Stock Markets Soar!
By Mike Conlon | June 3, 2010
So much for yesterday being an “inside day”. The US stock market made a major afternoon move to the upside, all but rendering my assessment from yesterday useless. This set the stage for other world stock markets with both Asian and European indices higher this morning as well. Commodities followed suit, with oil reaching 74 and change before pulling back to the 73 level in this morning’s trade.
As a result, the commodity currencies predictably had a nice run-up as well, with Dollar and Yen weakness. This activity has continued into the morning, though US employment figures came in positive but worse than expected. Tomorrow’s Non-Farm Payrolls report will provide a better picture of how economic recovery is going here in the US.
In addition, the Euro zone will be reporting its GDP figures, which could send the Euro lower on a resumption of the overall downtrend.
In the forex market:
Aussie (AUD): The Aussie is higher on risk appetite and stock market gains, and Australia reported export growth at the highest level in almost 30 years. Chinese demand helped Australia report a trade surplus for the first time in nearly a year. Expectations were for a trade deficit.
Loonie (CAD): The Loonie is somewhat lower this morning taking its cues from oil prices, which have pulled back from yesterday’s highs. Canada’s finance minister said that Canada is “coming to a time when exit strategies from stimulus can start to be implemented.”
Kiwi (NZD): The Kiwi is also higher on risk taking, and the market is betting that the RBNZ will raise interest rates at its June 10th policy meeting. Using interest rate swaps data, that chance appears to be about 80%. Chinese purchases of NZ goods rose some 40%. However, the RBNZ would prefer to keep rates low to rebalance the NZ economy.
Euro (EUR): The Euro is mixed this morning ahead of tomorrow’s GDP report. Retail sales figures came in worse than expected at -1.2%, showing signs of a weaker economy. In addition, manufacturing activity expanded at a slower pace than last month.
Pound (GBP): The Pound is mixed as well this morning, after the UK reported that home prices rose to the highest level in nearly 2 years. However, expect the BOE to try to keep a dovish stance to prevent Pound appreciation if inflation data falls back to the 2% target range.
Dollar (USD): The Dollar is mixed as well this morning, as the ADP employment report came in a little lighter than expected, as did initial jobless claims. While it is a good sign that employment is not getting worse, the market is getting impatient as gains need to occur in order to instill confidence that the US economy is improving. Tomorrow’s NFP report could be the catalyst.
Yen (JPY): The Yen is also weak as the Asian stock markets rebounded taking its cues from yesterday’s US stock market rally. Funding for carry trades helped contribute to Yen weakness. Capital spending decreased as Japanese businesses pare back as the export-led recovery has not sufficiently stoked domestic demand.
As mentioned above, the jobs numbers here in the US may reverse the early risk-taking we have seen so far this morning. At some point the data is going to have to start coming in better than expected to really provide confidence that economic recovery in taking place.
While the economies of New Zealand and Australia appear strong, the Euro zone appears weak. One of the biggest drivers of world growth is China, and it will be interesting to see what happens if they try to slow the pace of their economic growth.
While things have been quiet in the Euro zone as of late, don’t be lulled into a false sense of security as there still are major risks in the economy.
So for now, trade what you see and not what you want to happen!
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, BOE, cad, canada, carr, carry trade, China, commodities, commodity, course, currenc, currencies, currency, currency market, currency trading, data, dollar, dow, downtrend, economic, economy, EUR, Euro, Europe, falls, forex, forex market, free, fx, fxedu, gbp, home, Il, interest, interest rate, interest rates, Japan, jpy, Kiwi, live, loonie, lower, market, meeting, mie, Mike Conlon, new zealand, nfp, nzd, oil, payrolls, pound, practice, practice account, retail sales, ssi, stock, time, trade, trades, trend, USD, Yen
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Is Spain Next?
By Mike Conlon | May 24, 2010
Over the weekend, the Euro debt crisis took an unexpected turn for the worse as the Spanish central bank took over a savings bank after a planned merger had failed. While in and of itself this is not a big deal, viewing it through the context of overall EU financial health has made the bounce in the Euro short-lived. The Euro is lower again to start the week, as last week’s short-covering rally has been reversed and the longer-term trend for the common currency is still down.
There’s not a ton of market-moving news on tap this week, with GDP figures due out from the UK tomorrow and the US on Thursday. Other than that, there are some smaller events that will provide color to the overall economic picture which will either help re-affirm or correct market sentiment.
