Forex Trading Blog

Survived the Weekend!

By Mike Conlon | May 17, 2010

One of the biggest fears in the marketplace is holding positions over the weekend as news may come out that may affect an investment and there is nothing investors can do about it until that specific market reopens. This is why many professionals “hedge” their risk by investing in un-correlated asset classes. The forex market is one such market.

As we have seen, the Euro debt crisis not only affects currencies, but it can also affect world stock and commodities markets. Overnight, the Asian stock markets were down as investors rushed to the safety of the Yen and Dollar, as oil prices slid briefly below $70.

While cheaper oil may not sound like a bad thing for consumers, it has historically been used as a proxy for economic growth rates. So when oil is down, the markets are expecting economic slowdowns.

Starting tomorrow, we get a bunch of CPI figures from different regions around the globe that will show where we are in the inflation/deflation debate. It is interesting to note that even though global economies are inter-twined, they can and do experience different degrees of inflation or deflation. So these reports could have a material impact on the forex market this week. Stay tuned!

In the forex market:

Aussie (AUD): The Aussie is lower this morning as the Australian stock market tumbled the most in almost a year on EU debt concerns as most of the Pac Rim markets were lower overnight. Risk aversion was the theme in the overnight session, but risk seems to have rebounded some after the European stock markets opened.

Loonie (CAD): The Loonie is lower on risk aversion, though it has rebounded with the price of oil which traded briefly under $70 overnight. The hope around the world is that the European debt crisis will not spread outside of the EU. Canadian CPI and retail sales figures are due out on Friday, which could foreshadow what the BOC is going to do with rates in June.

Kiwi (NZD): The Kiwi is the biggest loser this morning as the Pac Rim countries were sold earlier on risk aversion. In addition, the NZ government said it would spend $1 billion dollars to repair homes. While not a game-changing development, this helped add to notion of risk aversion.

Euro (EUR): The Euro has bounced back from 4-year lows as it was sold off overnight on risk aversion. As I’ve mentioned before, a lower Euro is going to be good the EU economies, and the market finally caught on and pushed Euro Bourses higher, which then in turn helped stabilize the common currency. CPI figures are due out this week, but expect the debt crises to dwarf the readings. There is also talk (finally) about instituting some sort of fiscal regulation to go along with the monetary regulation in the region. It was this disconnect which largely led to the debt crisis they are facing today.

Pound (GBP): The Pound fell to a 13-month month low vs. USD as UK budget woes are heating up. New British PM Cameron said that they discovered “very bad” spending decisions made by the previous government, which will lead to more austerity and spending cuts than previously thought as well as higher taxes. While this will weigh heavily on the Pound in the short-run, it will help UK manufacturing in the long run.

Dollar (USD): The Dollar is higher, getting a bid from risk aversion despite the Empire Manufacturing number which came in much worse than expected. While this number cannot be viewed alone, it does give insight into how economic recovery is going here in the US. It appears as though recovery at this point may be more demand-driven; we’ll have to see if the US consumer can maintain hungry for goods and services. CPI data due out on Wednesday.

Yen (JPY): Yen started out in the overnight session much higher as there was major selling in the Asian markets overnight. However, it looks like we have survived the weekend and both European and US markets are set to move higher. This is causing some yen weakness as risk appetite appears to be returning. Japanese machine orders were higher, which bodes well for sentiment surrounding economic recovery. In addition, we’re going to get Japanese GDP figures on Wednesday, and their interest rate policy decision on Friday. Don’t expect much variance from the expectations.

With every passing day that the Euro zone doesn’t collapse, the markets regain more confidence. The blue-print for EU recovery is actually pretty simple: enact massive budget cuts despite popular opposition, allow the Euro to depreciate, keep nations from defaulting, and wait for your economic cycle to return.
Having a stronger currency has afforded members of the EU an opportunity to amass goods and services over the last few years. Now that the party is over, it’s time to cut back. This is classic story of the ant and the grasshopper, where there were too many grasshoppers (spenders) and not enough ants (savers). If the EU can pull together and make the tough decisions necessary to return to financial health, then they will see progress maybe not today, but definitely tomorrow.

Especially if world powers band together to tackle the next major crisis or impediment to global recovery: China. The Chinese currency peg as allowed them to prosper on the back of every other nation in the world. This has upset the “natural economic balance” that the free market provides, effectively stealing gains from other regions around the globe. This has caused a massive misplacement of capital as the Chinese attempt to do in 20 years what has taken the rest of the world 100 years.

So due to the EU debt crisis, China is on borrowed time. They should begin to prepare themselves for currency appreciation once the EU is on stable footing. The unfair currency peg has allowed China to amass humungous surpluses, which will be partially offset if they are forced to re-value. Stay tuned!

