Ban The Shorts!
By Mike Conlon | June 9, 2010
Both France and Germany have called on the EU to ban short-selling on certain stocks and government bonds with the intention to curb speculation in the market. While I am never a fan of this type of regulation, there does need to be some sort of “fix” for the market as speculation has gotten a little out of hand.
However, there are always unintended consequences to this type of action, and this could end up hurting their ability to raise capital. This could also hurt the forex market, as Euro-related pairs lack the volume to trade orderly. Nevertheless, there still is a ton of risk related to the Euro, with sovereign debt defaults the primary driver.
In addition, ECB President Trichet helped push the Euro higher with comments on the state of the Euro. As I mentioned yesterday, expect the game of “show and tell” to pick up, with officials telling us how great everything is but showing us little.
Also today, the US Fed Beige Book report comes out, with Bernanke expected to echo his comments from the other night.
In the forex market:
Aussie (AUD): Consumer confidence fell for the 3rd straight month down under, nevertheless the Aussie is higher on risk appetite. Fears of a global slowdown (particularly in China) and the raising of interest rates have added to the sentiment that the economy will slow in Australia.
Loonie (CAD): The Loonie is also higher this morning as oil prices have bounced higher and equity futures are set to open higher on risk-taking in the market.
Kiwi (NZD): The Kiwi is higher ahead of its interest rate policy meeting tomorrow, where the market is anticipating a 75% chance that the RBNZ will raise rates 25bp to 2.75%. Put me in the camp that is betting against the rate hike, as I feel the NZ economy rides on the coattails of Australia, and that the risk in the market may be too great to warrant a hike just yet.
Euro (EUR): The Euro is mixed this morning, trading higher against the safe-haven currencies, but lower against the commodity currencies. Comments from the ECB have helped push the Euro higher slightly, but let’s not forget about the huge risk the Euro poses as they struggle to get their fiscal houses in order.
Pound (GBP): The Pound has a bid this morning after a 4-day decline as investors seems more confident in the UK’s ability to combat their fiscal woes, much more so than the EU. The UK trade balance missed estimates, but narrowed from last month’s reading.
Dollar (USD): Today we get “Fedspeak”, as Bernanke gives his beige book report to Congress. I do not expect any change in language from the Fed Chief, and at this point I’m guessing that we will not see a rate hike this year. The Dollar has been higher this year on the flight to safety trade, and at this point I believe that inflation is a non-issue.
Yen (JPY): The Yen is lower this morning as risk-taking inspired carry trades are taking place ahead of the New Zealand rate decision. Japan will report its own GDP figures tomorrow, which are expected to show moderate but steady growth. In addition, new Finance Minister Noda said he would like to see price gains above 1%, but didn’t make that an “official” inflation target. Japanese deflation has plagued its economy for some time.
As I mentioned yesterday, this is “cheer-leading” week for the various markets, as the lack of hard economic data is supplanted by discussions of various economic situations.
I am always skeptical when it comes to government announcements and prefer to analyze the hard data myself. But with that in mind, you have to pay attention to what they are saying.
As a trader, it is important to trade what you see and not what you think should happen. If Bernanke wants the market to go up, you should play along even if you think the fundamentals don’t match. However, be sure to exit quickly at the first sign of market sentiment change as the market is always right, regardless of what is said.
So pay close attention to the technicals as the various market participants digest the rhetoric.
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Kiwi Update!
By Mike Conlon | December 9, 2009
As expected the RBNZ kept rates unchanged at 2.5%, but did mention that they would likely be looking at a raise sometime in mid- 2010. It appears as though the economy is on track and that they will meet their inflation targets.
Here’s a quick look at a 1-minute chart of NZD/USD as it was announced: (click chart to enlarge)
I mentioned earlier that resistance was around was around .7175. Well, it looks like I drew the chart correctly, but mistakenly said resistance was at .7175, when it should have been at .7185. If you look at this chart, you can see how the price went up through that resistance, then traded back down and consolidated before moving higher.
It just goes to show how powerful simple support and resistance can be in your observations of charts and in technical analysis.
