Month: August 2009

Source: ForexYard

Traders moving assets to safer, lower yielding currencies appear to be playing a factor in the correction of the major crosses. The USD and JPY, which are seen as a safer bet than others currencies in times of market stress, will likely keep drawing demand as investors stay away from riskier assets.

Economic News

USD – Dollar Extends its Gains against the EUR and Pound

The U.S. Dollar extended its gains against the EUR and Pound yesterday. The Dollar Index, which tracks the USD vs. its 6 most traded currencies, such as the EUR, Pound and Yen, showed a 0.4% increase to 79.31 on Monday. This added to last week’s rise of 0.8% in the index. Monday’s USD trading behavior was due to last week’s better than expected unemployment, manufacturing, and consumer confidence figures. Adding to the USD’s gains yesterday was the increased speculation that in the long run, the U.S. economy is likely to grow at a faster pace than the Euro-Zone, Britain and Japan.

The realization that the USD is much undervalued against the EUR was one of the main reasons for the extension of the USD’s bullishness vs. the EUR yesterday. The pair fell by 70 pips to 1.4130 at yesterday. The greenback also made great inroads into the British Pound yesterday, as British banking woes reemerged, and deflation fears kicked in. This led to a massive slide in the GBP/USD pair by 235 pips to 1.6475. The USD also rose against the Canadian Dollar, as the CAD slid on the much weaker metals and energy sectors yesterday, which Canada’s economy is highly dependent upon.

Looking ahead to today, we can expect much volatility in the forex market following yesterday’s bullish trend in the USD. Today, unlike yesterday, the U.S. will be present when it comes to economic news. The major news events to drive USD trading today are the release of Prelim Nonfarm Productivity and Prelim Unit Labor Costs data both at 12:30 GMT, and Wholesale Inventories at 14:00 GMT.

EUR – Pound Slides on Fears of Worsening British Economy

The Pound slid dramatically against it major currency pairs yesterday, as fears increased over the health of the British economy. The Bank of England’s (BoE) decision to increase quantitative easing last week, and the collapse of British banking and energy stocks on Monday raised fears that the British economy may yet again fall into the abyss. With regards the Euro-Zone, the EUR fell on the assumption that Europe’s economy will grow at a slower pace than the U.S. This resulted in higher demand for the USD yesterday, adding to the EUR’s losing streak.

The EUR/USD pair plummeted to the 1.4170 level yesterday. This came about as the latest misfortune for the EUR against the USD possibly signals that the best is over for the European currency. This comes about as German banks face the threat of corporate downgrades. The GBP/USD pair fell by a massive 235 pips yesterday, as the British economy is fairing worse than the U.S. at the current time. It seems that the behavior that we see now in the forex market signals that conditions may be favoring a possible Dollar rally in the medium term against the GBP and EUR.

Today we may see a further bearish move for both the EUR and GBP against the most traded currencies. This is provided that economic conditions continue to favor the USD. There are plenty of economic news events today that may determine this. These include the Trade Balance and the DCLG HPI figures from Britain at 08:30 GMT. Coming out of the Euro-Zone are the German Final CPI and German WPI at 06:00 GMT, and the French Gov Budget Balance at 06:45 GMT. These figures are likely to determine the EUR and GBP crosses in todays trading.

JPY – JPY Soars against the Major Currencies

On Monday, Japan recorded a better than expected increase in Machinery Orders in June, the first increase in 4 months. However, other data showed that the Japanese economy was still in dire straits. Despite this, the Yen gained against its most traded currencies yesterday. For example, the GBP/JPY cross fell by 280 pips to the 159.74 level. This occurred as a decline in global equity markets led to a decline in riskier currencies, such as the GBP. Also, yesterday’s gains mark a correction from the bullishness we have seen in the GBP/JPY and USD/JPY crosses in the past few weeks.

Today, there is yet another opportunity for the Yen to build on its recent gains as the global economy destabilizes yet again. This is despite the fact that growth is expected to return to the U.S. economy in the 3rd quarter. There are 3 vital news events coming out of Japan that are expected to drive JPY trading for much of the day. These include the Monetary Policy Statement, Overnight Call Rate and the BOJ Press Conference. The results of these publications may see the JPY go bullish yet again today against the greenback, British Pound and EUR.

