Top Performers!
By Mike Conlon | March 3, 2010
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US Jobless Claims Rise!
By Mike Conlon | January 21, 2010
I don’t know why I even bother to express surprise anymore when every economic figure that comes out is “unexpected”. Trying to peg certain figures by using analyst expectations can be a fool’s folly. Let’s take today’s US Jobless claims figures which showed a rise of 36K more claims, as opposed to the analyst expectation of a small decrease.
As a result, the equity markets did an about face and proceeded to sell despite the fact the Goldman Sachs reported “record earnings”. Don’t lose sight of the fact that this comes on the back of the US taxpayer, but what’s a few billion dollars among friends?
So now that the stock market is down considerably, we have switched from mild risk-taking to risk aversion. This means that both the US dollar and Japanese yen are now the favored currencies of the day. Let’s take a look at a chart of the Aussie/Yen (AUD/JPY) to show the extreme volatility of this move. (click chart to enlarge)
As you can see, the market is still VERY skittish regarding any bad economic numbers that will show the recovery is not moving along as may have been previously thought. In markets as volatile as these, it’s important to keep tight stops and to look for reversals. As the new year is just starting, the markets are trying to find some sort of direction in what can only be described as “rudder-less ship trading”. In other words, extreme volatility.
As a quick aside, this AUD/JPY pair is down another 30 pips to 82.35 in just the time its taken me to put up this post. Wow. If you own stocks, today might be an ugly day.
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Tags: account, AUD, Aussie, blog, course, currenc, currencies, currency, currency trading, dollar, dow, economic, forex, forextrading, free, fx, fxedu, Il, Japan, jpy, market, mike conlon, pair, pips, practice, ssi, stock, stocks, time, Yen
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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!
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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
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Pound Gains!
By Mike Conlon | January 13, 2010
The British pound (GBP) is trading higher after a BOE policy maker stated that interest rates in the UK may need to rise this year. This could signal the end to the Quantitative Easing (QE) policy the UK had undertaken to stimulate its economy.
So what’s left to do?
Sit back and wait.
This is a refreshing stance in world where instant and immediate gratification need to happen to keep the public at bay. What this policy-maker is essentially saying is that its OK to let market forces happen and to see how the policies they put in place will work out. All too often governments are quick to react to any negative news regarding their economic situation and are always trying to “tinker’ with policy, rates, statements, intervention, etc.
I’m not certain where they dig up some of these people charged with setting policy, but its almost as if they have completely forgotten that economies move in cycles. What goes up, must come down. Basic laws of gravity. The fable of the Ant and the Grasshopper. I could go on and on.
So kudos to Andrew Sentance, BOE policy maker for keeping it real. While the UK is not yet back on firm ground economically, the “wait and see” approach is better than the overkill that we see here in the US.
So let’s take a quick look at a chart of the British pound vs. the US dollar (GBP/USD): (click chart to enlarge)
As you can see from the chart, the pound has been up for the last four days in a row for the first time since last November since we’ve seen dollar strength in December. 1.59 is a good support level. As this pair has broken through the 38.2% fibo retracement level, it looks like the next stop could be 1.636 at the 50% retracement level. This could happen sooner than later as the US CPI numbers come out on Friday. If this figure comes in lower than expected, then that could send this pair higher on dollar weakness. So I expect we will be at the 1.64 level in short time.
If we should breach that 50% fibo level, then I would move my stop up to the 23.6% fibo level at 1.612 for those who are long this pair. While it is important to find trades that look like they are at the start of a trend or in a trend, it is equally important to know how to manage trades and place stops to limit losses.
Happy Trading to all!
Do you know how to manage your risk? If not, be sure to check out our currency trading courses! Losses in trading are unavoidable, but knowing how to limit them based on technical factors is the difference between the amateur and professional trader.
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Euro Gains on Weak Dollar, Oil!
By Mike Conlon | January 11, 2010
The Euro is up today across the board and is at a 3-week high against the US dollar as dollar weakness is back on the table. In lieu of Friday’s NFP report, investors are betting that US interest rate hikes have now been pushed out even further, and world stock indexes and commodities are up on the morning.
The Euro, otherwise known as the “anti-dollar”, should strengthen unless sovereign default issues come back into play. Not to mention the strength in oil, which has shown a strong positive correlation to the Euro. This also benefits the commodity currencies (Aussie, Kiwi, and Loonie) in that order due to the interest rate differentials.
