InvestMacro FX

By Elliott Wave International

Almost everybody who follows financial markets has heard about climbing the “wall of worry”: the time when prices head up bullishly, but no one quite believes in the rally, so there’s more worry about a fall than a rise.

What’s the opposite condition in the market?

Bob Prechter named it the “slope of hope,” meaning that as prices head down, no one wants to believe the market really has turned bearish, so there’s more hope for a rise than fear of a fall.

Want to Know How to Prosper in a Deflationary Depression?If you haven’t yet given Robert Prechter’s deflation argument your full attention, you should know now that yesterday was the best time to do so. Download Prechter’s 60-Page Guide to Understanding Deflation here.

The market has been rising recently, following a bearish decline from late April through the end of June, which makes now the perfect time to learn more about the slope of hope.

* * * * *

Excerpted from The Elliott Wave Theorist by Robert Prechter, published June 18, 2010

According to polls, economists are virtually unanimous in the view that the “Great Recession” is over and a recovery is in progress, even though “full employment will take time,” etc. Yet mortgage writing has just plunged to a new low for the cycle (see Figure 1), and housing starts and permits just had their biggest percentage monthly drop since January 1991, which was at the end of a Primary-degree recession. But the latest “recession” supposedly ended a year ago. How can housing activity make new lows this far into a recovery? The answer is in the subtitle to Conquer the Crash, which includes the word depression. The subtleties in economic performance continue to suggest that it “was” not a “recession.” It is a depression, moving forward, in punctuated fashion, slowly but inexorably.

Despite this outlook, keep in mind what The Elliott Wave Theorist said last month: “Even though the market is about to begin its greatest decline ever, the era of hope is not quite finished.” For as long as another year and a half, there will be rallies, fixes, hopes and reasons to believe in recovery. Our name for this phase of a bear market is the Slope of Hope. This portion of the decline lasts until the center of the wave, where investors stop estimating upside potential and start being concerned with downside potential. Economists in the aggregate will probably not recognize that a depression is in force until 2012 or perhaps beyond. That’s the year the 7.5-year cycle is due to roll over (see April 2010 issue). Stock prices should be much lower by then, but optimism will still dominate, and it will show up in the form of big rallies and repeated calls of a bottom.

Want to Know How to Prosper in a Deflationary Depression?If you haven’t yet given Robert Prechter’s deflation argument your full attention, you should know now that yesterday was the best time to do so. Download Prechter’s 60-Page Guide to Understanding Deflation here.

By Fast Brokers – The USD/JPY is giving back some intraday gains as the currency pair tries to regain its footing following last week’s hefty pullback.  Investors rushed towards the yen in reaction to a wave of negative U.S. data.  The yen has flexed its muscles as a safe haven once again as the USD/JPY sinks towards 2009 lows.  Meanwhile, investors are awaiting more budget plans from Japan’s government regarding how to reign in the nation’s huge budget deficit.  Meanwhile, if the USD/JPY continues to decline then it wouldn’t be surprising to see the BoJ step in with some form of verbal intervention to prevent the yen from rising too fast, particularly if the currency pair tests 2009 lows.  Speaking of which, the BoJ will be releasing its monetary policy meeting minutes tomorrow and it will be interesting to see how the central bank addresses recent strength in the yen.  Investors will also be digesting U.S. building permits data and more signals of a slowdown in U.S. housing could weigh on the USD/JPY.

Technically speaking, the USD/JPY has technical supports in the form of intraday and 11/30/09 lows.  Additionally, the psychological 85 level could serve as a solid cushion should it be tested.  As for the topside, the USD/JPY faces technical barriers in the form of intraday highs.
Present Price: 86.70
Resistances: 86.82, 86.98, 87.11, 87.23, 87.36, 87.49
Supports:   86.58, 86.46, 86.26, 86.12, 86.01, 85.87
Psychological:  85, 90, November 2009 lows

By Fast Brokers – The Cable is trying to balance above our key medium-term downtrend line originating from November ’09 highs and connecting through January highs as the currency pair extends its decline from Friday.  Investor sentiment is still rattled from last week’s disconcerting U.S. data and the risk trade is struggling across the board.  The UK was quiet on the data wire again today, meaning the Cable is just following correlative forces for the time being.  However, the UK will light up the data wire tomorrow with the release of prelim mortgage approvals, public sector borrowing, and industrial order expectations.  Additionally, investors will digest housing data from the U.S. and the RBA’s meeting minutes.  If the UK’s data prints positive this could help bolster the Cable and help the currency pair hold above our medium-term downtrend line.  Meanwhile, investors are brushing aside negative news from Ireland and Hungary.  Moody’s downgraded Ireland’s debt by a notch and Hungary walked away from negotiations with the IMF and EU concerning the remainder of its emergency funds.  Even though investors have shrugged at the news, we suggest keeping an eye on the situation in Hungary since EU banks have sizable exposure to Eastern European economies.  If the situation deteriorates investor uncertainty could rise and rattle the Euro, a negative for the risk trade as a whole.

