Market Surfing!
By Mike Conlon | July 27, 2010
Now may be the time to “ride the wave” in the markets as the major news of the summer, the Euro bank stress tests, were received positively by the market. Yesterday I commented on the credibility of those tests, and reminded readers to follow the market rather than impose their own view.
So far this morning the market is in risk-taking mode, as CPI data will begin to be released tomorrow in the Euro zone and Australia. Higher readings may show that policy adjustments may need to take place, especially in Australia.
Adding to Euro strength is the news from the Basel committee on Banking Supervision who announced they would be seeking new measures to shore up the global banking system.
In the UK, a CBI report showed that household spending increased at its fastest pace in nearly 3 years, lending support to the view that economic recovery is taking place.
This morning, US consumer confidence figures and home prices are due out, and yesterday’s housing sales figures were bad historically, yet the market reacted favorably because they were higher than expected. The market also seemed to overlook the revised figures from last month, which showed a much lower figure.
In the forex market:
Aussie (AUD): The Aussie is higher as risk appetite has increased due to a positive economic outlook in the markets. CPI data is due out tomorrow and should those figures come in higher than expected, the market may expect a further rate hike at the next RBA rate policy meeting.
Kiwi (NZD): The Kiwi is also higher on risk themes going into the RBNZ rate policy meeting tomorrow night. The expectation is for a rate hike of 25bp to 3%, but pay attention to the policy statement as the Kiwi is closing in on 2010 highs.
Loonie (CAD): The Loonie is also higher as oil has surged to 79.50 in addition to general risk appetite. There is no real news on the docket until Friday, when Canada reports GDP figures.
Euro (EUR): The Euro is also mostly higher, trading largely as expected according to our risk ladder. Consumer confidence figures and import prices were higher in Germany, showing continued strength in the Euro zone’s largest economy. This shows a renewed outlook for growth but don’t expect tomorrow’s CPI data to affect monetary policy just yet, as the ECB cannot start raising rates until after the sovereign debt issues of the countries in trouble are rectified.
Pound (GBP): The Pound is higher across the board as CBI reported sales data showed that household spending increased at the fastest pace in nearly 3 years. This CBI gauge showed a reading of 33 vs. an expectation of 3. So it beat handily and the market has responded accordingly as economic growth prospects have advanced.
Dollar (USD): The Dollar is lower as a “normal” risk-appetite scenario is taking place this morning. The home price index came in showing a slight increase which is a good sign in that prices aren’t still falling. However, with the end of the homebuyer tax credit, this may not be the case going forward and as always, the economic prospects here in the US will come down to jobs growth.
Yen (JPY): The Yen is lower across the board as risk appetite has increased the demand for carry trades. Recent Yen strength vs. the Dollar has heightened the awareness of possible intervention, but the BOJ appears (for now) to let the market dictate prices. Japanese employment and CPI data are due out on Thursday night.
So if the market tells you it wants to go up, you should listen. Many times traders (myself included) try to interpret market news and data and then make predictions of what they think should happen. A better way to approach the markets is to follow trends that you see on the charts, and then act accordingly. Try to find low-risk entry points based on technical support and resistance, and then hop on and enjoy the ride.
The news we have been receiving as of late has largely been positive and has emboldened risk appetite. While there are bound to be hiccups along the way; use them to your advantage by buying pullbacks or selling rallies.
The global economy is still fragile, but every passing day that does not bring bad news should be viewed as a positive for risk appetite. Money has to flow somewhere, and if you can catch it just right, you may be in for a great ride!
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, AUD, Aussie, Australia, bank, cad, canada, carr, carry trade, charts, course, currenc, currency, currency market, currency trading, data, dollar, dow, ECB, economic, economy, EUR, Euro, forex, forex market, free, fx, fxedu, gbp, home, Il, index, intervention, Japan, jpy, Kiwi, live, loonie, lower, meeting, Mike Conlon, money, news, nzd, oil, pound, practice, practice account, rate, release, sales, ssi, technical, time, trade, trader, trades, trend, USD, Yen
Topics: What To Look At In The Market | No Comments »
Risk Heating Up!
By Mike Conlon | April 19, 2010
This morning is marked by major risk-aversion in the forex market in an extension of Friday’s sell-off. News over the weekend has sent investors running for the safety of the US dollar and Japanese yen as carry trades are un-wound. What’s causing this fear to heat up?
