Tuesday, July 28, 2009

Euro & British Pound at 50% above Fibonacci Levels


As the Euro ( EUR / USD ) & the British Pound ( GBP / USD ) are at above the 50% Fibonacci levels; it is ironic that a possible correction can be made against last week's continued strength on both major pairs as the US Dollar continued to drop at an orderly manner. Although Gold prices has also been seen correcting at this time which led a more supportive role for the USDX to advance at a much slower pace for its corrective move. Although some of the negative reports on earnings has already been discounted by the market; the relative lower volumes have made most majors move rather at a normal pace and the wild swings have been lesser.

The start of the week towards the end of the month have made it clear that the sentiments still remain bias for the bulls on the European market sessions. With that in mind, most traders are still keeping the existing positions long and may try to weather the corrective movements while they wait for a self-reinforcing market to continue it upward trend. Although, there is a glimpse of dark clouds forming on the higher price levels of the pound at the price above the 1.6680 and above where a possible selling divergence may occur as against the technical indicators other than being at the higher trading range of William's % Range with the combination of the Relative strength index. Any drawback on prices fro both Euro and Pound may be temporary and a preparation for the next upturn towards the end of the month and probably the spill-over sentiments on the first week of August with slight corrections along the way; if any.

The technical outlook still remains in the mid-range that the continuation for the Pound and the Euro is to move up. Expect some minor corrections along the way and not to panic whenever such price swings suddenly emerges every time the market makes its assault on the north upside area. Some momentum would still have to build up this towards the end of the month when other traders are simply covering their long positions against any sudden surprises. This goes for the rest of the major as well. Watch the first week of August if the bias sentiments would spill over to the next round of active trading.

Good Luck and Happy Trading!

Sunday, July 19, 2009

STRONG Negative Probability for . . .


For the past several months, the USDX have been quite resilient and providing a positive tone for the US Dollar's value. It has been holding up and stable for it has been selected by most investors to hold while the stock market still tries its best to recover from its downturn, Significantly, the stocks have made some head way from the start of the year with better than expected numbers for the economy. yet the unemployment figures still bears the negative effects as it climbs to its higher levels.


There now exists a possibility that the USDX which closed below the 80.00 is showing that a probability of a downturn may prove to be in the limelight. Although, price re-alignments can be seen this third quarter of the year as expectations for a continuation for the GBP/USD and the EUR/USD to still gain their strength although at a slower pace than previously made. The persistent bias still remains as prices made some newer highs from the previous week ending the 17th of July 2009.


As we approach the end of the 1st month of the 3rd quarter; whenever the USDX remains at this lower levels, the continuation of the GBP and EUR vs. the US dollar will strengthen as the legs established by these two major pairs are becoming more stable than it was earlier expected. The wider swings are becoming frequent as many traders have obviously been stopped at their trigger points of stoploss orders. We would not be surprise to see a strong reaction towrds the end of the month of July towards the first week of August.


On the technical side of it, the lower penetration of the USDX from the triangle formation as shown on the chart; already provides a signal that a downturn will probably be starting. However, any first penetration normally gives traders a chance to change existing positions giving way for a correction before it moves down. If and when this happens then this quarter may also signify a correction downwards for the dollar.


Good Luck and Happy Trading!

Tuesday, July 14, 2009

Compare the Price Action between . . .


As most investor and traders who trades in the foreign exchange market concentrates mostly on the economic numbers and reports that affects the price behavior and directions of the major pairs. It is very important that chart comparisons be made between other currencies versus the cross rates because they leave a very good impression as to where the market direction is headed. Although, to find which amongst the long list of major currencies traded will match how they perform. Here is a good example of being able to choose which may work in the forex market. However, it does not necessary mean that it will work all the time. The volumes and the number of participants do have an influence as to momentum increase of decline in prices.