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Tags: analysis, blog, charts, course, dow, economy, forex, forextrading, fx, fxedu, Il, Mike Conlon, nzd, rate, simple, technical, time, USD
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Weekly Outlook from InnerFX 12/07
By Mike Conlon | December 7, 2009
EURUSD
Despite several attempts to breach higher last week, the euro failed to hold gains as the dollar rallied across the board on Friday, as a result of better than expected unemployment figures. The 270 points decline of Friday has cleared half of euro’s gains accumulated during the previous two months, hence December started by favoring the dollar bulls. Is this the time of a prolonged correction? Could be… but I maintain my positive view on EUR against the buck, for now, treating such declines as potential opportunities to re-initiate EUR long positions. Speaking of current market conditions – short-term sentiment is slightly bearish due to recent rejection into the 1.5150 region along with Friday’s collapse below the 1.49 handle, back into the key support region around 1.4850. A rising trend line support coming from July’s low at 1.3830 has been reached and limited intra-day losses but in case of the decline’s resumption within the coming trading sessions, we should focus towards the next support levels – into the 1.4700/30 and 1.4600 regions. In case of a recovery, which at this moment seem more plausible to me, I expect the 1.5000 mark, along with 1.5050, to provide a minor barrier – a lot weaker than before (during October and November). A sustained breach above the 1.5 handle would also turn momentum positive, signaling that the correction is over. Also keep an eye on the S&P500 as important levels are still intact into the upside – the 1113 barrier which is still intact, despite several attempts to breach higher along with false breaks/spikes to as high as 1119. Another key barrier is the median retracement of the long-term decline from 1576 to 666.75 which is set at 1121. Due to the solid correlation between EURUSD and S&P500: no sustained break above 1113 -> no breach above the 1.5100/50 region, simple as that.
(click all charts to enlarge)
Gold
The superior band of the uptrend channel (seen in the chart below) is, once again, providing support on current pullback. In case of a break lower, next downside barriers into the 1126 and 1100 regions may limit losses. Short-term sentiment shows some bearish signs but it was about time to look for a correction – because it can’t just climb to record highs forever, right? However, if the correction continues – below 1100, bulls should start to worry. On a medium term basis – uptrend is intact and extended dips will favor further buying.
GBPUSD
In my previous article, when cable was trying to recover some ground pushing on the 1.6600 handle from below, I pointed out that more selling towards 1.64 was likely – further weakness emerging, as expected, and cable printed session lows around 1.6420 before closing the week .36% lower. Downside remains favored for now, and a break above 1.6700 is needed to confirm the positive bias. Recent hesitation into the 1.6700 zone confirms the indecision of both bulls and bears and the 1.6270-1.6700 range will probably remain valid for now. However, the said 1.6270/00 support region may limit extended losses and provide a reversal point, as that’s quite an important level.
NZDUSD
Former support provided by the rising trend line coming from .6475 of July has provided a stable resistance on last upside attempts into the .7280/00 region. A break was needed to resume uptrend but selling into rallies favored the current decline which extended to as low as .7130 on Friday. Although NZD’s losses have been relatively smaller comparing to EUR (-0.86% vs. -1.37%), there are no signs of uptrend’s recovery yet. Below current market levels, important support is formed around .7050 by the 61.8% fibonacci retracement of .6685 – .7635. We’ll see how it reacts if current decline continues.
Happy trading!
Tags: analysis, article, blog, buck, charts, decision, dollar, dow, EUR, Euro, forex, forextrading, gbp, gold, Il, lot, market, momentum, nzd, sentiment, ssi, time, trend, unemployment, uptrend, USD
Topics: What To Look At In The Market | 1 Comment »
Yen Strength!
By Mike Conlon | November 25, 2009
As I’m getting ready to take off for Thanksgiving, was just taking a look through some different charts and noticed this one on dollar/yen (USD/JPY): (click chart to enlarge)
This 10-year chart of USD/JPY shows that the dollar is at its weakest against the yen in over 10 years! Remember that when this chart makes new “lows”, it actually means strength for Japanese yen. And you thought I was kidding about dollar weakness in my article below!
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Happy Thanksgiving to All!