Well, in addition to the usual Greece rumblings and UK election concerns, the major news of the weekend is: Goldman Sachs. On Friday, the SEC charged Goldman Sachs (one of the world’s most prestigious investment banks) with fraud. What is amazing is that just on last Thursday, I mentioned in this blog article that Goldman Sachs was upgrading its outlook for the Canadian dollar and how I saw that as a bad thing for the Loonie as my experience has taught me to do the opposite of what Goldman Sachs says. Sometimes a trader’s intuition is more important than all of the charts and research combined. I don’t take solace in that call.Also, the volcano in Iceland preventing travel is causing financial duress.
Nevertheless, the commodity currencies are lower, as are stocks and commodities world-wide. Whether or not Goldman is guilty of wrong-doing will be answered in due course, but for now the market is selling and will ask questions later.
In the forex market:
Aussie (AUD): The Aussie is lower this morning on risk-aversion as well as reports that Chinese Yuan re-valuation may cause Australia to slow the pace of its interest rate hikes. If Chinese demand cools, than the Australian economy will be affected by decreased exports. There is now talk in the market that the RBA may have raised rates too quickly, as home loan approvals have fallen for 5 straight months.
Loonie (CAD): As I mentioned last Thursday, while I still have a rosy outlook for the Canadian economy, doing the opposite of what Goldman says is one of my rules to live by. The Loonie is lower this morning as commodities are lower, with oil leading the way down 2.5% to $81. There is also news that the BOC may announce this week at its rate policy meetings that it will begin raising rates in June, rather than starting in July but in larger increments. Tomorrow is the interest-rate statement, and Thursday is the monetary policy report.
Kiwi (NZD): The Kiwi is actually higher this morning despite the risk-aversion in the market, as the Performance of Service Index rose to its highest levels in almost 2 years. A surge in hiring drove the this reading higher, which come a day in advance to the NZ Consumer Price Index which is due out tomorrow in the overnight session. Analysts are predicting a .6% rise after a .2% contraction last quarter.
Euro (EUR): A volcano eruption in Iceland from last week is still causing a major log-jam to commerce as flights have been canceled in Europe since last week. However, it is the other volcano waiting to erupt– namely Greece and the rest of the PIIGS countries that have sovereign debt issues that may be the bigger story. Germany’s bonds are now starting to take a hit as their role in the backing of Greece is starting to call their credit-worthiness in to question.
Pound (GBP): The pound is lower once again as concerns over political gridlock due to the May 6th elections are putting pressure on the Pound. This comes on the heels of a report that showed that house prices have advanced 2.6%, the fastest pace in 3 years. This precedes Wednesday’s BOE policy meeting minutes which are expected to show a dovish stance on rates.
Dollar (USD): The Dollar is higher on the flight to safety trade due to risk aversion. The Goldman news could send shockwaves through the market, especially if other firms are hit with similar charges. Thursday marks the big day of news for the US economy, as PPI, home sales, and initial jobless claims are due. Expect the dollar to trade on risk themes and inversely to stocks and commodities this week.
Yen (JPY): The Yen is higher this morning as the un-wind of carry trades due to risk aversion is creating demand for Yen. In addition, Asian stock markets were down overnight, and the Yen will often times trade inversely to the Asian stock markets, much like how the US stock markets and dollar trade. Adding to yen strength is the news that consumer confidence figures came in at their highest levels in almost 3 years as Japan is benefiting from its export-led economic rebound.
As you can see, all it takes is a little bit of risk-aversion to send the markets into a frenzy. While economic figures have been improving world-wide, none of this matters if fear of loss outweighs potential gains in the market.
Global recovery is still on very fragile terms, despite what media and government types may try to have you believe. This Goldman news could be the first of many dominoes that fall as the truth comes to light about what really happened with the housing market, credit derivatives, and just overall greed.
In the meantime, if the various volcanoes, both real and metaphorical, don’t subside soon, Europe could be in real trouble economically.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, article, AUD, Aussie, Australia, bank, blog, BOE, cad, carr, carry trade, charts, commodities, commodity, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, Europe, fear, financial, forex, forex market, free, fx, fxedu, gbp, gold, home, housing market, Il, index, interest, interest rate, invest, investor, Japan, jpy, Kiwi, live, loonie, lower, meeting, Mike Conlon, minutes, news, nzd, oil, piigs, pound, practice, practice account, sales, ssi, stock, stocks, time, trade, trader, trades, USD, Yen
Topics: What To Look At In The Market | No Comments »
Fed Surprise!
