Monthly Archives: July 2011

Weekly Recap – Trying Week On Both Sides of the Atlantic

It’s amazing how the lack of any progress creates progress in and of itself. USD fundamental data remained mixed as better than expected Unemployment Claims, Home Sales and CB Consumer Confidence data were overshadowed by disappointing GDP figures and the debt crises itself.  The EUR/USD had a brief rally earlier in the week but gave back all of its gains to settle at 1.43971 just 31 pips removed from where it started. With the US on the brink of one of its worst economic blemishes to date the euro remained flat as investors seemed unable to determine the lesser of two evils. This occurred despite the strong technical inclinations for a USD rally.

The mixed messages suggest traders are truly undecided on the direction of the pair and have unsavory feelings towards both. In the event an amicable resolution is reached over the weekend or early next week on US debt ceiling, traders may be in for a long downward spiral. If such an agreement is viewed as insufficient or fails to matriculate entirely, we may be gearing up for an epic run on the dollar as it is already facing pressure across just about every currency.

This notion however is not limited to EUR/USD. This week saw record lows for the dollar against the loonie, kiwi, franc and yen with no end to the rally in sight. The loonie and franc in particular are beginning to come into their own as reserve currencies rallying in lieu of the dollar as the week brought with it somber economic data from nations across the globe.  The golden rule of thumb, what goes up must come down, will sooner or later come to fruition. How high it may go is anyone’s guess although the next few days should be telling. If in fact an agreement is reached that satisfies investors concerns and wards off a looming credit downgrade, we may see a massive correction as investors across the board scramble to take profits before Isaac Newton’s infamous rule sets in. If an agreement is not reached, or a downgrade occurs nonetheless, today’s highs may become tomorrow’s levels of support for a very long time to come.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Dollar Stays Strong After US Session

As Michael pointed out yesterday, the dollar has been strong during the US session in recent days, and more bearish during the European and Asian sessions. However, for the first time in a while, perhaps as a result of his jinx, the greenback was able to hold throughout the Asian session today, and then continued to gain almost 100 pips in a little more than an hour during the European session. Why?

One major sign point to dollar weakness, and that is the continued failure to resolve the issue of the debt ceiling. Yet despite this, we are seeing dollar strength? This must mean things in Europe are even worse than they are stateside, and indeed, this is the case. While the debt ceiling crisis is a real one, the general assumption is that a resolution will be reached. It may not be satisfying for one party, or the other, or both, from a political point of view, but ultimately the strife and turmoil is temporary. The most likely outcome is that the issue is resolved, or at least the “can is kicked down the road” as we continue to hear. In Europe on the other hand, the issues being faced are of a more long term nature.

The very fabric of the European Union is in question, with the differences in political and economic culture between the member states highlighted currently more than usual. How long will German taxpayers continue to support their free-spending PIIGS neighbors? Price action over the past 2 days, with the euro dropping from a high of 1.4540 to a low of 1.4248 sheds some light on the question.

On the fundamental analysis front, there was good news for the US dollar today as well. First, at 8:30am EST the Department of Labor released their weekly unemployment claims result, representing the number of individuals who have filed for unemployment benefits for the first time last week. Expected to come out at 413,000 with some analysts expecting a worse that projected report, we were greeted by some positive news when the actual figure came out at 398,000, just a tad below the significant 400k mark for the first time since April. Good news indeed.

An hour and a half later the National Association of Realtors released their Pending Home Sales report, which represents a change in the number of homes under contract to be sold. Last month there was surprisingly positive news of an increase of 8.2%, but this month expectations were for a small contraction, down 1.5%. Instead, we received good news when the change came out positive, by 2.4%. The dollar gained a bit immediately on the release of these two reports, but gave back a bit throughout the day as talk continued to swirl of Boehner’s problems in unifying his rowdy party.

Shortly the house will vote on Boehner’s debt ceiling bill, and the outcome, as well as reaction from Harry Reid and his merry band of senators and the POTUS himself may prove to be interesting.

The big play tomorrow will continue to be the push and pull of debt concerns in the US and the eurozone, but if you are sick of this news, keep your eye out for the Canadian GDP announcement at 8:30AM EST tomorrow. Projected at 0.1% growth, any figure just a few tenths of a percentage up or down may have a major psychological impact, and could cause some steep and tradeable swings in the markets.