Crude Oil – Crude Oil Slips Below $71

Crude Oil slipped 40 cents to $70.70 a barrel yesterday, as the Dollar rebounded against the EUR, which in turn reduced the need for commodities as an alternative investment. Crude’s fortunes were further dampened yesterday, as there was a slump in equities in both the U.S. and Europe. Additionally, commodities also suffered in yesterday’s trading. One of the main reasons for this was the strong USD, which is highly important, as Crude Oil itself is priced in Dollars.

The black gold may be helped today, if we see a fall in the value of the USD. Playing on Crude Oil’s downside too is the fact that demand can’t keep up with prices. Moreover, it seems that the price of Oil may have been overvalued as of late, and a slight correction in the market may take place in order to determine the real value of this commodity.

Technical News

EUR/USD

The typical range trading on the hourly chart continues. The daily RSI is floating in neutral territory. However, the 4-hour RSI is already floating in the over-sold territory indicating that a bullish correction might take place in the nearest future. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

GBP/USD

There is a fresh bullish cross forming on the daily chart’s Slow Stochastic indicating a bullish correction might take place in the nearest future. The upward direction on the 4-hour chart’s Momentum oscillator also supports this notion. Going long with tight stops might be the right strategy today.

USD/JPY

The USD/JPY has gone increasingly bearish in the past 2 days, and currently stands at the 96.66 level. The daily chart’s Slow Stochastic supports this currency cross to fall further today. However, the 4-hour chart’s Stochastic Slow signals that a bullish reversal may take place today. Entering the pair when the signs are clearer seems to be a wise choice.

USD/CHF

The hourly chart is showing mixed signals with its RSI fluctuating in the neutral territory. However, the 4-hour chart’s RSI is already floating in the over-bought territory indicating that a bearish correction might take place in the nearest future. When the downwards breach occurs, going short with tight stops appears to be preferable strategy.

The Wild Card – Gold

Gold prices dropped significantly yesterday and peaked at $945.60 an ounce. However, the 4-hour chart’s RSI is floating in the over-sold territory suggesting that a bullish correction is impending. This might be a great opportunity for forex traders to enter the trend at a very early stage.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By CountingPips.com

The US Dollar has continued to show strength in the forex market today against the other major currencies after rallying at the end of last week.  The dollar gained sharply on Friday after the  government non-farms employment data came in better than expected with a decline of just 247,000 jobs following June’s 443,000 decrease.  The unemployment rate also edged down for the first time in fifteen months.

Today, the dollar has increased versus the euro, British pound sterling, Swiss franc, Australian dollar and Canadian dollar while falling against the Japanese yen and trading virtually unchanged versus the New Zealand dollar.

The EUR/USD pair has declined from today’s opening rate of 1.4202 at 00:00GMT to trading to 1.4131 at 2:50pm ET in the U.S. trading session according to currency data by Oanda.

The GBP/USD has sharply declined from today’s opening level at 1.6713 to trading today at 1.6456 for over a 200 pip loss.

The US dollar has fallen today against the yen as the USD/JPY opened today at 97.27 and has advanced to trading at 97.04. The dollar has bumped up today versus the Swiss franc as the USD/CHF has gone from the 1.0811 opening rate to trading at 1.0865.

The dollar has increased today against the Canadian loonie by almost 100 pips as the USD/CAD has advanced to trading around the 1.0909 level today after opening at 1.0818.

The Australian dollar has fallen versus the US dollar today as the AUD/USD has declined to the 0.8342 level after opening at 0.8392. The New Zealand kiwi has traded almost unchanged against the dollar as the NZD/USD has edged up to the 0.6741 level today after opening the day at 0.6734.

GBP/USD Chart – The British Pound falling sharply today against the US Dollar in Forex Trading and the GBP/USD has declined by more than 200 pips.