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, British, cad, China, commodities, course, crisis, currenc, currencies, currency, currency market, currency trading, data, decision, dollar, dow, economic, EUR, Euro, Europe, fear, financial, forex, forex market, free, gbp, home, Il, interest, interest rate, invest, investor, Japan, jpy, Kiwi, live, loonie, lower, market, mie, Mike Conlon, news, nfa, nzd, oil, pair, pound, practice, practice account, retail sales, RSI, sentiment, short, simple, ssi, steal, stock, time, trade, USD, Yen

Topics: What To Look At In The Market | No Comments »

ECB Leaves Rates Unchanged!

By Mike Conlon | January 14, 2010

In what can only be described as “not surprising”, the ECB left their benchmark interest rate unchanged at 1%. As a result, the Euro (EUR) is down across the board today. Also weighing heavily on the Euro is German Chancellor Merkel’s remarks about the debt issue in Greece hurting the strength of the Euro.

As it turns out, Greek debt is more than 4 times the EU’s limit as a percentage of GDP. ECB President Trichet has repeatedly stated that the EU will not bail out individual countries that have been fiscally irresponsible. So all eyes are on the PIIGS countries (Portugal, Italy, Ireland, Greece, Spain) to see if any further problems may arise. While its no secret that these countries are not in good shape, it will be interesting to see who can turn it around and how it impacts the Euro going forward.

The basic “tug-of war” on the Euro is between the structural problems of the Euro Zone countries, and the Euro’s status as the “anti-dollar”. If global stock and commodities markets continue to rise, then the Euro may benefit if the “normal” risk-taking plays continue despite their fiscal problems.

In the meantime, news out of Australia is that their employment figures were much better than expected, putting the possibility of a future rate-hike back on the table, contrary to earlier statements from the RBA. The Aussie (AUD) is showing strength this morning as a result.

Do you want to learn how you can profit from simple news events such as these? Check out our currency trading courses!

Want to see how easy forex can be? Watch these events unfold in a free, real-time practice account!

Tags: account, AUD, Aussie, Australia, commodities, course, currenc, currency, currency trading, dollar, dow, easy, ECB, EUR, Euro, forex, free, fx, fxedu, Il, interest, interest rate, market, Mike Conlon, news, piigs, practice, practice account, simple, ssi, stock, time, Trichet

Topics: What To Look At In The Market | No Comments »

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.

To learn more about this, check out our forex courses!

Tags: analysis, blog, charts, course, dow, economy, forex, forextrading, fx, fxedu, Il, Mike Conlon, nzd, rate, simple, technical, time, USD

Topics: What To Look At In The Market | No Comments »

How to know how much a “pip” is worth for any pair!

By Sean Hyman | August 13, 2009

Many times, newer traders ask me how they can find out how much a “pip” is worth for any pair. Some will refer to these as pip “costs”, others will say pip “values”, etc. but it’s all the same thing.

They all want to know, if my pair moves up one increment or down one increment…how many dollars does that equate to?

Here’s the simple answer. It’s automatically calculated for you on your trading station. You can view this on the “Advanced rates” which is the default setting..OR…you can view it on the Simple rates” tab.

See both of them below.

I’ve circled (in each format) where to find the pip cost/value for a pair. Notice that any pair that ends in USD (ex. EUR/USD, GBP/USD, NZD/USD, etc.) all have pip values of $1.00 per standard mini lot. Had this been a micro account, then the pip value would be 10 times less or .10 (10 cents) per pip of movement (since a micro lot is ten times smaller than a standard mini lot).

Remember, that a standard mini lot = 10,000 units of currency and a micro lot = 1,000 units of currency.

So the pairs that end in something other than USD (ex. EUR/CHF, USD/JPY, EUR/AUD, etc.) will have pip values that change slightly over long periods of time.

However, you can easily see what a “pip” is worth in that pair BEFORE you place your trade since it’s conveniently located on your quote screen.

This is important to note because there’s a big difference in EUR/GBP’s pip value of $1.66 and EUR/AUD’s pip value of .84 (84 cents).

So one pip of movement for or against you in EUR/GBP is +/-$1.66. However, in EUR/AUD this same amount of movement is +/-$0.84 (big difference, dollar wise…yet the same amount of pips moved). Click on the charts to enlarge them.

Sean Hyman

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, CHF, currency, dollar, dow, EUR, forex, forextrading, gbp, Hyman, jpy, lot, movement, nzd, pair, pips, rate, Sean, Sean Hyman, simple, time, trade, trader, trading station, USD

Topics: What To Look At In The Market | No Comments »

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 »

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

Topics: What To Look At In The Market | No Comments »

Fundamentals in a Nutshell!

