DXY vs. EUR & GBP

The vulnerability of prices influenced by Mario Draghi's comments still weighs in the market. However, the talks of Quantitative easing, continued crisis in Europe compared with the upcoming FOMC report,BoE rate decision and Friday's Non-farm payrolls number would again prove not only the vulnerability of analyzing the market's direction. But also how price volatility would occur during this week's reports.

Price action and market behavior's mix reaction have been due to these factors and would likely continue until a more defined direction would lead investors sentiments towards the Forex market.

Meanwhile, majority of market participants still weighed-in the Global Stock market as the Dow Jones continued working above the 13000 levels as expectations that the U.S. Federal Reserve and European Central Bank will provide stimulus to support the economies on both sides of the continent.

Although, the USDx have closed below the initial su;pport level of 83.05 by closing the previous week at 82.70 basis point; with the adjusted trendline support indicates that its closing price at the 82.70 has recovered at the opening of the trading day on Monday. Pls. continue at http://megatrade101.com/

Market Strategy & Analysis 725

The UK GDP figures for the 2nd Qtr. falls for the third straight quarter thus placing the UK economy technically recession. The British economy has some serious economic problems attributed by some influence from its neighboring countries other than their own.

However, these numbers have prompted the GBPUSD to move lower currently at 1.5490 while this movement have cushioned its decline by the corrective move of the USDx lower to 83.55/60 basis point. Likewise, this would justify a weekly techncial selling divergence for the USDx from the high at 84.10 and would adjust the relative strength index lower for another attempt higher if and whenever the figures on the US GDP would be better than most would expect.The 83.05/10 basis point still proves to be the initial support price to watch relative to the closing price for the week and month of July. Whenever the prices closes lower and establishes a piercing formation or a spike; a correction lower would be speculated upon prior to the next leg higher.

Today's price action has provided the Euro and correlated EURGBP cross rate a relief and a recovery from their lows; at 1.2040 & 0.7760 respectively. A calculated risk position contrary to the trend, a counter-trend strategy applied have proven to be good for a short-term trade before the end of the week. Either way, a push in any direction would be well tolerated as it brings interest that a possible counter-trend can occur between both major pairs of the USD vs the Euro.

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Forex Price Equilibrium

Its that time of the cycle year when we have to do some due diligence analysis as to where and how global prices of world currency rates fair compared down to the very basic commodity prices. However, the balance of trade amongst the largest economies and emerging markets worldwide are taking up necessary steps & measures avoiding going back to recessionary periods and the global financial crisis of the past. Austerity programs in the European continent is underway with Political policy changes to go alongside with it. Although, the crisis has now rekindled previous resolutions that would try to resolve other European neighboring crisis in other countries have again retested investors confidence in the financial marketplace. This is on top of the Middle-East uncertainty from the Iranian sanctions to the political crisis in Syria with China and Russia pulling their veto strings towards a possible resolution.

With the three major economies deploying strategies like the US QE measures, Japan's repurchasing programs and a slowdown in China has kept a slow global growth indicating investors to do the same in terms of trading activities. Thus making liquidity flowing in the financial markets across the global economies. But even with these measures the trading volumes have declined while investors shifting to the world's Reserve currency and US Dow Jones have reached its current levels in this kind of economic conditions.

The foreign exchange market prices have come to another pivotal point in time where current prices are now at the verge of global price re-alignment in the forex market or in simple terms an equilibrium level where prices would have to re-adjust through market forces before a major market movement would occur contrary to or a continuation of its current trend. There will always be a major corrective move within any major trend either way on its way up or down. Pls. observe the prices of the EURO, EURGBP cross and the USDx price levels dated September 13, 2010 in this article / video and compare the price levels currently in today's markets. The indicators used are one and the same and should assist in being able to determine as to which direction the markets would probably bring to the table for the next best currency to trade within the upcoming major price fluctuation.
Related article: Before a major market action occurs 
                   : FX Trends & Market Opportunities

Technical Perspective: DXY

Trend following the US Dollar Index (DXY) for the past few months have been overshadowed by the Euro crisis. While its been more of the EURO's fundamental weakness rather than the strength of the US Dollar; the underlying support from the technicals of the USDx shows the reliability of the trend on the chart formation as descride herein.

