Finally - A Concerted Central Bank Action

When was the last time you remember a concerted effort of central banks in the market?
*For central banks aim for a joint intervention is simply to calm the markets. This is exactly what happened in the year 2000, and of course it could happen again whenever the real need arises. Intervention occurs when a central bank steps into the open market in an attempt to strengthen or weaken its own currency just like the intervention in 2000 was a concerted effort by the Group of Seven (G7) nations to stabilize the Euro.

*The Federal Reserve, the European Central Bank, the Bank of England and the central banks of Canada and Sweden effectively reduced primary lending rates by a half percentage point. Switzerland also cut its benchmark rate, while the Bank of Japan endorsed the moves without changing its rates. Thisoccured in October 08, 2008. And apparently, the Chinese central bank joined the effort — without explicitly saying it was doing so by reducing its key interest rate and lowering bank reserve requirements to free up cash for lending.
For a complete analysis supporting our Market view TUG OF WAR - USD, EURO & GBP in a Fundamental stand point visit http://www.megatrade101.com/ for the continuation of this report.

TUG OF WAR - USD, EURO & GBP

With the TUG OF WAR, as in the ART OF WAR between the US Dollar and currency majors remains volatile, as we have seen on the opening Monday and Tuesday's corrective movement finally failed with the EURGBP cross rate giving way to its original directional trend lower.

After touching a short-live rally back to the 0.8603-0.8610 trading range as indicated with a circle on the chart Fig.A compared with the previous charts on Fig. 1&2. The continuation lower have been attributed to the steadier and corrective move of the Pound slightly higher compared with the lower Euro as of this update today the 28th of November 2011.

Currently, the EURGBP cross at 0.8533 below the S3 PIVOT support nearing its retest of the lower band

of 0.8380-0.8450 from its initial attempt as we gain closer to the end of the month's trading. However, the overlapping case scenario of closing month's trading within the mid-week closing month will provide a glimpse of the pre-market sentiment. The weekly candlestick bar will move in sync with the monthly bar's outlook giving a head start for the new month to open. This is a critical and important aspect of trading both Spot and futures, with the new month coming for December that would switch the nearby months forward. A closer look and analysis of both would be an advantage as a lot of traders do know the correlation of

Spot and Futures but without the distinct significance of an overlapping closing month. This is one of the trading tips that we suggest to seriously look into.

SEQUENCE OF MARKET BEHAVIOR & PRICE MOVEMENTS

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STRATEGIC FX TRADING TECHNIQUES

PIVOT Price Levels for EURGBP Cross

EURGBP DAILY as of 11.22.11

Identifying the Pivotal point for the EURGBP Cross rate after its continued downward trend momentum from the registered highs of 0.8820 down to the 0.8484 is very difficult. Although, based from our previous market view report dated the 1st of November where we called a probable low between 0.8420-0.8460. (Pls. refer to EURO, EURGBP & GBPJPY price reversal on our website)

The registered low then was at the 0.8484; not too far from our calculations and it was at the 23.6 Fibonacci support retracement levels providing a similar support. And thereafter, the 2nd re-test of that price extension dated the 10th of November and closed above the 0.8550 spinning top candlestick bar for the weekly have indicated a halt on the extension. The succeeding bar was not as signficant as the correlation with the negative news reports in the Euro Zone prevailed and still is up to this writing. As the obvious reports coming from both sides tries to outweigh trade investors to play the markets in a defensive mode. For a detailed technical outlook and analysis please visit: http://www.megatrade101.com/

Do expect some pullbacks in between trading session in Europe, Asia and the US as the coming Turkey holiday is just around the corner.

Only the best for your trades!

US Dollar Index Market Analysis

For the past decade, with more e-trading developments and accessibility to the markets have made it easier to monitor market behavior during market holidays. The up-coming trading period before the Thanksgiving holiday would prove to be one of those times where a handful of institutional and majors players would again be in place. Although with an expected mix bag of market directional movements and the general trend developments into a bullish advance through the year end from thereon as a comparison as far back in 2008 that should not be discounted unless otherwise proven not to follow the cyclical pattern hereunto.



