Monday, August 30, 2010

Expect Volatility to Build

The opening sessions in Asia and the European market towards the US trading sessions has been lackluster and sluggish with some traders disappointing expectations on the emergency meeting held by the BOJ. As we have expected that such intervention that some analyst are anticipating from the meeting have not materialized.
The upcoming reports towards Friday from the FOMC minutes, initial jobless claims, home sales for July and the more important Non-farm payrolls numbers would be the incentives that will drive the market's volatility higher. Not to mention the coming Labor day holiday that may trigger some liquidation towards the end of the month transactions by major players in the market.
Cautioning traders during these kinds of trading period may result to be more volatile position adjustments before the closing month and opening of the new month will trigger wider price swings on both directions. However, the present technical conditions for the major pairs have been heading lower for the Euro and the Pound at the 1.2675 and 1.5465 respectively and has not shown any real market recovery from last weeks movement. The reluctance of traders to create positions is quite obvious. Meanwhile the USDJPY and the USDCHF has moved to its lower band while formation a basin-like formation for the weekly charts much lower from the 21 week MA on both pairs. Currently still at the 84.67 for the USDJPY and 1.0254 for the USDCHF. Although, the USDCHF is nearing a possible SNB intervention price but is closely watching the USD behavior prior to the market news this coming Friday.
In most cases, the directional trend for the USD would be opposite before the news on the Non-farm payrolls and the actual movement lower would be after the news reports at the mid-trading session of the US closing hours. this would hold true to its historical behavior depending on the volumes accumulated during the mid-week as most institutional traders in the interbank market would prefer to trade the cross rates rather than go straight majors. The advantage of trading with interbank as currency conversions and Forex collateralized trading are available to sophisticated accounts held at their bank for purposes of hedging and other clearing services that allows other investors to hold other foreign currencies on their books.
Holding cash/ spot currency transactions with strategies to buy currency options for arbitrary hedging purposes would be ideal. However, it does take a lot more than simply trading straight through with the regular currency pairs being offered in the open market by retail brokers. As what Warren Buffet used to say, that some traders or investors would want to be aggressive at the same time be fearful of the market as volatility kicks-in the market place.


For a full report pls. visit our website at : http://www.megatrade101.com/

Friday, August 27, 2010

Market's Reaction on Bernanke

The closely watched speech delivered by Fed Chairman Ben Bernanke has made the market react with some of the majors but more influential on the cross rate as some of the spread bets were simply between the USDCAD, USDNZD, USDJPY and the AUDJPY in particular. It took some time for the market's reaction as most analyst digested the speech made and what it means for the USD and the economy.
However, the technical expectations that we have presented in our most recent FX video presentation has proven well for the USDJPY as it moved higher from a low of 83.57 and currently at the 85.35 levels. The weekly and monthly chart divergences on the lower band of the prices have finally made it rally today, but more importantly watch for the sustaining market reaction as we are nearing the closing of the month. Where position adjusting and liquidations would be expected prompting some more volatility moving forward by mid-week towards the new trading month of September overlapping with the closing of the month of August. The next three days of next week would justify a continuing pattern of corrective movements that may cover the previous strength of the USD by moving lower as we have mentioned in our market view report dated the 23rd of August.
Pls. visit our FX video presentation as it defines the 6 major pairs-Live Highlight on the USDJPY, USDNZD & USDCAD; before the market reacted today on Bernanke's speech at http://youtube.com/megatrade101

Monday, August 23, 2010

Opening Technical Perspective

It has been quite a directionless forex market at the opening for the week as the overall price movements for almost all major pairs have been within the previous week's trading range. As the market awaits further details coming from the upcoming reports on the Existing Home Sales and the durable Goods Orders that may show some mix expectations for the next couple of days. Thereafter, the jobless claims, the Michigan Consumer Sentiment Index and the more important speech of the Fed Chairman Ben Bernanke towards the end of the week.
So as a matter of analysis, we have to go by with the Technical perspective looking at the market ahead of these reports. However, the reluctance of the market players make trades could still be looked at as in a weary situation after being battered down by the wider market swings that led to an onslaught of stop loss and liquidation for retail investors and traders for the last two weeks. However, we did took into consideration to state in our market view reports and blogs to simply stay clear of the market as it was very obvious that central banks and major institutions were adjusting positions and hedge funds were simply so busy with their trade conversions that not a lot of analyst making their market calls did even mention what is actually going on in the market place.
With that said, the majority of the trade now would concentrate on the cross rates rather than the USD base vs. foreign currency trades. Although, AUDJPY and the GBPJPY has been on the Yen favor as the USDJPY base currency pair went as low as the 84.70 support price.
The strength of the Japanese Yen has been in focus by the Bank of Japan and at this time talking the Yen back down to a more desirable level would be their strategy. but to intervene would be a long shot as they already have tolerated the prices back to its 15 year high. So most carry trades may not be as attractive as this point of time.
One of the best indicators used during these kinds of market condition is to follow where the directional trend for the USDX and the behavior of the financial futures simply because the most common technical tools that determines the future directions based on the volumes and open interest of the futures prices relative to spot market prices.
Where a normal and contagion market may pre-determine the next move of the traders. But some other traders and analyst correlate the Dow Jones and S&P more often to get some indication. Well, everyone has their styles and trade analysis. Why the financial futures? Its because of its direct relationship with the spot market prices. However, the momentum and where exactly money shifts to would be determined quite easily. There is a distinct advantage of having the experience of trading directly with both the interbank market and commodity futures through the CME and the CBOT.
The weekly chart of the EURGBP still holds a distinct divergence as it moves lower, while both majors are still in the sidelines as to where they started from. currently at 1.5570 for the GBPUSD and 1.2715 for the EURUSD respectively.
A full report could be found in our market view report at http://megatrade101.com/

