action in USDCAD after the decision. A cut might lead to USDCAD testing the old low above 1.0325.

US Treasury Secretary Paulson was out yesterday outlining a possible plan for mitigation of subprime loan rate resets in an attempt to bail out some of the lenders and stabilize the subprime market. For excellent commentary on this issue, see Caroline Baum's latest column on bloomberg.com. Her commentary helps show why building any equity market rally (or rally in risk appetite in general) based on "the US govt to the rescue" on subprime is a very feeble proposition indeed.

Many market commentators are pointing out that with the tremendous trend we have seen this year in the USD, many funds and others out there will look to deleverage into year end, as speculative short USD positioning has been quite extended. This possible end-of-year deleveraging would be supportive of the USD and could explain why the USD is not really reacting negatively to widening rate differentials that should be causing more weakness, all other things being equal.

The GCC summit is not living up to its hype so far as currency issues were apparently not on the agenda yesterday. With oil prices off USD 10 from their recent highs, will the gulf powers try to duck the issue for now to "see what happens " down the road?

The US Fed's Yellen joined the parade of more dovish Fed rhetoric yesterday as she said she saw signs of very sluggish consumption and bigger risks to growth than she saw previously. Although she is not a voting member on the FOMC, she is considered influential. The market is looking for significant, but less than 50% odds, for a 50bp cut on 11th Dec.

US ISM Manufacturing data out yesterday was exactly as expected at just above 50, and therefore just above the level that divides expansionary from recessionary manufacturing activity. The more important number for the overall US economy this week will be the ISM Non-manufacturing - released tomorrow - which is still expected to come in well above 50. If we are going to see a recession in the US, that number will need to fall more..

On the risk aversion trade, we've been looking for a strong continuation of the JPY cross sell-off, and haven't really been seeing it. Could this also be due to end-of-year factors and a market that has been endlessly frustrated in trying to see a bigger unwind of the carry trade?. Uncertainty levels are rising as these carry trades can't make up their minds for now it seems. Of course, if equity traders dive for the exits again, we could have a story there ...

Charts: AUDUSD and GBPCHF

AUDUSD: Further signs of a bit of deceleration in Australia overnight as Retail Sales came in far weaker than anticipated. The market may further unwind expectations for a rate hike (currently priced for early next year) on further data weakness. Watch for the GDP data tonight. On the AUDUSD chart, it appears that the battle lines are drawn. The first attempt lower through the head and shoulders formation, with neckline at 0.8750, resulted in no follow through. Instead, we've seen a rangebound market capped by the 55-day SMA. This chart needs to resolve soon, with either a break of the sub 0.8700 lows or a rally through the 55-day SMA. We prefer an eventual downside resolution, but we may need to see an outright market pricing of rate cuts from the RBA before we see a bigger AUD unwind. AUD will also be very sensitive to any further unwind in base and precious metals and equity markets.

GBPCHF: Here's an interesting play for those looking for a rate cut from the BOE on Thursday. GBPCHF was rather overextended to the downside and has seen a sharp rally from the lows. While there's a bit more room until the "final resistance" area provided by the old low (2.3500-ish), the near-doji candle yesterday is showing signs of uncertainty as GBPCHF may soon be ready to resume the sell-off.

Central Bank Bonanza kicks off this week with BoC, RBNZ, ECB, and BOE announcements all on tap

2007-12-03T17:35:00.000+07:00

Forex Market Update, 03 December 2007

Is it time for risk averse positioning again? Key resistance levels approaching on the carry trades.

MAJOR HEADLINES – PREVIOUS SESSION

Overnight developments:

*

China Nov. Manufacturing PMI out at 55.4 vs. 53.2 in Oct.
*

Australia Nov. AiG Performance of Manufacturing Index out at 53.8 vs. 53.3 in Oct.
*

Japan Q3 Capital Spending rose 3.4% YoY vs. 3.3% in Q2
*

Australia Oct. Trade Balance out at -2983M vs. -1800M expected and -1916M in Sep.

THEMES TO WATCH – UPCOMING SESSION

Key event risks today (all times GMT):

* Switzerland SVME PMI (0830)
* EuroZone Nov. PMI and Individual member country Manufacturing PMIs (starting 0845)
* EU ECBs Trichet to speak (0930)
* US Fed's Rosengren to speak on subprime issue (1300)
* US Nov. ISM Manufacturing (1500)
* US Fed's Yellen to speak in Seattle (2030)
* Australia Oct. Retail Sales and Oct. Building Approvals (0030)

Market Comments

The USD finished the session very strongly on Friday, but the strength smelled a bit of end-of-month fixing factors and then stop-triggering on Friday rather than any new fundamental developments. In fact, as we discussed Friday, interest rate differentials continue to favor the USD even weaker, and we'd like to see a correction there before hopping aboard the move in USD strength beyond the shortest term here... The 1.4715 area is the key short term resistance for EUR/USD. EURUSD is tough to call lower for the moment if we glance at the rate differential trend of late, even if the short term technicals suggest that we have seen a technical break here. CAD and AUD are also looking vulnerable against the greenback, particularly if we get a technical follow through on the charts there.

Having a look at the data from Australia overnight, it would seem that expectations for tightening from the RBA early next year may quickly fade -and AUD may be very vulnerable here as gold price reamin under pressure. Imagine that Australian trade balance if commodities see a sharp correction on global growth fears... We have a look at AUDCHF in the Charts section below as a possible way to play for a weaker AUD unit.

The Bank of Japan's Fukui was valiantly trying to talk up the prospects of further rate tightening overnight, but it's questionable how much the market believes him and odds for a rate hike at the Dec. 20 announcment are very low. In any case, Fukui's rhetoric was the excuse given to the JPY strengthening overnight, and the JPY crosses may be ready to fall once again - not on a hawkish BoJ, but due to the prospects of a renewal of the risk aversion trade, which has much further to go in the big picture, we fear.

This week sees a host of Central bank meetings - the most interesting perhaps being the Bank of Canada announcement tomorrow - as the a 25 bp cut is an approximate 50/50 proposition as USDCAD trades at the fulcrum of 1.0000. Considerable movement may be seen in either direction depending on where the hammer falls. We look for a cut as the Bank may want to make a statement to the market after the scary appreciation of the loonie before its recent sell-off.

The other interesting announcment will be from the Bank of England on Thursday - here the market is leaning for a cut, as it definitely should. The Times Shadow MPC was out this morning, with 3 members looking for a 50 bp cut and 1 even looking for 75 bps! Although the GBP crosses got a boost on Friday after a strong CBI report and a BOE expressing two-sided risks, the short GBP trade may be worth putting on again versus the likes of CHF and EUR this week as we've seen significant consolidation there. GBPUSD is also interesting as it approaches the 55-day SMA just above 2.0500. In other central bank news, the ECB is not expected to move on Thursday, nor is the RBNZ on Thursday (Wed. evening European time), but we should of course note hints in the rhetoric.

The other main focus for the week will be the US data, with the ISM manufacturing index today (a weak number could be disappointing for the view that US manufacturing should find strength on a weaker USD), the ISM Non-manufacturing number mid-week. This is ahead of the key US employment report, which could be very weak assuming the usual statistical manipulation doesn't warp the results...

Watch the GCC summit for announcements on currency pegs as well!

Chars: AUDCHF and USDJPY

AUDCHF: We saw a significant, sharp bounce in this carry trade last week as equity markets regained their footing. But with Australia seeing poor data overnight and gold selling off, this trade may be ready to resume the downtrend. Note that the bounce stopped right at the 0.382 Fibo retracement. Risk of further upside would come if equity markets continue higher.