By Fast Brokers – The USD/JPY is reversing from 98 and our 4th tier downtrend line after Friday’s encouraging rise.  The currency pair is now bouncing between our 4th tier downtrend line and 2nd tier uptrend line as they approach their inflection point.  Today’s appreciation of the Yen comes with much better than expected Core Machinery Orders and Current Account data points from Japan.  Investors are favoring the Yen and the Japanese economy in reaction, particularly after economist Paul Krugman cautioned that the U.S. economic recovery has a long road ahead.  The improvement in Japan’s economic data is certainly encouraging, especially the sizable rise in the nation’s Current Account balance.  The pickup in Japan’s Current Account balance is likely due to the economic recovery taking place in China.  Therefore, better than expected economic data from China tomorrow could add further near-term downward pressure since this news would favor Japan’s economy.

Despite today’s pullback, the USD/JPY made encouraging headway on Friday.  The currency pair finally woke from its hibernation, heading back into contention for 100.  However, the USD/JPY faces new immediate-term foes, including our 4th tier downtrend line and Jen highs.  Regardless, the USD/JPY is in an opportunistic position to extend its near-term breakout.  Furthermore, any eclipse of our 5th tier downtrend line could signal a longer uptrend line with a retest of 100 likely.  On the other hand, should our 2nd tier uptrend give way, the USD/JPY’s immediate-term pullback could pick up speed towards the 96.42-96.74 zone.

Present Price: 97.30

Resistances: 97.37, 97.78, 98.09, 98.54, 98.90

Supports:  97.05, 96.74, 96.42, 96.02, 95.75

Psychological: 95, 100

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – The Cable snapped after August 3rd lows failed to hold their ground.  Friday’s sell-side action was simply too much for the currency pair to handle, and the GBP/USD has proceeded to flop towards the 1.66 area as we anticipated.  There’s continual downward pressure on GBP/USD and EUR/USD as FX investors head for safety.  Meanwhile, the Pound is experiencing relative weakness in light of the BOE’s $84 billion QE injection last week, as indicated by an upturn in the EUR/GBP.  However, even though further immediate-term losses in the GBP/USD appear likely, the currency pair has a strong support zone approaching.  The Cable has experienced immense consolidation around the 1.65 level in the past, and there’s no reason to believe this behavior should change any time soon.  Therefore, with 1.65 and our 1st and 2nd tier uptrend lines within reach, we believe any immediate-term losses could be halted by these technical cushions.  In the meantime, crude and the S&P futures are consolidating above their respective psychological levels, $70/bbl and 1000.  As long as these investment vehicles hold strong, the Cable should forego any further technically significant setbacks.  Meanwhile, investors should keep an eye on sell-side action to deem whether the Cable’s pullback has the juice to drop below its aforementioned technical cushions.

All is quiet on the data front until Britain releases its BRC Retail Sales Monitor and RICS House Price Balance numbers late Monday.  A continual rise in housing prices could help solidify a temporary bottom in the Cable.  Furthermore, investors will keep a close eye on key Chinese economic data.  We could witness a broad-based Dollar depreciation if the Chinese numbers come in better than expected.  China is helping pull the entire global economy out of the gutter, so outperformance in China could lift both the Pound and the Euro.  Meanwhile, we’ll monitor the Cable’s correlation with the S&P futures since we witnessed a large appreciation of the Dollar on Friday despite stability in U.S. equities.  Though we are not tossing the GBP/USD’s positive correlation with the S&P futures, we are certainly monitoring the situation closely.

As for the upside, an encouraging development would be for the GBP/USD to solidify above our 3rd tier uptrend line.  However, the Cable has quite an uphill battle, including July 31st highs and our 2nd tier downtrend line.  On the other hand, any climb above our top 1.6651 resistance could result in an additional immediate-term pop in the Pound.  We maintain our negative immediate-term outlook on the GBP/USD, though losses should be limited with strong supports on the horizon.  The Cable’s medium-term uptrend is still safe, and the currency pair would need a hefty technical reversal to alter its path.