 

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Record Highs Left and Right

Its only midweek and yet the last 72 hours have been filled with multiple record highs and lows. The AUD has broken out against the USD and finally climbed above 1.10 along with its pacific trading partner the NZD which has set a new record high vs. the greenback every day this week save for today’s pull back. The aussie and its high risk/high yield commodity currency partner the kiwi have both been on an absolute tear vs. the George Washington, both boosted by a rally in Gold prices and of course the ever looming US debt crisis which has yet to be resolved.

Gold touched a new record high today at $1628 while investors fled risk in pursuit of safe haven investments. US stocks shed close to 200 points as the Dow fell to a 12302.55 close. Oil also took a beating causing the CAD lose ground compared to the dollar – weak US economic numbers to blame.

On a side note, I think I may have noticed a pattern in this week’s trading. Correct me if I am wrong but doesn’t it seem as though during the US session the dollar remains strong and holds onto support levels while during the Asian and into the European session the USD bears get the best of the greenback?  As always comments, suggestions and even corrections are welcome.

 

VT Trader forex trading platform charts below show indicators from our customized suite of technical analysis tools and charting software.

The AUD/USD chart features DeMark’s Projected Range Indicator and the NZD/USD chart displays Ehlers MESA Indicator.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Consumer Confidence and New Home Sales Drive Prices

Hope you were paying attention to your fundamentals today. At 10:00 AM EST the CB Consumer Confidence report was released out of the US at a better than expected 59.5. This was followed by the New Home Sales number which was worse than expected at 312K. Both economic numbers released added more volatility to the market as traders were butchering each other at the front lines, confused between debt default in Europe, debt ceiling discussions in the states, and the expectation of interest rate hikes from the eurozone and US sometime this year. Hopefully even technical traders had their eyes wide open as they watched their chart patterns and indicators act contrary to what was happening in the market. This extreme type of volatility leads to margin calls regardless of whether traders are long or short the currency pair even stops are placed too tightly.

If we look at the 4 hour and daily charts for the EUR/USD we’ll notice that it has been trading in a range between 1.4690 and 1.3840 for almost

8 weeks. Currently the popular pair is looking at 1.4500 as a strong psychological resistance level and the market closed today above 1.4500 at 1.4510.

We also had the USD/JPY and USD/CHF falling down further. USD/JPY now is at 77.90 and USD/CHF is now resting on the strong support level of 80.00. We haven’t seen these low levels for dollar relative to these 2 other safe haven currencies before, and can’t be sure when the reversal will take place or if the bearish trend will continue.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Debt Concerns Carry into the New Week

Over the weekend many traders were eying a possible resolution in Washington about the debt ceiling debate and concerns of a possible U.S. ratings downgrade. As we all know now, there was no agreement and the anxiety has carried over onto Monday’s trading session. Currencies against the US dollar benefited from these concerns. The USD/CHF was the best mover of the day as it fell to its all-time low of 0.8019. Commodity based currencies as well rallied as traders saw opportunities with the dollar weakness.

The EUR/USD ranged from 1.4415 to 1.4324. The Equity markets finished lower with the Dow Jones and S&P 500 closing down -88.36 and -7.58 respectively. Commodities like Gold reached record highs above $1,620 a troy ounce yet settled at $1,612. Sliver as well shined up 0.8% at $40.34 an ounce. Crude Oil closed lower to settle at $99.12 a barrel.

This week look out for Tuesday’s Consumer Confidence data and New Holes Sales report. Then on Wednesday Durable Goods Orders data where we can see some improvement in the manufacturing sector and the influence that have on capital spending will be reported. Thursday we have the Jobless Claims report and Pending Home Sales index, where we hope to see some relief in two sectors that have been struggling. Then on Friday we close the week with Gross Domestic Product data.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Weekly Recap – A Dance with Debt and Fire

What do the European debt crises, the US debt crises and the weather in New York have in common? Lots of heat and no end in sight. Interestingly enough that’s not exactly where the similarities end.  That notion alone probably has Alexander Hamilton churning in his grave.

