Sunday, February 28, 2010

Fundamental Vs. Technical Trading



The Foreign Currencies past performance was undoubtedly been much a surprise to the traders when the GBP/USD and the EUR/USD made their dramatic follow through movement lower touching 1.5150 and 1.3450 respectively that led the EUR/GBP to move higher touching an inital high of 0.8972 before the closing of the week and month of Feb. 26.

Such correction on the closing were also expected as it has been a short trading hour after all the mix economic reports that came out for the week that still sustained the levels from the opening of the week for the US Dollar Index closing at 80.35 Not much have really change on the fundamental side of the equation as the highlights for the European currencies were focused on Germany and France's support for Greece financial crisis. These two major economic countries have taken a stronger stance as the after effects for the Euro is weighing in more on the EUR/USD and now rippling through the GBP/USD in spite of the better numbers from the reports coming out from the UK.
Although, the Major trend on the Major pairs are still down and would be quite difficult to pin point a possible reversal pattern. As the technicals showing its extreme numbers from the over pressured price movements in both directions, everyone is waiting for some signals that may be good for scalping opportunities for traders on the retail side. There has been a wait and see attitude since the closing numbers came. However, a noticeable scenario which some may or may not have noticed is the relationship of the Gold And USD same directional path that they have been taking and their both heading towards the high. On a day to day basis it would be identified, but the overall trend has been in line with each other.
As far as value relationship is also concerned, the Japanese Yen's strength is also in line with the strength of the USD where the USD/JPY is at the 89.23 as of this writing with a low at 88.54 for the month. With the USDX at 80.35 with a high at 81.35. Combining the Technical tools and analysis as to where all the above currencies and gold prices may eventually show some clearer signals as to the directional trend and price reversal can take place.
For the time being , let us observe the price behavior based on the one page indicator that we normally apply to be able to find some signals from the analytics of the USD price settlement on a day to day basis. As long as no significant fundamental news reports that may come out we do maintain our stance with a US dollar corrective movement lower only to adjusts its technically driven chart areas just to leave some elbow room to continue its upward trend.
Good Luck and the Best for all your Trades!

Friday, February 19, 2010

The Aftermath of a FED Rate Hike

FUNDMENTAL
The unexpected Federal discount rate hike after 30years made by the bank was a surprise to the market as well as the traders. Although, we have addressed before in one of our articles that the more likely scenario for the Fed' to raise rates would be towards the second and third quarter of the year.
This is a clear signal that the Fed's stance may soon change as the economy still tries to recover from its recent crisis. And this could not have been more timely after the President have also addressed the creation of a commission to reduce the deficit down by 4% from the current 10% of GDP as its initial target headed by both a democrat and a republican.
With this said, the reaction of the Forex market have been more volatile than ever while it was awaiting for the rest of the numbers coming from, unemployment, homes sales, and the producer price index without mentioning the employment report from the UK and the most recent crisis of Greece and the rest of the European nations regarding their deficit / debt problems.

TECHNICAL
The overall case scenario on a fundamental standpoint weighed heavier for the USD to move higher with the barometer USDX registering a high of 81.25 bp for the week ending Feb 19, 2010. That prompted the EUR/USD and the GBP/USD to move lower at 1.3443 and 1.5341 respectively. This also influenced the support price of the cross rate EUR/GBP to move higher currently working at 0.8780 from a low of 0.8601.
The opening of the week was a short term correction for the USD that produced a relative buying opportunity for the Euro and the Pound but lost momentum when due to the thin market holidays in Asia and the absence of the major players from the market. Although, the market's wide trading range lent to some traders and investors more confused as to where the actual direction of the market will prevail. But the underlying major trend has not change where the USD is still holding its strength. And the rate hike was the fundamental trigger for the USD to continue its upward trend as we always have stated since Dec. 22 in our article " USD Trend and Price Reversal " specially focusing for the 1st quarter of the year 2010.
On a technical view point, when an engulfing downward candlestick bar established for the EUR/USD and the GBP/USD on Feb.17 as shown on our Market View updated report; it was the signal that the continuation for the trend lower is back and just waiting for a fundamental news to push it lower. And that was the when the FED has done on a Thursday surprise move.

FORECAST
A spillover of the market trend will continue for next week as the market may only correct since its the last trading day for the week of Feb 19. However, we still favor the EUR/GBP to move higher and may have some legs to continue until it reaches its initial objective from a symmetrical triangular formation signifying a near term trend heading north. As we also maintained our current positions at the 0.8672 long positions and would go for the distance run. Percentage trading has been more favorable as well.

