Author: FX_Trdr

By Sylvain Vervoort – Let’s have a look at the heikin ashi candle chart and the use of this technique to smooth price data together with the zero-lagging technique we presented in an earlier article about moving averages.

Heikin ashi, Japanese for “average bar,” is a technique used to better visualize price trends by recalculating the standard candlesticks. This technique was introduced by Dan Valcu in 2004. The heikin ashi chart is a candle chart based on the recalculated values for the normal open, high, low, and closing prices, but with a different interpretation.

The Heikin ashi candle is a technique to better visualize price trends and is calculated as follows: *HaClose = (Open+High+Low+Close)/4 = the average price of the current bar *HaOpen = [HaOpen(previous bar) + Close(previous bar)]/2 = the midpoint of the previous bar *HaHigh = Max(High, HaOpen) = the highest value in the range *HaLow = Min(Low, HaOpen) = the lowest value in the range

The average heikin ashi closing I calculate dividing the sum of these 4 values by 4.

If you compare the standard candle chart, based on the real open, high, low, and closing prices with the heikin ashi candle chart, based on the re-calculated prices for haOpen, haHigh, haLow, and haClose, it will look like a much smoother move. You can of course not use the standard candle patterns recognition here. The interpretation of the heikin ashi candle is much simpler.

A strong uptrend has up-moving white bodies without a lower shadow. A strong downtrend has down-moving black bodies without an upper shadow. The trend is weakening when the bodies get smaller, eventually with shadows on both sides.

With most technical analysis programs it is not possible to create an indicator that will result in more than one data item displayed on a single bar. For heikin ashi candles, however, you need four data items displayed on the same bar. So, if you really want to use heikin ashi candle charts, it is best to buy conversion software that automatically converts the basic data creating a mirror of the data in heikin ashi format.

For many applications and formulas it is interesting to have a smoothed closing price without any delay. For this you can use my average heikin ashi closing price as the result of (haOpen + haHigh + haLow + haClose)/4.
You will see the nice smoothing effect of using the heikin ashi average closing price compared to the standard closing price. The smoothing is mostly without a delay at the price turning points. So, it is very useful as a first degree smoothing indicator.

A first application could be to smooth the heikin ashi average closing price with a 21-period triple Exponential moving average or TEMA, one of the averages we talked about in a previous article about moving averages. Trading on the turning points of this average, preferably confirmed by breaking a downtrend or uptrend line can give you very nice profitable trades.

Combining heikin ashi with the TEMA average and with the zero-lagging principle also explained in my previous article about averages, you can produce a nice fast and reliable cross-over system. You can use the crossing of a 55-days zero-lagging closing price average crossing the 55-days heikin ashi zero-lagging TEMA average. Try it out and you will see some very profitable buy and sell signals.

These are the formulas I use in MetaStock. Zero-lagging TEMA average on closing prices: Period:= Input(“Closing prices average?”,1,100,60); TMA1:= Tema(CLOSE,Period); TMA2:= Tema(TMA1,Period); Difference:= TMA1 – TMA2; ZeroLagTMACL:= TMA1 + Difference; ZeroLagTMACL

Zero-lagging heikin ashi TEMA average: avg := Input(“ZL TEMA average? “,1,100,55); haOpen:=(Ref((O+H+L+C)/4,-1) + PREV)/2; haC:=((O+H+L+C)/4+haOpen+Max(H,haOpen)+Min(L,haOpen))/4; TMA1:= Tema(haC,avg); TMA2:= Tema(TMA1,avg); Diff:= TMA1 – TMA2; ZeroLagTMAHA:= TMA1 + Diff; ZeroLagTMAHA

The heikin ashi price bar can be used as a smoother candlestick bar chart while the heikin ashi average closing price is very useful as a smoothing device and replacement for the normal closing price in all kind of custom formulas as shown in a few examples here. You can certainly built profitable trading systems with this indicator.