Earlier this week president Barack Obama held “secret” talks with congressional GOP leaders to try and hammer out an agreement to raise the debt ceiling in exchange for certain austerity measures. The not so secret talks seem to have led to a not so surprising lack of compromise. In fact, as certain states and the Fed begin taking precautionary steps to prepare for default one may begin to wonder if that is actually where we may be headed. GOP house members attempted to pass a bill Friday requiring $5.8 trillion in cuts to lift the debt ceiling. That’s only $4.3 trillion shy of what the democratic leadership proposed! If one doesn’t find the above sarcasm amusing, perhaps the notion of US politicians setting aside their partisan differences for the common good of their populace and the economy will bring about some smiles. After all, it’s the economy stupid. With presidential elections just around the corner traders ought to really wonder who the real dummies are. Those who believe that when push comes to shove, an agreement will be hammered out to avoid potentially irreparable damage to the US and its economy or perhaps those who seem to think the GOP actually has no interest in coming to an amicable agreement and would actually like to see the US economy conveniently burn right before we head into an election year. Then again, what if an agreement is reached? Will the US trade deficit suddenly decrease? Will its economy suddenly shake off the lethargy of the past few months and surge? Will the US suddenly take a look at its spending across the board and learn to live within its means? Or perhaps will yet another band-aid be applied and the prospect of default merely delayed till we reach the new limit.

On the other side of the Atlantic, a very different but oddly similar story seems to be unfolding. The Euro surged against the dollar earlier this week as debt fears were eased by notes leaked from the EU summit suggesting rates on any new loans to Greece will have a rate of only 3.5% and that the loans already issued by the European Financial Stability Facility (EFSF) will have their terms doubled, from 7.5 years to 15 years. It sure sounds like EU is working towards a solution to help prop up their failing brethren.  A European monitory fund seems to be on the brink of creation – but wait! They already had that. In fact the only thing that really seemed to come out of the leaked notes is a change in how the currently available funds will be disbursed. That is to say, the actual amount of capital available to prop fledgling economies has not changed but rather the terms by which that money can be distributed.  To extrapolate on its consequences further, it seems that the EU is positioning itself not to prevent the default of its troubled members but merely to prepare itself for if and when it does happen. The subsequent surge in optimism should really help put the desperation of traders in perspective as markets appear ready to surge on any sign of stability.

Traders should take the fickleness of the market in stride and perhaps come to terms with the prospects of extreme volatility among eur and usd major pairs until stability returns or catastrophe runs its course. Like with any forest fire the old stalwarts are destroyed and life begins anew. The initial destruction cannot be fully measured until its run its course but brighter days lay just ahead. The fires of 2009 may have subsided but its embers are still growing bright red.  The Aussie, Kiwi and Cad seem to have come into their own and sit at or near record highs against both the Euro and the Dollar while Gold continues its climb to unchartered territories. As temperatures rise, embers smolder and fires come and go the market’s direction will be subject to winds and whims.  An astute trader embraces the cycle and its consequences. After all, once the smoke finally does clear its new inhabitants will only have the sky as their limit.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Positive Outlook Starts to Shine Through

What has defined the economic conversations of the last couple of weeks?  Most would quickly point to the debt ceiling negotiations in the US and the ongoing debt crisis in the EU, with a focus on the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) and more recently the EU summit to address said crisis.

The euro has been getting pummeled, down almost seven cents in the past couple of months and the bad news has been nonstop.  Banks failing stress tests, the basic acceptance that Greece will be defaulting in one way or another, the list goes on.  Today, there was a bit of a turn of events, and the euro responded by rallying from 1.4259 to a high of 1.4415, after having dipped early in the day as low as 1.4138.

So why the surge?  Perhaps after all of this selling pressure, a correction was inevitable.  More likely though is the leaked documents from the EU summit, suggesting that rates on any new loans to Greece will have a rate of only 3.5%, and that the loans already issued by the European Financial Stability Facility (ESFS) will have their terms doubled, from 7.5 years to 15 years.  If in fact Merkel and Sarkozy are able to come to an agreement and pony up more to help their struggling neighbors than the market had recently been expecting, we may see some of the bleeding start to clot for the beaten down euro.

On the other side of the Atlantic, the news for the US economy hasn’t been much better, with Philly Fed Chairman Plosser commenting to the media yesterday that the Central Bank has been preparing for the scenario of US default – not a great way to instill confidence in the shaky markets Mr. Plosser – thanks.

As the GOP and POTUS struggle to come to a deal, and the debt ceiling deadline closes to t-minus 2 weeks, nerves have been high.  The greenback though trades in a bit more tricky manner, because even though the news has been unnerving to investors, and bad for equity markets, the USD hasn’t lost strength across the board, mostly due to its status as a safe haven currency, even when the danger stems from the US itself.  If we take a quick peek at gold though, we get a clearer picture of the dollar’s real strength, and that is one steep trend line, with XAU/USD shooting up from a recent low of $1489 at the start of this month, to a record high of over $1600 an ounce!  The sharp rise in gold is indicative of the markets’ general fears.  Today, we had a drop in gold relative to the dollar though.  This afternoon, the New York Times reported that Obama and Boehner might be close to a deal, and that they are bringing their respective parties into the loop on where things stands.  The market liked this calming report and gold dropped by about $15 an ounce on the news.