Present Price: 1.6570

Resistances: 1.6572, 1.6591, 1.6612, 1.6637, 1.6651

Supports: 1.6544, 1.6521, 1.6504, 1.6486, 1.6467

Psychological: 1.65

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

By Fast Brokers – Friday’s large pullback is following through into Monday while the S&P futures continue to dangle just above their highly psychological 1000 level.  Friday’s pullback came on abnormally large volume, giving ample reason for the EUR/USD to continue its slide today.  Weakness in the EUR/USD comes despite better than expected French Industrial Production data.  However, positive data from the EUR/USD is likely giving the Euro relative strength, as exhibited by the bounce taking place in the EUR/GBP.  We recognize similar downturns in both the GBP/USD and gold as well, indicating a broad-based market weakness.  The USD/JPY is also trading lower today, deviating from Friday’s theme of a stronger Dollar.  Meanwhile, crude and the S&P futures are holding strong above their psychological levels, $70/bbl and 1000 respectively.  The continual strength in the U.S. marketplace despite the overall appreciation of the Dollar is puzzling.  Could the Dollar’s latest round of appreciation indicate an approaching pullback in the S&P futures, or are the crisis-prone correlations shifting?  We will closely monitor the S&P’s correlation with the Dollar for any sort of confirmation.  There is always the possibility that an appreciation in the Dollar was overdue and doesn’t detract from the S&P’s rise.

Meanwhile, we shifted our trend lines to form new 1st tier and 2nd tier uptrend line.  The EUR/USD is quite a ways from our 2nd tier uptrend line.  However, if the EUR/USD can’t stay above our 1.4155 support a pullback towards the 2nd tier seems probable.  Our 1st tier turned 3rd tier uptrend line is reaching an inflection point with our 1st tier downtrend line.  Therefore, there’s the possibility of heightened volatility over the next 24 hours.  While we maintain our negative outlook on the EUR/USD for the immediate term, the EUR/USD’s medium-term uptrend still has two uptrend lines and the psychological 1.40 acting in its defense to the downside.  As for the upside, the EUR/USD will just build more obstacles to the upside the more it declines.  The immediate-term hurdles to the upside are intraday highs and our 1st tier downtrend line.  A recovery into the meat of the 7/20-7/28 trading range could be a positive develop and allow the EUR/USD to build a new base.  However, Friday’s high volume shows immediate-term momentum is still in favor of the downside.

Present Price: 1.4175

Supports: 1.4163, 1.4155, 1.4132, 1.4116, 1.4082

Resistances: 1.4195, 1.4215, 1.4234, 1.4248, 1.4275

Psychological: 1.40

Market Commentary provided by Fast Brokers.

Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.

We were watching the open last night for signs of continued USD strength from Friday, but the last 15 hours have been very quiet. EUR/USD (current bid 1.4176) is in a tight range.

Without any follow through of lower EUR/USD we will put back on our full position of long EUR/USD.

We originally bought at 1.4059 on July 30 (http://www.backbayfx.com/blog.php?action=fullnews&id=140) with a target somewhere in the 1.47xx handle. Friday morning we noted the price action and the distinct lack of short EUR/USD commentators so we took off half our position before the numbers at 1.4360.

We want to pick up our full position again but not at market, there may still be room for a real wipeout move this morning. We will use a Buy Limit order at 1.4125 to pick up the other half of our order today. If we do not get filled today, we will look to buy at market during the Asia Pacific session tonight.

We will keep our Stop Loss level of 1.3750 in tact for the full EUR/USD position.

Stay Nimble!

Stephen Leahy
Back Bay FX Services, LLC
www.backbayfx.com

Source: ForexYard

The movements we saw during Friday’s trading session may have been exaggerated and may be reversed. Today is a quiet news day for the U.S. as there are no major economic data releases on the calendar today. However, Britain and Euro-zone appear to be releasing the bulk of today’s news, which means we may see a day of trading with low liquidity and therefore increased volatility. Day-traders can take advantage of these intense trading days by swinging within the larger-than-normal price fluctuations.

Economic News

USD – USD’s Bullish Spike at an End?