About the Author

Want to learn more about the use of heikin ashi? You can find more technical analysis articles for free at my website: http://stocata.org/. Sylvain Vervoort is a trader and the author of a new book “Capturing Profit with Technical Analysis” and a regular contributor to Stocks & Commodities magazine

Source: ForexYard

The dollar fell slightly against the major currencies on Monday as signs of a sustained economic recovery and reduced concerns of a default in Dubai curbed demand for the U.S. currency as a refuge. The emirate’s move initially prompted investors to sell the dollar and pushed up global equities on improved risk appetite.

Economic News

USD – Dollar Falls on Dubai Bailout

The dollar slipped slightly against most of its major counterparts on Monday after Dubai’s announcement it had received help from Abu Dhabi to repay its debts. This bolstered risk appetite and eroded some of the U.S. currency’s safe-haven appeal. By yesterday’s close, the USD fell against the EUR, pushing the oft- traded currency pair to 1.4647. The dollar experience similar behavior against the GBP and closed at 1.6302.

The currency market’s bent to sell dollars on improved risk appetite, contrasted with last week when strong U.S. economic data boosted risk sentiment to the benefit of stocks and the dollar, and have bolstered the view that the Fed may have to act sooner than expected to tighten monetary policy. Investors were also watching to see whether a year-long trend in which the dollar weakens on strong U.S. data was starting to break down.

Moreover, markets await more details from the Federal Reserve, which wraps up its last policy meeting of the year on Wednesday. Investors expect the central bank to keep its benchmark interest rate at a historic low level of near zero for the time being, but there is some concern that rates could rise sooner than previously thought as the economy improves. Higher interest rates or the expectation of higher interest rates in the near future can boost a currency as investors transfer their funds to higher yielding currencies.

EUR – EUR Boosted by Increased Risk Appetite

The EUR rose slightly against the dollar on Monday as Abu Dhabi’s decision to throw
Neighbor Dubai a $10 billion lifeline to repay debts slowed safe-haven buying that boosted the U.S. currency last week. The emirate’s move initially prompted investors to sell the dollar and push up global equities on improved risk appetite.

The 16-nation currency edged up to $1.4647 in late New York trading from $1.4617 Friday after Greece’s prime minister announced a barrage of spending cuts and warned that the country risked drowning in debt. The government has promised to step up efforts to reduce the deficit after a ratings agency downgraded the country’s debt rating. Also last week, a rating agency lowered the credit rating outlook for Spain to negative.

Looking ahead today, the news event that may have a very large impact on the EUR and its main currency pairs in today’s trading is the German ZEW Economic Sentiment at 10:00 GMT. This report is very important and is likely to impact the EUR volatility. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow this release.

JPY – Yen Experiences Mix Result against Major Currencies

The Yen completed yesterday’s trading session with mixed results versus the other major currencies. The JPY was broadly unchanged versus the EUR yesterday and closed its trading session at around the 130.05 level. The JPY also saw a small bullishness against the USD and closed at 88.55.

Confidence among Japan’s largest manufacturers climbed the least since the economy emerged from its worst recession as companies have become more concerned the yen’s gains will erode profits. The report showed large companies planned deeper spending cuts to protect earnings that are under threat from a currency that climbed to a 14-year high against the dollar last month.

OIL – Crude Oil Declines on Falling Demand

Oil dropped for a ninth day yesterday, the longest losing stretch in eight years, amid declining industrial output in Europe and the smallest improvement this year in consumer confidence in Japan, the third-largest oil-consuming country.
Prices have fallen because of a slow recovery in demand in developed markets. Oil has dropped 11% since Dec. 1 in the longest decline since July 2001.

Oil failed to reverse the downward trend on Monday despite rising equity market and falling dollar, which had helped to boost oil prices most of the year. Investors were worried about the weak demand as fuel supplies have risen six out of the past ten weeks.

Technical News

EUR/USD

The daily chart shows the pair may be relatively oversold. The Relative strength index has the pair’s price floating in the oversold zone, hinting at the possibility of a price appreciation. Traders may see this as a buy opportunity to go long on this pair.