Perhaps the biggest news is that US Treasury Secretary Geithner is in China and is advocating that China adopt a more free-floating currency. Because of the Yuan peg to the US dollar, China has been allowed to experience very rapid growth through artificial means that have allowed their goods to remain cheaper around the globe. However, with the crisis in Europe looming, US dollar strength could cause Chinese Yuan strength via the Dollar if the Euro continues its slide. With European austerity measure taking place (Germany included); this could slow world demand which would slow China’s growth as well.
So while there have been some “clues” that perhaps China is ready to make changes to Yuan policy, I’m not certain it will take place if their economy slows due to slower exports as a result of a strong dollar buoyed by risk-aversion and global austerity.
This all adds up to risk-aversion in the market today in a continuation of the major trends, but it’s possible that we could see a reversal as US markets open for the week.
In the forex market:
Aussie (AUD): The Aussie is lower on risk-aversion as fears out of the EU and a potential slowdown in China are reducing demand for higher-yielding assets. The Aussie is the worst performer this month, down some 10% vs. the US dollar as risk aversion has dominated the marketplace.
Loonie (CAD): The Loonie, on the other hand, is showing strength this morning as oil is back in the $70 range, showing signs that we may get a reversal this morning. The Loonie is not really a carry trade destination as it doesn’t provide the yield differential of the Aussie or Kiwi; however it is affected by commodity prices (particularly oil). The Canadian rate decision is due out in early June so there still is some speculation that they could be the next to hike.
Kiwi (NZD): The Kiwi is lower for the same reasons as the Aussie, getting hit a bit harder as it does not have as great a rate differential as the Aussie. Same risk, less reward. However, should the markets begin to stabilize, then we could see the Kiwi move faster to the upside.
Euro (EUR): The Euro is lower as the bank of Spain took over a regional lender causing investors to question whether or not the debt crisis is spreading. There has been a major property bubble in Spain so many banks are holding bad debt which could come to the surface if Spain needs to access the bailout money to stabilize its banks. In addition, Germany has adopted its own austerity measures, essentially trying to lead by example. Considering that the market is looking for any excuse to sell the Euro, expect the longer-term downtrend to continue. The Euro is lower across the board.
Pound (GBP): The Pound is lower this morning going into tomorrow’s GDP reading as the UK is walking a fine line between trying to grow its economy without incurring inflation, and cutting its public debt. The new government announced 6 billion Pounds in spending cuts in hope of sending a “shock-wave” through government departments. While not an enviable position to be in (although EU members may disagree), the government feels these actions are necessary to avoid its own sovereign debt crisis.
Dollar (USD): The Dollar has been higher on risk themes, and US existing home sales are due out later this morning. Consumer confidence figures are due on Tuesday, followed by US GDP on Thursday. These figures will show whether or not the US economy has been jump-started enough to sustain recovery in light of the EU debt crisis and could send fears of further problems down the road. Expect the Dollar receive support through flight to safety trades if risk-aversion remains high.
Yen (JPY): The government in Japan said that the economy is picking up steadily leaving its assessment unchanged for a second month in a policy statement today from its monthly economic report. However, growth in Japan has been driven by world demand and stimulus measures, so it is not a self-sustained recovery. Like the Dollar, expect the Yen to trade on risk themes until at least Thursday, when a slew of economic data points are due out.
Will overnight risk be counter-acted by the US markets today? Stock markets are opening lower, though commodities are trading higher. Risk in the overnight session can sometimes be overcome by decent news from the US. Existing home sales could be that number if they come in better than expected.
So while the overall mood of the market has been risk-aversion for some time, any pockets of economic strength could help stabilize the situation and perhaps show signs of recovery.
Until that time, expect continued selling of the Euro which will have an effect over all other markets as historical correlations begin to break down.
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, bad debt, bank, cad, carr, carry trade, central bank, China, commodities, commodity, course, crisis, currenc, currency, currency market, currency trading, data, decision, dollar, dow, downtrend, economic, economy, EUR, Euro, Europe, existing, fear, financial, forex, forex market, free, fx, fxedu, gbp, Geithner, home, Il, invest, investor, Japan, jpy, Kiwi, live, loonie, lower, market, Mike Conlon, money, news, nzd, oil, pound, practice, practice account, rate, rate decision, RSI, sales, sentiment, short, ssi, stock, time, trades, Treasury, USD, Yen
Topics: What To Look At In The Market | 1 Comment »
Dollar’s rally is just about to run out of steam!