Technically speaking, the Cable has multiple uptrend lines serving as technical cushions along with intraday and 7/7 lows.   Additionally, the highly psychological 1.50 level should serve as a solid technical cushion should it be reached.  As for the topside, the Cable faces technical barriers in the form of intraday highs and 7/15 highs along with the psychological 1.55 level should it be tested.

Present Price: 1.5217
Resistances: 1.5224, 1.5242, 1.5274, 1.5295, 1.5324, 1.5350
Supports: 1.5204, 1.5184, 1.5164, 1.5140, 1.5111, 1.5079
Psychological: 1.55, 1.50

By Fast Brokers – The EUR/USD is consolidating below its highly psychological 1.30 level despite today’s negative news from Ireland and Hungary.  Moody’s lowered Ireland’s debt rating by one notch over worries of financial deterioration within the country’s banking sector.  However, investors have brushed aside the downgrade as overdue and Moody’s also stated that Ireland is making good progress as far as austerity is concerned.  Meanwhile, Hungary ended talks with the IMF and EU regarding the remainder of bailout funds after Hungary refused to continue with austerity measures.  Hungarian bond yields soared in reaction to the news and the Forint tumbled by nearly -3.5% vs. the Euro.  Investors should keep a close eye on the situation in Hungary since EU banks undoubtedly have substantial exposure to Eastern European economies.  On an encouraging note, it is likely that the Hungarian government is just trying to win political points and leaders will likely come to an agreement with the IMF and EU.  Regardless, investors should monitor the situation over the coming days.  Despite the negative news hitting the wires today the EUR/USD has held up well and the EUR/GBP is popping.  The relative strength in the Euro likely stems from anticipation of the release of bank stress test results on Friday.  Investors expect the report will boost confidence in the EU’s financial situation.  However, considering how much the Euro has been boosted ahead of the stress test results it wouldn’t be surprising to see the currency pair sell on the news if investor uncertainty stays at a heightened level throughout the week, particularly if the stress test isn’t as thorough as desired.  The EU will be quiet on the data wire tomorrow, meaning investors will be focusing on the release of the RBA’s meeting minutes along with U.S. building permits data.

Technically speaking, the EUR/USD faces technical barriers in the form of intraday highs and the highly psychological 1.30 level.  As for the downside, the EUR/USD has supports in the form of intraday and 7/15 lows.

Present Price: 1.2928
Resistances: 1.2973, 1.2990, 1.3020, 1.3040, 1.3067, 1.3091
Supports:   1.2940, 1.2914, 1.2886, 1.2856, 1.2836, 1.2799
Psychological: 1.30

Well technically, the daily chart of the CADJPY pair is a bit ugly. As you can see, the pair has just been ranging for the past several months. Presently though, it appears to have found support at the psychological 82.00 level. If this support holds, it can reach its previous high near 86.50, 90.00 or even near 95.00. But if it does not, the 80.00 marker should be able to carry it on its back. A break below 80.00 could be costly as the pair could slide all the way down to 70.00.

Fundamentally though, several economic indicators are pointing to a possible upmove for the pair. Tomorrow (July 20), the Bank of Canada (BOC) is expected to raise its interest rates to 0.75% from 0.50%. Such would make investments in Canada more attractive which would then lead to an increase in the demand for the Loonie, thus, likewise pushing its valuation upwards. A rate hike would also raise the interest differential between the CAD and the JPY. In case you don’t know, the JPY only have an interest rate of 0.10%, netting those who are long on the CADJPY with 0.65%.

Several other economic factors point to a short term rise in the valuation of the Canadian dollar. On Wednesday, Canada’s wholesale sales is projected to print an uptick of 0.3% after declining by the same pace during the previous month. Its retail sales figures, which will be posted the next day, are also predicted to have increased. Core retail sales are seen to have gained by 0.5% after dipping by 1.2% while the headline account is also predicted to have expanded by 0.5% after sliding by 2.0% the other month.