GBP/USD

The 4-hour chart is showing a tightening of the pair’s Bollinger Bands, indicating the potential for an imminent breach. On the daily chart, the price is floating near the lower border, indicating the potential for the pair’s break out to be higher. Traders may want to be long on the pair with take profit at the significant resistance level of 1.6340.

USD/JPY

The bullish correction on the hourly chart appears to be weakening as the pair has now fallen back below the upper Bollinger Band line. We may expect the pair to fall back to its lower Bollinger Band, in line with the long term trend. Traders may want be short with a limit order near the 88.40 price level.

USD/CHF

Signals are pointing to a correction for the pair. The daily chart is displaying a bearish cross on the pair’s Slow Stochastic Oscillator, indicating the potential for a downward correction. The chart has the pair floating in the oversold range on the Relative Strength Index, signaling further potential for downward movement. Being short on this pair today may be the right move.

The Wild Card – Crude Oil

Crude oil may due for an upward correction as the daily chart is providing significant buy signals. The chart shows the pair floating in the oversold range on the Relative Strength Index, indicating the potential for a price appreciation. The daily chart also displays a bullish cross on the Slow Stochastic Oscillator, giving forex and commodity traders reason to be long on crude today.

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.

Market Movers of the Day

Asia-Pacific

*Japanese Industrial Production at 0.5%, in line with market expectations

Europe

*UK Rightmove House Price Index worse than expected at –2.2%

*Swiss PPI at 0.0% as expected

*EU Employment Change for 3Q worse than forecasted -2.1% annualized

*EU Industrial Production worse than expected at -11.1% annualized

Americas

*Canadian Capacity Utilization fell to 67.5% in the third quarter

The Overall Sentiment

Equities

Stock markets rose around the globe as Abu Dhabi, the richest country of the UAE, declared it will support Dubai World consortium with $10 billion, a week after it announced a renegotiation of its debt. In the US, EXXON Mobile stated it will acquire XTO Energy for $31 billion but its shares dropped by 4.3%, thus limiting the advance of the S&P to a modest 0.7%. In Europe, the main indices also climbed as the news of Abu Dhabi’s intervention relieved concerns about Dubai World defaulting on its debt. The British FTSE 100 added 1% driven by financial institutions and the German DAX rose 0.8%.

Forex

The Dollar weakened in a day with no economic data releases coming from the US. EUR/USD advanced from 1.46 to the 1.4650 level in a relatively quiet manner, following the huge sell-off that closed last week. The Pound experienced great volatility in early trading hours bouncing between 1.62 and 1.63 against the Greenback to finally settle slightly above 1.63. All Commodity linked currencies climbed versus its US counterpart. AUD/USD consolidated around 0.9165 ahead of the RBA’s Monthly Minutes. The Yen declined against most majors as Abu Dhabi’s support of Dubai World’s debt alleviated worries of a default reducing the demand for safe-haven currencies.

Commodities

The weak Dollar helped push Gold up for the day, from last week’s lows around $1110 to a closing above $1126. Silver advanced as well, ending slightly below $17.35. Crude Oil recuperated modestly above $69 with a brief intraday visit over $70, drifting a little lower to close around $69.60.

The Day Ahead

The day will start early in Australia with the Dwelling Starts, which is seen as a key indicator of the Australian housing market’s health. The RBA Minutes will be closely followed by traders to try to assess the chances of further rate hikes after three consecutive months of rising interest rates. In Europe, the Swiss Industrial Production and the British CPI are due for release. The ZEW Survey will shed light on the current economic sentiment of investors in Germany and the Euro-zone. During the US session Canada will release its Leading Indicators and the US PPI is expected to rise indicating commodity inflation. Towards midnight GMT the attention will go back to the Asia-Pacific region for the Australian Westpac Leading Index and the Japanese Tertiary Industry Index.

Technical Analysis

EUR/GBP DAILY

After a pronounced bullish trend that originated in early August EUR/GBP peaked just above 0.94 and changed direction developing a bearish tendency. The last sessions, although volatile, are in line with the recent downwards movement, presenting the opportunity to open a Short position to take advantage of the current trend towards the next reliable support at 0.8835.

