Live Trading

1. Bought EUR/USD 1.2667 [Closed +20]

Live Trading

1. Sold EUR/USD 1.2729 [Closed +30]

EUR/USD intraday: the downside prevails

Pivot: 1.2675
Our preference: Short positions below 1.2675 with targets @ 1.256 & 1.2525 in extension.
Alternative scenario: Above 1.2675 look for further upside with 1.2725 & 1.28 as targets.
Comments: the pair is rebounding on its support but remains within a MT wide bearish channel, the RSI lacks upward momentum.

US DOLLAR: WAITING FOR OBAMA

Kathy Lien (gftforex.com)

With US equity and bond markets closed for Presidents Day, trading was relatively quiet for currencies. The G7 meeting did not lead to any fireworks but the dollar did gap higher against all of the major currencies except for the Japanese Yen at the Asian open on Sunday. Despite the Congressional approval of the $787 billion stimulus package, the US dollar and Japanese Yen have strengthened across the board which indicates that risk aversion dominates. So far, the prospect of the bill being signed by President Obama has not helped the market. The official G7 statement singled out the Chinese Yuan but not the Japanese Yen. The tone towards China was rather conciliatory with the Group of Seven welcoming China’s fiscal stimulus measures and their steps towards a more flexible exchange rate. These comments and lack thereof suggests that the US is trying to play nice after Geithner suggested that China may be branded a currency manipulator. As for Japan, the lack of comments suggest that no is interested in intervening to stop the Yen from rising anything soon. There was no US economic data released this morning, but a number of reports are due for release over the next 24 hours. This includes the Empire State Manufacturing survey, the Treasury International Capital flow report and the NAHB housing market index. All of these are Tier 2 economic data which means that they should not have much of an impact on the US dollar. Instead, all eyes will be on how the market reacts to the official announcement of the Economic Stimulus Bill.

EUR/USD: NEARING 1 MONTH LOWS

Once again, the Euro is attempting to test its 1 month lows against the US dollar. Since there was no Eurozone economic data released this morning and all of the major currency pairs are lower, the weakness of the single currency is purely a reflection of the market’s risk appetite. In contrast to the aggressive monetary policies that we expect from other central banks around the world, European Central Bank member Stark warned against aggressive actions. He said that gradualism is needed in combating the global economic crisis and that aggressive action can lead to more economic uncertainty. He did indicate that interest rates will continue to fall, but his comments suggest that the next rate cut will be no more than 50bp. Compared to the BoE, RBA and RBNZ who cut interest rates by 100 to 150bp clips, the ECB has been very conservative. Only time will tell if their stubbornness will hurt or help them. If inflation skyrockets everywhere except for the Eurozone, the ECB will be vindicated but if their recession lasts much longer than everyone else then Trichet’s credibility will be severely tarnished. The German ZEW survey of analyst sentiment and the Eurozone trade balance are due for release tomorrow. We expect the numbers to be Euro bearish.

Trades for the Day

Trade for the Day

US DOLLAR: BIG ANNOUNCEMENTS FROM WASHINGTON

Kathy Lien (http://www.gftforex.com/)
This morning, the Bureau of Labor Statistics reported that January was another month of massive job losses. For the third time in a row, more than 500k Americans lost their jobs. The market was looking for payrolls to drop by 540k, but instead they fell by a whopping 598k ( Instant Insight on January Non-Farm Payrolls ). Yet, currencies and equities traded like non-farm payrolls increased rather than decreased but this baffling response to a very negative number can be easily explained by the prospect of help from Washington.

Politics Overshadowing Economics

Politics will come head to head with economics next week and if today’s price action is any guide, then politics could overshadow economics. The Obama Administration is expected to make a big announce at noon (Eastern Time) on Monday. Treasury Secretary Timothy Geithner will be unveiling a much awaited bank rescue plan that will “be critical in supporting an effective and lasting economic recovery,” according to Treasury department. Geithner will talk about how the Obama Administration plans on getting credit flowing again to family and businesses while imposing new measures and conditions to strengthen the accountability, oversight and transparency in how taxpayer dollars are spent.” The focus will be on how banks will be able to offload toxic debt from their balance sheets. The Treasury could announce a bad bank to absorb the assets or provide a guarantee against losses on the illiquid assets or both. They are also expected to announce some direct support for mortgage foreclosures. If investors are satisfied with Obama’s financial rescue program, the optimism may last. We have long said that fiscal stimulus is one of the few things that can trigger a meaningful recovery in risk appetite. In addition to Geithner’s speech, Fed Chairman Ben Bernanke will be testifying on Tuesday while the market still awaits the Senate to vote on the economic stimulus package, which could happen next week.