By Mike Conlon | February 19, 2010
Just when you thought the markets were starting to calm down and that the news out of the Euro zone was beginning to fade, the US Fed dropped a bombshell on world markets last night at 4:30 PM EST, just after the US stock market closed. The Fed announced to everyone’s surprise that they would be raising the rate at the Fed discount window 25bp to .75%, effectively charging banks more for Fed borrowing.
The markets immediate reaction was to buy dollars and cover dollar shorts, and stock futures tanked. Asian equity markets were down big last night and Europe looks to be bouncing back from earlier lows.
This move was the dominant theme in the overnight market, as retail sales figures in the UK and Canada are taking a back seat, as is the US CPI report which came in less than expected showing that inflation may still be at bay.
The two major things to take away from this move are: 1) the Fed is stressing that this move is not to tighten credit on consumers and businesses, but is merely trying to remove some over the overly-accommodative measures they have taken, and 2) investors need to be wary of the fact that the Fed may continue with these “sneaky” off-hours moves to try to avoid inter-day market Armageddon. It will be interesting to see how the market reacts to this move once trading begins today.
In currencies:
Aussie (AUD): The Aussie is down this morning as it is the currency that is most likely to be affected by this move, all other factors being equal. While I wouldn’t classify today as a risk-taking or aversion day, this is the third day in a row that the Aussie is down against USD.
Kiwi (NZD): Like the Aussie, the Kiwi is down 3 in a row. In addition to being affected by the discount rate hike, New Zealand has just reported the widest budget cash deficit in almost 9 years on lower tax receipts and increased government spending.
Loonie (CAD): The Loonie is lower this morning on lower commodity prices and the US discount rate hike. Also, Canadian retail sales figures came in slightly less than expected, but were at least positive. This could be a sign that economic growth is not as strong as investors may think, and everyone is anticipating the inevitable “Olympic Hangover” as the one-time economic windfall goes away.
Euro (EUR): The Euro is at nine-month low to the Dollar after the discount rate hike in addition to all of the problems coming from the Euro zone. Now speculation is heating up that perhaps Italy used the same sort of derivative maneuver to conceal debt that allowed them to enter the EU as well as Greece. There’s a lot of tension and in-fighting right now among EU members. This could put further pressure on the Euro in weeks to come.
Pound (GBP): The Pound is also at a nine-month low to the Dollar as fiscal concerns continue that the UK may need to continue accommodative measure to revive their economy. Retail sales figures came in at a disappointing -1.2% vs. and expectation of -.5%, showing further economic weakness.
Dollar (USD): It is going to be interesting to see how the market reacts to the discount rate hike today. Personally, I think that this move shows that the Fed is trying to get the market to believe that economic recovery is taking place. This move is sort of a red herring, which induced a knee-jerk reaction from the market as soon as everyone hears “rate hike”. This move does not affect the Fed Funds Rate so it shouldn’t affect either businesses or consumers. So by the end of the day I expect that we’ll see some risk-taking as economic strength in the US is good for world economies and inflation is lower as reported by the CPI.
Yen (JPY): The yen is higher on risk-aversion, however I think the market may “have it wrong” as its gotten used to the risk-on, risk-off mentality. Let’s see if the Yen gives back some gains by day’s end.
In overnight markets, the Hang Seng and Nikkei were down over 2% and European markets have reversed prior losses and are trading higher. US futures are still negative, but trading well off their lows in the overnight session. Oil has reversed earlier losses and is trading around 79.5, and gold is back to around 1115.
When I saw the charts last night immediately following the Fed move, my initial reaction was similar to that of much of the market—sell everything, buy dollars and yen. However, as I thought about the implications of the move, I’m actually quite impressed with the timing of the move and think the Fed did a great job implementing this. And I haven’t been a big fan of the Fed as of late! In my view, this is positive for world markets.
Also, watch out for volatility as today is options expiration.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, AUD, Aussie, bank, cad, canada, charts, closed, commodity, course, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, fed, free, fx, fxedu, gbp, gold, Il, interest, invest, investor, IRA, jpy, Kiwi, loonie, lot, lower, market, mie, Mike Conlon, new zealand, news, nzd, oil, pound, practice, practice account, rate, retail sales, RSI, short, ssi, stock, time, USD, Yen
Topics: What To Look At In The Market | No Comments »
More Problems for the Euro!
By Mike Conlon | January 19, 2010
The Euro (EUR) is down again today against the US dollar (USD) and looks ready to test support at 1.42. The problems in Greece may have a carry-over effect which will diminish the Euro as a viable alternative to the US dollar.