Monday, August 16, 2010

Opening Analysis

The economics reports on CPI (YoY) basis were in line with expectations and market sentiments on the opening week still remains to be quite volatile particular for the USDCHF and the GBPUSD making their mark on both directions. The weakness of the USD as its corrective move from a stronger tone last week is an expected one.
The only remaining report that may still trigger volatility would be the speech that the US Secretary Geithner would be making this week. However, the real market sentiments prevail as the reports of the US deficits weighs heavier specially with a 13.3T national debt and China's recent reduction of 2.7% of US treasuries about $24B. making China now as the 2nd biggest economy for the 2nd qtr. of the year.
The currency majors are spread all over the market place, as investors and traders has been more reluctant to buy USD inspite of the USD strength last week. Some analyst mentioning flight to quality, but the real issue that most major players in the forex market including the central banks have been shifting funds unloading Euros held from the previous European crisis.
With that said, the GBPUSD and Euro have made some recovery from its downtrend as it is at the 1.5655 from a 100pt. low and 1.2827 respectively as of this writing.
Please check update on Analysis at
http://www.megatrade101.com/

Tuesday, August 10, 2010

Forex Market Behavior

The relief rally for the USD came about even before the FOMC announcement was released. Although, most analyst have already discounted the possibility that the Fed would still hold rates at their current low levels just to keep check with a slow economic recovery. This has prompted major participants to take advantage of a corrective move for the USD before the news specially in North American early trading sessions.
The most active relative to the rally of the USD is the USDCHF which touched the 1.0616 high and a whipsaw occurred after the news came by moving loer to where it is currently at 1.0569 from 1.0460 low. the effects was felt with the USDCAD that recovered from a 1.0106 parity level and since then moved higher to its current price of 1.0360 as of this writing. And the rest of the majors and cross rates are much lower accross the board.
However, a selling divergence occurred a few days before as shown on the above chart for the GBPUSD that moved lower to its price of 1.5709 as indicated with the brokern yellow line on the volumes and the previous day highs of the GBPUSD. While the Euro didn't have any other indicators but simply followed suit with the flow of the trend lower for the time being.
The EURGBP has no or slightly been affected in spite of the Euro and the Pound heading lower current price at 1.3050 and 1.5788 respectively. the 0.8180-0.8250 range would be a good support price to consider watching. Although, our bias position in still taking long trades would hold as we are more in a mid-term trade plan which our tolerance levels are well defined.
A combination of cross rates on the spot market with currency options to hold for a couple of weeks forward and a cross trade arbitrary hedge position long on the USDCHF would be a better combination. This strategy is vital to keep in place as the market reaction and behavior is unstable with increased volatility and volume trading from major players would still be in effect towards the CPI numbers this Friday closing.
However, we do not recommend the above strategies for retail investors, as market whipsaw like we have seen with ranges of 200 pips on both directions would easily trigger stop loss points. Stop loss or cut loss orders as a matter of trading principles are practised by almost all traders. However, for more diversified strategist in the interbank market applies a variety of position trades that simply serves as cushions in a very volatile market to weather the storm before and after. In London it what we call the " London fake out " and in Asia we call it the " Shaking out the Rookies " . This has been the case scenario in most major market price actions before and after the news released in the market place. Please stay clear out of these markets if and whenever investor and traders would not be able to tolerate such radical movement such as what happened in the last 24 hours of trade. And its just the middle of the week.
Likewise, we still remain as our previous market analysis until any other developments occur this Friday.
Best of luck in your trades!