USDJPY: It looks like Fibonacci-ists were having a busy night, as the USDJPY rally last week was stopped exactly at the 0.382 Fibonacci level and ahead of the "final" resistance area around 111.60/80. Minor support comes in at 110.45, a close back below 110.00 could mean that the sell-off is ready to resume.

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Bernanke comments possibly threaten the USD rally as rate comparisons could put pressure on the greenback.

2007-11-30T17:05:00.000+07:00

Forex market update 30 November 2007

Bernanke comments possibly threaten the USD rally as rate comparisons could put pressure on the greenback.

Bernanke not as dovish as Kohn, but December rate cut looks a certainty - some now calling for a 50 bp cut. BOE says it is in a tough spot on inflation and growth.

MAJOR HEADLINES – PREVIOUS SESSION

Overnight developments:

*

Japan Oct. Jobless Rate out at 4.0% as expected
*

Japan Oct. YoY Overall Household Spending out at 0.6% as expected
*

Japan Nov. Tokyo CPI out at 0.3% as expected
*

Japan Oct. National CPI out at 0.3% vs. 0.1% expected, but ex Food and Energy CPI out at -0.3% as expected.
*

Australia Oct. Private Sector credit up +1.0% vs. 1.1% expected
*

Australia Q3 Current Account Balance out at -15.6B vs. -16.4B expected
*

Japan Oct. YoY Housing Starts out at -35.0% vs. -36.3% expected
*

Switzerland Q3 GDP out at 0.8% vs. 0.7% expected
*

Switzerland Nov. CPI out at 0.5% vs. 0.2% expected
*

Germany Oct. Retail Sales out at -3.3% vs. -0.4% expected

THEMES TO WATCH – UPCOMING SESSION

Key event risks today (all times GMT):

* Norway Oct. Credit Indicator Growth (0900)
* EuroZone Nov. CPI estimate (1000)
* EuroZone Q3 GDP (1000)
* EuroZone Nov. confidence indicators (1000)
* EU ECB's Tumpel-Gugerell to speak (1030)
* UK Nov. GfK Consumer Confidence Survey (1030)
* US Oct. Personal Income, Spending and PCE Core (1330)
* Canada Sep. GDP (1330)
* US Nov. Chicago PMI (1445)
* US Oct. Construction Spending (1500)
* US Fed's Kroszner to speak (1840)
* US Fed's Poole to speak (2100)

Market Comments

The FX market is sending a very mixed message here, as we have seen a bit of scrambling of themes of late. On the one hand, equities have launched a tremendous relief rally, at least partly fed by the prospects of further Fed easing in the immediate future. Bernanke's comments last night were not quite as dire as Kohn's, yet his focus on the uncertainty of the "current stresses in financial markets" suggests that he will be in favor of the 25 bp cut that the market has already priced in for the Dec. 11 Fed meeting (in fact, the market has moved into giving reasonable odds of a 50 bp cut at that meeting). "Current stresses", indeed, as the spread between, for example, US 3-month libor and the 3-month US t-bill has widened to 216 basis points yesterday - a level not seen since the 1987 stock market crash. This is a very ugly sign of panicky illiquidity and credit evaporation. Junk bond spreads are also showing credit stress.

At the same time, however, EM fixed income spreads have tightened over the last few days, and other credit measures have eased off a bit as well - and the stock market has decided to line up at the rate-cut punchbowl for now, so the risk-willing trades have enjoyed a few days in the sun. EM has rallied sharply to erase the recent short squeeze and the JPY has sold off again on stronger global equity performance. We prefer to recognize the risks of the other warning signals that are key market inputs and suspect that this move to higher risk appetite will not extend much farther. This would suggest an eventual turnaround to the downside again for the JPY crosses and EURCHF.

The GBP got mixed news yesterday, with the housing market showing clear signs of turning south, but the CBI report showing a resurgent consumer and heady inflation levels. The BOE member comments to parliament suggests they feel they are in a tough spot, as there were both growth and inflation risks. King stated: "certainly compared with the very small movements we've seen in the last 10 years, this looks like a very sharp slowdown." Yet inflation worries may be high enough to prevent any move in the near term on rates, and GBP may therefore avoid the sell-off extension we've been anticipating for the very short term - though the longer term case remains.

Certainly for the USD, the risks remain that we could see another leg of selling if we look at rate comparisons. We have been pulling for a USD rally in recent days, but the CB rhetoric has not been supportive at all and the market continues to price even more aggressive easing by the Fed. Certainly wait for technical breaks before selling USD. Beware that end of month fixing factors could cause exaggerated/erratic moves today.

Next week certainly looks important, with the GCC summit and possible depegging announcements, the BOE and ECB meetings, and a look at US payrolls data and ISM readings. The trend seems to have taken a turn for the worse on US employment as the unemployment rate fell consistently since mid-2003 before ticking up mid-2007. Weekly jobless claims have been very high of late. Fresh USDJPY shorts may be the place to be again soon.

JPY crosses bounce back from the abyss once again - but for how long? Are we in for another "Thanksgiving Surprise" for the USD?

2007-11-22T15:46:00.000+07:00

Forex market update | Thursday, November 22, 2007

JPY crosses bounce back from the abyss once again - but for how long? Are we in for another "Thanksgiving Surprise" for the USD?

The USD has tumbled sharply twice in the last three years over the Thanksgiving holiday.

MAJOR HEADLINES – PREVIOUS SESSION

Overnight developments:

*

US equities closed sharply lower at new lows since August, while Japan's market bounced sharply from new lows and JPY crosses also bounced in the Asian session.
*

US 2-year note benchmark closed below 3.00% for the first time since late 2004
*

UAE lowers rates in line with the Fed to temper revaluation speculation

THEMES TO WATCH – UPCOMING SESSION

Key event risks today (all times GMT):

* US Markets Closed for Thanksgiving Holiday.
*

Switzerland Q3 Employment Level (0815)
*

Swedish Riskbank's Nyberg to Speak on Credit Turmoil (0900)
*

UK Q3 Total Business Investment (0930)
*

ECB's Trichet out speaking on French television (1630)
*

UK BOE Deputy Governor Lomax to make speech (2000)

Market Comments

Developments in US markets took the headlines again yesterday, as equities turned south rapidly into the close ahead of the long weekend (for most, as Thursday markets are closed and some markets in the US open for a half day on Friday). This also meant that US rates closed sharply lower and underlined the bearish case for the USD in terms of rate differentials with Europe, among others. But the JPY strengthening was halted for the short term once again Japanese importers were apparently out overnight locking in JPY at these relatively elevated levels. This pulled the JPY crosses back from the brink once again, as the cross/JPY pairs have been near impossible to trade of late. EURJPY, for example, crossed the important 160.50 threshold yesterday and posted minor new lows before storming back higher for the sixth consecutive day of sharp direction changes. The 55-day SMA comes in just above 163.00 and seems vital resistance for the cross, which we prefer lower eventually as the global move away from carry takes hold (the final exhaustion of the EURUSD rally will also be important for any big EURJPY unwind).

EM currencies are certainly responding to the risk aversion theme as EUR/CEE currencies are moving higher. Could EURISK be a leading indicator for what awaits many of the EM currencies? Of course, the recent S&P downgrade was not helpful, to say the least, in the specific instance of ISK. In G10, AUD is bearing the brunt of the "slowing global growth" theme, as it should. AUD/USD just crossed the 0.8750 threshold, but with the USD under so much pressure elsewhere, volatility could mean that the path lower could be a rough one.

As we noted in the headline of this publication, EUR/USD saw a large rally over Thanksgiving in both 2004 (Wed close 1.3186, Fri Close 1.3296 for a new high) and especially 2006 (Wed Close 1.2942, Fri Close 1.3093), so don't count out the period as a quiet holiday time, but rather as a nervous one...