The problem in the Euro Zone is two-fold: either the other Euro nations come to Greece’s aid and bail them out which will in turn send the wrong message to the other PIIGS countries, or they allow Greece to exit and risk possible defaults as credit spreads widen because of the increased risk. Either way, the solution for the Euro is not easily rectified and how this plays out will be interesting to say the least.
In either event, I expect continued Euro weakness and if the Euro breaks psychological support at 1.42, then the next stop could be 1.382, back to its 50% retracement levels against the US dollar.
Because of the lack of viable alternatives to the Euro, the British pound (GBP) is seeing some strength today, up across the board against all other currencies.
Until clarity emerges from the Euro situation, the pound appears to be ready to strengthen against the Euro.
Let’s look at 2 quick charts: (click charts to enlarge)
The first chart is of EUR/USD and illustrates the different Fibonacci levels which can act as support or resistance within larger trends. When trends reverse, these levels an act as “magnets”– pushing the prices toward those levels. So if the problems with the Euro persist, then keep an eye on these levels.
The second chart is of EUR/GBP and it shows the current action of the Pound vs. the Euro. The pound provides a viable alternative to the Euro, so even though the UK has their own set of problems, the market may deem the Euro’s to be worse so I’m expecting continued pound strength against the Euro. I’m looking for a move down to .85 for this pair.
To learn more about how you can use Fibonacci numbers or other technical analysis to enhance your trading, be sure to check out our currency trading courses!
If you want to follow these trades live to see how this may play out, get a free, live demo account here!
Tags: account, blog, charts, course, currenc, currencies, currency, currency trading, demo, dollar, dow, EUR, Euro, forex, forextrading, free, fx, fxedu, gbp, Il, interest, market, Mike Conlon, pair, rate, ssi, technical, trade, trades, trend, USD
Topics: What To Look At In The Market | No Comments »
Dollar/Yen at 3 Month Highs!
By Mike Conlon | December 30, 2009
The US dollar/Japanese yen (USD/JPY) trade is at a 3-month high as high as 92.5 in today’s session. I’ve been on this trade since early December, when I mentioned in this article about the possible trend reversal that occurred and that the Japanese government was attempting (turns out successfully) to jawbone the yen lower. This also comes about on US dollar strength, which I’ve repeatedly mentioned over the past few trading sessions.
Also interesting to note is some weakness in the Canadian dollar, otherwise known as the Loonie (CAD). Its down across the board, most notably against the US dollar, -1.00%. This is due in part to oil price fluctuation as well as a pullback from the recent strength its been showing.
Because we are at year -end, I tend not to put as much emphasis on the price charts as volumes are lower so the normal patterns and strength and resistance levels that I usually rely on can be compromised. So while I do see some intriguing set-ups, I’m going to keep the rest of my trades very short-term until we start the New Year.
This will allow time for the heavy hitters to come back and decide where they want prices to be. Call it a New Year “reset”. Liquidity risk is sometimes a factor that most traders don’t consider. I tend to become more cautious as the end of the year approaches as I like to hold on to my profits, thank you very much!
So if you are trading now, look to be a bit more cautious going into year end.
To learn more about how to trade in the currency market, be sure to check out our forex trading courses!
Have you been following this blog but have been afraid to check out the forex market?
Make it a New Year’s resolution to get a risk-free, real-time practice account to see what all the excitement is about!
Tags: account, blog, cad, charts, course, currenc, currency, dollar, dow, forex, forex trading, forextrading, free, fx, fxedu, Il, interest, Japan, jpy, market, Mike Conlon, practice, ssi, time, trade, trader, trades, trend, USD, Yen
Topics: What To Look At In The Market | No Comments »
End of the Year Blowout Sale!
By Mike Conlon | December 28, 2009
END OF THE YEAR BLOWOUT SALE! OVER 55% OFF!
As we come to the end of 2009, now is the time to look back and reflect upon this past year and to think about making changes going forward. 2009 was a “roller coaster” of a year for investors and many were left wondering what to do when the markets were collapsing and then missed the rally back.
However, one group of investors was able to navigate the treacherous waters of 2009 with relative ease and was able to turn market panic into profits! You may be asking yourself where these investors found these opportunities…..
In the Currency Market!
MAKE YOUR #1 NEW YEAR’S RESOLUTION TO GET EDUCATED!
Did you know that the currency market is the largest financial market in the world with over $3 trillion traded every day and is 30 times larger than the daily trading volume of NYSE and NASDAQ put together?