EUR/USD: WILL DEEPENING RECESSION FORCE ECB’S HAND?

The improvement in risk appetite helped to drive the EUR/USD within a whisker of the 1.30 price level. Economic data was mixed with the French trade deficit narrowing but German industrial production plummeting. Even though Germany is the world’s third largest economy and France is the world’s sixth, the Germany economy is only 20 percent larger than France, making them both major contributors to the Eurozone. For the time being France is faring much better than German economically. This upcoming week, we will learn how the region as a whole is doing through their fourth quarter GDP report. The recession is expected to deepen significantly which may renew speculation that the ECB could take interest rates towards 1 percent. A 50bp rate cut is widely expected and to some degree validated by Trichet’s comments earlier this week, but weaker growth could force a heavier hand from the central bank. Meanwhile, the Swiss franc sold off against the Euro following comments from Swiss National Bank member Jordan who warned that the central bank is watching the exchange rate closely. The SNB has been very unhappy with the appreciation of the low yielding Swiss Franc but based upon their contradicting comments with the Swiss government, we believe that more verbal intervention is more likely than physical intervention.

EUR/USD: Currency in Play for Next 24 Hours


The currency in play for Monday of the upcoming week will be EUR/USD based on German Current Account and Trade Balance being released at 7:00GMT or 2:00AM EST. After a massive downtrend which has been in place since late last year, the pair seems oversold and entering the Range Trading Zone which we determine using Bollinger Bands. Since the beginning of the year, the pair formulated a downward slopping triangle, which proved to be effective numerous amount of times. The pair is on the verge of breaking the triangle upon moving past its first resistance which is at a psychological level of 1.3000. If the resistance of the upper line of the triangle is negated the next level of resistance will be 1.3180, which is a 78.6% retracement of December high and this year’s low. Nevertheless, the pair may establish another leg of downtrend if support is broken at 1.2705 which is a 2009 low for the pair.

Trading Pure Trend Using Bolinger Band

Indicators come and go but for its sheer simplicity and reliability, the Bolinger band has stood the test of time. Ooopps, reliability? Well, there's no such thing like accuracy in forex. Then we have to go to the next best thing. Bolinger is so simple that many of us take it for granted. Bolinger band which is affectionately called "the BB" allows short-oriented traders and long-oriented traders alike to exploit the interplay between the lower and upper bands. This technique is actually originated from a book written by a well-known trader. Here is how the trade sets up with a long position example. (Reversed for the short side). It works wonderfully on larger timeframes.

1. Price enters the buy channel and closed strongly (not just pierce) above the 20 SMA.

2. Buy at 10 or 20 pips lower from the open price of the next opening candle.

3. Stop loss should be decided according to your own discretion.

4. TP depends on your risk appetite.
Good luck!! Any questions should be forwarded to annenaim81.

5 Quick Forex Facts

1. London is the heart of the forex market with more than 300 major dealing houses and 35% percent of average daily volume.

2. Almost everybody who has traded forex has faced an MC at least one.

3. Most traders feel dejected by a series of losing trades become stubborn and try to fight the market, often placing no stops or removing the ones already in place.

4. While pound is the "streakiest" currency out there, the euro is the steadiest.

5. The Fib ratios represent about two-thirds of the total value of the move.

Trades of the Day

US Dollar:Geithner vs. Payrolls

On Friday, the Bureau of Labor Statistics is expected to tell us that US employers fired another 500k people in the month of January. Surprisingly enough currencies and equities are trading higher ahead of the non-farm payrolls report which suggests that traders are not afraid of a bad number. Everyone knows that the US economy is very weak and major job losses will continue. Since traders are becoming immune to bad data, it may take job losses in the area of 600k to spook them (January Non-Farm Payrolls Preview) . Instead, traders are looking beyond Friday’s non-farm payrolls report to the Monday, February 9th speech by US Treasury Secretary Timothy Geithner. According to a Treasury official, Geithner is expected to unveil a bank rescue plan next week . This is one of the few things that could strike a meaningful recovery in the currency and equity markets. If traders deem Geithner’s plan as satisfactory, we could see a further recovery in the financial markets despite the fact that the US economy will get worse before it gets better.