More on LaidTrades.com …

Good day forex friends! On my post last July 8 (kindly see it here), I questioned whether the EURUSD‘s recent success will be shortlived since it was approaching a significant technical resistance at that time. Back then, it already broke out from a mini inverted head and shoulders formation but still it remained below the longer term downtrend. But based on its present daily chart, you can see that it has just moved past the long term downtrend resistance – finally, a sign of better things to come for the euro bulls! Haay! In any case, the pair could still range or even retrace for awhile given its overbought conditions. If it weakens, the former neckline of the inverted head and shoulders should serve as a support to keep it from falling further. A move to the upside, on the other hand, could send it back up until it encounters some selling pressure at around 1.3250. And as I’ve said, things are looking better now for the euro bulls which means that the euro, at of this moment, has a higher chance of moving north compared to before. Long on weakness anyone?

No major economic events are due in the euro zone up until Thursday (July 22). On that day, the recent manufacturing and service PMIs of France, Germany, and the euro zone itself are all seen to dipped slightly from their last readings. The euro zone’s industrial new orders are also projected to have slipped by 0.1% for the month after logging a gain of 0.6% during the previous period. On Friday (July 23), the German Ifo Business Climate is likewise anticipated to have declined to 101.5 from 101.8. These projections, if they are indeed true, could soften the euro’s climb. Any positive surprise from these, on the flip side, could send the EUR higher.

More on LaidTrades.com …

By CountingPips.com

The latest Commitments of Traders (COT) data out on Friday showed that futures speculators continued to decrease their bets for the U.S. dollar against the euro as of July 13th, according to the COT data released by the Chicago Mercantile Exchange. Non-commercial futures positions, those taken by hedge funds and large speculators, were net short the euro against the U.S. dollar by -27,050 contracts after being net short the euro by -38,909 contracts the week before on July 6th. short positions have now fallen for two straight weeks and are just a month removed from being short by -111,945, showing the change of sentiment for the euro.

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 expecting that currency to fall against the dollar and net longs expect that currency to rise versus the dollar.

The British pound sterling was the only other major currency in addition to the euro that was net short in the CME futures market against the dollar as of July 13th while the Australian dollar, New Zealand dollar, Japanese yen, Swiss franc, Canadian dollar and Mexican peso all had a net long amount of contracts against the dollar.

The British pound net shorts decreased to -34,671 from a total of -38,077 that were reported net short on July 6th. The Swiss franc positions turned to net long last week by 14,590 contracts after registering -7,455 net short positions the week before. This was the first time since January 26th that the Swiss franc positions have been net long.

The Japanese yen net long contracts continued to advance higher to 47,359 as of July 13th following 37,926 net long contracts on July 6th. Investors have increased their yen positions for five straight weeks and have reversed their yen positions substantially from being short by 65,612 contracts on May 4th.

The Australian dollar futures positions were net long by 23,480 contracts as of July 13th, rising higher after totaling a net 7,246 long contracts on July 6th. The New Zealand dollar futures positions also rose higher on the long side with 5,452 long contracts this week after a total of 2,577 long contracts as of July 6th.

The Canadian dollar long positions rose to net 22,038 contracts and after 8,094 net longs the week before while the Mexican peso long contracts advanced to 28,135 longs from 22,725 longs the prior week.

COT Data Summary (vs. the US Dollar) as of July 13th, 2010

Australian dollar net longs increase to 23,480 contracts from 7,246
British pound sterling futures contracts were net short by -34,671 from -38,077
Canadian dollar net long contracts rose to 22,038 from 8,094
Euro net short positions declined to -27,050 from -38,909
Japanese yen net longs up to 47,359 from 37,926
New Zealand dollar longs increased to 5,452 from net long of 2,577
Mexican peso long contracts increased to 28,135 from 22,725
Swiss franc net long contracts are at 14,590 from -7,455

Go to the Commitment of Traders CME futures data

By Jonathan Dayan – Every activity you’ll ever try supplies its own list of shameful errors and online financial trading is no different. They’re the mistakes you make which are too obvious or too embarrassing for you to tell anyone else about. They haunt you in your sleep and they hurt you in your wallet. We’ve all made at least a few of them and none of us like to talk about it. But in the interest of keeping these sloppy mistakes under wraps in the future, here named and shamed are the classic mistakes traders make when trading Forex, indices and commodities online. And don’t worry we all make them; regardless of whether we’re starting out or we’ve been in the market long enough to know better.

1. What’s In A Name? – Confusing “Ask” And “Bid”

It’s the mistake we don’t own up to but getting confused between “Bid” (that’s buy … I think) and “Ask” (sell) whether you’re trading online or through the phone is all too common. “Why couldn’t they just name them up and down” is what you may start wondering if you make this costly error. Because in Forex trades a pair of currencies is being traded every time – one currency bought and one currency sold simultaneously – it’s the error that’s almost bound to creep in at some point or other.