It's tough to say whether this will happen this year, though the ingredients are there with the rather panicky close yesterday in US markets. In general, with the very poor liquidity conditions of late and the holiday only making matters worse, moves could be erratic and exaggerated.

The next key focus is the next round of CB meetings, especially the Fed's on Dec 11. Again, we note the contrast between Fed rhetoric, which has consistently begun to mention the risks of a weak USD, and the market's very aggressive view that further sharp interest rate easing is ahead. A Dec 11 "no cut" is a rather tantalizing idea, even if it's a very long longshot at this point.

Charts: NZDUSD

Is NZD the "next one to go"? In the carry universe, NZD has actually done relatively well of late considering it is usually the first one to get hit on risk aversion - like we saw in the August credit crunch. Perhaps the focus on AUD and AUDNZD selling has been keeping NZD a bit artificially elevated. We certainly have a hard time with a strong NZD in a risk averse market. For NZDUSD, a series of important supports are coming into view: the "neckline" like area defined by the blue line below, and the 55-day (in red) and 200-day (in black) moving averages. A fall through this zone of support could open up considerable downside.

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Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.

Please read our full Analysis Disclosure & Disclaimer at www.saxobank.com/analysis/disclaimer.

[Forex Market Update] Carry trades pull back from the brink of key support - market remains nervous. EURUSD may be set to try at the recent top.

2007-11-20T11:09:00.000+07:00

Carry trades pull back from the brink of key support - market remains nervous. EURUSD may be set to try at the recent top.

FOMC minutes and more US housing market data on tap for today.

MAJOR HEADLINES – PREVIOUS SESSION

Overnight developments:

*

US Nov NAHB Housing Market Index at 19 vs. 17 expected, and the Oct number was revised to 19 from 18
*

Former BoJ official stated that the US subprime debacle kept Japan from raising rates.
*

Germany Oct Producer Prices rose 0.4% vs. 0.3% expected
*

Switzerland Oct Trade Balance out at +1.56B vs. 1.49B expected

THEMES TO WATCH – UPCOMING SESSION

Key event risks today (all times GMT):

* Norway Q3 GDP (0900)
*

UK Oct BSA Mortgage Approvals (0930)
*

UK Nov CBI Industrial Trends Survey (1100)
*

Canada Oct CPI (1200)
*

US Oct Housing Starts and Building Permits (1330)
*

US Minutes of FOMC Meeting of Oct 31 (1900)

Market Comments

Yesterday, the market responded to the crescendo of worry evident in various risk meausures as equities sold off further and the Dow Jones Industrials average posted its lowest close since the mid-August credit crunch. FX responded with the JPY making gains and the commodity currencies struggling. But fading momentum was evident in the Asian session, as USDJPY bounced strongly from a marginal new 3-day low and EURJPY bounced back from the key 160.50 area support. Commodity currencies also pulled back from key support (see AUDUSD chart below). Apparently, some of the bounce was due to rumors of an emergency Fed meeting to cut rates, but also due to a bid for a Japanese bank by a US buyout firm With several days in a row of direction changes, this carry trade has become a difficult one. Meanwhile, EUR/USD has been biding its time in a narrow range and may have consolidated enough for an attempt at the recent and all-time top at 1.4750, but perhaps only if JPY remains rangebound.

The FOMC minutes are up today - let's see if they can offer the market any surprises. Although Fed rhetoric has very much begun to recognize the inflation risks inherent in continuing to cut rates in the face of a flailing USD, the market is still aggressively pricing in further easing from the Fed as this shift has seen little affect on actual rate expectations. The Fed Funds rate now stands at 4.50%, yet US 6-month treasuries just closed below the 3.50% threshold yesterday. This is an extraordinary expression of lack of confidence in the economy heading forward. The fixed income market is showing white-knuckle worry indeed. For the USD to get much support against the other majors, we would really need to see an easing of this worry relative to the yield curve in Europe. German 2-year rates fell sharply to 3.70% yesterday, but still are close to recent highs in yield vs US 2-year rates, which closed at 3.2% yesterday.

We also have US housing starts and building permits numbers today - the most forward looking of the US housing numbers, but we wonder if these will get much focus - as only shockingly good numbers would call into question the overall trend. Watch for the Canadian CPI figures today as these will be key for determining the prospects of a cut in rates by the Bank of Canada going forward. The BoC seems the most likely to follow Norges Bank in heavily adjusting growth and inflation projections lower due to a strong currency.

The general and rather difficult picture is this: global risk measures are still screaming a warning signal, but the markets have only partially responded. The short-term technical picture looks a bit choppy and rangy. Add to this the risk of thin markets with a very long US weekend immediately ahead and the short-term picture is difficult indeed. We still look for the risk aversion trade to reestablish soon.

Charts: EURUSD and AUDUSD

EURUSD has been quietly consolidating in a range as the focus has been on JPY crosses and the commodity currencies. If things remain rangebound on that front, the pair may have a chance at trying for the 1.4750 top if 1.4690 gives way. Still, the USD picture today could be jumpy with the FOMC minutes on tap.

AUDUSD - broke through the 55-day moving average, which was clearly serving as support, and further fell to test the even more important 0.8750 area, which is increasingly looking like a head and shoulders neckline. While the short-term bounce leaves bears disappointed and could lead to further short-term gains, the significance of the 0.8750 area has been underlined once again for this pair.

Credit worries dominate once again - are we in for another wild Friday? Is EURUSD ready to consolidate lower?

2007-11-16T09:38:00.000+07:00

Gold tumbled yesterday - has AUD priced in enough worry?

MAJOR HEADLINES – PREVIOUS SESSION

Overnight developments:

* US Philadelphia Fed out at 8.2 vs. 5.0 expected
* US Fed's Hoenig says he is in "wait and see" mode on interest rate policy
* China Oct Fixed Assets Investment rose 26.9% YoY vs. 26.2% expected
* Switzerland Retail Sales rose 7.1% in Sep (YoY) vs. 4.2% expected

THEMES TO WATCH – UPCOMING SESSION

Key event risks today (all times GMT):

*

US Fed's Kroszner to speak on Economic Outlook (1345)
*

US Sep Net Long-term TIC Flows (1400)
*

US Oct Industrial Prodution and Capacity Utilization (1415)

Market Comments

Credit worries are accelerating as the likes of Fannie Mae are being dragged into the fray and dark rumors of various other market behemoths in trouble are swirling. This could be a day to remember in markets as risk aversion could remain very elevated. Again, we think this favors JPY above all, but also the USD and CHF.

Looking at how things have played out in this very large correction, we notice that many of the riskier currencies have already taken a rather large hit versus the USD - here we're talking about the "other dollars" and the likes of NOK and GBP. But the EUR has remained perhaps a bit too elevated, as normally it's relative movements to the USD have been tightly correlated with other currencies' movements versus the greenback. The short term support at 1.4600 is breaking as this is being written, and we wonder if this could be the kick-off point for further waterfall declines toward a reasonable consolidation levels. Although credit worries are grabbing the headlines, there seems to be a growing noise level on the prospects of a global growth slowdown, which means that other currencies' forward expectations have further room to fall compare to the expectations for the US economy, which are already very low.

Still, the emerging markets are amazingly resilient as not all of the panic buttons have been pressed, and there's always the risk of "one more round" of short-term optimism, or the risk that the market gets overpositioned in the short term. Still, it would seem that this risk aversion theme has further to run as real systemic risk in the financial industry is increasingly evident. This could mean a wild ride into the close today.

In the UK, the negative Retail Sales reading pushed GBPUSD below the 2.0500 level, and the pair could be set to test the next key support area at 2.0000 with 2.0500 serving as resistance now.