Last Friday’s release of the US Non-Farm Payroll figures drastically altered the forex market with a sharp uptrend for the US Dollar. Ending the week at 1.4181 against the EUR, down from the weekly high of 1.4447, and dropping the GBP/USD rate back towards the 1.6600 level, the greenback is beginning to benefit from positive economic news. Should forex traders go long on the USD? Not necessarily.

As was anticipated by many analysts, when economic recovery comes online, the first result will inevitably be a weakening of the USD versus its currency counterparts. As the world’s number one safe-haven investment, the USD must by this definition suffer a significant loss as banks and investors dump their Dollar reserves for riskier assets and portfolio diversification. The immediate effect of the NFP report was a strong bullish movement priced in for the greenback, but the long-term trend will likely be a continuation of the bearishness experienced over the previous two weeks.

While some analysts claim that the recovery began prior to last week, and thus the USD may be reacting positively to favorable economic news, this is less likely to be the case. It may be more likely that global investors saw the sudden decrease in American unemployment as a sign that the US may be a calmer market to invest in, and not just as a safe-haven.

After the hectic news week experienced for the first week of August, this week may appear mild in comparison. With hardly any significant news being released from the United States until at least Wednesday, forex traders are advised to follow the British Pound as it may end up being this week’s focal currency.

EUR – EUR Reaches near 2009 High against JPY

The EUR was one of the primary victims of Friday’s Non-Farm Payroll release from the United States. After the release, which showed employment shrinking much slower than expected, and witnessing the first drop in the Unemployment Rate since May of 2008, the EUR saw a sharp sell-off with investors’ protective strategies adding downward pressure on the EUR as the price fell below significant resistance levels, triggering massive Stop Orders.

Good news for the EUR is that it was not the biggest loser on the day last Friday. It managed to cling to a few of the gains made Thursday against the Pound, and reached a year high of 138.69 against the JPY. While the bearish move experienced against the USD appeared to be a reversal to the EUR’s bullishness, many analysts actually claim that this spike merely represents values which had been priced in before the NFP release. Now that the market is on the path to recovery, the safe-haven USD should enter a sell-off phase of its own and push its rival currencies to new highs in the near future.

For the days ahead, forex traders should focus their attention away from the Euro-Zone for their economic news, primarily as there will be very little news coming from Europe this week. Most attention will be placed on Great Britain following its announcement of the increase in quantitative easing from 125B Pounds to 175B. This week’s announcements from the UK will no doubt assist traders in determining the direction of the GBP for this week and next.

JPY – JPY Drops from Surging Risk Appetite and Dollar Strength

What most analysts are now calling Friday’s biggest loser, the Japanese yen suffered more than any other currency following the release of America’s Non-Farm Payroll data. The JPY indeed plummeted to price levels near 2009 lows against the EUR and GBP, prices of 138.69 and 163.08, respectively. Against the USD, the JPY dropped to 97.76, a price level unseen since mid-June.

The surge in risk appetite, and the sudden spike of the USD combined to put insurmountable pressure on the island currency last Friday, causing major breakouts to occur in the moments after the release of the NFP report. With a surprisingly heavy news week for the Japanese currency ahead of forex traders, there is the possibility for this bearishness to continue, since many are expecting positive results which may likely boost the appetite for risk in the market and thus put additional selling pressure on the traditional safe-havens like the JPY and USD.

Crude Oil – Crude Oil Hits 10-Month High, then Tumbles

The price of Crude Oil spiked on Friday, following the sudden surge in market volatility after the release of US Non-Farm Payrolls. Prices climaxed at a 10-month high of $72.81 before tumbling back towards the $70 price level. Much of the market pressure and volatility was correlated with the strength of the US Dollar.

The sell-off of the USD following the report pushed oil prices higher, however, the sudden rapid sell-off of all other currencies directly thereafter led to a surprising surge in the value of the Dollar. Considering the greenback’s relationship to commodities, the price of Crude Oil mirrored the movements of the EUR/USD almost perfectly, with a strong upward surge followed by an even more rapid decline. Now that the market appears to have stabilized, the growth pattern forecast by many economists may very well be underway. If predictions are correct, the USD should drop in the coming weeks and oil prices should climb as a result.