Daily Forex Market Analysis provided by eToro

Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.

© 2009 eToro Blog.

By Fast Brokers – Gold has managed to avoid a retest of the psychological $1100/oz level thus far.  The precious metal is about where we left it on Friday as we witness consolidative patterns in the FX markets.  Gold has been under quite a bit of selling pressure since the beginning of the month, so consolidation is a healthy technical development for the time being.  That being said, the EUR/USD and GBP/USD are testing the patience of their uptrend by consolidating just above their respective key uptrend lines.  Hence, another wave of Dollar strength could result in a sizable leg down in both currency pairs, meaning gold could follow suit considering its negative correlation to the Greenback.  As a result, investors should keep an eye on the major Dollar crosses as we receive another set of key economic data from the U.S., EU, and Britain.  The EU will release ZEW Economic Sentiment data followed by CPI and RPI figures from the UK.  However, the spotlight could be on the U.S. since it will release its PPI, Empire Index, Industrial Production, TIC Long-Term Purchases, Capacity Utilization Rate, and Industrial Production.  Should America’s econ data outperform once again it will be interesting to see whether the FX markets experience another wave of broad-based Dollar strength.

Technically speaking, gold has multiple uptrend lines serving as technical cushions along with 12/9, 11/13, and 11/10 lows.  Furthermore, the psychological $1100/oz level could serve as a reliable technical support should it be tested.  As for the topside, we’ve placed a downtrend line on our chart, albeit a steep one.  Additionally, gold faces topside technical barriers in the form of 12/9 and 12/7 highs along with the psychological $1150/oz and $1175/oz levels.

Present Price: $1122.90oz

Resistances: $1123.03/oz, $1128.34/oz, $1134.47/oz, $1141.42/oz, $1147.54/oz, $1152.85/oz

Supports: $1115.27/oz, $1110.77/oz, $1105.05/oz, $1100.15/oz, $1097.29/oz, $1089.12/oz

Psychological: $1100/oz, $1150/oz, $1175/oz

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 rally lost steam as the USD/JPY was deflected from our 2nd tier uptrend line.  The USD/JPY neglected to retest the highly psychological 90 level again despite another broad-based wave of Dollar strength in reaction to positive U.S. consumption data.  However, the USD/JPY is still trading well above 12/9 lows, indicating the currency pair may be awaiting a signal from other major Dollar pairs.  That being said, both the EUR/USD and GBP/USD are currently testing the patience of some key uptrend lines, meaning another leg down in these currency pairs could be in the making.  However, it remains to be seen how the USD/JPY would react to such a movement since the USD/JPY’s behavior depends on whether a pullback stems from risk-aversion or broad Dollar strength.  Hence, investors may want to keep an eye on tomorrow’s key econ data releases, highlighted by U.S. PPI, Industrial Production, and TIC Long-Term Purchases.  Should tomorrow’s set of U.S. data outperform again, we could experience another leg up in the Dollar, a positive development for the USD/JPY.  Meanwhile, Japan released economic data of its own.  Japan’s Tankan Manufacturing Index printed stronger than analyst expectations, resulting in a slight Yen bounce during the Asia trading session.

Technically speaking, the USD/JPY is presently locked between our 2nd tier downtrend and 3rd tier uptrend lines, a supportive environment for further intraday consolidation.  As for the topside, the currency pair faces multiple downtrend lines along with the highly psychological 90 area 12/11 highs and 12/7 highs.  As for the downside, the USD/JPY has built a comfort zone between present price and our uptrend lines.  Additionally, the USD/JPY has 11/23, 12/8, and 12/9 lows serving as technical cushions.