What to do when it happens to you: exit the position and learn better for next time.

What to say to your friends: absolutely nothing.

2. “It Can Also Go Down?” – Misunderstanding Margin

Margin, leverage, leverage, margin: sometimes you’re only completely sure about what it all means when one of them is at $0, the other is at 400x and you find yourself wishing it was the other way around. Yes, for the all time future avoidance of doubt, your margin will decline if a trade goes against you and yes you should always keep enough money in your account to cover the scale of the positions you have open – the more leveraged your positions, the more money you’ll need.  Think of margin, the funds in your account and leverage as three friends in a field – the closer they are together the better everyone gets along, the further apart they move the more quickly your likely to see the friendship fall apart; and realize to your sadness that all three are gone.

What to do when it happens to you: register for the eToro Forex course.

What to say to your friends: it was a vital experiment within my long term strategy.

3. Oops I Did It Again – Forgetting Your Stop Loss When You’re Trading On The Fly

Few mistakes can be more common or more costly than this one. In the middle of a volatile trading session – with action happening all around you – it’s easy to neglect your stop loss but it can be a fatal mistake. Once they’re opened, most brokers will keep your trades open until you close them, so if you exit your platform or otherwise forget a trade and leave it to run on, the results can devastate your account. Even if you’re not so unfortunate, keeping unlimited positions open when you’re trading under heavy leverage can very quickly eat into your funds if the market moves against you suddenly. Unless you’re a serious scalper, think twice about opening a position without a stop loss. Never forget that acts of God and acts of technology conspire all too often to leave your account at risk.

What to do when it happens to you: blame it on lack of sleep and know better for next time.

What to say to your friends: stop loss is for sissies (and so is making money)

4. Too Much Of A Good Thing – Getting Drunk On Leverage

Nothing feels so much like easy money as trading under leverage when you’re starting out. Instead of investing with the $500 or $1000 which you thought you had available, suddenly you’re able to start making deals worth many hundreds of $1000’s. That kind of power can easily go to a trader’s head: and all too often it does. Getting intoxicated with leverage is a risky business. Keeping your leverage within a reasonable range – of between 10 to 50x for the majority of positions you enter will help you develop a more reliable feel for the trading market. It should also shield you from the short sharp market shocks which often leave the 400x leverage trader with nothing left to hold on to but his memories.

What to do when it happens to you: remind yourself you’re not demo trading – it’s time to trade sensibly

What to say to your friends: it was only $—– (fill in as appropriate)

5. How To Lose Money And Alienate Profits – Setting Your Stop Loss Too Close For Comfort

As we’ve already discussed stop loss (and also take profit) orders are really important for effective and secure Forex and financial market trading. However, even these faithful tools can let you down in a crunch if you haven’t yet mastered how to use them. The most common error traders fall in to with stop loss limits is placing them to close to their entry points. At first glance this strategy seems to make sense because it offers a way for you to protect your account from unfavourable market movements. In practice, however, the markets rarely run smoothly and even the most favourable trend on an asset which you’re trading will see moments of reversal within the wider positive trend. To avoid you’re trades closing prematurely at a loss make sure your stops are set a fair distance away from the open rate – a few pips isn’t going to do it. Alternatively, employ a trailing stops approach where you move your stop loss level forward or backwards in-line with the direction of trade.

What to do when it happens to you: re-examine your trading strategy. If you’re anxious to contain your losses consider reducing the leverage in your trades instead of shortening your stops.

What to say to your friends: I may not have made money but I didn’t lose that much

If reading through this catalogue of errors has left you feeling ready for a Forex refresher course ask your Forex broker what they can offer or visit the eToro website www.eToro.com for more Forex hints and tips.

By Greg Holden – The euro has been falling since Friday against most of its currency counterparts, but few traders are concerned since many indicators are pointing toward an impending correction. As can be seen below, the EUR/JPY has reached the lower border of a steady bullish channel and many of the corresponding indicators appear to be anticipating a bullish correction over the remainder of the day.

– The chart below is the EUR/JPY 4-hour chart provided by ForexYard. The indicators used are the Stochastic (slow) and Williams Percent Range.

– Point 1: on the chart below you can see the bullish channel lines drawn in red. The price has recently fallen to touch the lower border of this channel and may experience a technical correction.

– Point 2: the Stochastic (slow) on this chart appears to be providing us with a fresh bullish cross, indicating that the next major movement may be in an upward direction.

– Point 3: the Williams Percent Range has the price indicator far below the -80 mark, indicating the price is over-sold and should see some upward pressure.