Technical News

EUR/USD

The daily chart is showing mixed signals with its RSI fluctuating at the neutral territory. However, the 4-hour chart’s RSI is already floating in the over-sold territory, suggesting an upward correction may be imminent. When the upwards breach occurs, going long with tight stops appears to be preferable strategy.

GBP/USD

The price of this pair appears to be floating in the over-sold territory on the 4-hour chart’s RSI, indicating an upward correction may be imminent. The upward direction on the Slow Stochastic also supports this notion. Going long with tight stops might be the right strategy today.

USD/JPY

A bearish cross on the 4-hour chart’s Slow Stochastic implies that a downwards correction might take place in the nearest time frame. The daily chart’s RSI is floating in the overbought zone suggesting that the upward trend might be out of steam. Going short with tight stops appears to be the right strategy today.

USD/CHF

There is a bearish cross forming on the daily chart’s Slow Stochastic indicating a bearish correction might take place in the nearest future. The downward direction on the 4-hour chart’s Momentum oscillator also supports this notion. When the downward breach occurs, going short with tight stops appears to be preferable strategy.

The Wild Card – Gold

Gold prices are once again dropping, and it is currently traded around $956 per ounce. And now, the 4-hour chart’s Slow Stochastic is giving bullish signals, indicating that gold prices might go up. This might give forex forex traders a great opportunity to enter a very popular trend.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By Jeffrey Kennedy

The following is an excerpt from Jeffrey Kennedy’s Trader’s Classroom Collection. Now through August 17, Elliott Wave International is offering a special 45-page Best Of Trader’s Classroom eBook, free.

———–

I think that, as a general rule, traders fail 95% of the time, regardless of age, race, gender or nationality. The task at hand could be as simple as learning to ride a bike for the first time or as complex as mapping the human genome. Ultimate success in any enterprise requires that we accept failure along the way as a constant companion in our everyday lives.

I didn’t just pull this 95% figure from thin air either. I borrowed it from the work of the late, great Dr. W. Edward Deming, who is the father of Total Quality Management, commonly known as TQM. His story is quite interesting, and it actually has a lot to do with how to trade well.

Dr. Deming graduated with degrees in electrical engineering, mathematics and mathematical physics. Then, he began working with Walter A. Shewhart at Bell Telephone Laboratories, where he began applying statistical methods to industrial production and management. The result of his early work with Shewhart resulted in a seminal book, Statistical Method from the Viewpoint of Quality Control.

Since American industry spurned many of his ideas, Deming went to Japan shortly after World War II to help with early planning for the 1951 Japanese Census. Impressed by Deming’s expertise and his involvement in Japanese society, the Japanese Union of Scientists and Engineers invited him to play a key role in Japan’s reconstruction efforts. Deming’s work is largely responsible for why so many high quality consumer products come from Japan even to this day.

In turn, Japanese society holds Dr. W. Edward Deming in the highest regard. The Prime Minister of Japan recognized him on behalf of Emperor Hirohito in 1960. Even more telling, Deming’s portrait hangs in the lobby at Toyota headquarters to this day, and it’s actually larger than the picture of Toyota’s founder.

So why do people fail? According to Deming, it’s not because people don’t try hard enough or don’t want to succeed. People fail because they use inadequate systems. In other words, when traders fail, it’s primarily because they follow faulty trading systems – or that they follow no system at all.

So what is the right system to follow as a trader? To answer this question, I offer you what the trader who broke the all-time real-money profit record in the 1984 United States Trading Championship offered me. He told me that a successful trader needs five essentials:

1. A Method
You must have a method that is objectively definable. This method should be thought out to the extent that if someone asks how you make decisions to trade, you can quickly and easily explain. Possibly even more important, if the same question is asked again in six months, your answer will be the same. This is not to say that the method cannot be altered or improved; it must, however, be developed as a totality before implementing it.

