Month: October 2010

Good day FX friends! Today, I present to you a look at the currency cross, AUDCAD. As you can see from its weekly chart, the pair has been trading very well since it touched a low of 0.8579 back in June this year. Since then, the Australian dollar was able to take the Loonie’s number as the pair hit parity (1.0000) and even went on to reach a high of 1.0023 last September 23. Technically, however, the pair’s recent uptrend maybe starting to reverse already. For one, it failed to completely overpass its previous high at 0.9915. The pair has also formed a shooting star candle pattern, indicating that the prior move up north maybe losing momentum. With the stochastics also in the overbought region, the pair could indeed weaken by either moving sideways or reverse. If can find support just above 0.9200 in case it does reverse. On the positive side, a successful breach above the shooting star’s high could propel the pair to its next notable high at 1.0550.

The Reserve Bank of Australia decision not to increase its interest rate from 4.50% to 4.75% caught the market by surprise. As a result, the Aussie lost some of its appeal. The rapid rise of the currency against most of the majors have prompted the RBA to postpone its rate hike. Still, the central bank remained somewhat hawkish stating that “If economic conditions evolve as the board currently expects, it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target.” Aside from this suprise, the weaker-than-expected growth in the country’s retail sales (0.3% versus 0.5%) also placed some selling pressure on the Aussie.

On Canada’s side, its latest employment figures will be out this Friday (October 8). Canadian firms are seen to have added 11,300 more jobs which would have brought the country’s jobless rate down to 8.0% from 8.1%. Improvement in the labor market, of course, would reflect positively on the economy of Canada and on the CAD at least in the short term.

More on LaidTrades.com …

By Russell Glaser – Spot crude oil has shown a propensity to range trade between Fibonacci levels but a recent rally may have momentum behind it to break the sideways movement.

Since the end of May spot crude oil prices have moved in trading ranges between the Fibonacci levels from the May high at 87.12, unable to breakout into a defined trend in either direction.

A recent sharp appreciation in the price may have the ability to carry the price of spot crude oil past a significant resistance level into a breakout play. The resistance level lies in a range between the 76.4% Fibonacci level at 82.40 and the August high of $83 (R1). Should the price make a close above this level, the next target for spot crude oil would rest at the May high near $87 (R2).

Traders should be patient and wait for confirmation of the breakout before initiating a long position. A protective stop should be placed near the support of $80 to defend against a false breakout.

Forex Market Analysis provided by ForexYard.

© 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 GCI Forex Research

Fundamental Outlook at 0800 GMT (EDT + 0400)

USD

Price action during the Asia session was governed by two major policy surprises: the RBA kept the cash rate on hold despite market expectations of a +25bp hike; AUDUSD lost over 70pips on the announcement. The BoJ eased policy by much more than expected, effectively cutting the policy rate by replacing the existing policy target of 0.1% with a range of 0-0.1%. EURUSD traded 1.3637-1.3695, USDJPY 83.33-83.99. Earlier, during the US session data included a slight disappointment in factory orders mixed in with a pick-up in pending home sales. Factory orders were slightly below expectations in August at -0.5% but July orders were revised up. Our analysts note their 1.5% real GDP growth forecast for Q3 has assumed a 10% pace for real equipment and software spending, which is close to the data reported so far. Meanwhile, the pending home sales index rose more than expected in August Leading up until July, the weakness reflected payback for the expiration of the home buyer tax credits at the end of April. Looking beyond this period of volatility, we still expect support for home sales over the medium-term as the employment situation improves, mortgage rates remain near historically low levels, and affordability remains favorable. Though Fed comments were relatively limited, QE2 is still on investor minds ahead of the larger data releases this week, with non-manufacturing ISM up next.
EUR

The euro did not manage to regain lost ground during the overnight session as there was little to counteract the reports that the Irish central bank reportedly views risks to the ECB staff growth forecasts as slightly tilted to the downside and global economic uncertainty is regarded to have increased. Another report also weighed on the euro, where a major Austrian bank is looking to change existing CHF loans into EUR loans, which, if it triggers a trend, would provide the franc with structural support versus the euro.
The ECB announced that €1.344bn worth of sovereign bond purchases settled last week under the ECB’s Securities Market Program. This represents a very significant increase on the tally for the week before and clearly suggests that sovereign bonds yields amongst issuers on the Eurozone periphery would have been significantly higher last week were it not for the ECB’s intervention.
We expect EURUSD upside to become increasingly limited again by structural weakness in the periphery. We also remain cautious on risk sentiment, as a sudden return of risk aversion cannot be excluded in an environment of heightened global economic uncertainty. Going forward we expect EURUSD to approach 1.28 in the medium-term.
JPY