By Sean Hyman | August 12, 2009
Even bear markets have rallies. But why would I refer to the dollar’s recent rally as a “bear market rally” and not a rally into a “new trend”? Because there is no technical indication that has surfaced to think otherwise. Click on the chart below to enlarge it.
Several things worth noting on that chart of the U.S. Dollar Index:
The pair is still downtrending as shown by it trading below BOTH the 50 and 200 Simple Moving Averages. Also, the MACD lines are below the zero line (red boxed area) and the Slow Stochastics are just about to go into the “overbought” territory once again as the dollar approaches its 50 day SMA resistance area.
There’s an old Wall St. saying….”trade the trend until it ends”. However, do realize that there are rallies in every bear market (downtrend). These are to be expected. After all, they usually can’t go “straight down”. Therefore, upward corrections are involved…much like the pull backs that happen within an uptrend.
Therefore, there’s no reason to see this as any other thing unless this technical picture changes. So far it has not. So I’ll stick with the trend “until it ends”.
That means, it’s probably better to be a buyer of strong currencies as these dollar rallies happen and start to roll over once again. Two of the top “strong currencies” right now are NZD and AUD…so being a buyer of NZD/USD and AUD/USD after these dollar rallies (which cause pull backs in these pairs) is to be favored until such time that there’s an actual re-emergence of a “dollar uptrend” which I think is a long ways off.
Sean Hyman
www.forextradingblog.com
Tags: AUD, blog, currencies, dollar, dow, downtrend, forex, forextrading, Hyman, index, market, nzd, pair, pairs, Sean, Sean Hyman, time, trade, U.S., uptrend, USD
Topics: What To Look At In The Market | 1 Comment »
New Zealand strength starts to emerge!
By Sean Hyman | August 10, 2009
New Zealand is climbing its way up to the top of the pack of stronger currencies. It has THE highest CPI (year over year) and has the 2nd highest interest rate out there. With the high CPI readings, traders are starting to bet that they will have to hike rates sooner rather than later.
But you can see this NZD strength when you compare it across the board. For instance, NZD/USD’s chart is holding up better than most other dollar pairs, NZD/JPY is holding up better than many yen crosses.
Then when you compare NZD directly with many other pairs, it shows its strength too: EUR/NZD’s downtrend due to NZD strength…AUD/NZD slumping over due to NZD strength,…GBP/NZD breaking lower to on a weaker GBP AND NZD strength.
So whether you’re a position trader (weeks to months), swing trader (days to weeks) or an intraday trader (in and out within the same day typically)…it’s always better to “buy strength” no matter what your holding period.
Therefore, a “technical buy” signal on a NZD pair may be better to take than a technical buy that shows up on a weaker currency.
So while you may look for technical entries…I also want to get you thinking about which currencies may be the best choices to pick from too…when looking for technical entry signals on your charts. Click on the chart to enlarge it.
Sean Hyman
www.forextradingblog.com
Tags: AUD, blog, charts, currencies, currency, dollar, dow, downtrend, EUR, forex, forextrading, gbp, Hyman, interest, interest rate, jpy, lower, new zealand, nzd, pair, Sean, Sean Hyman, technical, trade, trader, Yen
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Which is more important? Trend direction or Support/Resistance?
By Sean Hyman | July 31, 2009
Many traders grapple with this all the time. To me it’s clear. The “trend is the trend” because it continues on and blows through supports in a downtrend and resistances in an uptrend.
A current example of this is AUD/USD. Get ready for the AUD/USD to break higher as the “bottom and top pickers” try to short this pair soon (since they are believers that the resistance will hold). The trend traders will get the last laugh, as the top pickers get caught on the wrong side of the market and have to scramble to cover their losing positions which only “fuels the fire” for the trend trader. Click on the charts to enlarge them.
This is why “top and bottom pickers” almost always give up their money to the trend followers. Oh sure, there’s eventually ONE of these that will ultimately be the true “top or bottom” but in between ..there are tons of places that appear to be the top or bottom and are losing trades. So the odds are skewed against them and skewed towards the trend trader.
See a historical example of this here.
Sean Hyman
www.forextradingblog.com
Tags: AUD, blog, charts, dow, downtrend, forex, forextrading, Hyman, lower, market, money, pair, Sean, Sean Hyman, short, time, trade, trader, trades, uptrend, USD
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How to decide on which currency pair to trade: EUR/USD or GBP/USD
By Sean Hyman | July 30, 2009
Many times, traders wonder “which pair is the better pick”. I say, let the charts decide it for you and take all of the guess work out of it.