2. The Discipline to Follow Your Method
‘Discipline to follow the method’ is so widely understood by true professionals that among them it almost sounds like a cliché. Nevertheless, it is such an important cliché that it cannot be ignored. Without discipline, you really have no method in the first place. And this is precisely why many consistently successful traders have military experience – the epitome of discipline.

3. Experience
It takes experience to succeed. Now, some people advocate “paper trading” as a learning tool. Paper trading is useful for testing methodologies, but it has no real value in learning about trading. In fact, it can be detrimental, because it imbues the novice with a false sense of security. “Knowing” that he has successfully paper-traded during the past six months, he believes that the next six months trading with real money will be no different. In fact, nothing could be farther from the truth. Why? Because the markets are not merely an intellectual exercise, they are an emotional one as well. Think about it, just because you are mechanically inclined and like to drive fast doesn’t mean you have the necessary skills to win the Daytona 500.

4. The Mental Fortitude to Accept that Losses Are Part of the Game
The biggest obstacle to successful trading is failing to recognize that losses are part of the game, and, further, that they must be accommodated. The perfect trading system that allows for only gains does not exist. Expecting, or even hoping for, perfection is a guarantee of failure. Trading is akin to batting in baseball. A player hitting .300 is good. A player hitting .400 is great. But even the great player fails to hit 60% of the time! Remember, you don’t have to be perfect to win in the markets. Practically speaking, this is why you also need an objective money management system.

5. The Mental Fortitude to Accept Huge Gains
To win the game, make sure that you understand why you’re in it. The big moves in markets come only once or twice a year. Those are the ones that will pay you for all the work, fear, sweat and aggravation of the previous 11 months or even 11 years. Don’t miss them for reasons other than those required by your objectively defined method. Don’t let yourself unconsciously define your normal range of profit and loss. If you do, when the big trade finally comes along, you will lack the self-esteem to take all it promises. By doing so, you abandon both method and discipline.

So who was the all-time real-money profit record holder who turned in a 444.4% return in a four-month period in 1984? Answer: Robert Prechter … and throughout the contest he stuck to his preferred method of analysis, the Wave Principle.

For more trading lessons from Jeffrey Kennedy, visit Elliott Wave International to download the Best of Trader’s Classroom eBook. Normally priced at $59, it’s free until August 17.

By GCI Fx Research

€

The euro lost sharp ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4230 level and was capped around the $1.4410 level.  The common currency sold off sharply following the release of U.S. July non-farm payrolls data that saw 247,000 workers lose their jobs last month from a positively revised -443,000 in June.  Also, the July unemployment rate improved to 9.4% from 9.5% in June, better-than-expected, while July average hourly earnings were up 0.2% m/m from 0.0% m/m.  July average hourly earnings were also up 2.5% y/y, down from 2.7% y/y in June, while July average weekly hours printed at 33.1, up from 33.0.  Even though today’s data evidenced an improvement in the U.S. labour market, many economists believe the unemployment rate will peak above 10.0% later this year or early next year.  U.S. economic growth is still contracting and it must grow approximately 2.5% per year in order to accommodate new entrants into the job market.  In eurozone news, German June industrial output was off 0.1% m/m and 18.1% y/y.  French President Sarkozy will meet with the heads of a few banks next week and impress upon them the need to increase their lending activity.  Data released in France today saw the June trade deficit widen to €4.01 billion while the German June trade surplus expanded to €12.2 billion from €9.6 billion.  European Central Bank President Trichet reported “We’re leaving this period of free-fall, we’re still falling.  We’re in a period which still requires a great deal of vigilance.  We have all had to cope with exceptional situation.  We all took decisions that were commensurate with the problems we faced. We did not do the same because the situation was not the same.”    Euro bids are cited around the US$ 1.3900 figure.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥96.95 level and was supported around the ¥95.05 level.  The yen was given across the board as risk appetite returned to the market following the stronger-than-expected U.S. July jobs report.  Data released in Japan overnight saw the July trade surplus up 127.8% y/y at ¥251.21 billion during the first twenty days of July.  Liquidity will be reduced next week in Japan next week with the beginning of the O-bon summer holiday.  Bank of Japan’s Policy Board convenes next week and is not expected to change monetary policy at this time.  The Nikkei 225 stock index climbed 0.23% to close at ¥10,412.09.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥138.55 level and was supported around the ¥136.50 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥162.45 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥90.60 level. In Chinese news, the U.S. dollar gained ground vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8288 in the over-the-counter market, up from CNY 6.8283.  Traders continue to express concern that People’s Bank of China will begin to tighten monetary policy.