In a surprise move the BoJ was much more dovish than expected, and effectively cut the policy rate target by replacing the existing target of 0.1% with a range 0-0.1%. No changes were made to the BoJ’s monthly intake of JGBs which will continue to accumulate on the BoJ’s balance sheet at a rate of ¥1.8 trn per month. However, the BoJ has set up a new “temporary” facility specifically to purchase short-term assets with a maturity of 1-2 years. The aim will be to use this facility to buy ¥3.5trn in short-dated JGBs and T-bills and about ¥1trn in CP, ABCP and corporate bonds.
AUD

Against consensus expectations, the RBA held the cash rate unchanged at 4.5% for the fifth consecutive meeting. However, our Australian economics team note that the RBA maintains is tightening bias, noting that rates are “appropriate for the time being” and that “it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target.” Our analysts now expect the next hike will come in November.

TECHNICAL OUTLOOK

USDCAD focus on 1.0108.
EURUSD BULLISH Bull pressure held below 1.3818/96 ahead of 1.4194. Near-term support comes in at 1.3560 ahead of 1.3381.
USDJPY BEARISH Look for a break below 82.88 for extension of bearish trend towards 79.75. Resistance remains at 84.50 ahead of 85.40.
GBPUSD BULLISH Move above 1.5999 and 1.6069 would expose 1.6276. Support at 1.5670 ahead of 1.5503.
USDCHF BEARISH Clearance of 0.9709 exposes 0.9590 and 0.9500 next. Resistance at 0.9918 breakout low.
AUDUSD BULLISH Sharp decline pressures 0.9559 ahead of 0.9463, but overall model is bullish with initial resistance defined at 0.9751 ahead of 0.9850.
USDCAD BEARISH Focus is on downside; initial support lies at 1.0108 ahead of 0.9931. Resistance comes in at 1.0380.
EURCHF NEUTRAL Following the pullback from 1.3467, model has turned neutral. Support at 1.3165 ahead of 1.2991.
EURGBP BULLISH Next resistance above 0.8738 lies at 0.8808. Support holds at 0.8563 ahead of 0.8510.
EURJPY NEUTRAL Expect gains to extend towards 116.68 and 119.33 next. Near-term support comes in at 112.98 ahead of 115.53.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

Source: ForexYard

The yen is taking center stage today following the completion of the Bank of Japan two-day policy meeting. Traders were anticipating further calls for intervention but were surprised to hear of a cut in the interest rate and a new fund to purchase assets.

Economic News

USD – Greenback Gains on Renewed Euro-Zone Concerns

The U.S. dollar gained versus the EUR Monday as renewed concerns regarding euro zone debt problems weighed on the common currency. The dollar also strengthened versus the JPY following the announcement by the Bank of Japan to cut interest rates and the creation of a fund to purchase assets.

The greenback held on to gains despite a release of mixed economic data. While pending home sales showed an increase of 4.3% in August, factory orders fell 0.5%, a worse than expected result.

Today traders should follow the release of the ISM Non-Manufacturing PMI at 14:00 GMT which is expected to show a slightly better reading than the previous month.

EUR – EUR Falls on Expected Budgetary Concerns

The EUR fell from a six-month high against the U.S. dollar Monday declining below $1.3700, as renewed debt concerns weight on the common currency. The drop followed the release of further details about the extent of Ireland’s budget deficit as well as an announcement by the European Central Bank (ECB) regarding the extent of new government bond purchases, which was at the highest level since June.

The purchasing is intended to assist governments like Ireland and Portugal that must undertake sever budget cuts which may stump their economic recovery. According to an Irish newspaper, the government’s budget required budget cuts for December stand at EUR4.5 billion ($6.2 billion).