From the Pivotal price point of 80.09 which served as the major support for the USDx on its corrective movements has held very well. That has been our basis of price reference since February. The consolidation period which also helped the gradual decline of the EURUSD from a 1.3485 high ( Feb 26, 12) to its current levels of 1.2102 as of this writing. Although, the price equilibrium levels of the current EURUSD is quite a stretch of its extension. What this means is that the equivalent price level for the USDx is misaligned compared to the present Euro price. Whereas the 83.65 basis point current working price of the DXY spot would continue to move higher especially with an opening gap for the 1st trading day of this week. Pushing the EURO lower and with a spill-over for the EURGBP cross rates at 0.7770 have placed more selling pressure in the marketplace. The strong correlation between these three major currency pairs have played well while investors have shifted attention towards the Japanese Yen crosses and unloading some Aussie and Kiwi positions at the end of the previous week.

Support & Resistance levels:

DXY = 81.20, 83.05 Support / Resistance 84.70, 85.05/10

  

Counter-trade Strategy 711 Update

All eyes on Ben Bernanke's semi-annual Congressional testimony for any clues for the market's direction. However, the earnings numbers are closely being monitored as the stock market have recovered significantly to the high side for the start of the week.

This also signaled some renewed investors confidence despite of the mixed to negative reports on the economy for last week reports. While consumer prices came out as expected signaling that there are no inflationary pressure.

The USDx has continued its mix to lower trading activity as it has re-tested the lower band support at the 83.05 basis point(market view dated: July 11) with an intraday low at 82.91 while currently working at 83.10 as of this writing. Although, the overall trend for the USD is bullish; daily corrective moves are likely to continue and risk of a major correction may occur before with no fresh news that would provide the next leg higher. The technicals on the USD is more correlated with the currency price and behavior of the Euro and the Japanese Yen. Whereas the market's action related to the GBPJPY and EURJPY crosses have moved the market prices to their lower levels not seen in recent months.

The mid-trading day for Tuesday while waiting for Bernanke's testimony have been a little sluggish. The EURUSD and GBPUSD corrective move higher were simply due to the USD correction. While investors shifting to stocks trading during the earnings report have grown more in terms of volume transactions compared to the diminishing volumes and open interest for the foreign exchange market.The Euro would be consolidating in its lower range heading lower for some time before any real serious recovery can be made. While USDJPY and USDCHF would still move contrary with each other on a daily price movement in both directions; whereas the USDCHF would move more in tandem with the USDx.

The price action seen for the past few trading weeks have been obvious that prices have continued its decline for the European majors and crosses but the daily price fluctuation has been volatile in both directions. The trade strategy applied based on July 03 - 17 position trades have been best described with the counter-trades continuing strategies to cover both sides of the market on a short-term basis. Maintaining a net positive net result is always the objective of the trades combined regardless of the next price action in the market after each settlement.

Here is a summary of the trade & Counter-Trade strategies as of July 03 to present:

7.03 Long GBPCHF @1.4883   settled @1.5255 1st (R1)     7.13 +372
7.11 Short USDJPY @79.48      settled @78.82 1st (S1)     7.16 + 66
7.12 Short GBPJPY @123.78    ave. settled @122.88          7.16 + 90
7.13 Short GBPCHF @1.5208   ave. settled price 1.5275     7.17  - 67
7.13 Long GBPUSD @1.5529   settled price 1.5620             7.17 + 91

Counter-trade Strategy 711-GBPUSD vs. GBPJPY



GBPUSD as of 7.13 Fig. 1

 Having utilized the GBPUSD to counter-trade the GBPCHF & GBPJPY cross rates have provided the protective hedging strategy for any gains made from the two previous GBPJPY shorts dated 7.03 @124.59 marked on 7.05. And on the 7.11 @122.98 with an average price @123.78 in case that any adverse price changes at the closing Friday's movement. The 1.5391 low served as the initial price meeting short-covering position adjustment and liquidation for the week ending the 13th of July being in the oversold levels. The recovery was likewise due to the corrective daily move lower by the USD for the week. However, the 1.5580 first (R1) resistance level would have to be penetrated on the way higher but still does not indicate a trend reversal but merely a possibility of a major correction from its recent down movement from last week. While the USDJPY have remained steadier with its price levels and closed @79.25. Therefore, any corrective move higher for the GBPUSD ( Cable) would provide and off-setting position if and whenever prices do continue to move higher for the GBPUSD that may spill-over towards the GBPCHF & GBPJPY trade positions for trade strategy 711.