Present Price: 88.50

Resistances: 89.60, 88.77, 88.97, 89.14, 89.41, 89.66

Supports: 88.34, 88.15, 87.89, 87.70, 87.56, 87.35

Psychological: 90, December Highs and Lows

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 is consolidating along our 2nd tier uptrend line as we notice similar intraday patters in the EUR/USD and gold.  Due to the relative lack of economic data, it seems investors are waiting for tomorrow’s slew of data from across the globe.  Britain will release more pricing data on Tuesday, including CPI and RPI data points.  Tomorrow’s data will go along with Friday’s disappointing PPI figure.  Hence, it will be interesting to see if we witness a broad decline in UK prices.  Should all pricing data print below analyst expectations it may be difficult for the BoE to maintain its new neutral/hawkish monetary stance.  Furthermore, if tomorrow’s UK pricing data prints negatively and U.S. data outperforms once again, we could witness another wave of Dollar buying similar to what occurred on Friday.  Meanwhile, FX investors are presently showing little reaction to Abu Dhabi’s announcement that it will provide $10 billion to help Dubai settle some of its expiring debt.  However, we will have to see how U.S. equities open and whether activity picks up as the session progresses.

Technically speaking, the Cable appears to be flirting with dangerous territory since our 2nd tier uptrend line runs through October lows.  Hence, should our 2nd tier uptrend line give way we could witness another sizable leg down towards the 1.58-1.60 area.  Below our 2nd tier uptrend line the Cable does have our 1st tier uptrend line (off chart) serving as a technical cushion along with the psychological 1.60 level, September lows and October lows.  As for the topside, the Cable still faces multiple downtrend lines along with 12/9 and 12/7 highs.  Furthermore, the psychological 1.65 level could serve as a technical barrier should it be tested.

Present Price: 1.6233

Resistances: 1.6265, 1.6286, 1.6325, 1.6346, 1.6371, 1.6405

Supports: 1.6211, 1.6186, 1.6163, 1.6133, 1.6113, 1.6098

Psychological: 1.60, 1.65, September and October lows

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 EUR/USD is moderating around our 1st tier uptrend line after taking another step down on Friday.  Investors responded to encouraging U.S. consumer-related data buy buying up the Dollar across the board.  This was the second Friday in a row that we witnessed a preference for the Dollar in reaction to positive U.S. econ data.  Investors should take note of the development for the relationship could persist if U.S. data continues to improve.  Although the data wire is relatively quiet today, the EU did release an Industrial Production figure meeting analyst expectations.  Even though the FX markets are rather quiet right now, activity could pick up during tomorrow’s session with the release of key econ data from around the globe.  From the EU investors will receive ZEW Economic Sentiment data.  Analysts are expecting a slight decline in the ZEW numbers while remaining above the expansion threshold (50+).  If tomorrow’s ZEW data should disappoint, we could witness further weakness in the EUR/USD as investors find another reason to snap up the Dollar.  In addition to tomorrow’s EU data, investors will also receive pricing data from Britain and the U.S. along with TIC Long-Term Purchases, the Empire State Manufacturing Index, Capacity Utilization Rate and U.S. Industrial Production.  Hence, another wave of key U.S. data could yield further Dollar volatility.

Technically speaking, the EUR/USD is fighting to stay above our 1st and 2nd tier uptrend lines.  These uptrend lines may carry some weight since they run through September and August lows, respectfully.  If our 1st tier doesn’t hold, then the EUR/USD has additional technical supports in the form of 11/3 lows and the psychological 1.45 area.  However, it seems the EUR/USD is testing the patience of its uptrend since our new 1st tier runs through 8/17 lows, meaning if it doesn’t hold we could eventually witness a more protracted decline towards 1.40.  However, before we get ahead of ourselves, we’ll have to wait and see how the EUR/USD interacts with present technical cushions.  As for the topside, the EUR/USD still faces multiple downtrend lines along with 12/9 and 12/8 highs.