US Dollar Index Weekly Candlestick Chart



However,as for the US Dollar unexpected downward distortion after touching the 79.83 by dropping back down in October for a re-test of the 74.72 low was the appropriate corrective move in preparing for the 2nd leg higher where the market conditions are presently at. The backlash of news reports from both continents have been dragging this lagging recovery which should be respected from the market behavior. As price movements by market numbers doesn't lie. And the only way that we can stay unbias of any market analysis is to always trade with a level playing field in any given position(s) while in the market. For the Technical description & Analysis, please refer to our website at http://www.megatrade101.com/

The coming holiday trading conditions will certainly be a complicating factor for trading the US dollar. For the time-being, focusing our attention on the backdrop for financial strains; with the European market’s are particularly stressed; with both the EU and other major US Financial bank's exposure to the EU debt crisis have been a huge part of this global recovery. Money market funds have significantly reduced exposure to EU banks, though the ill-effects have nevertheless found their way into funding costs in the US system.

These are the underlying issues that we should consider to be critical rather than the ineffective event of risk aversion and appetite in the market place. The coming crucial reports this week; including the 2nd reading of the third (3Q) quarter GDP on TUES NOV. 22, the Fed minutes, the UK BOE MINUTES on WED. NOV. 23; US durable goods,the University of Michigan Consumer Confidence Nov.numbers and personal spending and on the EURO ZONE side would be Germany and the UK's Nov. 24 GDP figures.

All this reports would occur towards before and after the end of the trading week of the Thanksgiving holiday which would provide the market with an ever increasing volatility from lack of liquidity in a thinly traded market to position adjustments and liquidation for the rest of the month of November towards the end of the trading year. However, pay close attention to market behavior as these are the ripe times to consider.

Just a side precautionary note where we would like to quote the words of Gordon Gekko from the movie Wall Street - Money never sleeps..."bulls make money, bears make money...but pigs get slaughtered".

Only the best for your trades!

Forex Volatility Increases Squeezes GBPUSD Trade

Review & Analysis: Increase Volatility

The contagion and ill-effects of the European crisis still haunts the financial and stock market in spite of the short lived relief of the political change of the interim governments in Greece and Italy. Meanwhile, the general sentiment which was fueled with fears amid political instability prior to and thereafter in Greece and Italy; not to mention the weak fundamentals from the trade deficit widening in the U.K. Which prompted the European majors to continue to head south of the charts. While the continued demand for the USD as primary & safety currency choice supported the US Dollar Index to hold above the 77.05 levels.

As early as the American trading sessions on Monday, have started and all through out the entire mid-trading sessions, the market price behavior particularly the GBPUSD have been really 'squeezed' with volatility and price extensions lower. Which have given back the gains that it had made from the previous day's trading. The obvious bull and bear spreads were traded heavily between major institutional players with at least 150-200pips in both directions for the past couple of days. Swing and day speculative traders would have found this extremely dangerous as more market capitulation were seen along the entire trading sessions.

GBPUSD Daily

The GBPUSD established trading range is between 1.5850 - 1.6160 inclusive of extensions from October 26, 2011. The wide range and consolidation period shows the ectreme uncertainty of bull and bear trades struggling to dominate the market especially with the movements of the past closing and opening days of the trading week. But the increase market shift of prices can change at any given notice coming towards the mid-end of the week's trading.

Currently, the GBPUSD is at the lower band of the support at 1.5883. Almost all traders and investors have concluded that even with the partial political resolution in Europe, it still does not change the fact that these countries in Eurozone would be heading to recessionary period for a longer period. Thus, the fundamentals would be for the European majors to be in the defensive. For more information about this review and analysis please visit out website at http://www.megatrade101.com/  

EU Majors Confirms 11.01 Analysis

USD influenced by EU-Italy Crisis

The price direction for the Euro today, half-way through the week re-confirms the Price reversal called last Nov 01. Its really not a matter of price but rather the re-affirmation of the overall market sentiment that has gauge investors shifting funds out of the Euro-zone. This has provided a price stability for the time being with the tight consolidation levels of the US dollar, as measured by the USDX Hi/Lo band where the current 77.42 basis point is nearing the high resistance band. The technical breakout may only occur with a strong momentum towards the end of the week's trading which would culminate with the release of the University of Michigan's confidence report on Friday.