Late Monday afternoon, the EUR was at $1.3690 from $1.3784 from late Friday. In today’s early trading, the pair stands at $1.3660. The EUR was at Y114.20 from Y114.81. The U.K. pound was at $1.5837 from $1.5841.

JPY – Yen Weakens on Surprise Interest Rate cut

The Japanese Yen weakened against the U.S. dollar following a surprise reduction in the interest rate during the Bank of Japan policy and enacting of further credit easing measures. The bombshell announcement allowed for gains in the yen versus the major currencies and a reversal of the negative sentiment.

The USD/JPY rose to a high of 83.97 in today’s early Asian trading from 83.36 in New York yesterday, Japan’s currency is trading at 114.79 per EUR from 114.08.

The overnight call rate was reduced below 0.10%. Few analysts predicted the BOJ would cut the rate from 0.10%. The speculations surrounding the policy statement will surely make the Yen one of the most exciting currencies for trading today.

OIL – Stronger Dollar Weighs on Oil Prices

Crude- Oil futures settled slightly lower Monday as a stronger dollar and weak equity markets pressured oil prices. Light, sweet Crude Oil for November delivery settled 11 cents, or 0.1%, lower at $81.47 a barrel on the New York Mercantile Exchange after hitting an intraday high of $82.42 earlier in the day.

Futures declined yesterday after stocks fell for the third time in four days and the U.S. dollar advanced against the EUR. A stronger dollar is making the commodity more expensive to purchase as it is denominated in dollars. Putting further pressure on the commodity is the expectation that an Energy Department report tomorrow will probably show crude stockpiles rose last week.

For today traders should follow any news from the U.S. as the direction of the USD will likely affect oil prices.

Technical News

EUR/USD

After yesterday’s decline some correction may be expected for the pair in the short term. The RSI for the pair is floating in the oversold territory on the two hour chart while a bullish cross is evident on the hourly and 4 hour charts’ Slow Stochastic. Going long with tight stops may be advised for today.

GBP/USD

The pair is currently range trading between 1.5790 and 1.5830, with most indicators in neutral territory. Waiting on a clearer direction for the pair may be advised for today.

USD/JPY

The pair seems to be exhibiting mixed signals. While the daily chart’s RSI is floating in the oversold territory with a bullish cross evident on the chart’s Slow Stochastic as well as the MACD, the 2 hour chart’s Slow Stochastic is showing a bearish cross with the 2 hour chart RSI floating near the overbought territory. Waiting on a clearer signal for the pair may be advised

USD/CHF

The pair may be seeing some upward correction today as the pair’s RSI is floating in the oversold territory on the 4 hour and daily charts while a bullish cross is seen on the 4 hour charts Slow Stochastic and the hourly MACD. Going long for the day may be advised.

The Wild Card

AUD/NZD

The RSI for the pair is floating in the oversold territory on the 4 hour and 8 hour charts with a bullish cross seen on the 8 hour chart’s Slow Stochastic. Furthermore, a breach of the lower Bollinger Band is evident on the hourly, 2 hour, 4 hour and 8 hour charts, indicating an impending upward movement. Forex traders are advised to go long for the day.

Forex Market Analysis provided by ForexYard.

© 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.

Video (Part 3): Prechter – Investing in Extreme Markets

(Note: This interview was originally recorded on September 20, 2010)

In the video below, Robert Prechter talks to Yahoo! Finance Tech Ticker host Aaron Task and Henry Blodget about a technical pattern he sees forming in the Dow.

Get Up to Speed on Robert Prechter’s Latest Perspective — Download this Special FREE Report Now.

By Bob Moore – If you were a lone bull in a herd of stampeding buffalo, your survival instincts would tell you to follow the herd, regardless of its direction. The same is true for the successful trader or investor maneuvering within the financial herd called the Stock Market. As trader psychology changes, so do the Markets.

The Elliott Wave Principle captures the essence of trader psychology. It is an effective, visual representation of traders’ human nature to follow ‘in a crowded path’ extreme optimism followed by extreme pessimism, and then repeat the process again and again. The Elliott Wave patterns capture the continuous unfolding of the extremes depicted as Stock Market sentiment.