Monday, August 9, 2010

Opening Analysis 8.09


As the Asian & European sessions have opened the week with prices moving in both directions as influenced more from last Friday's US Non farms payroll and numbers were much lower than most analyst have expected. Although, the reports we have been expecting was still bias to negative for the USD, we have remained bearish on the overall picture as far as the USD is concerned.
However, trailing the major pairs for positioning would not be our strategy. As an alternative trend following the cross rates would be a better choice as we have continued our bullish analysis and position trade particularly for the EURGBP, the AUDJPY and the EURCHF, not necessarily in this order. The arbitrary hedge strategy would be a combination trade with the USDCHF and the USDJPY as both currencies on a day to day / intraday basis do move contrary with each other and use them for short term trade opportunities. But the overall weekly directional trend for these two pairs is still in line with the USD trending lower.
With that said, the primary strategy is still bullish for the EURGBP now at the 0.8330 levels from last weeks low of 0.8253. Looking at the candlestick bar and its cluster formation have indicated that the interpretation of a bullish spinning top have signaled a price reversal. Whenever the price attempts to move to 0.8380-90 and does penetrate the Fibonacci resistance fan trend line a new high will be in the making. A timeline would be seen in the next few days towards the release of the Consumer Price Index on Friday.
The same case scenario is applied with the AUDJPY and the AUDCHF. As both the USDJPY and USDCHF are reaching its lower band price which has been the basis of the support prices of 1.0340/45 and 84.75 levels respectively. Some analyst do speculate that these movements may well be in preparation of a USD rebound. True enough for them as most have seen the prices are on their oversold conditions prompting a relatively good correction in between before it resumes its down trend.
Good Luck and Happy Trading ahead!

Wednesday, August 4, 2010

Mid-Week Analysis

A follow-up analysis for the mid-week as made it all clear for the strengthening European Majors to maintain their higher levels with a few minor corrections along the way. The probability of getting a mix reports from the Jobless claims and the NFP may make the Forex market vulnerable, as the volatility index have increased. Although, we have seen some traders and investors heading for the exit as risk appetite and aversion from investors has been uncertain. Catching a trade on the way up for some traders have declined while scalping opportunities for others are increasingly present for retail investors and traders. However, there should be a word of caution has wider swings are expected as we head towards the closing of the week's trading.
From our previous market view analysis, both pairs for the Euro and Pound came true to their form of continuing their trend higher. Which would continue after a minor corrective move would be in the making. The bullish players apparently still holding the current positions may not allow this but will show some significant trade swings in prices that would be a sign for false signals heading in both directions.
The GBPUSD's mid-week high was close to our initial target of 1.5988; a 21Mo-MA on a weekly chart analysis at the 1.5962/66 and currently making a slight corrective move as of this writing. This has been clearly identified with our market analysis on the closing of the month of July report and a speculative outlook as well.
The same held true with the EURUSD with a high of 1.3261 and currently at 1.3196. So expectations are still intact for now while the market awaits the market reports this coming Friday. But the news however they may turn as we have been contemplating on a mixture but the overwhelming market would still prevail with the USD heading south. the opening gaps of the majors have been quite influential on a technically motivated market fueled by negative sentiment by investors.
Meanwhile, the USJPY has turned towards it previous low of 85.31 and is re-attempting its old low at 84.79 which should not be discounted for now. The old contrary movement of the USDCHF is present as most European participants are weary of an SNB sudden movements from the backdoor and some analyst persistence of speculating a BOJ intervention that may not even happen. As some traders may not be aware of the current policy stance of BOJ as far as intervening in the Forex market directly.
While the NZDUSD may have more potential of continuing its trend as it has more leg room to do so. And the AUDUSD may also meet some resistance moving forward , but apparently will still be moving forward with its major trend direction.
A word of caution would be to have enough room for tolerance and the appropriate amount to accompany any trades and position for proper cushion and hedging purposes. These kind of market conditions may not really be appropriate for some retail investors as trade stops would easily be triggered. Although, when a trade is profitable , simply take it and run. Its always good and healthy to stay ahead of the market and wait for the next good signal.
Pls. do not be an ' eager beaver '

Monday, August 2, 2010

GBP plus EURO vs.USD



Certainly the market has gotten most traders and investors surprised with the strength of the European majors to take the market's highlights. As the week started in Europe with the manufacturing data as presented by the final Euro Zone PMI manufacturing index and the United Kingdom were better than most have expected; touching a 56.7 high for the month of July. it has been the best performance for the past three months of the year.
These news were enough to add the fuel to boost both the EURO and the POUND higher against the weakening US Dollar. And to top it all, the opening prices of most of the major pairs had opened mostly with a gap from their previous closing prices of last week that ignited most of the bullish technicians to further their advance towards the American sessions.
And to top in all, the USDX upon the North American session also opened with a gap that added more volatility downwards for the ailing US dollar compared with the rest of the currency pairs.
Currently, the USDX is at the 80.95 levels which would still stretch lower as the European pairs are taking the lead in the forex market. With the EURUSD at 1.3187 and 1.5893 for the GBPUSD as of this writing have already shown the intense momentum as the market moves forward. the technical signals were already present during the closing sessions of last Friday. As we were more closely relating our focus on the GBPUSD in our closing report " On the Spot . . GBPUSD " which could be found in our website at http://www.megatrade101.com/ dated the 30th day of July. Likewise we have mentioned from this previous market view that the target price levels for the GBPUSD is 1.5988 closest to its moving averages for the past weeks.
Meanwhile, the continuing advances of the AUDUSD and the NZDUSD currently at 0.9133 and 0.7329 never failed to amaze us. The volumes and open interest even on the financial futures have increase during the course of the month in July which has doubled towards the weeks heading the end of the month. Therefore, we still hold our stand until any newer developments occur or may arise in the next few days. As the NFP may also affect the behavior of the market participants toward the release of this weeks reports as well.
Only the Best for your Trades!