So, it appears to be back to a “risk-taking” day with the dollar down, everything else up. Look for this theme to continue well into the first half of this year. The only way this gets derailed is if the Fed makes a move on interest rates or if there is some sort of global crisis.
So the million dollar question is what is going to cause the Fed to act? Normally, I’d be inclined to say that an improving employment picture or the threat of inflation would be the catalysts, but I’m not even sure that these will be enough. With the catastrophe that is US national debt, Bernanke is begging for any type of inflation to help mitigate this, so it could be some time before we see rate hikes. Economists are now looking at mid-year as the most realistic chance of this occurring, but if then employment picture and by proxy demand doesn’t pick up, then this could be entirely off of the table.
Also to note today is the employment figures coming out of Canada, which showed a small loss vs. a gain in the month of November. The Canadian dollar (CAD) is down across the board. While the Loonie benefits from commodity gains, it should lad both the Aussie and the Kiwi due to lower interest rate differentials. The Loonie is also somewhat dependent on US recovery as the US is the largest recipient of Canadian exports.
If US dollar weakness continues to be a theme well into 2010, then we are going to see MAJOR commodity inflation.
This means that if you hold US dollars you could see a MAJOR reduction in your purchasing power. There are ways to protect yourself from this happening, but you have to know what you’re doing. And that’s why we offer our currency trading courses! They are affordable, convenient, and could help you save your nest egg from dollar destruction!
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Tags: Aussie, blog, cad, commodities, course, currenc, currencies, currency, currency trading, dollar, dow, EUR, Euro, fed, forex, forextrading, fx, fxedu, Il, interest, interest rate, interest rates, invest, investor, market, Mike Conlon, ssi, stock, time
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Non-Farm Payrolls Disappoint!
By Mike Conlon | January 8, 2010
The US Non-Farm Payrolls Report (NFP) is usually one of the biggest market moving numbers in the currency markets. Today’s number is no exception. The report came in for December at -85K, a very disappointing figure. Estimates were expecting this number to be flat, that we neither gained or lost jobs for the month. Although I had seen some pretty wild numbers tossed around, anywhere from +/- 200K. The revisions for the prior two months showed a net loss of 1K jobs, a negligible but encouraging figure.
So what does this all mean? Well in a word: trouble.
The US economy is not adding jobs nearly as quickly as the government had hoped. With all of the enormous amounts of stimulus spending, we have little to show for it. As a result of this figure, the US dollar reversed course and immediately began to weaken. If anyone had any delusions about a US rate hike in the first quarter of the year, they can pretty much forget about it as its now off of the table. Unless the dollar tanks so badly that Bernanke HAS to do something.
My guess is that we’re going to be looking at Japan 2.0 here in the US, our own version of their “lost decade”.
Just to illustrate the volatility that can occur around this figure, take a look at this chart of EUR/USD: (click chart to enlarge)
Close to 100 pips in a few minutes!
This could make an interesting year for the US dollar. There are 2 basic ways that we will see dollar strength this year; either through interest rate hikes or risk aversion plays. So while this logic may be a bit counter-intuitive to some, it’s going to be very important to take our clues from the other markets to see which theme is playing out.
And of course don’t forget that the dollar can continue to weaken well into this year, the question is going to be that if things don’t get better on the employment front, at what point does that filter through to the other markets?
Only time will tell.
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Tags: Bernanke, blog, cad, course, currenc, currency, currency market, dollar, economy, EUR, eurusd, forex, forex trading, forextrading, fx, fxedu, Il, interest, interest rate, Japan, Mike Conlon, minutes, nfp, payrolls, pip, pips, time, USD
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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.
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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
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Waiting for US Consumer Confidence 10AM EST!
By Mike Conlon | December 29, 2009
This morning’s trading is marked by an increase in risk appetite, with the Australian dollar (AUD) and the New Zealand dollar (NZD) leading the way. AUD/USD is +1.33%, AUD/JPY +1.45%, NZD/USD is +1.74, NZD/JPY +1.86%. All this comes in anticipation of the US consumer confidence numbers, which are expected to have improved from previous readings.
Also to note is the increased feeling that the global economy is recovering as we get encouraging news from various regions and sectors of the world economy.
Two things I wanted to address:
I have written at length recently about the possibility of the US dollar’s inverse correlation to equity and commodity markets breaking down, as both the dollar and the equities seemed to be trading in tandem. And while I do think that there are definitely conditions where this can exist, I do feel that in the New Year we will see some sort of “reversion to mean”. This means that the recent break could be more of a short-term phenomena than the start of a long-term trend.