Present Price: 1.4639

Resistances: 1.4650, 1.4672, 1.4690, 1.4707, 1.4724, 1.4740

Supports: 1.4628, 1.4611, 1.4598, 1.4583, 1.4565, 1.4550, 1.4528

Psychological: 1.45, 1.40, 1.50, November Lows

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 Dan Eduard – After making significant gains against both the U.S. Dollar and Euro in trading late last week, the Scandinavian Kroner dropped amid positive American economic news. After reaching a 2-day high of 7.0576 against the Dollar last Thursday, the Swedish Krona is currently trading just above the 7.1230 mark. The Norwegian Krone similarly decreased in value against the greenback. Trading as high as 5.722 against the Dollar last Thursday, NOK is now hovering around the $5.7900 level.

The reversal in fortunes for the Scandinavian Kroner is largely due to the overall impression among investors that the American economy is steadily improving. A string of reports released on Friday have caused the Dollar to improve against all of its major counterparts.

Traders may want to note some of the significant news events that may impact the U.S. economy in the next week. Chief among these are the statements coming out of the Federal Reserve this Wednesday. While it is not expected that American interest rates will change soon, any indication that the American economy is improving will likely mean bad news for the Kroner. That being said, if the statements from the Federal Reserve do not give investors a positive feeling about the U.S. economy, the Scandinavian currencies could see substantial profits.

Technical Analysis

– The chart below is the 1-day chart for the USD/SEK currency pair.

– The indicators used are the Stochastic Slow, RSI and Bollinger Bands.

– Point 1: The Stochastic Slow indicates a bearish cross and may enter a downward trend.

– Point 2: The RSI shows the currency pair approaching overbought territory line. If it should cross this line, a downward correction is likely to follow.

– Point 3: The price is currently floating at the upper end of the Bollinger Bands which indicates downward pressure is likely to occur.

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.

Source: ForexYard

Last week’s major development was the strengthening Dollar. This has shown that a real change in the market might take place, and that the Dollar could strengthen further. The most significant news publication this week will be the U.S Interest Rates announcement on Wednesday. Will the FED hike rates?

Economic News

USD – Dollar Continues to Strengthen

The Dollar continued to rise on all fronts last week. The Dollar climbed about 300 pips against the Euro, as the EUR/USD pair dropped below the 1.460 level. The Dollar also strengthened against the Pound.

It seems that the main reason for the Dollar’s bullish trend is the positive data coming out of the U.S economy. The U.S Trade Balance, which measures the difference in value between imported and exported goods and services during October, came in at -32.9B. This result was much better than predicted, and far better than September’s result, -36.5B. This showed that the U.S export industry is beginning to recover, which strengthened the Dollar instantly. In addition, Retails Sales unexpectedly rose by 1.3% in November, beating expectations for a 0.6% rise. It seems that as long as positive figures continue to be published from the U.S economy, the Dollar will continue to soar.

Looking ahead to this week, the main news event is likely to be the Federal Funds Rate scheduled for Wednesday 19:15 GMT. The Federal Funds Rate is constitutes the U.S Interest Rates announcement for December. Current expectations are that the Federal Reserve (FED) will leave rates at the current level. However, if the Fed decides to surprise and hike rates, the potential exists for mayhem in the market.

EUR – EUR Sees Mixed Results vs. the Majors

The Euro underwent an extremely volatile session during last week’s trading. The Euro continued to weaken against the Dollar, and the EUR/USD pair dropped below the 1.4600 level. However the Euro saw mixed results against the Yen and the Pound.

The Euro’s volatile behavior seems to be a direct result of the mixed news coming out of the Euro-Zone’s leading economies. On the one hand, German Factory Orders dropped by 2.1% in October, and the French Trade Balance failed to reach expectations for a -2.3B result, instead coming in at -4.4B. On the other hand, the German Trade Balance rose to a 12.9B surplus in October. In addition, the German Final Consumer Price Index dropped by 0.1% in November, much better than expected. According to both of these indicators, the German economy is recovering nicely.

As for the week ahead, many interesting publications are expected from the Euro-Zone. The most significant publication appears to be the German ZEW Economic Sentiment survey on Tuesday. Traders should follow this survey, as a better than expected end result could correct some of the Euro’s losses against the Dollar from the past two weeks.