Jobless Claims, Factory Orders and Chain Store Sales

This morning’s economic data was mixed with jobless claims skyrocketing but the losses in factory orders and chain store sales moderating. The number of people claiming unemployment benefits for the very first time broke the psychologically hobbling 626k mark, which is consistent with a very weak labor market. It should just a matter of time before the total number of people collecting benefits (continuing claims) hits 5 million, up from its current level of 4.788 million. Non-farm productivity increased while unit labor costs declined. This suggests that the people who still have jobs are working harder for less pay. Chain store sales fell less than expected, but the improvement was due primary to sales at discounters like WalMart. As for factory orders the rebound is off of record lows. Don’t expect any good news from US economic data, the best that we will get are less negative reports.

How to Trade Non-Farm Payrolls

In this current market environment, a weak non-farm payrolls report may not be entirely dollar negative. The currency market’s reaction to the labor market number should primarily revolve around risk appetite. A truly negative number could trigger another fit of panic, sending investors into the safety of US dollars and out of any currency that does not hold ranks as a safe haven. On the heels of a weak number, the only currency that the dollar could lose value against is the Japanese Yen. If payrolls fall by 524k (the number of jobs lost in the month of December) or less, we may see renewed risk appetite that could benefit the Euro, Yen, Australian, Canadian, and New Zealand Dollars. Non-farm payrolls is the most market moving number for the greenback which can make trading NFPs very risky. This is particularly true since revisions can easily exacerbate or offset the headline release. Usually it is best to stand aside, but if you insist on trading the event risk, USD/JPY may have the cleanest reaction to the economic data.

EUR/USD: ECB STILL STUCK IN THEIR OLD WAYS

The Euro was one of the few currencies to lose value against the US dollar today. Following ECB President Trichet’s post monetary policy meeting press conference, the EUR/USD actually traded above 1.2880 before reversing all of its gains to end the day lower. Initially, the EUR/USD rallied because Trichet was reluctant to turn extremely dovish but the currency pair quickly lost ground as Euro traders realize that the central bank is stuck in their old ways which could mean the destruction of the Eurozone. The ECB is in their own world and no one can quite understand why Trichet refuses to give up on his obsession with inflation and finally deliver the monetary stimulus that the Eurozone needs. Thankfully, Trichet did not hide the fact that 2 percent will not be bottom for Eurozone rates . More rate cuts will be delivered and the 50bp easing that the market is looking for is probably the right bet according to Trichet. With that in mind however, Trichet also said that the ECB does not pre-commit or exclude anything. We believe that interest rates could fall as low as 1 percent, because another half point cut is not enough ( Trichet’s Folly ). The economy remains very weak as illustrated by this morning’s German factory orders report. The orders dropped 6.9 percent, which is 150 percent more than the market’s forecast. Ratings agency Moody’s also cut the bank debt guarantee for the Irish government to negative. Ireland is expected to be one of the next countries to face a credit downgrade by rating agencies.

Trades of the Day

Trichet Says ECB May Cut Rate by Half Point to 1.5% Next Month

European Central Bank President Jean- Claude Trichet said policy makers may cut their benchmark interest rate by a half percentage point to a record low of 1.5 percent next month as a recession in the euro region deepens.

“I don’t exclude that we could reduce interest rates at our next decision,” Trichet said at a press conference in Frankfurt after leaving its key rate at 2 percent today. When asked whether the ECB will cut by a half or a quarter point, Trichet said: “It would probably more be the first figure.”

The ECB has so far been reluctant to adopt the more aggressive path of other central banks from Washington to London and Trichet said today he wants to avoid cutting rates to zero. The Bank of England lowered its benchmark to 1 percent today, the lowest since it was founded in 1694, and the Federal Reserve has reduced its benchmark almost as far as it can.

“Zero rate doesn’t seem to us appropriate at this stage,” Trichet said. He also said price pressures are waning and uncertainty across the economy “remains exceptionally high.”