Other reports overshadowed by politics today included a worse than expected jobless claims report, rising to 418,000.  The Dems were hoping for a figure below 400k, and they did not get it – still though a clean and substantial resolution to the debt ceiling issue will overshadow this and any other weekly report.  As this week comes to a close tomorrow, keep your political science hats on, because the political dynamics on both sides of the pond are and have been driving price action.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Calm Before the Storm

While traders worldwide eagerly await the euro zone summit and news on the US debt ceiling limit being raised, let’s focus on the happenings of today for a moment. Wednesday’s trading session can be summed up as “the calm before the storm” however, there was still plenty of action.

There is optimism that we could see an agreement on Greece’s all too publicized debt crisis and this has lifted the single currency back over 1.42 versus the George Washington. Yesterday’s mild rise in crude oil helped push the loonie north and the yen’s run on the greenback sometimes looks as though it will never end. However, we all know from experience that what goes up, must come down. Gold spiked $12 to $1600 and that boosted the Aussie dollar back into the mid 1.07 zone. We could see AUD/USD test 1.08 in the next 48 hours…or less. Keep your eyes peeled. In a battle of risk against flight to safety – the EUR/JPY for a majority of the day appeared as though it wanted to touch 110, but by day’s end it had managed to climb to 112.

VT Trader forex trading platform charts below show indicators from our customized suite of technical analysis tools and charting software.

USD/JPY features Choppiness Index Indicator with Chaos Fractals Reversal Trading System (yes, VT Trader has trading systems) and XAU/USD displays Double stochastic Oscillator and also features Elliot Oscillator indicator on the bottom.

Dollar/Yen and Gold/Dollar Charts

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap – Getting Closer on Debt Ceiling Issue

Today was another quiet summer day in the forex markets. Most pairs traded in fairly tight ranges as traders attempted to digest the fundamentals. With a resolution to the US raising the debt ceiling still in discussion, President Obama today announced that there is a plan and that both parties are going to get together and come up with a solution hopefully this week.  Equities markets in the states were buoyed by the news.  We had somewhat positive news on two other fronts for the greenback today as well, with the Building Permits report slightly up at 0.62M and Housing Starts beating expectations a bit as well with a reading of 0.63M.

Across the pond, things still look ugly as yields on Italian bonds are up to 6% and the German Economic Sentiment report came out worse than expected at -15.1 against the projection of -11.8.

Last week, equity markets were bearish, but today saw a rise on average of 1.5% for all major global market indices to make up for some of the losses. Gold hit another record high and touched $1600 for the first time. The EUR/USD traded in a range between 1.4070 and 1.4215 then ended the day in the 1.4150 area.  The USD/JPY also traded in a range between 78.82 and 79.25.

 

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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Daily Recap- Gold Surges, EUR in the Dust

Worsening debt in Euro zone still fuels the risk aversion trade as EUR falls in early market trading. This was all triggered on Friday as eight European banks failed stress test. Adding to more uncertainly in the market mainly on the EUR as traders trying to see whether the ECB can resolve these issues effectively. Big trade today was currencies VS the EUR and with Gold.

The range for the EUR/USD $1.4133-1.4013 and settle to be over the $1.41. Commodity prices like Gold reach $1,606.20 a record high. Crude oil prices fell off $1.20 to settle at $96.04. Equity markets closed lower with the Dow Jones and S&P 500 down -94.57 and -10.70 respectively.

What to look out for this week starting with housing starts data tomorrow where we can see if there can be another rebound in a sluggish housing sector along with news on Wednesday of Existing Home Sales. On Thursday its a busy day with Jobless Claims data in we are hoping to see if it get below the 400k mark. Also, a press conference with Ben Bernanke at 10am (EST) and with Philadelphia Fed Survey data. To end the day at 4:30pm (EST) with Money supply report in where we can see any indication of inflationary pressures on the fed balance sheet.

The charts and examples found on this website are educational examples and are not intended to be representations of profits or losses that can be achieved through forex trading. When reviewing any such examples, please keep in mind that past results are not necessarily indicative of future results.

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