Tags: account, analysis, article, blog, charts, course, currenc, currency, currency trading, demo, demo account, dollar, forex, forextrading, fx, fxedu, Il, Japan, jpy, USD, Yen
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Weekly Outlook from InnerFX
By Mike Conlon | November 24, 2009
EUR/USD
Yesterday’s rebound against the US dollar (USD) provides a clue about a potential resumption of the longer term uptrend. We’ll see if the euro will manage to hold gains above the fresh breached barrier into the 1.4950 region (which is currently under minor pressure) – formed by the falling trend line coming from 1.5045 over the previous lower highs. In case of an extended pullback below 1.4950, the 1.4850-1.4900 level will eventually limit losses in order to keep the bullish structure under development. I maintain my bullish stance on euro but I’m slightly cautious due to the repeated price action hesitation against the 1.5000-1.5060 top side. As I said earlier today: it won’t be easy to break higher, but it won’t be easy to drop lower (below 1.4800/50) either, while signs of hesitation continue to rule across the board – resulting in short-lived moves in a chop-chop manner.
- EURUSD 4hrs chart 11-23-2009
- EURUSD daily chart 11-23-2009
NZDUSD
In my previous short-term outlook, I mentioned that a pullback from .7440 would probably face solid bids around .7300, and eventually lower – around .7150. The upside remains favored for now as the pullback has faced a solid support, indeed. The rising trend line coming from .6475 also coincided with the recent bottom, so there are some valid reasons to keep the bullish view on NZD valid. Keep an eye on the .7400 handle as a breach is needed to fully confirm that the corrective cycle has ended.
Gold seem unstoppable and continues to rally to fresh highs on a regular basis – recently exceeding the upper boundary of the uptrend channel, as seen in the chart below, and the 1130 region is expected to provide support on pullbacks within the coming days. While it continues to push higher, dollar weakness across the board is likely to continue.
Let’s take a look at current Gold and S&P500 charts: both seem to provide enough bullish clues (for now) to support the ‘weaker dollar’ scenario. The important levels to watch are: 1130 support for Gold; 1095-1100 support region for the S&P500 along with the 1113 resistance.
- Gold chart 11-23-2009
- S&P500 short-term chart 11-23-2009
Have a great week!
Tags: analysis, charts, Conlon, data, dollar, dow, easy, EUR, Euro, eurusd, fx, gold, Il, live, lower, nzd, pair, pairs, scheme, short, Swiss, time, trend, uptrend, USD
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USD to Strengthen on Double Dip Concerns?
By Mike Conlon | November 12, 2009
So I’ve kind of been looking around a bit for some sort of technical confirmation that something big may happen in USD to support a “hunch” that I have that the dollar may strengthen. Not seeing anything yet. And this is good. Because its usually opposite of how I tend to trade.
Readers of this blog know that I tend use a combination of fundamental and technical analysis, but normally I’ll find a technical set-up that I like and then do some research to see if there are any possible fundamental reasons that support my conclusions. Well now I’m searching high and low (pun intended) to find a technical set-up to support a hunch.
Not seeing the set-ups that I like. The nice thing about technical analysis is that you can ALWAYS find some sort of pattern or indicator that will confirm one direction or another, but its more important to have the patterns that you KNOW work time and time again.
We all know about the Fed’s commitment to keep rates low and therefore depressing the dollar, but the dollar could benefit from the risk-aversion trade if worries about falling into the dreaded double-dip recession ramp up. One of the main reasons why this fear may pick up is because of the removal of the stimulus programs and the pull back in quantitative easing.
In other words, the economy is going to have to stand on its own two feet. Much like a baby who’s taking his first steps, you’re always concerned about the inevitable fall. And with all of the fear out there, a fall is inevitable. How bad it is going to be is anyone’s guess.
I’ll be watching closely for technical set-ups in the dollar that may foreshadow this move, but will not be acting on the hunch. So, check back to see if I find any, and if you see your own, well you know what to do.
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Tags: account, analysis, blog, course, dollar, dow, economy, fear, fed, forex, fundamental, fx, fxedu, Il, Mike Conlon, rate, recession, RSI, ssi, technical, time, trade, USD
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All Eyes on US Consumer Confidence, 10AM EST
By Mike Conlon | October 27, 2009
A lot of the time when I am considering potential trades, I like to “match up” what I am seeing on a chart with what might happen in the news. This means that I pay close attention to potential reports that I think might be important.