When this happens a re-test of the 78.85 would likely be seen with extensions at the higher band and within breaking an inverted H/S formation that is reflected as a mirror imaged from the previous H/S daily chart formation. The high probability that the same would occur on the way higher when it happens. This has been a repeat only that the opposite circumstances would be inversely related to the down swing of the recent movement of the US dollar index when it touched a 74.72 low Oct. 27, 2011.

The location of the projected price direction when such a break higher would be beyond the Ichimoku Senkao Span A(green) breaking a neckline towards the next FIB retracement along the 78.85 basis point. Extensions higher would occur upon a completion of several daily pull backs until fresh volumes and price settlements would be made towards the week ahead. While the overlay STOCH/RSI still breaths positive with a 21/9 measure as compared to the T4-FIB 61.8% extension which would establish an overbought area if it attempts it in one spike upwards. This can only happen if and when a sudden unexpected event happens in both continents. But weigh in from the other is equally important. This can justify the technical outlook thus far. 

Meanwhile, the current market situation with the EURUSD at 1.3603 low and 1.5932 low for the GBPUSD respectively has proven the investors prevailing market sentiments for the continuation of the US Dollar to move higher--another flight to quality safer bet versus the crisis in the Euro zone.

The defining analysis is based on the market's price behavior with a true reflection of the Price Page indicator which is indicative of the historical prices and price directional price extensions. As price extensions are derived from the average day & weekly trading range plus /minus the difference of the extended price higher/lower from the previous day/week's prices. And the number of days/weeks where such consolidation has occurred would be the measure of the directional trend higher/ lower.

Special Report: Trading the GBPCHF

Is an alternate choice of the cross rates for the weeks to follow. The process of deduction based on the market's behavioral price movements has led to this preference. This process is not as easy as simply choosing which of the currency pairs would be appropriate to trade, aside from the market's potential that it would generate. The market psychology has played a vital role based not only from the current price trends, volumes and open interest; but including the historical correlations of each currency pair with a dominating and least dominant pair to choose from.

Trading the GBPCHF for the following weeks ahead has bottomed to two basic reasons in part of its technical overview from the chart patterns. One reason is that the British Pound has shown its resiliency for the past few months from its recovery price reversal which was at the 1.5270 GBPUSD rate which has sustained from October 06, 2011 extension & base price. Secondly, the USDCHF rate of 0.7071 has been the strongest appreciation for the Swiss Franc compared with the Japanese Yen's 75.55 intervention price levels. Timing market price movements is never easy, although a lot of traders and analysts have tried to anticipate such market speculative reactions but not everyone would have the distinct privilege of riding in one.

The GBPJPY trade of October 27 is one of those times where such an anticipation and a speculative decision was made prior to the Bank of Japan's intervention on the USDJPY rate. Luck and skill did play well and paying off for this trade which has been riding the price trend to this writing. The irony of the market's reaction before and after such volatile price action would 'stall' or others would term it simply as directionless as pairs would consolidate at a tight range. And the next move would come towards the closing of the week or month where position adjustments are made.

With trading heading towards the week, not much to really weigh except for the usual news wire crossing between the Euro zone with Greece, Italy and other contagion effects spilling over the rest of Europe. where a political divide and a financially strapped EU members are weighing a negative tone for the rest of the members as well. The other reports such as the German CPI to hold the same. While the ECB monthly economic report and the Bank of England's rate decision on November 10 and the US University of Michigan's confidence report may provide a clearer direction for other market participants and investors.