One of the currencies that should be really suffering in this environement is the AUD, and with yesterday's more than 30-dollar drop in gold prices and copper prices breaking to new lows this morning, we wonder why AUD is not even weaker - keep an eye on that one as a global growth slowdown should be devastating for AUD. One possible reason AUD is finding support is continued capital flows and the fact that the interest rate view for Australia hasn't seen any downward adjustment thus far.

Chart: EURUSD was breaking the short-term support at 1.4600 this morning and is having a look at breaking the rising trendline here. A sustained sell-off here could have the pair focusing on the 0.618 Fibo down at 1.4365, which is also close to the old high at 1.4345.

Risk Warnings:

Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.

[via]www.saxobank.com/analysis/disclaimer.

Carry trades snap back higher on huge equity rally. Key US inflation and Retail Sales data on tap.

2007-11-15T05:57:00.001+07:00

Shorts in the JPY crosses getting squeezed. USD still on the defensive as market continues to look for Fed cut in December.

MAJOR HEADLINES – PREVIOUS SESSION

Overnight developments:

*US Oct Pending Home Sales rose 0.2% vs. a drop of -2.0% expected
*New Zealand Q3 Producer Prices - Input/Output out at +2.3%/1.6% vs. 1.1%/1.1% expected
* US ABC Weekly Consumer Confidence out at -17 vs. -16 expected

*Australia Nov Westpac Consumer Confidence dropped -4.2%

*Australia Oct Wage Cost Index rose 4.2% YoY as expected

*China Oct Retail Sales rose 18.1% vs. 17.0% exp.

*Germany's Q3 GDP rose 0.7% as expected

THEMES TO WATCH – UPCOMING SESSION

Key event risks today (all times GMT):

*France Q3 GDP (0745)
*ECB's Trichet to speak at event (0800)
*UK Sep Avg Earnings and Oct Jobless Claims Change and Claimant Count (0930)
*EuroZone Q3 GDP (1000)
*UK Bank of England Quarterly Inflation Report (1030)
*US Weekly MBA Mortgage Applications (1200)
*US Oct Producer Price Index (1330)
*US Oct Advance Retail Sales (1330)
*US Fed's Bernanke out speaking (1410)
*New Zealand Sep Retail Sales (2145)
*New Zealand Oct Business PMI (2300)
*Australia Reserve Bank Monthly Bulletin (0030)
*New Zealand Non Resident Bond Holdings (0200)
*China Industrial Production (0200)

Market Comments

US equity markets got a big boost yesterday as one of Wall Street's titans Goldman Sachs claimed that it was weathering the subprime debacle quite well (the market decided to focus on this good news at least, as there were negative announcements elsewhere and Goldman itself said it expected that the credit crisis would worsen). Also, WalMart earnings were bettter than expected and their holiday outlook is far more positive than the market has been fearing. This combined with a very large sell-off in crude, and the market had plenty of reason to toss fear aside for the moment and consolidate. In the FX market, this of course resulted in a big swing higher for the carry trade after its recent precipitous drop. Whether this rise can continue for the short term will likely be determined by the US data releases today.

US data today: PPI is an important inflation number, but perhaps less followed than the PCE Core and CPI. Still, today's expectation is for a new 2-year high at 2.6% after the index ticked back over 2.0% the last 3 months. More importantly, the Retail Sales data out today is expected at a mere +0.2% less Autos. There is a strong risk that this number comes in worse than expected as shopping center data released yesterday showed the lowest rate of YoY growth since 1995. The risk to calling a lower number is that higher gasoline spending from elevated prices sometimes obscures weakness in discretionary consumer spending areas.

Somewhat ironic in this environment is that highly negative US data could actually boost the USD more than highly positive data as negative sentiment and sharply weaker equities seem to be associated with the USD and JPY strength and positive sentiment seems to have the opposite effect.

As long as the market continues to look for a December cut from the Fed (fully priced in), the USD will have a hard time sustaining a rally unless equities sell off again, and even more importantly further out, unless we begin to see further signs of weak data elsewhere. The UK seems to be at the head of the pack in this area - but we look for further signs of deceleration from Europe soon. Today's GDP data from EuroZone is not very relevant for the forward situation, unfortunately.

We looked at the potential to play a lower volatility pair in selling EURSEK yesterday, which continues to show signs of reversing lower. The short term key for the pair is a close through the 9.2400/9.2350 area for a possible continuation to the 9.1000 area. The Riksbank minutes were supportive as the officials voted unanimously to raise rates to parity with the ECB rate and looked to hike them again at the meeting in December (as they seem less hamstrung by the weak USD situation). The risk is that SEK seems to be loosely correlated with the risk aversion theme, so if everyone is diving for the bomb shelters again, long SEK trades could sour.

Charts: EURCHF and GBPUSD

EURCHF is one of the classic risk appetite trades, and it finally showed signs of a bounce yesterday as it was closing in on the 55-week moving average. If the bounce in risk appetite continues here, there could be room for the pair to have a go at the 55-day SMA over the short term (shown as 11-week SMA). The bearish technicals would really set in if the pair breaks the old rising trendline and crosses the 55-week SMA and recent lows. We look for eventual confirmation of the bearish potential.

GBPUSD. The UK may be at the "head of the pack" in catching up to the US' economic weakness, and we see little further upside potential for GBPUSD for the cycle. The recent sell-off seems to have inflicted mortal damage on this chart. Still, we need to see some follow through below the 2.0500 area the 55-day SMA not far below to get confirmation that further weakness is in the cards and for appropriate trade triggers.

Note: the support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.

EURUSD
=======
Resist.
=======
1.4810
1.4698
1.4650
1.4662
1.4538
1.4473
1.4361
=======
Support
Quoted:
14 Nov 07
07:41 GMT
========

GBPUSD
=======
Resist.
=======
2.1145
2.0905
2.0806
2.0810
2.0566
2.0425
2.0185
=======
Support
Quoted:
14 Nov 07
07:41 GMT
========

USDJPY
=======
Resist.
=======
113.89
112.13
111.51
111.47
109.75
108.61
106.84
=======
Support
Quoted:
14 Nov 07
07:41 GMT
========

EURJPY
========
Resist.
========
167.80
164.36
163.16
163.45
159.72
157.48
154.04
========
Support
Quoted:
14 Nov 07
07:41 GMT
==========

USDCAD
=========
Resist.
=========
1.0022
0.9817
0.9702
0.9554
0.9497
0.9407
0.9202
=========
Support
Quoted:
14 Nov 07
07:41 GMT
==========

USDCHF
========
Resist.
========
1.1409
1.1338
1.1307
1.1236
1.1236
1.1196
1.1125
=========
Support
Quoted:
14 Nov 07
07:41 GMT
=========

AUDUSD
========
Resist.
========
0.9344
0.9120
0.9038
0.9052
0.8814
0.8671
0.8447
========
Support
Quoted:
14 Nov 07
07:41 GMT
=========

NZDUSD
========
Resist.
========
0.7913
0.7731
0.7661
0.7647
0.7479
0.7367
0.7185
========
Support
Quoted:
14 Nov 07
07:41 GMT
==========

Risk Warnings:

Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.

[Via]

Forex Market Update

2007-11-14T11:11:00.000+07:00

Japan's PM warns on JPY appreciation and puts JPY back on defensive. UK key RICS housing survey even worse than expected. UK inflation numbers on tap.

SEK turns stronger again ahead of Riksbank minutes - is the EURSEK rally over with?