Since both the EUR/USD and GBP/USD have the USD in common, their differences are EUR and GBP. So if we got a “dollar move” they’re both going to be affected some. However, the real difference comes in when you directly compare EUR to GBP and see which is the stronger/weaker currency.
You can do this by looking to the EUR/GBP pair. Right now, EUR/GBP is in an obvious downtrend. This can be seen by the red downtrend line below. It can be seen by the declining 50 day simple moving average (SMA). It can also be seen by the MACD being below the zero line and its lines crossing over to the downside. This can also be seen, most recently from it breaking down out of its upward correction (red circled area). Click on the chart below to enlarge it.
Therefore, CLEARLY right now, the stronger of the two is the GBP/USD. So if you feel that these pairs are headed higher, then go with GBP/USD. Right now, GBP/USD’s daily trend is upward, so that would be my pick.
Now if you felt that the trend was downward or turning downward, then you’d pick the “weaker candidate” to pick on which would be EUR/USD (buy strength/short weakness). However, right now, so far their daily trends are still upward as shown by the 50 period simple moving average on their daily charts.
Notice though, how much EUR/USD is struggling and how GBP/USD is starting to pop up higher right now. That’s due to the advantage of buying the stronger candidate. And right now, that’s GBP/USD when you directly compare the two.
You can do this for any pairs. For instance, now if I wanted to see if GBP or AUD were the strongest, I could look to the GBP/AUD pair. This could give me a bias as to whether I’d be better off buying GBP/USD or AUD/USD, for instance.
Currencies are a “comparative/relative” game. In other words, you always want to “rig the fight” with the absolute strongest candidate vs. the absolute weakest candidate and then “bet on that match” by buying the stronger vs. the weaker.
This, coupled with great risk management, will greatly improve your odds of success in trading. In other words, don’t over-leverage your account. You should probably be trading no more than 1 standard mini lot per $2,000-$3,000 in your account OR 1 micro lot per $200 to $300 in your micro account.
Sean Hyman
www.forextradingblog.com
P.S. - Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.php
Also, get a free, real time demo trading station here: http://www.fxedu.com/practice-forex-account
Tags: account, AUD, blog, charts, currencies, currency, dollar, dow, downtrend, EUR, forextrading, gbp, Hyman, lot, pairs, Sean, Sean Hyman, short, simple, ssi, time, trade, trader, USD
Topics: What To Look At In The Market | 1 Comment »
Buy EUR/CHF in newly established uptrend with “blessing” of the Swiss central bank, while earning daily interest too!
By Sean Hyman | July 22, 2009
The best of all worlds…
Trade a pair that recently broke into a new uptrend. Trade it because the Swiss are intervening in their currency to weaken it and boost the EUR/CHF pair. Trade it to earn intereest daily with little downside likely.
Take your pick, on your reasoning…personally, I trade it for all three reasons. Click on the chart to enlarge it. You’ll see that the daily downtrend is broken by almost any measurement you can think of. It’s above its red downtrend line, above its 50 SMA, also above its 200 SMA (long term moving average).
Then check out the 4 hour, 40 day chart below. You can buy the breakouts of these red downward corrections and get in “in a timely fashion”. Click on the chart to enlarge it.
Want to learn more about fundamentals and technicals? Sign up for an inexpensive, only forex course today and we’ll show you how: http://www.mywealth.com/currency-trading.php
Also, get a free, real time demo trading station here: http://www.fxedu.com/practice-forex-account
Sean Hyman
www.forextradingblog.com
Tags: account, blog, breakout, CHF, course, currency, demo, demo trading, dow, downtrend, EUR, forex, forextrading, free, fundamental, fx, fxedu, Hyman, mywealth, pair, practice, real time, Sean, Sean Hyman, station, Swiss, technical, time, trade, trading station, uptrend
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Building Permits & Housing Starts improve for the 3rd month in a row!
By Sean Hyman | July 17, 2009
Building Permits and Housing Starts improved for the 3rd month in a row. This is the first “breath of fresh air” that the housing market has gotten in a while.
The weird thing is…as things improve economically in the U.S. it improves the sentiment for the larger, global economy…since the U.S. is such a big part of that. So in the end, the positive U.S. data will help foreign currencies even more than it does the U.S. dollar. In fact, I’d expect the dollar to stay in its “well defined” downtrend even as the U.S. economy continues to improve for that very reason.
Canadian Core CPI came in at 0%. So there was literally no inflationary or deflationary pressures. Given the neutrality of that report, it probably won’t affect the CAD that much. So any moves on it today, from this point on are likely to be “technical” in nature. The USD/CAD trend has been down. That trend is likely to continue (with periods of corrective upswings along the way).