DISCLAIMER:
Although, spread and arbitrary hedging strategies may not guarantee that they may have favorable results at all times ; the strategies do work but the choices and timing are equally important. Poorly executed trades and wrong choices on major pairs and crosses may result to a negative trade or even greater losses in trading the Forex market. So ,please always consult a financial adviser if this would be suitable for your investment portfolio.

This market outlook is intended for informational purposes and not a recommendation to buy or sell and particular currency as trading the Foreign Exchange Market carries a high degree of risk of loss as prices changes from time to time from fundamental and technical factors.

Good Luck and Best in your trading!

Sunday, February 14, 2010

USD trade Vs. Foreign Currency Direction

In the absence of the Major Asian participants the Foreign currency market will again be susceptible t wider trading ranges amongst the majors. The Chinese holiday period would normally last for a week as investors take a breathing room as they celebrate the year of the Tiger. Although, some may disagree to these hypothesis but the major Asian players are equally as important like the traders of Europe which happens to own majority of the volumes in the Forex market.
On the technical side point of the forex market, the expectation would be a price reversal of the previous weeks prices as a technical pause on the candlestick configuration is seen on most of the majors from the EUR/USD, GBP/USD, EUR/GBP cross rate has a significant bearing due to a thinner market. Although, a price reversal may not literally be a trend reversal. As the major trend for the US dollar is to follow a ladder-like scale up formation as we have mentioned for the past months starting December. We are just assuming that we have made our point that the 1st quarter of the year was meant for the USDX to upstage most of the majors which it did and have closed at 80.20 week ending the 12th of February 2010.
YouTube URL : http://www.youtube.com/megatrade101 - Corrective Move on the Euro, GBP
Key prices to watch would be helpful specially for the EUR/USD crossing between 1.3585 and 1.3510 on the low side of the price. As for the EUR/GBP around the 0.8590 - 0.8660 levels were it may find some speculative short-term buyers as the range may fluctuate wider as we would be expecting. This has been quite the favor to trade if we were to choose as the trading range from the previous weeks has been identified as a symmetrical triangle and that the prices wold range within the apex of the triangle moving higher temporarily. As the USDX may have to make some breathing room and head lower gradually on a temporary reaction as it continues to build some more open interest after the Chinese holiday period.
The USD/CHF and the USD/JPY may also continue to play its contrary movments on a day to day basis as to confuse traders and investors as to which direction the USD would head to and the inconsistency of the trading ranges that would be establish this week of the 19th of February. However, it would not be difficult that the actual trend for the USD to move higher after its corrective move will still prevail in the market. Although. there is no such thing as a straight up or down. But if one would notice that the gradual ladder-like formation for the USDX already has proven its course. This would also hold true with similar expectations for the Aussie Dollar and the Kiwi.
As of the moment just bear in mind that there is no alternative currency that would replace the USD dollar as the World's Reserve currency. As Europe has its own problems as far as the EUR/USD is concerned. The same case with the GBP/USD even if they are not with the ECU but still tries to hold its ground when it comes to the current price levels.
Best to your trading and good luck!

Tuesday, February 9, 2010

Wide trading range for Euro

With the recent reports on Greece and other European countries as to their financial status, debt payments and deficits mounting in high levels have prompted to aggravate the EUR/USD situation as it headed lower to its initial support price of 1.3585 low last Feb 05, 2010.
However, even before that announcement the EUR/USD has already been heading south of the charts due to the continued strength of the US Dollar since December 22 and some FX price reversal price signals since the last quarter of 2009. Although, the negative sentiments could not be shaken out from the market place that made it bias towards selling the USD on the way up. Until such time towards the end of the year 2009 and the beginning of 2010 when traders and some speculative sellers of the US Dollar threw in the towel where such market capitulation were seen. Position trades and investment shift from stocks to USD flight to quality made the US Dollar to move higher than most expected.
When the Euro came down on its support price of 1.3585 and the Bloomberg's most recent report on the 8 Billion short-sell of the Euro due to the European countries financial troubles with a particular attention to Greece. However, Germany's intention to provide assistance have made the EUR/USD pause from a high of 1.3840 and currently working at 1.3767 corrective move. Such confusion are present in the market as the relationship of the USD with the lowered DJIA have made investors weary of what is next to happen.
We do expect that the Foreign Exchange Market specially for the EURO to make some wild price fluctuations since a dramatic trading from 1.3585 to 1.3840 is wide enough for retail investors to get trapped in a volatile market.
Watch the lead currency as of now and try to analyze the market even before considering trading. Thank you and Good Luck in your trading!