MAJOR HEADLINES – PREVIOUS SESSION

Overnight developments:

* Japan's Prime Minister Fukuda warned that the JPY is appreciating too rapidly
* Japan's BoJ voted 8-1 to keep rates unchanged at 8-1 at its rate setting meeting
* Japan Q3 GDP out at 0.6% QoQ vs. 0.5% expected
* UK RICS House Price Balance out at -22.2% vs. -18.0% expected
* Australia Oct NAB Business Confidence out at 9 vs. 7 in Sep.
* China Oct Consumer Price Index out at 6.5% YoY vs. 6.3% expected

THEMES TO WATCH – UPCOMING SESSION

Key event risks today (all times GMT):

* Sweden Riksbank Minutes from Oct 29 rate meeting releases (0830)
* UK Oct CPI/RPI (0930)
* Germany/Eurozone ZEW Survey (1000)
* US Pending Home Sales (2000)
* US Weekly Consumer Confidence (2200)
* Australia Westpac Consumer Confidence (2330)
* Australia Wage Cost Index (0030)
* China Retail Sales (0200)

Market Comments

A rare bout of good news from Japan as the GDP numbers came out better than expected on better than expected consumer spending. Still, exports, which are vital for Japan's growth, showed worrying signs of slowing. Also, the PM is already out with Japan's first round of verbal intervention with USDJPY trading around the 110 handle. This seems to be a psychologically important area for exporters and officialdom with Japan's economic prospects so reliant on exports considering its moribund domestic scene. Recall that the lows in the brief spring 2006 EM blowout was 109 in USDJPY, which we almost exactly touched yesterday. Volatility is ensured short term, in any case!

Elsewhere, we've seen a first big wave in USD strength yesterday, and that is fading rather sharply today on collateral damage from the weaker JPY overnight. The risk-willing trades could bounce back sharply here, but the pressure will remain on the JPY crosses further out as long as things at the end of the tunnel don't turn lighter.

More subprime worries yesterday with the implosion of E*Trade and ugly words from various corners of the market, including Blackstone. Fitch also announced a huge downgrading of CDO structures. This theme is ongoing - the question being if it can get any worse with so much dirty laundry already aired. What we need to keep the global slowdown theme going is to see the actual economic data showing signs of slowing.

One curious victim of the bout in risk reduction has been SEK, which has weakened against EUR rather sharply over the last two weeks. Today we see the release of the Riksbank minutes, as the Riksbank has shown signs that it will continue to tighten and bring the rate to parity with Europe. The CPI number from Sweden was also higher than expected yesterday. Consider EURSEK shorts and NOKSEK shorts if you'd like to keep things strictly Scandinavian (NOK a big loser in this environment after the CB adjusted down growth and inflation expectations the last time around and as oil is coming off sharply). 2-year rate differential developments suggest that EURSEK is very mispriced and could be headed for another good sized sell-off. It's also a nice trade if you'd like to keep away from the JPY volatility. Yesterday's technical developments suggest that EURSEK may have put in a top here.

The RICS housing data, which we consider the most forward indicator on the UK housing market, was out even worse than expected and this buttresses the weak GBP theme. The next resistance levels are 0.7107 - the Dec 04 high, and 0.7254, the 2003 and 10-year high. We see little real resistance to the upside for the duration in EURGBP - a significant repricing of GBP may be unfolding here. Today we have the two big inflation numbers from the UK on tap.

Charts: EURJPY and EURSEK

EURJPY: are we going to see yet another dramatic turnaround after a scary sell-off or is this just a short squeeze on verbal intervention? Key levels to watch here as the JPY crosses rally are the 200-day and 55-day SMA's at 161.66 and 162.72 respectively. Also, 162.10 is the first Fibo retracement for the bounce.

EURSEK: the last two days of blow-off highs that don't hold combined with the fundamental underpinnings of interest rate differentials favoring a strong SEK could mean that EURSEK has put in a top for now. The pair hasn't been able to put in a session close above 9.3000 so far, and 9.2350 comes in as an interesting flatline support area, with the rising consolidation line a bit higher. A break through support levels could usher in a try at the recent lows. To make things even more interesting, the 55-day SMA comes in around 9.2600.

EURUSD
=======
Resist.
=======
1.4894
1.4739
1.4643
1.4621
1.4488
1.4430
1.4275
=======
Support
Quoted:
13 Nov 07
07:45 GMT
========

GBPUSD
=======
Resist.
=======
2.1389
2.1053
2.0847
2.0660
2.0511
2.0381
2.0045
=======
Support
Quoted:
13 Nov 07
07:45 GMT
========

USDJPY
=======
Resist.
=======
113.28
111.61
110.75
110.07
109.09
108.27
106.60
=======
Support
Quoted:
13 Nov 07
07:45 GMT
=======

EURJPY
=======
Resist.
=======
167.73
164.07
161.98
160.92
158.32
156.74
153.08
=======
Support
Quoted:
13 Nov 07
07:45 GMT
=======
USDCAD
=======
Resist.
=======
1.0069
0.9822
0.9730
0.9582
0.9482
0.9328
0.9081
=======
Support
Quoted:
13 Nov 07
07:45 GMT
========

USDCHF
=======
Resist.
=======
1.1441
1.1354
1.1322
1.1243
1.1235
1.1179
1.1092
=======
Support
Quoted:
13 Nov 07
07:45 GMT
========

AUDUSD
=======
Resist.
=======
0.9574
0.9247
0.9050
0.8923
0.8723
0.8593
0.8266
Support
Quoted:
13 Nov 07
07:44 GMT
=========

NZDUSD
========
Resist.
========
0.7944
0.7737
0.7616
0.7551
0.7409
0.7323
0.7116
=======
Support
Quoted:
13 Nov 07
07:45 GMT
========

Risk Warnings:

Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.

Please read our full Analysis Disclosure & Disclaimer at www.saxobank.com/analysis/disclaimer.

[Today forex strategy] Forex Market Update

2007-11-13T04:59:00.000+07:00

Renewed credit worries have put JPY back in the drivers seat. USD getting a big boost on the risk aversion theme again.

G20 meeting this coming weekend to focus on the USD. US accounting rule could see further writedowns from US banks on credit problems.

MAJOR HEADLINES – PREVIOUS SESSION

Overnight developments:

* Barclays denies rumors of huge US subprime related losses and says it will give fuller financial disclosure on 27 November
* Japan Current Account surplus for Sep out at +2880B Yen vs 2690B Yen expected and 2081B Yen in August
* Japan Corporate Goods Price Index rose 2.4% YoY in October vs. 2.3% expected.

THEMES TO WATCH – UPCOMING SESSION

Key event risks today (all times GMT):

* Today is US Banking Holiday (fixed income futures closed, US stock exchanges open)
* Sweden Oct CPI (0830)
* UK PPI Input and Output (0930)
* UK RICS House Price Balance (00:01)

Market Comments

Credit worries accelerated suddenly again on Friday, with Barclays write-off rumors swirling and the news of a blown up CDO structure sending red flags up everywhere. This saw the broad based risk aversion trade resuming in force, with equities seeing a large sell-off to end the week on an ugly note and yields diving lower. The equity sell-off continued in Asia on Monday. In FX, the JPY grabbed the pole position, and JPY crosses are smashing down through key levels. This action could be set to continue this week.

A key development this week that will keep the focus on credit worries is a new accounting rule from the US that may require banks to announce further large writedowns due to a requirement to record prices for "Level 3" assets that are illiquid. This rule is to go into effecton Thursday, so watch for announcements up to that day.

So where are JPY crosses headed? Many of the cross/JPY pairs fell through their 55-day SMA's late last week, as the sell-off may accelerate. Like last time around in August, the daily ranges could accelerate dramatically. Choosing a pair to trade, we would look at non-USD JPY crosses (even though it is also falling here), with the likes of GBP/JPY, AUD/JPY and CAD/JPY being the big movers. Could GBP/JPY be headed for a quick meltdown to 200 in the coming weeks? Gold is off USD from its recent highs - could AUD/JPY be headed for the basement as well? If oil adjusts sharply lower this week, CAD/JPY could actually see the largest sell-off of all the G10 currencies in a strong JPY environment.