GBPJPY as of 7.13 Fig. 2

The advantage of having to trade and monitor prices with two and more trading systems (Fig.1& 2) and accounts to place the trades would provide the investor and trader a distinct elbow room to move trades and pre-condition the trades with a netting position similar to a market maker's/broker-dealer's market accessibility without having to strain or over-trade in any single account. Since trading balances from previous trades marked to open positions are netted -out to achieved a net positive balance overall on all accounts. Having to have a floating loss while in between trade positions would clearly provide a review of the market behavior and would also determine whether the applied strategies are working or not. Thus whenever the market moves adversely against a trade yet still provide a contrary-hedging strategy to absorb the sudden prices changes and maintain a positive net effect on all positions; then you would know how effective the strategy is. And that such order execution was importantly timed correctly. Please take note that the sequence of market view analysis may be construed to be in the wrong side of the trade is actually a strategy related to other existing or recently marked positions. A careful review of the past analysis compared with the present would be advised.

Trade Strategy 7.11 - GBPCHF, GBPJPY, USDJPY

The market sensitivity for the majors and its price action for the remaining couple of days trading have dominated the current marketplace with the strength of the Yen and weakness of the Euro have again lifted the US Dollar. With the USDx rising to a new 83.80 basis point high as of this writing, started with Japan's action of increasing its repurchasing program led the USDJPY lower to the previous 79.22 while spinning the EURUSD down to the 1.2170 low, and the GBPUSD keeping pace at the new 1.5432 low levels have left investors the flight to quality US dollar next best choice in slow global growth.  

Trend following the US Dollar through its Index have been our main leading indicator relative to the price action of the currency majors and the correlated cross rates. While the European Debt crisis has been the fundamental catalyst for a counter-party price market mover that resulted to a Tug of War between the each currency pairs. Please proceed to our website for a complete analysis : http://megatrade101.com/  

MFGlobal then PFGBest... who's next? - Forex Awareness

As we came across the news wire that PFGBest is under the scrutiny of regulators were approximately 220M customers funds are missing from the broker's bank accounts is nothing really new. Their involvement with Trevor Cook troubles in Forex trading, as then Wasendorf Sr. didn't do more to distance the company from a massive $194 million forex-trading Ponzi scheme run by Trevor Cook in Minnesota then, who admitted defrauding more than 700 investors. Cook is serving 25 years in prison.

Before PFGBest, the flagship was then called simply Peregrine Financial Group (PFG), but there was a division created under PFX where forex trading was offered for retail clients and clearing services was made through PFG. Apparently, our group of investors used to trade our Forex positions with PFX in Chicago for almost 2 years with no hitches in 1995-97. But when it came to finally withdrawing funds it took them such a long time to clear. As they referred to their procedures; where client segregated funds had to be withdrawn from their counter-party once positions were established and needs to be closed-out. That was the 1st red-flag; since our positions were long time settled. And by mistake they have sent us counter-trade positions of our trades marked in the financial futures; which we gave them notice and demand for explanation. The head FX dealer then explained it was a mistake and meant for another client. However, what they didn't know was that we were also trading the financial futures with another broker-dealer. We were also informed that the company PFX do invest client's funds on segregated accounts only in Government TBills and all Forex trades are guaranteed and cleared through their main company PFG. How true those information then, was really unclear since it was the years 1995-97 where there was a grayline in Forex Trading guidelines. 