EUR/JPY – 4-Hour Chart

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

The U.S currency dropped to its weakest level in 2010 against the Japanese Yen as signs the U.S. economic recovery is losing momentum supported speculation that the Federal Reserve will keep borrowing costs low for the rest of the year. The USD also declined versus the EUR for the first time since May as a gauge of U.S. consumer confidence dropped more than economists expected and corporate revenue missed analyst forecasts.

Economic News

USD – Dollar Weakens on Signs of Economic Slowdown

The U.S Dollar fell the most against the EUR in 14 months and dropped to the lowest level this year versus the Yen as economic reports added to evidence that the U.S. recovery is losing momentum.

The greenback touched a level weaker than $1.30 versus the European currency as minutes of the Federal Reserve meeting last month indicated policy makers trimmed their forecasts for growth.

On Friday, a private survey showed U.S. consumer sentiment weakened in early July to an 11-month low and capped a week which saw U.S. data on the softer side, raising questions about the sustainability of the U.S. recovery.

Investors are closely watching the USD/JPY for the possibility of the greenback dropping to a 15-year low by breaching the November 2009 trough of 84.00 yen. Analysts said with U.S. yields heading lower, the Dollar could break past support around its 7 month low of 86.25 yen in the next few days.

EUR – EUR May Erase Gains on Bank Stress Tests

The European currency rose for a 3rd straight week against the U.S Dollar ahead of partial results of stress tests on the region’s banking system, which are due on July 23. The 16 nation currency has surpassed $1.30 on Friday for the first time since May and traded around $1.2950.

The EUR has rallied 8.9% versus the Dollar since reaching a 4 year low of $1.1877 on June 7 as concern eased that Europe’s sovereign-debt crisis would undermine the region’s economic recovery.

However, the EUR may reverse its recent advances against the U.S Dollar given the slim likelihood of a very positive surprise from European bank stress tests this Friday, analysts said. European regulators will be examining the strength of 91 banks to determine if they can survive potential losses on sovereign bond holdings. The European currency is unlikely to fall past $1.20 unless there is a major negative surprise given that U.S. economic growth shows signs of slowing down.

JPY – Yen Rises Towards Year’s High

The Japanese Yen rose toward its strongest level this year against the U.S Dollar as signs the U.S. economy is losing momentum added to speculation that the Federal Reserve will keep interest rates at almost zero this year. The Yen also rose against the Dollar as falling U.S. yields continued to weigh on the U.S. currency, with traders targeting stop-loss orders placed under 87.00 Yen.

Japan’s currency gained versus all 16 of its major counterparts and rose toward the strongest level this year. The Japanese currency traded at 87.20 per USD from 87.40 yesterday, after climbing to 87.17, approaching this year’s high of 86.97 set on July 1.

Crude Oil – Crude Falls below $76 On Poor U.S. data

Crude Oil prices fell below $76 a barrel in early Asian trading Monday, extending the previous session’s decline on concern about the U.S. economic outlook after data showed consumer sentiment fell to a near one-year low.

However, analysts said marginal slide in Oil prices shows that Crude was receiving ample support at above $74 a barrel, thanks to bullish inventory reports that showed large draw downs in U.S. Crude stockpiles over the past three weeks.

Technical News

EUR/USD

Following the prolonged upward movement the pair has experienced recently, it appears a bearish correction may be imminent. The Relative Strength Index on the 8-hour chart is currently in overbought territory, as is the Stochastic Slow on the daily chart. Traders are advised to go short with tight stops today.

GBP/USD

Mixed technical signals indicate that no clear direction for this pair is presenting itself at this time. While the Stochastic Slow on the 4-hour chart indicates the pair may experience upward movement later today, the Relative Strength Index on the 8-hour chart shows the opposite. Traders may want to take a wait and see approach for this pair today.

USD/JPY

Most technical indicators are showing this pair trading in oversold territory, indicating that an upward correction will likely occur today. The Stochastic Slow on the daily chart shows a bearish cross forming, and the Relative Strength Index on the 8-hour chart supports the theory that upward movement is forthcoming. Going long may be the preferred strategy today.

USD/CHF

Practically all technical indicators show the pair currently trading in neutral territory, with no clear direction at this time. These include the Stochastic Slow and Relative Strength Index on the 8-hour and daily charts. Traders are advised to take a wait and see approach for this pair today.

The Wild Card

Hang Seng Index

The Slow Stochastic on the 8-hour chart shows a bearish cross forming, indicating that upward movement could occur in the near future. The Relative Strength Index on the 4-hour chart supports this theory. CFD traders are advised to go long 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.