We note that the USD did very well on Friday, as the moves we are seeing in the JPY supports the USD purely from a market positioning perspective. This means that as long as we have the risk aversion trade on, the USD will likely remain reasonably bid, especially versus the "other dollars" and GBP.

The G20 is set to meet this coming weekend and the weak USD will be at the top of the agenda, according to a Canadian official. Now that USD/CAD is trading above the 0.9400 resistance level, we wonder if the pair may continue to rally toward its first Fibo level at 0.9750 before meeting resistance, or if it might even make a dash for parity if the volatility accelerates.

The weak GBP story finally kicked into gear Friday as the credit worries are particularly negative for GBP is the world's most dependent on the financial services industry. EURGBP jolted higher and is now trading at the highest level since Jan 2005 and could be set to test much higher still, especially if the data this week from the UK supports the bearish thesis. GBP/CHF has been an even bigger mover (to the downside), as CHF had its strongest week in recent memory this last week. Going long CHF is a slightly less volatile version of going long JPY in this environment.

Looking at the economic data for the week ahead, we wonder how much it will affect the bigger picture with so much focus suddenly back on credit again, but watch for the UK inflation data today and the RICS house price balance released overnight. Other highlights include: Tuesday we get the German ZEW. Wednesday, we have the EuroZone CPI and the US PPI and Retail Sales. Thursday we get US CPI and the Empire and Philly Fed numbers. Friday we see US Industrial Production and TICs data.

One very key development we will be watching for is a convergence of EuroZone indicators with those from the US, as we feel that if the EuroZone shows noticeable signs of slowing relatively to the US, EUR/USD could show signs of having put in a top for now.

Charts: GBP/JPY and USD/CAD

GBPJPY: closed back below the 55-week moving average last week and may be in the process of building a head and shoulders formation with the neckline on weekly closes at about 226.50. A meltdown in risk appetite could see the pair to 200 eventually.

USDCAD: is seeing a sharp countertrend correction that could extend in the current environment. A natural first target to the upside comes in at 0.9750 area, the 0.381 Fibo for the last big leg of the sell-off from above 1.0865.

Note: the support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.

EURUSD
========
Resist.
========
1.4929
1.4808
1.4743
1.4641
1.4622
1.4566
1.4445
========
Support
Quoted:
12 Nov 07
07:32 GMT
========

GBPUSD
========
Resist.
========
2.1548
2.1265
2.1083
2.0833
2.0800
2.0698
2.0414
========
Support
Quoted:
12 Nov 07
07:32 GMT
========
USDJPY
=======
Resist.
=======
116.13
113.74
112.21
110.32
109.83
108.97
106.59
========
Support
Quoted:
12 Nov 07
07:32 GMT
=========

EURJPY
========
Resist.
========
171.27
167.41
164.94
161.52
161.07
159.68
155.81
=======
Support
Quoted:
12 Nov 07
07:32 GMT
========
USDCAD
========
Resist.
========
0.9788
0.9586
0.9517
0.9465
0.9315
0.9182
0.8980
========
Support
Quoted:
12 Nov 07
07:29 GMT
=========
USDCHF
========
Resist.
========
1.1418
1.1324
1.1274
1.1238
1.1180
1.1137
1.1044
=========
Support
Quoted:
12 Nov 07
07:32 GMT
==========
AUDUSD
==========
Resist.
==========
0.9627
0.9403
0.9259
0.8986
0.9035
0.8956
0.8732
========
Support
Quoted:
12 Nov 07
07:32 GMT
=========
NZDUSD
========
Resist.
========
0.8097
0.7896
0.7768
0.7587
0.7567
0.7496
0.7295
========
Support
Quoted:
12 Nov 07
07:32 GMT
==========

Risk Warnings:

Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.

Forex Autotrading

2007-11-12T04:22:00.000+07:00

Leverage (the ability to control 50x your account value or more) can be one of the forex trader’s most useful tools when it comes to creating money through trading. It is this leverage, combined with seamless market access and very low transaction costs that mke forex trading as lucrative as it is.

However, even though the potential rewards of becoming a successful forex trader are great, being a full time trader still does require a large time commitment. It possible, though, to take advantage of the benefits of the foreign exchange market without the large time commitment, and that is the topic of this article.

The term that I want to introduce to you (which is something you may or may not have heard of) is called ‘autotrading.’ Autotrading simply means devising a set of mathematical rules and calculations, plugging them into your trading platform, and literally having your platform trade for you regardless of whether or not you are at your computer.

Have you ever heard the term ‘passive income?’ Well in kind of a funny way, creating and setting into motion a forex autotrading system is alot like creating a stream of passive income. Allow me to explain:

In business, there are really two types of income that you can earn: either active income or passive income. Working as a shop clerk would be a good example of active income, because you come to work one day and later you will be paid for one day’s work. If you want to make more money, you must again do more work.

Passive income is a bit different. Working to set up a utilities company is a good example of passive income. There might not be any immediate benefits, but once you get the company rolling you will have people that pay you like clockwork every single month because they need utilities.

So instead of trading your time for money, you spend your time setting up a system that will make money for you regardless of whether or not you are still working at it. That is exactly what creating a forex autotrading system is like.

When you trade the forex market in the regular sense, you will need to sit down at your computer and identify a profitable trade every time you want to make money. Now this can still be very worthwhile, but if you want to make more money you will need to do it al over again.

When it comes to devising a forex autotrading system that can be consistently profitable, instead of spending your time doing something that will make you money once, you spend your time doing something that can make you money over and over again.

You put your energy and effort into devising, tweaking, and testing different technical and mathematically-based strategies, and once you can create a trading system that can profit consistently over time, all you need to do is set it up and walk away.

A few good forex trading platforms that I know of that support autotrading are called Metatrader and Tradestation. When using Metatrader, you will use their simple programming language to create a small piece of code called an ‘expert advisor.’

In your code, you will give the instuctions for your technical-based trading strategy, such as what indicators or calculations should be used to find entry and exit points.

All in all, forex trading has massive profit potential, and creating an autotrading system is one of the ways that you can leverage your time and effort to make as much mney as possible.

The Stochastic –;a Momentum Indicator For Bigger Profit Potential

2007-11-11T05:06:00.000+07:00

If you want to time your trading signals with great accuracy then you need momentum indicators and if you are looking for one of the best look no further than the stochastic. It is an essential indicator for all traders serious about making bigger profits so let’s look at it.

Why is it such a vital indicator?

Quite simply, it gives you advance warning of shifts in price momentum near important turning points allowing you enter the market with great accuracy for bigger profits.

An Introduction

George Lane, who developed the stochastic indicator, concluded that in an up-trend, prices tend to close near their high, and in a down-trend, prices tend to close near their lows.

The further the price closed away from the low or high the stronger the trend was likely to be.

We have all seen this in forex markets and this simple observation was the basis for the stochastic indicator.

The stochastic indicator therefore is:

A momentum oscillator that can warn of strength or weakness in a currency in advance making it a great leading indicator to confirm trading signals against chart support or resistance.

The Technical Bit!

Don’t worry if you don’t understand how the equation works – it’s a visual indicator and you can simply look for the set ups on most major chart services so the math’s below is only for those of you who really want to know – for the rest of you skip it and move to the next paragraph.

The stochastic is plotted as two lines %K, a fast line and %D, a slow line.

The %K line is more sensitive than %D

The %D line is a moving average of %K.

The %D line triggers the trading signals.

The way the stochastic is plotted is actually very similar to the way a moving average is plotted.
Just think of %K as a fast moving average and %D as a slow moving average.

The lines are plotted on a 1 to 100-scale.

"Trigger" lines are normally drawn on stochastic charts at the 80% and 20% levels.