CCY CHOICES: GBPCHF STRATEGY

Long Position / on Market Condition Steady
Trend : Bullish ( UP ) after BOJ Intervention
Signal Indicator : Breaking a Channel / Trendline Resistance
Strategy : Using the USD Index as a Primary Indicator
Trade buying only on the way up from a correction
Exposure : 500,000 in leverage amt./ own discetion
Position: Long ( Buy ) on the way up with volumes * momentum
Current Price: 1.4250 as of 11.06
Entry / Exit : 1.4245 OB / 1.4680 OH
Risk / Tolerance : 1.4080 ( -165+/- ) on entry price +/-             

Probable loss / Stoploss: 1.4000 ( -245+/- ) on entry price +/-
Potential Profit 1.4680 /even ( +435+/- ) OB on entry price
Rationality : 2.x from risk tolerance / Net Exposure pre-calculated versus overall trade position on margin requirement/maintenance / swaps / point value
Time Table : Within 1-2 week period + / -
Status: Closed / settlement based on net percentage gain or Loss on overall net position of trades within above period
Others: Using the USDCHF as cross hedge strategy for contingency

EURO, EURGBP & GBPJPY Forex Price Reversal

Keeping pace with a rapid market after the unilateral BOJ intervention and now the EURO and EURGBP cross rates reversing their price directions lower is one of those unexpected market movements which we were referring to in our previous market view report on Oct.10-EURO & EURGBP key levels and the 'Mid-week Market Analysis 10.27'. As most Forex traders, hedge fund and portfolio managers were caught flat-footed on the main price reactions and repercussions that has spilled over across the board particularly the EURO and the EURGBP. 

Currently, the EURUSD at 1.3650 with a low at the 1.3607 is struggling from the obvious market news on the EU debt crisis prompting the continued strength for the USDX to move higher now at the 77.52 basis point higher. Meanwhile, the cross rate EURGBP making its low at the 0.8546 with its initial objectives at this levels with extensions below the 0.8420/60 trading range. 

Sequence of Trade & Applied Strategy:

The strategy in place since the 10.10 was after taking/settling the EURGBP short trade and simultaneously reversing to a long the EURGBP was the right move as prices have reached its extensions at the 0.8810. Although, our calculations were at the 0.8870 not too far from the registered high on the week of the 28th of October. Pls. refer to our market view on 10.27 above. Long EURGBP is Shorting GBP; hence long GBPJPY ( while USDX at 74.72 low and USDJPY 75.75 equilibrium price levels ) is hedging the GBP while buying the USDJPY as a cross trade strategy before the BOJ intervention. Cross referencing GBPJPY with the EURJPY was not an issue, since the EURO was more in the limelight.

Now with that said, the liquidation on the way down for the EURGBP as the GBPJPY rises is offsetting both positions while maximizing the market potential. The registered high on the GBPJPY is 127.27 with an intra-day corrective move lower, currently at the 124.76 as of this writing. And while the EURUSD and the EURGBP heading lower at 1.3674 and 0.8575 respectively. With extensions nearing their respective support levels but without discounting the possibility of further momentum as it moves forward the end of the week with NFP this coming Friday's report.

However, the momentum for the USDX to move higher was greater than just a probability; creating a sequence of short sell-EURGBP as shown on the chart makes more sense as the market lost confidence on a resolution to the EU crisis has driven the market prices for the EURO & EURGBP cross lower with much more conviction. Either way we have accomplished to level the playing field and would be able to tolerate any sudden and unexpected adverse price reaction in the market.

These strategies may be a lot more expensive and risky for others to manage. And there is no guarantee that the same results would occur as market conditions changes so rapidly that could also result in a negative balance on the account holder. Tolerance and risk factors should always be properly exercised.

Psychology & Market Behavior:

The market's behavior of stalling price market action and thereafter delivering rapid market prices in lightning speed is what makes the Foreign exchange market one of the most volatile and dangerous markets to deal with if not well prepared. As most trading platforms executing an entry and even stop loss would have difficulty in connecting with a busy line where most would not be executed at all. And wait for the next turn while prices have changed dramatically from your intended price action/order. We wouldn't be surprised really!

The sudden change of price direction and change of hands has made it clear that the market's ability the lat couple of days was susceptible and typical of price reversal on both directions. Catching unsuspecting players not knowing what hit them.