JPY – Yen Rises Again

The Yen saw mixed results against the major currencies during last week’s trading session. The Yen strengthened against the Dollar and the EUR, and only failed to rise against the Pound.

Several positive economic publications from Japan supported the Yen during last week’s trading. The Japanese Leading Indicators Index rose by 89.7% on October. This index is designed to predict the direction of the Japanese economy. It is a combination of 12 economic indicators related to employment, production, new orders and more. The extremely positive figure has shown that the Japanese economy is indeed recovering, and as a result boosted the Yen.

As for the week ahead, traders should look forward to the Tertiary Industry Activity report on Tuesday. This report measures the change in the total value of services purchased by businesses. If the end result will reach expectations for a 0.5% rise in October, this may support the Yen further.

Crude Oil – Crude Drops on Global Demand Concerns

Following the positive Dollar news on Friday, the price of crude temporarily rose above $70.00. This increase proved to be temporary, largely due to a Japanese business confidence report, and prices have since dropped to around the $69.50 level. The report showed that business confidence increased marginally, implying that demand for crude is down in the world’s third largest oil consuming country.

A U.S. Energy Department report released last week also showed that consumption levels in the U.S. are down compared to this time last year. This has the potential to change this week. If the Dollar continues to rise, consumption levels may go up in America, especially ahead of Christmas. Traders may want to pay attention to news events this week concerning the Dollar, as they may have a direct correlation to the price of oil. If the Dollar decreases in value, the price of crude oil may as well.

Technical News

EUR/USD

According to the Relative Strength Index (RSI) on the 1-hour chart, the pair is expected to enter a bearish trend in the near future. The Bollinger Bands on the same chart also say that volatility for the pair will occur soon. Going short may be the preferred option today.

GBP/USD

According to the Stochastic Slow on both the 1-hour and 4-hour charts, the pair is currently floating in neutral territory. The Relative Strength Index on the 1-hour chart states this as well. Traders may want to take a wait and see approach with the pair today, as a clearer signal may come about later.

USD/JPY

The Relative Strength Index on the 4-hour chart indicates that the pair has entered a bearish trend. The Stochastic Slow on the 1-hour chart does not support this theory and shows the pair trading in neutral territory. Traders are advised to wait for a clearer indication before trading with the pair today.

USD/CHF

The Bollinger Bands on the 2-hour chart indicate that volatility with the pair may occur in the near future. This theory is supported by the Relative Strength Index on the 8-hour chart, which indicates a bearish trend is imminent. Going short with tight stops may be the best option for today.

The Wild Card – Gold

Both the Relative Strength Index and the Stochastic Slow on the 1-hour chart indicate that Gold is heading for a bearish trend today. The Bollinger Bands on the daily chart indicate volatility may be imminent. Forex traders may want to go short with tight stops today.

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.

Last week started on a negative note, after Standard & Poor’s put Greece’s A- sovereign rating on negative credit watch, pointing to issues with government finances that could lead to downgrades.  Market participants already nervous after issues with Dubai World, immediately moved into safe haven products such as the dollar and treasuries.  The trend accelerated Tuesday after Fitch Ratings’ decision to cut Greece’s long-term foreign currency and local currency ratings to BBB+ from A-, with a negative outlook.  Despite the negative news including various downgrades the markets bounced back after finding support, with the S&P 500 closing the week up .7 points or .007%.

The middle of the week presented volatile session as the markets needed to absorb some interesting economic data.  The pace of Japanese Q3 growth was drastically revised lower, which added to fears about the strength of the recovery with GDP revised down to 1.3% from 4.8% initially reported and vs. 2.8% expected.  The main influence on this sharp revision was a 2.8% drop in capital spending from the previous quarter, compared with the initial estimate of a 1.6% gain. Figures earlier this month had shown that businesses had slashed their spending at a record pace in Q3, suggesting the downward revisions in overall growth numbers.

On Thursday, the Bank of England’s monetary policy committee held the key interest rate at 0.5% for a tenth consecutive month. The committee also met expectations by keeping the £200 billion ($325.14 billion) target for its policy of buying bonds with freshly created central bank money.