A signal is generated when the lines cross.

The zones above and below these two lines are referred to as stochastic bands.
Overbought and oversold levels.

The 80% value is used to show when prices are overbought and, the 20% value is used to indicate when prices are oversold.

The Stochastic generates signals in various ways and the two below are very effective:

1. Overbought Oversold

When the 20% and 80% trigger lines are crossed the following action is taken.

Buy when the stochastic moves below 20% and then rises above that level and sell when the stochastic rises above 80% and then falls back below this level.

2. Stochastic Crossovers

Crossovers are very effective.

Buy when the %K line rises above the %D line and sell when the %K line falls below the %D line. You need to be cautious of short-term crossovers that may generate “false” signals.

The best crossover is when the %K line intersects after the peak of the %D line (known as a right-hand crossover).

3. Stochastic Divergences

Divergences between the stochastic and the underlying price trend also offer good signals to trade and are a great leading indicator for entering positions.

If prices are making a series of new highs and the stochastic is moves lower or crosses then you have a warning sign that price momentum is weakening and a top may be at hand and vice versa in a bear market.

Combining the Stochastic With Other Indicators

The stochastic is probably the best momentum indicator and can work with just support and resistance on your forex charts. It can also be combined with other momentum indicators to filter false signals and the Relative Strength Index is ideal for this.

If you want to improve your forex trading strategy and time you’re trading signals with great accuracy, take a look at the stochastic indicator and you will improve your chances of currency trading success.

CALCULATING PROFIT AND LOSS IN FOREX

2007-11-11T05:01:00.000+07:00

The foreign exchange market, or Forex market, is an around-the-clock cash market where the currencies of nations are bought and sold. Forex trading is always done in currency pairs. For example, you buy Euros, paying with U.S. Dollars, or you sell Canadian Dollars for Japanese Yen. The value of your Forex investment increases or decreases because of changes in the currency exchange rate or Forex rate. These changes can occur at any time, and often result from economic and political events. Using a hypothetical Forex investment, this article shows you how to calculate profit and loss in Forex trading.

To understand how the exchange rate can affect the value of your Forex investment, you need to learn how to read a Forex quote. Forex quotes are always expressed in pairs. In the following example, your pair of currencies are the U.S. Dollar (USD) and the Canadian Dollar (CAD). The Forex quote, USD/CAD = 170.50, means that one U.S. Dollar is equal to 170.50 Canadian Dollars. The currency to the left of the "/" (USD in this example) is referred to as base currency and its value is always 1. The currency to the right of the "/" (CAD in this example) is referred to as the counter currency. In this example, one USD can buy 170.50 CAD, because it is the stronger of the two currencies. The U.S. Dollar is regarded as the central currency of the Forex market, and it is always treated as the base currency in any Forex quote where it is one of the pairs.

Let's go now to our hypothetical Forex investment to show how you can profit or come up short in Forex trading. In this example, your pair of currencies are the U.S. Dollar and the Euro. The Forex rate of EUR/USD on August 26, 2003 was 1.0857, which means that one U.S. Dollar was equal to 1.0857 Euros, and was the weaker of the two currencies. If you had bought 1,000 Euros on that date, you would have paid $1,085.70.

One year later, the Forex rate of EUR/USD was 1.2083, which means that the value of the Euro increased in relation to the USD. If you had sold the 1,000 Euros one year later, you would have received $1,208.30, which is $122.60 more than what you had started with one year earlier.

Conversely, if the Forex rate one year later had been EUR/USD = 1.0576, the value of the Euro would have weakened in relation to the U.S. Dollar. If you had sold the 1,000 Euros at this Forex rate, you would have received $1,057.60, which is $28.10 less than what you had started out with one year earlier.

As with stocks and mutual funds, there is risk in Forex trading. The risk results from fluctuations in the currency exchange market. Investments with a low level of risk (for example, long-term government bonds) often have a low return. Investments with a higher level of risk (for example, Forex trading) can have a higher return. To achieve your short-term and long-term financial goals, you need to balance security and risk to the comfort level that works best for you.

Make Your Options to Forex Training Course

2007-11-11T04:23:00.000+07:00

Types of forex training course. The only way to get into the Forex market and earn money is through proper education. Just like any other investment, spending money without any knowledge of a product or opportunity increases the chances of failure than success. In Forex trading, you need get as much Forex information as you can find to become competitive enough to face the big boys and girls of the Forex market. One of the most affordable and easiest ways in doing so is by attending or getting a copy of a Forex course.

Generally, there are two types of Forex training course available - one is where you sign up for online classes and take each lesson over the net, while the other is a traditional method where you attend class with other soon-to-be traders. If you are more comfortable in attending an on-location Forex course, then you can check out these classes, which are available for beginners, intermediate and expert levels, on your major city. The good thing about these types of lessons is that you receive personalized attention, giving you real-time answers by experts to any questions you may have. On the other hand, once you miss one class, you cannot make up later; you must follow class schedules strictly.

A Forex course can also be taught in seminars. However, most Forex seminars are aimed at intermediate traders, who have experienced trading in the market. Luckily, for those who have knowledge in Forex basics, these 1- or 2-day seminars can really be useful. Attending seminars is a good idea because most of the time, these seminars are conducted by prominent Forex traders who can share their strategies and new insights about the industry.

For many who wish to study Forex on the side of a day job or school, you could learn through a Forex training course by finding a reputable website that offers online lessons. By simply logging on to a website during your spare time, you can go through the course materials and study them at your own pace. The advantage of an online Forex training course is that you will be given 24/7 access to a support group as well as contact to instructors that can answer your questions through e-mail or via the site forum.

Another type of Forex training course is CDROM lessons, which offers the same set of information taught in a Forex school, but gives you the same flexibility in terms of studying at your own pace. Unfortunately, like any self-learning methods, this type of Forex training course cannot give you access to instructors, fellow traders and professionals that will answer you Forex questions.

Regardless of what type of Forex training course fits your lifestyle, time availability and studying patterns, a good Forex course should give you all the essential information, techniques and tools you need to get started into the Forex industry.

Forex Trading and Risk Return Ratio

2007-11-11T04:20:00.000+07:00

Forex trading is fast becoming the top method of making money on the internet and plenty of average people are trying their hand at becoming millionaires. For most people, forex trading is a much needed source of a second income, to supplement their current single income from their main profession. However, the true potential to become very wealthy is not tapped by most such investors and they earn mere pennies on the dollar, compared with what they could be earning. While everyone has their own forex currency trading system, this will be in proportion to your risk appetite and will only bring the returns that you strive for.

While there are many ways to invest your money in currency, most people play safe by either investing small amounts or spreading their money very thin across the various currencies they are invested in. This makes for a very small return but practically no risk potential, since the bases are mostly covered so that if one currency depreciates, the other appreciates and the losses are minimal. However, clearly this will never make the forex trader a millionaire.

Life is short, and most forex trading millionaires made their money fast off the forex market. These individuals are generally highly leveraged, because they know that money makes money, and the more money they invest, the greater the risk and the greater the potential reward. Also, betting on unlikely currencies is risky and can have a huge potential upside.

So what exactly will leveraging yourself mean for you? You can start with a portfolio, meaning that you put your investment towards buying a part of the forex trading. Then, you buy shares of the forex trading the world over, depending on what countries appeal to you. The prices of these shares may rise slowly to increase your portfolio, and you are still playing safe. Once your total portfolio value goes over the 5000 dollar mark, you as a forex trader can apply for something known as a console, which now puts you in the position to act as an agent for others. At this point, you can process exchanges for small investors who want to buy and sell currencies through you. For each transaction processed, you will earn a fee of 6% and this can roll into your portfolio, increasing further, making your status as a forex trader more credible.