One of the reason the dollar could have strengthened is simply short covering. The trade this year has clearly been dollar down everything else up so investors could be lightening the load.
Another possibility that I haven’t mentioned before but got to thinking about was potential government involvement. We’ve all heard of the plunge protection team (PPT) in the equities market, so why not currencies as well? It seems like Larry Summers, director of the National Economic Council, has been awful quiet lately. Let’s not forget his involvement in running the Harvard Endowment into major losses under his watch. In other words, he’s no stranger to making large bets with other people’s money.
So what’s a few billion between friends? I would not be surprised at all to hear of “government market operations” used to “maintain order” in the currency markets. And while this is all speculation on my part, I wouldn’t be surprised to hear of Fed window dressing as well.
As we can see today, the Santa Claus rally is still in effect as stocks are up, yet we’re seeing more risk taking in the currency markets, particularly in the Kiwi (NZD).
Secondly, with regard to the risk trades, look for the Kiwi (NZD) to outpace the Aussie (AUD) as the vehicle of choice for the risk trade going forward. While the Aussie has been the the best performing currency of 2009, investors are betting that we’ve seen the last of the RBA rate hikes for a while and that New Zealand could be next.
Here’s a quick chart of AUD/NZD (click chart to enlarge)
So I expect to see some Kiwi strength against the Aussie in the near-term. There is support at 1.24 for this pair so it will be interesting to see what will happen if it gets there.
In the meantime, keep an eye on the USD to see if we “revert to the mean”.
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Tags: AUD, Aussie, blog, course, currenc, currencies, currency trading, dow, economy, forex, forextrading, fxedu, Il, interest, invest, jpy, market, Mike Conlon, money, nzd, pair, rate, ssi, time, trade, trades, trend, USD
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BOE Stays the Course!
By Mike Conlon | December 23, 2009
British policy makers voted unanimously to keep their quantitative easing plans in place, signaling that the UK economy may not be rebounding as fast as they would like. This could lead to a longer period of low interest rates as the UK attempts to fight off deflation. As a result, the British pound (GBP) is near a two-month low against the US dollar (USD), trading just under 1.60 at 1.594.
In the meantime, it appears as though traders may have left early for the holidays as volume seems light. The US dollar is taking a brief pause today, down against every currency but GBP. This comes on the heels of the 5.1% rally the dollar has been on since year end. So this is a welcome pause.
Also, the US dollar has been on a tear against the Japanese yen (JPY) as the rising yields in the US are discouraging US dollar carry trades in favor of yen carries.
Let’s take a look at the daily chart of (USD/JPY): (click chart to enlarge)
As you can see, this pair has bounced off its low near 85 and has been on a steady climb higher. I identified this move at the beginning of the month in this article from Dec. 2nd. What I wanted to show in today’s chart was how you can use Fibonacci retracement levels to see where to get in and out of trades.
Today’s pause occurs right at the 38.2% retracement level. If you were looking to scale out of the position or sell some this could be a good place to do so. At these levels there will typically be pockets of resistance. If the trend continues higher, then we expect to reach the next level at 50% at a price of 93.68. Should the pair pull back, then we would expect to see some support at 89.8, the 23.6% level.
So as you can see, knowing where these Fib levels are can really impact your trading, helping to show you where “hidden” support and resistance may be. This is important because it can help you know where to place your stop and limit orders which will help you manage your trades.
I expect that we’ll see continued dollar strength through year-end and into the new year, so I’m going to be buying on pull backs of this pair.
To learn more about how Fibonacci levels and other tools of technical analysis can help your trading, be sure to check out our currency trading courses!
Tags: blog, course, currenc, currency, currency trading, dollar, dow, economy, forex, forextrading, fx, fxedu, gbp, Il, interest, interest rate, interest rates, Japan, jpy, market, Mike Conlon, pair, technical, time, trade, trader, trades, trend, USD, Yen
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Volatility Reigns Supreme!
By Mike Conlon | December 16, 2009
As I mentioned, things can get dicey around the Fed rate decision. Today is no different. Here is a 5-minute chart of EUR/USD:
Looks like the US dollar is strengthening against the Euro even though the Fed is keeping policy “unchanged”. Right now this pair is hovering around 1.451. It will be interesting to see if it can hold 1.45, an area of psychological support. If that level is breached, the next stop could be at 1.438. Stay tuned!
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