Did you know that trading currencies has become the hottest trend amongst retail investors with more than 150,000 new accounts opened each month?
We want to help savvy investors who are looking for sound trading opportunities by offering them education, tools and resources to capitalize on this lucrative market.
We realize that many of our subscribers are novices to the currency market and that is why we are offering our subscribers from now until the end of 2009 our most complete and thorough currency trading program — ALL 3 COURSES — at over 55% off the regular price!
The FXEDU currency trading course bundle, valued at $1397, can now be yours for only $625!
That’s over 55% off the retail price!
Our courses will teach you:
- Who and what moves the market
- How to read charts and profit from them
- How to spot trading opportunities
- How to effectively manage your risk
- Specific strategies designed to earn you profits
- Correlations between the markets
- And much, much more!
You will have over 6 months to complete the courses and will have 24-hour/day access to our instructors and course materials for one full year to continue your training throughout the year!
Don’t repeat the past mistakes of 2009 this year! Make this year’s resolution one you will remember for the rest of your life!
To take advantage of our offer, click here.
Tags: account, charts, comments, course, currenc, currencies, currency, currency market, currency trading, data, dow, financial, fx, fxedu, Il, instructor, invest, pair, pairs, rate, spot, Swiss, time, trade, trend, volume
Topics: What To Look At In The Market | No Comments »
FOMC Meeting at 2:15EST!
By Mike Conlon | December 16, 2009
The Fed decision on interest rates is due out at 2:15 EST today. The minutes leading up to and surrounding the decision are usually volatile and currency spreads can widen if there’s uncertainty. So if you do trade around that time, be cautious!
Now no one is expecting the Fed to raise interest rates, but all ears will be on the semantics of the meeting, that is, will they change their language. The Fed’s dovish stance on rates has persisted as the US dollar has fallen against almost all major currencies this year.
The zero-interest rate policy (ZIRP) that they have adopted has been in effect for just over 1 year. Will they tip their hand or provide statements of a more hawkish nature? The PPI numbers came out yesterday and showed a larger than expected degree of inflation, which some see as a sign that Bernanke et al will have to raise rates sooner than later.
In the meantime, the US dollar has picked up some short-term support and has been gaining ground against other currencies, particularly the Euro. But will that mark a trend reversal? Or is it just a brief pause?
As of late, the currency market correlations that we speak of often have started to break down. There are now actually days where both the dollar and the stock market can both be in positive territory. This tells me that we may be seeing a shift in the market response to risk-taking and that a rate hike may not be absolutely necessary for the US dollar to strengthen.
Remember, the forex market is a comparison market; that is, as a currency you don’t have to be the best, just be better than the rest!
So let’s see what Bernanke does today, but my feeling is it won’t be much. Weakness coming out of the Euro Zone in addition to Australia’s may be enough to see the dollar strengthen. Should he take a more hawkish stance, then expect the dollar to take off!
I’ll be following this event live and will hopefully have some charts to see what, if anything, takes place.
And of course you can follow this event on your own, by signing up for a free, live practice account here!
Tags: account, charts, course, currenc, currencies, currency, currency market, dollar, dow, EUR, Euro, fed, forex, free, fx, fxedu, Il, interest, interest rate, interest rates, live, Mike Conlon, practice, practice account, short, time, trade, trend
Topics: What To Look At In The Market | No Comments »
US PPI A Little Hot!
By Mike Conlon | December 15, 2009
At 8:30 this morning, the US PPI (producer price index) came in a little hot at an increase of 1.8% vs. expectations of .8%. In addition, the Empire Manufacturing Index came in at a disappointing 2.55 vs. an expectation of 24, missing by a wide margin.
What does this all mean?
Well there are a few takeaways from this. The first is that PPI is showing that inflation is heating up faster than expected which could cause the Fed to have to think about a rate increase sooner than they wanted. All eyes are on the Fed this week for tomorrow’s FOMC meeting, and now there is an increased possibility that they may change their language regarding rate hikes. Because we are near year end, many traders are on the sidelines, content to hang on to gains from earlier this year. This could be a time that the Fed could try to “slip one in there” while market impact could be minimized.
The manufacturing index number is disappointing because it shows that the temporary pick up we have had may have been due to the stimulus packages and that the economy may not be ready to stand on its own 2 feet.
So this could have a negating effect, although if inflation really starts to heat up, the Fed may have to act quickly to keep inflation at bay.