₤

The British pound lost additional ground vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6675 level and was capped around the $1.6825 level.  Bank of England’s Monetary Policy Committee yesterday surprised the markets by expanding its bond purchase program by ₤50 billion.  Data released in the U.K. today saw July producer price inflation index up 0.3% m/m and were off 1.3% y/y.  Core PPI was up 0.5% m/m and 0.2% y/y while input producer prices were off 1.4% m/m and 12.2% y/y.  Cable bids are cited around the US$ 1.6485 level.  The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8500 figure and was capped around the ₤0.8595 level.

Daily Market Commentary provided by GCI Financial Ltd.

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By CountingPips.com

U.S. Nonfarm Payrolls data released today showed that jobs declined the least since August 2008 and the unemployment rate fell for the first time in fifteen months. The Department of Labor nonfarm payrolls report showed that U.S. payrolls shed 247,000 jobs in July and the unemployment rate fell by 0.1 percent to 9.4 percent. July was the nineteenth straight month that companies have shed workers but the employment decrease was the least since payrolls declined by 175,000 workers in August 2008.

June’s employment data was revised downwards to a loss of 443,000 jobs after originally showing a decline of 467,000.  According to the Department of Labor, the average decline in jobs from May through July was 331,000 after an average decline of 645,000 jobs from November 2008 through April 2009.

The unemployment rate dip was the first decline since April 2008 after increasing in June to 9.5 percent. The July report was better than the market forecasts that were expecting a loss of approximately 328,000 jobs and expecting the unemployment rate to reach 9.6 percent.

The decline in jobs was spread throughout most economic sectors with the exceptions of the education & health services sector which saw 17,000 jobs created, leisure & hospitality which added 9,000 workers and government hiring which gained 7,000 jobs for the month.

The service-providing sector lost 119,000 total jobs in July with professional & business services shedding 38,000 workers and retail trade cutting 44,000 workers. The goods-producing sector lost 128,000 jobs for the month as the manufacturing sector cut 52,000 jobs and the construction sector lost 76,000 jobs.

U.S. Dollar mostly stronger today in Forex Trading.

The U.S. dollar has been mostly stronger in forex trading today against the other major currencies after the employment report. The euro, British pound, Swiss franc, Australian dollar, Japanese yen and Canadian dollar have all declined versus the American currency so far today while the New Zealand dollar has been virtually unchanged.

The EUR/USD pair has declined from today’s opening rate of 1.4360 dollars at 00:00GMT to trading to 1.4183 at around noon today ET in the U.S. trading session according to currency data by Oanda.

The GBP/USD has declined from today’s opening level at 1.6770 to trading today at 1.6681 and looks to be on the way to decreasing for the second day in a row.

The US dollar has gained sharply today against the yen as the USD/JPY opened today at 95.32 and has advanced to trading at 97.65. The dollar has also jumped sharply today versus the Swiss franc as the USD/CHF has gone from the 1.0645 opening rate to trading at 1.0827.

The dollar has increased today against the Canadian loonie as the USD/CAD has advanced to trading around the 1.0837 level today after opening at 1.0772.

The Australian Aussie has fallen versus the US dollar today as the AUD/USD has declined to the 0.8367 level after opening at 0.8378. The New Zealand kiwi has traded almost unchanged against the dollar as the NZD/USD has reached the 0.6715 level today after opening the day at 0.6712.

USD/JPY Chart – The US Dollar advancing sharply today against the Japanese Yen in Forex Trading after the US jobs report declined less than expected.