By Sean Hyman | May 15, 2009

Some people avoid fundamentals because they feel they are so complicated. However, the basics are very simple and easy to follow. You just follow the trail.

What’s the trail?Watch what the CPI (Consumer Price Index, which tracks inflation) does, especially on a Year over Year (YoY) basis. If it’s increasing, then central banks will have to address this by hiking interest rates. Increasing rates means that you can earn more money on your currency and money loves “yield”.

So the pattern is: higher CPI over time results in higher interest rates over time. Higher rates attract more money to that currency than a currency that has lower rates. Thus as money pours into that currency (they are buying up the currency), it pushes the currency higher. Therefore, over time…you end up with an appreciating currency that earns higher interest over time.

When do currencies not follow this simple pattern? When the pattern reverses. Slowing economy, can equal lower CPI and lower interest rates and money pouring out of a currency. So when a recession hits or an economic slowdown or a deflationary period hits….this cycle actually reverses. But even then, you know the drill and can profit from it.

Hope you’ve enjoyed this short lesson on fundamentals.

Sean Hyman

www.forextradingblog.com

Tags: bank, blog, central bank, currencies, currency, dow, easy, economic, economy, forex, forextrading, fundamental, index, interest, interest rate, interest rates, lower, money, recession, Sean Hyman, simple, ssi, time

Topics: What To Look At In The Market | No Comments »

Intraday thoughts

By Sean Hyman | April 6, 2009

As stock market indices have raced forward over the past few weeks, many traders/investors alike are wondering if it’s not time for a pull back of sorts. Therefore, this same type of thinking is also spilling over into the currency market when it comes to the yen carry trades that have done so well to the upside recently (NZD/JPY, AUD/JPY, etc.).

Therefore, the momentum may not be there today until the markets decide which way we’re going…do we get a sizable pull back in a near term uptrend? Or do we top out in a longer term downtrend? That’s the question that investors and traders are mulling over right now, whether it is stocks, commodities or currencies right now.

I can’t help but notice that USD/JPY is one of the first to trade above its 200 simple moving average in a long time. So far it’s holding above that average. See if this can continue. If so, it could be a ‘vote of strength” for the pair…..because there aren’t many pairs out there right now that are trading above their 200 SMAs.

Sean Hyman

www.forextradingblog.com

Feel free to post these articles on your Facebook, MySpace,Digg them, Stumble upon them, Twitter them, email them, send them You Tube links and IM the links to friends and family, etc. Help us to spread the word and therefore help others. As you can see by watching the nightly news, people are in dire need out there and you can bring them a solution.

Tags: article, AUD, blog, carry trade, commodities, currencies, currency, currency market, dow, downtrend, forex, forextrading, free, home, invest, investor, jpy, momentum, mywealth, nzd, pair, Sean Hyman, simple, stock, stocks, time, trader, trades, trend, uptrend, USD, Yen, You Tube

Topics: What To Look At In The Market | No Comments »

How to get started with a Forex Demo Trading Station

By Sean Hyman | March 31, 2009

I put together a couple of very quick videos to show you where to get a demo and how to download it (http://www.youtube.com/watch?v=WQMvavXrPMY) as well as how to understand quotes, lots, pips, and how to place a trade with a stop and a limit (http://www.youtube.com/watch?v=WhLChCWtw9M). Enjoy!

Tags: course, currencies, currency, demo, dow, easy, explain, forex, fx, fxedu, instruct, invest, lot, mywealth, pip, pips, quotes, Sean Hyman, simple, teach, trade, trading platform, trading software, trading station, video

Topics: What To Look At In The Market | No Comments »

Intraday update: AUD/JPY + 4.23% intraday!(280 pips)

By Sean Hyman | March 31, 2009

AUD/JPY c9ntinues to charge higher. This morning when I alerted you to it, it was up 194 pips on the day. Now it’s up about 280 pips on the day! So that’s about another 90 pips per lot traded!

It pays to watch where the intraday momentum is headed and who’s leading the pack, when you are an intraday trader.

The yen continues to weaken across the board. Upon looking to their daily charts, it appears that there could be more room to go in the upcoming days to weeks overall. So the bias should be to the upside and in looking for buy signals rather than shorting opportunities since that’s the way the overall momentum is positioned.

Also, watch USD/JPY to see if it can make it back up above its 200 SMA (simple moving average) on its daily chart. If so, this could be great for the intraday trader and swing trader. Be patient and wait to see. Click on the chart to enlarge it.