Today’s such event is the US Consumer confidence numbers that come out at 10AM EST. How do I know that this number may be significant? Well, call it just a hunch, but yesterdays price action in the US stock market and its corresponding effect on both the currency and commodities markets has led me to believe that that there is some rising fear out there.
Early this morning, the US equity index futures are flat, meaning there is indecision over which way the market might go today. Chances are the market will trade that way until this announcement at 10AM. And then the fireworks could begin.
While I don’t like to “guess” what will happen or “wager” on the number, I do like to use technical analysis to guide what I think may happen. This helps me form a general market thesis that gives me a short-to medium term macro view that can provide me with all kinds of opportunities in many markets. Because the different asset classes and instruments are both positively and inversely correlated, I can extrapolate what may happen today.
So what does that mean for today?
Well, the first thing first I am seeing is US dollar strength and a potential trend reversal. Dollar strength usually means weakness for stocks and commodities, as well as all of the “risk-seeking” currencies. When there is increased fear in the market, risk-averters sell higher yielding currencies and move back to the dollar, in the “flight to safety” trade we speak of so often.
So if the consumer confidence number comes in worse than expected, then expect dollar gains and equity market losses. I will be back a bit to later to see how this plays out, but I have orders place to sell non-dollar currencies below resistance, and to buy dollars above support. Tight stops are placed just below support and above resistance.
Check back later to see what happens!
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Tags: account, analysis, commodities, course, currenc, currencies, currency, decision, dollar, fear, fx, fxedu, Il, index, live, lot, market, Mike Conlon, news, practice account, short, stock, stocks, technical, time, trade, trades, trend
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Being a Fundamental trader no matter what your time frame.
By Sean Hyman | May 26, 2009
The fallacy that traders usually get into is that fundamental analysis is only “news event trading”.
However, the biggest traders out there aren’t so much “news event traders” and yet they are still fundamental traders.
How? Because they keep in mind where interest rates and CPI are heading in the given countries. They watch the GDP growth to see how the country is growing, etc. They rank the ones that perform the best fundamentally and pair them vs. some of the worst fundamentally.
That gives them their pairings, no matter what time frames they look for entries into that fundamental direction.
So let’s say that they think the Aussie is one of the best fundamentally sound countries out there (and thus its currency too). And let’s say that they think that the U.S. is very fundamentally flawed and is one of the worst performers when it comes to their fundamental data overall. Then they’d want to look for buy technical entries into the AUD/USD pair. That could be on a one hour chart, 4 hour, daily, 5 minute chart, etc.
No matter their holding time length…they buy the best and sell the worst. That’s how many big institutions look at fundamentals and technicals. They technically trade in the right fundamental direction on the best pairings.
Tags: analysis, AUD, Aussie, currency, data, fundamental, fxedu, interest, interest rate, interest rates, news, pair, Sean Hyman, technical, time, trade, trader, trading, U.S., USD
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Alert: NZD/JPY Breaks out Above 50! Next Stop 55-60!
By Sean Hyman | March 13, 2009
The Kiwi dollar has broken out agasint the Japanese yen on its daily chart. Get ready for another 500+ pips to come over the upcoming days to weeks. Click on the chart to enlarge it.
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Sean Hyman
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Yen Strength pushes GBP/JPY and AUD/JPY down this morning!
By Sean Hyman | March 12, 2009
The upward momentum so far is nothing…so looking to the downward momentum on the day, GBP/JPY and AUD/JPY are the biggest losers on the day. So expect the short sellers to sniff this out and jump on it. GBP/JPY down 1.46% so far on the day and AUD/JPY down 1.74% on the day so far….biggest losers on the day when I can over about 27 currency pairs. Get your practice account started today by clicking on the “Practice Trading” button above this page.
Tags: analysis, AUD, blog, currency, currency pairs, dow, forex, fxedu, gbp, jpy, momentum, mywealth, pair, Sean Hyman, technical, trend
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