On Friday, U.S. retail sales increased in November nearly twice as much as expected, making a broad-based increase that suggested consumers were buying aggressively and supporting the economy in the holiday shopping season.  Retail sales rose 1.3% last month, the Commerce Department said Friday. Wall Street had predicted a 0.7% increase.  U.S. business inventories rose 0.2% in October, to $1.3 trillion, the first increase since August 2008, the Commerce Department announced Friday.  Wall Street was looking for stockpiles to fall by 0.2%.  Business sales were $1.0 trillion in October, up 1.1% from a revised $993 billion in September. One must note that the rise in business inventories will possibly lead to an upward adjustment in expected 4^th quarter GDP in the US.

Also on Friday, U.K. factory gate prices rose at their sharpest annual rate for nine months in November due to higher fuel prices.  Output producer prices increased 0.2% from October due to a rise in petroleum products and were 2.9% higher than a year earlier.  Input producer prices for materials and fuels that manufacturers buy rose 0.1% on a month-to-month basis and 4% on the year, the strongest annual gain for a year.   Although the figures indicated that inflationary pressures are building in the U.K. economy. Despite current expectations, economists expect the Bank of England to maintain its very loose monetary policy for some months as the country struggles to emerge from its recession.

Forex:

The Australian dollar performed well during the week after the Australia’s unemployment rate fell to a lower-than-expected 5.7% in November from 5.8% in October and the number of employed jumped by 31,200, boosting expectations that the Reserve Bank of Australia will keep raising interest rates at its next meeting in February.  The strong jobs figures are the latest evidence that Australia’s economy continues to outperform other developed economies as it rides a wave of demand from Asia for its commodities, while still-low interest rates and government stimulus support domestic consumption.  Economists on average had expected an unemployment rate of 5.9% in November, with the number of employed up 5,000.  From a technical point of view The AUD/USD is consolidating and forming a triangle that could eventually break to the upside.

Over in Japan, a variety of mixed news affected the Japanese Yen during the week.  Japanese core machinery orders fell 4.5% in October from the previous month, as non-manufacturers scaled back spending.  The fall in this leading indicator of corporate capital investment was slightly worse than the 4.2% drop expected by economists. In addition, China’s Industrial production climbed 19.2% y/y in Nov (18.2% exp), while other data including retail sales and exports were not so strong.  Retail sales rose at a slower than expected 15.8% pace (16.5% exp, up from 16.2%).

The USD/JPY is now creating a bottom pattern forming higher weekly lows. Even though the pair is still trading below it 50 and 20 week moving average, a change in Dollar sentiment could provide further support around current levels.

Over in Canada, the BOC’s statement was more upbeat than expected but the positive impact on the Canadian dollar was cut short by overall US dollar strength.  While Governor Carney again noted the strong Canadian dollar could be a significant drag on growth he dropped the phrase, indicating that the currency’s strength would offset favorable economic developments.  Additionally, he noted that growth would become more solidly entrenched and reiterated that inflation would return to target in 2011.  The statement combined with Canadian FM Flaherty’s statement last week, where he gave the green light to Canadian dollar bulls, by signaling that the government is not likely to use its tool kit to stem currency gains, should be supportive for the Canadian dollar once the overall US dollar rally runs its course.

The Week Ahead

Even though the economic calendar is packed with data this week, the major event will be the U.S interest rate decision. The Fed is expected to leave rates at a low of 0.25%, despite signs of emerging inflation. Tuesday and Wednesday should give investors a clearer picture as the Consumer and Producer prices are expected to be released. One must note that even though other central banks have begun to use exit strategies, the U.S market is still treading on thin ice. Any irrational move or statement from U.S officials could lead to another market drop.

Furthermore the bank of Japan is expected to release its rate decision. Even though the Japanese central rate is now at its lowest possible point, one should concentrate on the accompanying statement. Bank officials have recently pumped additional funds into the system to boost economic activity. Further liquidity could put pressure on the Japanese Yen and send the USD/JPY to higher ground.

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