“Looking ahead, lower commodity prices confirm our assessment that inflationary pressures in the euro area are diminishing,” Trichet said.

Europe is sliding into its worst recession since World War II. Spain’s industrial production plunged by a record 19.6 percent in December, a report showed today. In Germany, Europe’s largest economy, factory orders extended their worst slump on record.

Europe’s service and manufacturing industries contracted for an eighth month in January and confidence in the economic outlook fell to a record low. The International Monetary Fund predicts the euro region’s economy will contract 2 percent this year.

Euro Falls Against Dollar as Trichet Indicates No Cut to Zero

Feb. 5 (Bloomberg) -- The euro fell to near a two-month low against the dollar after European Central Bank President Jean- Claude Trichet indicated policy makers may not lower interest rates as much as some traders expect to revive the economy.

The ECB kept the main refinancing rate at 2 percent today, according to a statement from Frankfurt. Cutting the rate to zero isn’t “appropriate at this stage,” Trichet told reporters following the decision. The pound rose on speculation the Bank of England will pause in cutting borrowing costs after it reduced its benchmark rate to a record low of 1 percent today.

“Trichet continues to sound cautious and it’s not what the market wants to hear,” said Adam Cole, head of global currency strategy at RBC Capital Markets in London. “If the ECB maintains the cautious tone the euro will remain sold. His insistence on not going to zero rates or using quantitative easing is a negative for the currency in this environment.”

The euro dropped to $1.2800 as of 2:37 p.m. in London, from $1.2849 in New York yesterday. It reached $1.2706 on Feb. 2, the lowest level since Dec. 5. The common currency was at 115.01 yen, from 114.90. The dollar was at 89.86 yen, from 89.43.

The last time the ECB left its benchmark rate unchanged, on Oct. 2, the euro fell 1.3 percent against the dollar. Today’s decision was in line with the median of 53 economists’ forecasts in a Bloomberg survey. The market may be “right” to be on a 50 basis-point cut in March, Trichet said today.

Trades of the Day

US DOLLAR: COULD POLITICS DERAIL THE GREENBACK?

By Kathy Lien (www.gftforex.com)

The Good News – Pending Home Sales, Daschle Withdrawal, Fed Announcement

For the first time since September, the number of contracts for purchasing new homes has increased. Although the data can be fairly volatile, the rebound suggests that we could see a similar rise in existing home sales. The US housing market has experienced a serious beating and any improvements are certainly a welcome development. However, given the state of the US economy and the recent layoff announcements, it would be unrealistic to believe that we have seen a bottom in the US housing market. Health care stocks led the S&P500 higher following news that Senator Tom Daschle has withdrawn his nomination to be secretary of health and human services. The reforms that he had proposed would have hurt the profitability of health care companies and the rally in stocks drove the EUR/USD and GBP/USD higher. The Federal Reserve also extended their liquidity facilities and swap lines from April 30 to October 30th. These facilities make up the alphabet soup of initiatives announced by the Federal Reserve over the past few months including the Commercial Paper Funding Facility (CPFF) and the Term Securities Lending Facility (TSLF).

Shifting to Non-Farm Payrolls

The currency market’s focus should begin shift to Friday’s non-farm payrolls report as the leading indicators for NFPs start to come in. On Wednesday, payroll provider ADP will be reporting private sector employment change, Challenger will be reporting the amount of layoffs while the Institute of Supply Management (ISM) will be releasing their report on service sector activity. If all 3 numbers point to a weaker non-farm payrolls report, there is a decent chance that more than 550k Americans may have lost their jobs in the month of January. Since ADP has its flaws, we will be keeping our eye on the employment component of service sector ISM which has a very strong correlation with non-farm payrolls.


EUR/USD: ABOVE 1.30 BUT FOR HOW LONG?