With that said, all these experiences has kept us be really aware of the surrounding circumstances while trading the forex market. And the investigation now has finally came to a point that regulations can only best serve the investors and clients. Due diligence in trading is more than enough and not add to the worrisome thought of having your trading capital be at risk. Good we were able to finally get our funds after giving them a last day notice and wired the funds to our bank account within two days notice. And decided not to trade with them any longer.

Counter-Trade Strategies l & ll Settled & Booked

UPDATE: Counter-trade Strategies l & ll executed from these market view trade analysis have been settled & booked prior to the closing trade as of today the 7.05.12

Target levels for the GBPUSD at 1.5510 first objective; GBPJPY at market current market value 123.90 and GBPCHF at the 1.5045/50 has been achieved. This is a considerable amount from the end-result of the ECB rate cut and a day before the NFP figures release. We'll be watching the market movements from hereunto as the strategies successfully implemented would provide us a trading break for the time being. Please refer to the market view analysis and sequential trades listed below. Or visit our website for a detailed report.

Counter-Trade Strategies 2 : Update GBPUSD & GBPJPY

GBPUSD DAILY

Cable finally continued to head south versus the US dollar and the Japanese yen on Wednesday's trading in preparation for the 4th of July US celebration but more importantly as the weaker than expected PMI data expects the Bank of England would seriously consider for more stimulus on Thursday. However, it does remain to be seen before any would-be speculation that it would.However, as a net counter-trade position on the GBPUSD was initially added prior to the release of the news. The Libor scandal have confirmed the higher risk of Cable to loose its grounds once the parliamentary inquiry would begin.

Although, the main highlight is the British Pound (Cable) currency is getting a beating from the Libor rate scandal as Barclay's former CEO B.Diamond faces the Parliament. As some of the Regulators are trying to dissect and determine whether other closely related banks deliberately tried to influence the Libor rate by intentionally or un-intentionally submitting inaccurate data during the financial crisis. Currently, working at the 1.5610 from a registered consolidated high at 1.5720 have shown its effects from the fundamental scandal on the Libor rate. Initial support is still at the 1.5580 and once prices move lower then the 1.5480-1.5510 would be the next testing area of support.

Thus simultaneously spilling over to the GBP/JPY cross rate which have lost over 70 pips throughout the day from its recent high at 125.40. The up and down swing of prices have been expected however, these price action is more fundamental with a combination of a technical move.As for technical levels, supports are seen at 124.50 and 124.00 lower range; while resistances 1,2 & 3 is seen at the 125.00/.45 & .80 price levels. Pls visit our latest news on the GBPJPY cross rate at http://megatrade101.com/

Counter-trend Strategies: GBPCHF vs. GBPJPY

Suffering its biggest,one-day loss the US Dollar (Index) settling at the 81.60 basis point levels; majority of which was due to the outcome of the EU xummit. Although, some of the reports today from the US Manufaturing numbers which proved to be lower than what the US Manufacturing figures are expected have given the USDx a pause from its recovery at the opening of the North American session.

The wider uncertainty in the long run that these troubles is not immediately going anywhere have prompted investors and traders reluctant in creating short positions at the beginning of the thrid (3rd) quarter of the year. The overall fear that a financial crisis may well be spreading across the global market is still up in the air. A review of the bigger picture, yields are still at its record lows, a sluggish economy with a fractional growth rate and major banks capital requirements are needed to extend liquidity in the market place the very core foundation of a bear market entering in the 2nd half of the year.

Speculation and institutional hedgers do weigh heavier as volatility may increase inspite of the lesser volumes traded daily. And with the upcoming 4th of July celebration the market would likely be all over the place in both directional play of price action taking advantage of some players not present in the opening trading week where the EU debate this Monday is expected. Subsequently by Wednesday's 4th of July celebration trading break for the stock market and the ECB meets Thursday followed by Friday's NFP numbers expect the market to be actively traded in the European and Asian trading sessions.

For the past couple of weeks now, we have applied a short-term exposure trading primarily the cross rates with a couple of majors and using the futures market for the USD Index. A counter trend position at the middle of the week's trading between the Asian and European markets and closing out at the end of the week's trading in New York.
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