Sean Hyman
www.forextradingblog.com
Tags: blog, cad, currencies, data, dollar, dow, downtrend, economic, economy, forex, forextrading, housing market, Hyman, Sean, Sean Hyman, sentiment, technical, time, U.S., USD
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An RSI trick to get you more signals when the traditional settings just won’t do it!
By Sean Hyman | July 3, 2009
Many times, in stronger trends…the traditional RSI setting just won’t cut it (14 periods). It won’t even come close to the overbought/oversold levels of 30/70.
[B]However, if you tweak your RSI settings to where they are set to 9 periods…then you will find that the RSI gets wider swings which will trigger more RSI signals at or very close to the 30/70 levels when the 14 period didn’t even come close.[/B]
See my chart and you’ll see what I mean. Copy/Paste this link into a new browser and you’ll be able to see the chart. http://www.forextradingblog.com/wp-content/uploads/2009/07/rsi-14-9.JPG
[B]Note:[/B] In downtrends, it’s best to ONLY take sell signals for your entries. In an uptrend, it’s best to ONLY take buy signals for your entry signals.
I’ve circled many of the signals below that triggered on the 9 period RSI that didn’t trigger on the 14 period RSI setting. This would allow for a lot more potential trading opportunities on this chart with that one small “tweak”.
Try it out, mainly when your 14 period RSI isn’t generating enough signals often enough. See if you like it.
Sean Hyman
Tags: currency, dow, downtrend, forex, Hyman, lot, RSI, Sean, Sean Hyman, setting, time, tip, trading, trick, uptrend
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How to Spot a Longer-Term Trend!
By Sean Hyman | June 30, 2009
When I’m teaching my courses each day, I get this question quite often. So I thought I’d share it here with you too! How in the world do you know how to spot the long term trend? Well it’s really simple.
First, you should pull up a daily chart that goes back in time at least a year (even more time is even better). Then place a 200 Simple Moving Average (SMA) on the chart. That’s the line that I’ve got the arrows pointing to on the chart below. The SMA can be found under the “Studies” or Indicators” section of most any charting package.
Let the 200 Day SMA be Your Guide
One of the most widely used indicators in the world is the 200 SMA. I even catch purely fundamental traders putting it on their charts. Why? Because everyone needs to be able to tell which way the long term trend is headed, even pure fundamentalists.
I’ve charted the EUR/USD pair on the daily chart going back several years in time.
The 200 SMA Smoothes out the Trend and Points the Way to Trade
Towards the left of the chart we can see that the “average” price moves upward over time. So while the price may be jagged and spiky at times, they moving average smoothes all of this out so that we can tell if the price is headed up overall or downward overall. To the left of the chart, the price continues to climb higher, so it’s in an uptrend at that point. However, on the latter part of the chart (right side), then trend turns downward and the longer term trend is then downward. You want to define the trend’s direction and trade with it because that’s where the higher probability trades lie. Low probability trades would be shorting an uptrend or buying a pair in a downtrend. You will notice that the price tends to trade at or above the 200 SMA in an uptrend and in a downtrend the price dips below the 200 SMA and holds at or below it.
How to know when a New Longer-Term Trend is likely Beginning!
Therefore, we’re alerted to a “new long term trend” emerging when the price makes this shift. We can see that in August of 2008 when the price fell below the 200 SMA. At that point, the long term uptrend ceased and the “new” downtrend emerged. Then in May of 2009, the uptrend re-emerged for the EUR/USD. As long as the pair can hold above this 200 SMA, then it’s still in its longer term uptrend. Once the pair drops back below the SMA and holds below it, we know that the uptrend has likely ended. So let the 200 Daily SMA on the daily chart be your guide as to whether you should be looking for “long” (buying) entry opportunities or whether you should be looking for “shorting” (selling) opportunities for your entries into a trend. Using this as your guide will enhance your trading performance. No matter how much you get tempted…don’t trade against this trend, but stick with it. Oh sure, you can take profits if you wish, once it trades way away from the 200 SMA…just don’t counter trend trade against it. Be patient and wait for a re-entry back into the trend once the pair retraces back towards its 200 SMA once again!
Click on the chart to enlarge it. 
Tags: alert, blog, charts, course, dow, downtrend, EUR, forex, forextrading, fundamental, Hyman, pair, Sean, Sean Hyman, short, simple, spot, teach, time, trade, trader, trades, uptrend, USD
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