An improvement in risk appetite and the expectation that the European Central Bank will leave interest rates unchanged on Thursday has driven the EUR/USD above 1.30. ECB President Trichet has been very vocal about his plans to delay the next interest rate cut to March and as a central banker who likes to prepare the markets for any imminent decisions, his warning should be heeded. However inflationary pressures continue to fall and that will push the ECB to bring interest rates down to 1 percent. Producer prices for the Eurozone fell 1.3 percent on a month to month basis, driving the annualized pace of PPI growth to 1.8 percent. Rising unemployment is also pushing consumer demand lower and softer demand should translate into even lower prices. Trichet’s comments on inflation or deflation on Thursday will provide some clues on how much further the central bank plans on lowering interest rates. German retail sales fell 0.2 percent in the month of December. The market had actually been looking for a rise, but consumer spending has taken a bit hit from the deterioration in the labor market. Tomorrow’s Eurozone retail sales report is expected to follow German retail sales lower. The Euro has recovered nicely after hitting a low of 1.27 yesterday, but the gains could be fleeting if Trichet makes some overly dovish comments or if developments in the US cause a turn in risk appetite.

Trades of the Day

3 Central Bank Acts: RBA, BoE, ECB

By Kathy Lien (www.gftforex.com)

There are 3 interest rate decisions on the calendar this week from Australia, the United Kingdom and the Eurozone. Only 2 out of the 3 countries are expected to cut interest rates but all 3 rate decisions and the corresponding comments from central bank officials should trigger some volatility in the currency market. Although the amount of easing is important, what will receive more attention are the comments on how much further these central banks could cut interest rates. The upcoming rate cut is not expected to be the last for the Reserve Bank of Australia or the Bank of England and the expectation of further rate cuts could prevent a major recovery in the Australian dollar and British pound.

ECB to Keep Rates on Hold

After cutting interest rates by 225bp, the European Central Bank is expected to leave interest rates unchanged at 2 percent on Thursday. The prospect of a monetary meeting that leaves rates alone seems almost abnormal these days. We have gotten so used to these massive all-out efforts to see rates go to zero that the idea of no cut may be psychologically worrisome to some traders. The fact of the matter is Trichet has not been quiet about his preference to keep rates remain steady. The ECB President feels obligated to allow the latest string of action time to work its way through the economy. However, up until now, the concerns over a worsening economic environment has not permitted the ECB head the privilege of time. It is undeniable that economic conditions since the last meeting have not made any discernable efforts at improving. However, there are certain bright spots that may allow Trichet the breathing room to resist further cuts. This month has seen, along with some truly devastating figures, a pickup in German IFO, German ZEW, and the Euro-Zone PMI composite.

After the last monetary policy decision in January, ECB President Trichet signaled to the market that 3 weeks is too short of a time to deliver another rate cut and therefore March will be the next meaningful meeting. Unlike other central banks, the ECB has not been extremely aggressive with easing monetary policy and has instead tried to defer rate cuts as much as possible. Even though interest rates in the Eurozone are already at historically low levels, Trichet is still expected to cut interest rates further. The rate decision itself should be a nonevent which leaves Trichet’s post meeting press conference as the main focus. Traders will be looking for clues on how aggressive the ECB will be in March.

Concerns over economic growth still dominate in individual European countries. Despite the fact that some data surprised to the upside they are only small advances off of multi-year lows. Among the reports that may warrant a bit more concern is the severe shifts in EZ and German Unemployment. Even though Trichet has expressed the notion that the risks of deflation are negligible at this point, the overwhelming decline in CPI proves to be relevant. In addition, there have been the unprecedented measures that resulted in downgrades of some member countries, including Spain, Portugal and Greece. Others were left with warnings that their credit ratings were at risk. The higher costs of borrowing that accompany the rating cuts may provide reason for the ECB to continue cutting interest rates.

Trades of the Day

UK Manufacturing Improves Barely

By Boris Schlossberg (www.gftforex.com)

UK Manufacturing PMI improved to 35.8 against 34.9 the month prior but remained essentially moribund as the country’s economy continues to experience the worst contraction in demand in more than fifty years. The lower value of GBPUSD proved to be of little help to the nation’s manufacturers as export demand was muted and the PMI reading remained well below the 50 boom/bust level.

The news suggests that BOE will almost certainly lower rates by another 50bp this week taking the overnight rate to a record low of 1%. Cable continued to slide in post news price action dropping below the 1.4200 level in early London trade.

After a counter trend rally last week sterling appears to have hit key resistance at 1.4500 barrier and given the strong down ward bias in the pair, that level appears to be a cement ceiling for GBP/USD for now, as fundamentals continues to show no rebound in sight.