Another thing to consider is the news out of the Euro-Zone, that Austria nationalized a bank in a multi-billion dollar bailout to prevent further contagion throughout the region.
This all plays in handily to the risk aversion trade, which seems to be the way the market is headed this morning. US stock futures are down this morning, and the US dollar is showing major strength, up .96% vs. the Aussie, .8% vs. the Kiwi, and 1% vs. the Yen.
I’m going to keep an eye on dollar strength today, and will put up some charts later. It is quite possible that we may see dollar strength due exclusively to risk aversion and not interest rate fears, although any change out of the Fed could be the “double whammy”.
To learn more about how to trade currencies, please check out our courses!
To follow these developments in a free, real-time practice account, click here!
Tags: account, Aussie, bank, charts, course, currenc, currencies, dollar, dow, economy, EUR, Euro, fed, free, fx, fxedu, Il, index, interest, interest rate, market, Mike Conlon, news, practice, ssi, stock, time, trade, trader, Yen
Topics: What To Look At In The Market | No Comments »
More Problems for the Euro!
By Mike Conlon | December 11, 2009
I wrote earlier in the week in an article titled, Euro Dead Zone, that there is some potentially trouble brewing in the Euro. Part of this is due to structure of that currency, in that it is comprised of different economies at different levels of strength.
Typically, the stronger economies “balance out” the weaker ones, and as I mentioned there are starting to be a lot more weaker than strong. One of the “solutions” that I pointed out is that the ECB might consider a lowering rates to make it more affordable for the weaker countries to gain access to capital. It doesn’t appear that there is going to be inflation there anytime soon.
But today there is another solution being reported on Bloomberg: that perhaps the weak countries, most notably Ireland and Greece, would pull out of the European Monetary Union (EMU). Or they can pray that the IMF will bail them out.
This presents a problem that is two-fold: 1) I can’t imagine that these countries would leave the EMU voluntarily, which would mean that they have become “persona non grata”, namely not welcome or forced out; which would 2) undermine confidence in the Euro as a currency.
And today we are seeing this on the charts. Let’s look at a 4-hour chart of EUR/USD: (click chart to enlarge)
Now while part of this move can be attributed to US dollar strength, I can’t help but think that the Euro is inherently weak due to the competing interests of its members. If they expel the “weak” members every time there is a problem, the Euro is quickly going to turn back into the Deutschmark! As of this writing, EUR/USD is down .68%.
To follow this situation real-time with a free, practice trading account, click here!
Tags: account, article, blog, charts, currenc, currency, dollar, dow, ECB, EUR, Euro, Europe, eurusd, forex, forextrading, free, fx, fxedu, Il, interest, lot, lower, market, mie, Mike Conlon, news, practice, rate, time, USD
Topics: What To Look At In The Market | No Comments »
Support and Resistance!
By Mike Conlon | December 10, 2009
You have probably heard the phrase “support and resistance” thrown around with regard to technical analysis and price charts. This is one of the most basic and fundamental concepts in analyzing charts. Support is the area on the chart where there is buying interest, and resistance is the area where there is selling interest.
Why do I mention this now? Yesterday’s trade on the New Zealand Kiwi (NZD/USD) is a perfect example of how support and resistance works. Let’s take a look at what happened yesterday and why support and resistance is such an important concept.
(Click charts to enlarge)
Looking at the above three charts, you can see how resistance was identified at .7185. In the first chart, once the price of the pair traded up to resistance, it paused and consolidated a bit as all of the sellers were absorbed at that level.
In the second chart, once the pair broke through resistance, it settled back down and now used what was formerly resistance as support. This means that there is now buying interest at that level.
In the third chart, you can see the pair extend for roughly another 100 pips.
What these chart illustrate is a classic case of when resistance becomes support. Savvy traders who can identify where these levels are can take advantage of low risk entry points for profitable trades. And the same thing also works on the other side, when support can become resistance.
Knowing how to identify these areas can be the difference between making and losing money. The professionals know how to find these areas, shouldn’t you?
To become more educated about technical analysis, be sure to enroll in our currency trading courses!
Want to test out you chart reading skills on a free, real-time practice account? Get started here!
Tags: account, blog, charts, course, currenc, currency, currency trading, dow, forex, forextrading, fundamental, fx, fxedu, Il, interest, market, Mike Conlon, money, nzd, pair, pips, practice, rate, ssi, technical, time, trade, trader, trades, USD
Topics: What To Look At In The Market | No Comments »