Traders cannot rely on news and events to drive the Stock Market. History has shown that news and events related to the Market have no consistent effect on its direction because of the influence of unfolding Market sentiment. For instance, Market reaction to the same news can be extremely positive at one given time, but then extremely negative at another given time.

Elliott Wave patterns display to the trader the most likely future Market direction based on current pattern structure. By understanding Elliott Wave pattern characteristics, a trader can identify higher probable outcomes from lower probable outcomes thereby reducing investment risk.

The classic Elliott Wave patterns consist of impulsive and corrective waves. An impulsive wave moves in the same direction as the current trend and is made of five sub-waves. A corrective wave moves against the current trend and is made of three sub-waves.

Traders can increase their probability of success by placing entry and exit points near levels favoring a change in Market direction. For example, placing an entry for a long position near the start of an upward impulsive wave has a higher degree of being successful than placing an entry for a long position near the end of an upward impulsive wave.

Forecasting Market direction from Elliott Wave patterns does not provide certainty, but rather a probability of Market direction. There can be more than one valid interpretation of wave patterns, each carrying a probability of being an accurate portrayal of Market direction.

Traders should keep in mind that it is typical for Elliott Wave patterns to be continually reassessed and altered as Market sentiment unfolds to provide a higher probability of Market forecast. Alteration of wave patterns should be viewed not as a weakness, but as a strength. To be sure, the Market is quite dynamic; therefore, any tool used to help forecast the Market must be dynamic, too.

It is important to note the principals and use of Elliott Waves have persevered for over 70 years, when in 1938, in collaboration with C. J. Collins, R.N. Elliott introduced ‘Elliott Wave Principals’. Mr. Elliott believed that while stock market prices may appear random and unpredictable, they actually follow predictable, natural laws that can be measured and forecast by implementing wave patterns based on Fibonacci number analysis, also pioneered by Mr. Elliott.

Mr. Elliott theorized that common waves are characterized by Fibonacci proportions of 38%, 50%, and 62%. Impulsive waves relate to one another in Fibonacci proportions and corrective waves tend to retrace in Fibonacci proportions.

Mr. Elliott, encouraged so greatly by the response to his theory in the investment world, expanded it to apply to all collective human behaviors. His final and most comprehensive work titled ‘Nature’s Law-The Secret of the Universe’ was published in 1946, two years before his death.

About the Author

Bob Moore is with Taylor Trading Plus, an international data-exchange trading service using George Taylor’s Book Method, Value Area trading, Elliot Wave analysis, and Short-Term Trend analysis to identify trading entries/exits in select instruments of Futures, ForEx, Commodities, Metals and Oil, ETF’s, and Stocks. To request this article with graphic depiction of Elliott Waves, please go to ‘Contact’ tab at: http://www.taylortradingplus.com.

By CountingPips.com

The latest Commitments of Traders (COT) report, released on Friday by the Chicago Mercantile Exchange, showed that futures speculators sharply increased their bets in favor of the euro against the dollar for a fourth consecutive week. Non-commercial futures positions, those taken by hedge funds and large speculators, were net long the euro against the U.S. dollar by 35,330 contracts as of September 28th following net positioning of 5,097 contracts on September 21st. The September 21st data was the first time contracts had been in positive territory for the euro since early December 2009 and the latest data marked the best euro positioning since October 20, 2009 when contracts were positive by 36,033.

The COT report is published every Friday by the Chicago Mercantile Exchange (CME) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. Open interest is the number of open contracts that have not been closed by a transaction or by delivery.

The British pound sterling was the only major currency on the short side against the dollar last week in the CME futures market while the euro, Australian dollar, New Zealand dollar, Japanese yen, Canadian dollar, Swiss franc and Mexican peso had a net positive amount of contracts.

The British pound sterling short positions were just -2,194 as of September 28th after being short on September 21st by -8,989 positions. This is the third straight week of improvement for the British pound future positions and could be back on their way towards positive levels.

The Japanese yen net long contracts increased to 28,666 as of September 28th from 23,100 net long contracts reported on September 21st. Yen positions had stayed above the 47,000 level for six weeks before the September 21st decline as many speculators may have decreased their yen long positions due to the Bank of Japan’s currency intervention.

The Canadian dollar positions edged lower after three consecutive weeks of increases and declined to a net total of 27,870 contracts after totaling 29,815 net longs on September 21st.