Other than an unlikely event such as a war or natural calamity, nothing on the forex market will give you a sudden unexpected windfall. Do not expect to become a millionaire over night. You will have to plan and strategize, and most importantly, leverage yourself, to truly make a lot of money. The forex market will generally move like the stock market, in small digits and only when you have plenty of money spread out on the forex market do you stand a chance of making a great deal of profit.

While this type of trading is not for the faint hearted, experience in forex trading will bring some confidence to your forex trading strategy, especially as you learn which systems work for you and which don't. As your level of confidence grows, the process will seem much less daunting. However, it is great to be cautious and be sure of any risks you take. That said, do remember that millionaires are always highly leveraged in the forex market – take calculated risks.

Forex Market Pin-cushion Timing - Why If you Try and Forecast You Guarantee to Fail

2007-11-11T04:18:00.000+07:00

To trade forex successfully you must your time of commerce signal. There are a lot of teacher vendor tells you can forecast top and pallet in the face of but this is the biggest myth from forex trade you will never your pin-cushion can your signal time by differ though and still make a lot of money.

If you try and predict market tops and bottoms you are simply hoping or guessing that support and resistance will hold and this will see the demise of your account equity.

The reason for this is markets do not move to scientific theory as many people think. This is common sense! If they did we would all know the answer in advance and there would be no market.

Markets don’t move by Hocus Pocus or a magic formula, it’s a bit more complex than that!

Humans decide the price of anything and the millions of traders who contribute the market price, are NOT logical and you cannot tell what they will do with any certainty at all.

Understand this in regard to forex market timing:

Forex trading is a game of odds NOT certainties.

If you understand the above, you can still make money - but your not going to predict your market timing, you are going to trade on the reality of price change and trade the truth - i.e the market price as it is.

If you want to win at forex trading you need to trade on confirmation.

If you don’t know anything about using leading indicators or price or momentum oscillators, its time to start making them part of your forex education.

For example you see prices dip to support but you don’t simply buy - you wait until prices turn away from support - supported by price momentum. Then you execute your trading signal.

We don’t have time to discuss the individual indicators here, simply see our other articles for a fuller discussion of momentum.

Sure you miss the turn but you didn’t know the price would turn would until AFTER it did so that’s not a problem.

Many traders are obsessed with trying to be clever and trying to get in with pinpoint accuracy - but its impossible to do so don’t try.

Your objective in forex trading is to make money and if you use market timing in line with price momentum, you can do this and trade with the odds for long term currency trading success.

If you got just 50% of every major trend you would be very rich.

So think about the money you can make rather than feeling smug.

Today, advances in science and computer technology are staggering and your personal PC contains more power than the computer Mission Control used for the moon landings and it’s tempting to think that computers can predict in currency markets - but they can’t.

Predicting a chaotic market with accuracy is impossible and anyone who tells you they can is a liar or a fool.

Of course, as we have said this doesn’t mean you can’t make money you can you simply trade price momentum and trade the odds. Understand the above and you are well on your way to currency trading success.

Make Forex Trading more Profitable

2007-11-11T04:16:00.000+07:00

Use an RSI indicator to make your forex trading more profitable. When it comes to forex-based technical analysis, using the relative strength index (RSI) indicator or your chart can give you insight into potential trading opportunities.

First, let’s talk about what the RSI is, how it is set up on your chart, and how it can be used to decide when to enter the market.

The RSI is an oscillator, meaning that it will be separate from price data but still on the same chart and it will go up and down (oscillate) in value from 0 to 100.

When it comes to setting up your RSI indicator on the chart, the most popular setting is a 14-day period, though it is possible to tweak this setting to fit your own strategy.

Keep in mind though, that the longer the period is on your RSI indicator, the less frequently it will give trading signals, though the signals that it does give can be considered more reliable.

If the period is much shorter (like 8 or 9 instead of 14), the oscillator will be much more volatile and can give false signals more frequently, so it is important to find a balance.

Now when it comes to actually reading the RSI for trading signals, there are two main methods of doing this. With the first one, the values 30 and 70 are of critical importance (remember the RSI always gives a value between 0-100).

Typically, the lows and highs of the RSI will be below 30 and above 70, so when the RSI reaches this level and stays there, you can be sure that when it changes direction and heads closer to 50 then you will see a trend or market reversal.

For example, you are using a 10-minute bar chart and 14-period RSI. You see that the RSI has crossed the 70 line, moved to around 80 for maybe 40 minutes, and is now climbing back down. This could be a good indication that the market prices will follow and this could be a good time to sell. Your indication to enter would be when the RSI crosses 70 and continues going down.

The other popular way to trade the RSI is to use the number 50 as a center line or deviation line. This means that when the RSI crosses the center line and continues to climb steadily, this could be an indication to buy.

Conversely, if the RSI crosses the center line and continues to decline steadily, this could be a good indication to sell.

One important thing to always remember when you are using the RSI indicator on your charts is that the main purpose of this oscillator is to convey the current strength of the market, and whether or not a trend is likely to continue or reverse. Happy Trading!

How Forex Trading Works

2007-11-09T05:26:00.000+07:00

Currency trading is mainly about buy and sell activities. Currencies are traded on a price interest point (normally called pip) system. Every currency pair has their own pip value. The objective of a trader is to hold as many profitable pips as possible. Some pip values are fixed, but some can fluctuate depends on the currency gain or loses strength. Normally I trade by using margin trading, where small deposit is required to control much larger amount in the market. Here I will use 1 percent margin deposit so that $1000 control $100,000 of trade currency. $100,000 is the notional amount. Let me shows some major currency pair with the currency exchange rate and the pip values.

Currency	Currency exchange rate	Pip Value
(GBP/USD)	1.7204	$10.00 per pip (fixed)
(EUR/USD)	1.1789	$10.00 per pip (fixed)
(USD/CAD)	1.1642	$8.59 per pip (fluctuating)
(USD/JPY)	117.82	$8.49 per pip (fluctuating)

For GBP/USD, 1 pip movement can be from 1.7203 to 1.7204. That means from 1.7102 to 1.7202, it should be 100 pip movement. Lets look for another example, USD/JPY, 1 pip movement is from 117.82 to 117.83 and 100 pips movement is from 117.83 to 118.83.

Foreign Exchange Calculation

Below will show you how to calculate pip values.

Formula is (1 pip value/currency exchange rate) x (Notional Amount)

For GBP/USD, 1 pip value is 0.0001. Assume currency exchange rate is 1.7204. Notional Amount is GBP 100,000.

Therefore, (0.0001/1.7204) x GBP 100,000 = GBP 0.58

If we want to convert back to USD, then GBP 0.58 x 1.7204 and we will get $1

For EUR/JPY, 1 pip value is 0.01 . Assume currency exchange rate is 138.96. Notional Amount is EUR100,000 . EUR/USD=1.1789

Therefore, (0.01/138.96)x EUR 100,000 = EUR 7.20

If we want to convert back to USD, then EUR 7.20 x 1.1789= USD8.49

Make Profit in Forex Trading

Foreign exchange trading is mainly about buy and sell activities. The theory is slightly similar with share market. To make the profit, there is the only way which is buy at lower price and sell at higher price, or we can also sell at higher price first and buy at lower price. Is it very easy? It is actually not that difficult. What we need to do is to analyze the forex in a correct way and do the good trade. Together with good money management and proper guideline, I can say that success will be eventually more on your side.

Sometimes, trader involves in foreign exchange not because of make profit but just do not want to lose money. Let me take an example, A US Construction Company want to build a subway in India and it is going to take about 7 years with $50 million construction cost. The first thing this company will do is to hedge the dollar value of the project. By buying or selling US dollar against the future market value, no matter how big the amplitude of the fluctuation, the company will not lose any money.