A four (4) hourly chart on the British Pound ( GBP / USD ) versus the Euro / Pound ( EUR / GBP ) may prove to be surprisingly close in the sense that one mirrors the other. Pay close attention to the time separators in between trading sessions. As you may be able to see the direction of the market opposite to each other. Also be aware that each currency pair does not have the same value, trading range and net change in any one particular point of time. Although, the investor needs to allocate the closest no. of contracts or amount to be invested to have either a relative close hedge position without over-exposing the leverage being used in the market.

As the prices move, the net effect on both positions in terms of dollar amount on the account can be managed because the other position serves as a cushion for negative effects in the price change. This strategy can maximize the full potential of the market direction to the clients' objective. Without being greedy, this can easily build up equity over the principal amount invested in the market. The trader just needs to be able to improve the timing of having a plan of action for existing the positions. The probability of knowing the market direction can be determined from the persistent bias of the market. Some would cut the wrong position and leave the right one longer in the market and vise versa.

This strategy is very effective for medium term traders who effectively use percentage trading as against short speculative positions like scalping or simply day trading. As clearer example can be found in the website: http://megatrade101.com There on the top menu, click on the Market View and you maybe surprised as to how this strategy works. There is no holy grail in this volatile market. However, with a well developed plan of action it can be done with proper execution. Remember that there are risks involved trading the foreign exchange market. Either a substantial amount can be lost while trading this market. So consider your financial condition whenever you decide to get involved in forex market.

Good Luck and Happy Trading!

Monday, July 6, 2009

The Markets' Advantage


As a general rule, trading markets are often thin before and after a major holiday. Not a lot of major participants are in the market specially a 4th of July Independence day in the United States. Although, for some traders this is the right opportunity for them to take advantage of the foreign exchange market.


As we have seen in the Asian trading sessions the GBP/USD and the EUR/USD have significantly moved lower from their respective opening prices. The persistent bias of calling these two major lower still hold true from last weeks movement. And true enough based on our market view dated the 23rd of June 2009; the EUR/GBP cross rate was the most ideal pair to trade with. Having a greater profit potential from the price levels of .8553 and is currently working in the price levels of .8638. Our blog as of the 25th of June did mention this trade. Some may say that it is quite far as traders often times trade on a short term basis. That is why it is important to know how the FX market really works. There are really no quick fixes but to be able to do research and careful study even before trading.


So for the week ending the 10th of July; the continuation for the US Dollar to remain resilient is still the sentiment. Remember, no straight ups or downs are expected. consider the tolerance points in any given position.

Good Luck and Happy Trading!

Wednesday, July 1, 2009

On Consumer Confidence influence . . .


The consumer confidence Index practically gave some investors a reason to switch to a safer haven again by buying more of the US Dollar compared with the British Pound and the Euro; prompting a huge corrective movement of the Pound from the high of 1.6742 to a low price level of 1.6382. These kinds of swings are what most traders in the FX market really has to avoid. Although, not a lot of them were expecting such a big drop of more than 300 pips from the high. But this is more than enough to trigger stop loss orders on the GBP and Euro / US Dollar. Currently, the EUR / USD is at the 1.4076 levels from a low price of 1.4000 slightly higher bottom from the previous 1.3982 set on the 29th of June.

Wild swings are still expected, but we still view a ladder formation on the upside as new highs will be attempted every now so often until the full leg is done. However, these wider and volatile trading ranges may not be suitable for some FX traders because of the tolerance levels that they are willing to take does not have enough elbow room for floating a substantial loss.

The EUR / JPY has more of a profit potential than trading straight major pairs as it goes towards the 140.25 high levels. However, any newer higher than this price would create a weekly divergence that may cause a drawback which maybe good to buy now and when the next setup occurs on the selling divergence; take your gains and time your reverse order to sell thereafter.

Be extra careful on the timing and entry for it may create momentum instead of a exhaustion. Make some adjustments to any tolerance levels for the 1st week of July may still be a rapid market.




Good Luck and Happy Trading !