Swiss franc long positions advanced higher to 19,993 long contracts as of September 28th after totaling a net of 14,462 long contracts on September 21st. This is the highest level for long Swiss franc positions since December 2009.

The Australian dollar positions continued to rise and reached their highest level since April against the dollar to a net amount of 69,533 long contracts as of September 28th from 64,324 long contracts on September 21st.

New Zealand dollar futures positions declined to a total of 17,270 long contracts after a total of 18,408 long contracts. This decrease breaks a round of three consecutive weeks of increases.

Mexican peso long contracts jumped higher as of September 28th to 66,591 net long positions from 26,376 longs the week prior. Peso positions more than doubled last week and have now risen for three consecutive weeks.

COT Data Summary as of September 28th, 2010
Large Speculators Net Positions vs. the US Dollar

Euro: +35,330 contracts from +5,097 contracts on September 21st
British pound sterling: -2,194 contracts from -8,989 contracts
Australian dollar: +69,533 contracts from +64,324 contracts
Canadian dollar: +27,870 contracts from +29,815 contracts
Japanese yen: +28,666 contracts from +23,100 contracts
Mexican peso: +66,591 contracts from +26,376 contracts
New Zealand dollar: +17,270 contracts from +18,408 contracts
Swiss franc: +19,993 contracts from +14,462 contracts

Go to the Commitment of Traders CME raw futures data

Further COT Resources from around the web:

Forecast The FX Market With The COT Report

The Only Indicator You Will Ever Need

Will the Aussie reach parity with the US dollar or even better in the months to come? Technically speaking, there’s a good chance that it would. As you can see from its daily chart, the AUDUSD pair has recently broken out from a descending right-angled broadening triangle. Having past the 0.9350 and 0.9400 hurdles, the pair could now aim for 1.0000. It could, however, encounter some resistance at its all-time high at 0.9849 which it set back in 2008. Nonetheless, a move above this level could put the AUD on track towards dollar-parity. In fact, if we project the height of the pattern from the point of breakout, its upside target is even better – 1.0600. And as long as the pair’s uptrend channel remains intact, I could say that the Aussie has some more room to move north. But with its present overbought conditi0n and the wall that it is seeing at the channel’s resistance, it could move sideways or even retrace for awhile in the near term before making its journey to the heavens.

A lot of high impact economic reports are due in Australia this week. Tomorrow (October 5), Australia’s retail sales and trade balance figures for the month of August will be on deck. Sales at the retail level are seen to have increased again by 0.5% on top of the previous month’s 0.7% gain. The country’s trade balance is likewise seen to tally handsome surplus of A$2.31 billion from A$1.89 billion due to the country’s expansion in exports to China.

Later that day, the Reserve Bank of Australia will also deliver its monetary policy decision. There, the bank is expected to raise its interest rate by 0.25% to 4.75% after 5 months of holding it at 4.50%. The 1.2% growth rate in Australia’s economy during the second quarter of the year plus the recent improvement in the country’s labor market could indeed warrant a hike in the central bank’s interest rate. A rate hike plus the overall weakness in the greenback would make the Aussie more attractive; imagine netting 4.50% (4.75% – 0.25%) just by going long on the AUDUSD.

More on LaidTrades.com …

By ForexYard – The euro fell back Monday after a warning that the wave of austerity sweeping across Europe could trigger a new recession. The euro had initially been helped by continued speculation of further quantitative easing by the U.S. as well as by weekend support from Chinese Premier Wen Jiabao as he conducts a tour of Europe this week.

Not only did Wen claim to support a “stable” euro but he said that Beijing would continue buying Greek bonds once the country returns to the bond markets. Wen’s comments came amid reports that China has been holding secret talks with the French to heighten coordination of exchange rates to make them more stable.

By midmorning, the euro had fallen back to $1.3698 from $1.3784 late on Friday in New York, according to analysts. Against the JPY, the euro also slipped back to 113.90 from 114.81, even though there is rising speculation that the Bank of Japan (BOJ) will provide further liquidity to Japanese money markets, one way or another, when it completes its latest two-day policy meeting Tuesday.

Forex Market Analysis provided by ForexYard.

© 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.