Best Thread FXCM/DailyFX Signals and Strategies

[Jason Rogers]

Crowds Short Euro Post-ECB - They Might Be Right

Hi Everyone,

It's Thursday, which means it's time to take a look at the weekly update of the Speculative Sentiment Index (SSI) from DailyFX.com. And today's readings carry special importance. The ECB went against expectations earlier today in holding rates at 0.75% when the consensus among economists was for a rate cut to 0.50%. Traders reacted by selling the Euro across the board, and as the latest SSI readings show, retail traders remain short the single currency. In his analysis of SSI today, Quantitative Strategist David Rodriguez explains why the crowds may have it right this time.

FXCM Execution Desk data shows that retail traders remain heavily long the US Dollar (ticker: USDOLLAR) against the Euro, and a disappointment in the recent ECB rate decision suggests the crowd stands to gain on EURUSD declines. We most often go against crowd sentiment, and the fact that crowds are heavily short EURUSD would normally lead us to go in the opposite direction and call for gains. Yet our Speculative Sentiment Index works best as...

Read the full article at DailyFX.com​

 

[Jason Rogers]

All Eyes on FOMC after Dismal NFP

Hi Everyone,

Today's weak jobs number led to further selling of the US dollar heading into next week's FOMC meeting. According to DailyFX Currency Analyst David Song, "The central bank may sound increasingly dovish amid the persistent weakness in the labor market. In turn, growing speculation for another round of quantitative easing may produce additional declines in the dollar...

"Indeed, the FOMC interest rate decision highlights the biggest event risk for the following week, and we may see the dollar trade heavy going into the policy meeting as a growing number of central bank officials lean towards more easing. There’s speculation that the Fed will implement an ‘open-ended’ QE program next week as Chairman Ben Bernanke looks for a stronger recovery, but the meeting may disappoint should we see the committee continue to rely on its transmission mechanisms. At the same time, we will be closely watching the updated forecast for growth and inflation as the central bank takes note of the slowing recovery, and Chairman Bernanke may sound rather downbeat at the press conference following the meeting amid the ongoing slack in the real economy..."

Read the full article at DailyFX.com​

 

[Jason Rogers]

US Dollar Hits Four Month Low, Fed Decision to Make or Break Trend

Hi Everyone,

The main event this week is the Fed meeting on Thursday. There are three components to the event: the policy decision (16:30 GMT), the release of the fundamental forecasts (18:00 GMT) and Chairman Bernanke’s press conference (18:15 GMT). After the US dollar hit four-month lows following another lackluster jobs number last Friday, traders will be looking to the Fed for indications of future direction in the markets. Below is an article by DailyFX's Senior Currency Strategist John Kicklighter where he breaks down what to watch for this week.

The dollar was dealt a hefty blow this past week. The Dow Jones FXCM Dollar Index (ticker = USDollar) dove into four-month lows Friday with its biggest single-day decline in 10 weeks. From a chart of the USDollar or EURUSD, it seems as if the dollar has had the floor ripped out from underneath it. However, selling momentum is not guaranteed. In fact, it will be more difficult to sustain than many may suspect. Whether or not EURUSD overtakes 1.3000 and AUDUSD surmounts 1.0600 is a matter for the Federal Reserve to decide.

To gain a sense of the dollar’s orientation over the coming week, we need to assess what fundamental themes are in control and what will provoke their development moving forward. Without doubt, the greenback’s greatest adversary moving forward is the Fed rate decision scheduled Thursday (16:30 GMT). Yet, why is the policy meeting so influential to the currency? Because of its direct impact on the currency’s value (via money supply and yields) and the sway over risk appetite trends (the greenback is the market’s preferred safe haven currency).

Market-wide investor sentiment (risk trends) carries the greatest...

Read the full article at DailyFX.com​

 

[Jason Rogers]

Euro Rallies after German Court Declines Injunction - Impact for Wednesday's Ruling

Hi Everyone,

On Wednesday at 08:00 GMT, the German Federal Constitutional Court will announce its decision on whether to ratify the EUR 500 billion European Stability Mechanism (ESM) permanent bailout fund. The big news from the European trading session today was that the high court rejected a bid by German Lawmaker Peter Gauweiler to delay their ruling. The markets took that as a positive sign for the Euro as EUR/USD rallied from 1.2750 past 1.2800.

Below is an excerpt from an article on DailyFX.com by Currency Analyst Christopher Vecchio regarding the potention impact of tomorrow's decision.

By no means is the Euro leading this morning although it remains bolstered by a few key facts: despite chatter from both the Italian and Spanish prime ministers that suggest neither country will be agreeing to the European Central Bank’s bond-buying scheme due to the conditionality, bond yields on the shorter-end of the curve haven’t reacted violently, and instead have only leaked higher; and the German Constitutional Court has eased some concerns over the ECB’s scheme by denying an injunction filed against the ECB’s scheme yesterday.

RELATIVE PERFORMANCE (versus USD): 10:20 GMT

NZD: +0.54%
CAD: +0.40%
AUD: +0.37%
JPY: +0.35%
CHF: +0.31%
EUR: +0.27%
GBP: +0.16%​

Nevertheless, the German Constitutional Court will decide on the legality of the European Stability Mechanism (ESM) tomorrow, in what is expected to be a highly contentious decision. The Court is expected to ratify the decision, but not with a pure “YES” stamp of approval; instead, like all other measures with German involvement, a heavy helping of conditionality is to be expected...

Read the full article at DailyFX.com​

 

[Jason Rogers]

VIDEO: Making the Most Out of EUROphoria

Hi Everyone,

As expected the German Constitutional Court ratified the European Stability Mechanism (ESM) which means Germany will contribute up to €190 billion for buying Itallian and Spanish bonds to help keep borrowing costs low in those countries. Since this was a key step in putting this bailout fund in place, the markets took it as a positive sign and the Euro surged to fresh highs up 100 pips from yesterday and is trading around 1.2900 against the US dollar. Here's a video on DailyFX.com today about Making the Most Out of EUROphoria:

Click Image to Watch Video on DailyFX.com​

 

[Jason Rogers]

How do we trade this Fed Rate Decision?

Hi Everyone,

Today's FOMC Meeting is "one of the most highly contested events the FX and capital markets have faced in months" according Senior Currency Strategist John Kicklighter. The research team at DailyFX.com is providing complete coverage of today's events including live video sessions where you can ask questions, and reports with fundamental and technical analysis.

Market Expectations and Potential Outcomes

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Live Coverage:

- Join Chief Strategist John Kicklighter as he covers the FOMC rate decision and its market impact Live in the DailyFX Live Trading Room or follow the Real Time News Feed to see all the analysts’ different take on the event.​

Video of FOMC Outcomes:

- What are the different outcomes for the Fed rate decision? What pairs are best to trade if there is no QE3 or the stimulus push proves larger than expected?​

Fundamental View on Why the Fed Decision is Important:

- Speculation has swelled heading into the Fed policy meeting, but why is this event risk so important to the US Dollar and risk trends in general?​

Technical View on Why the Fed Decision is Important:

- See how Senior Technical Strategist Jamie Saettele is positioning with what could be an extremely volatile market event.​

Economic Calendar for Times and Future Event Risk:

- What time is the Fed rate decision in your time zone? When will the group release their growth forecasts and Chairman Ben Bernanke Speak? Find all these times and more event risk in the DailyFX Economic Calendar.​

Click here for more details at DailyFX.com​

 

[Jason Rogers]

Euro Surges - Is Now the Time to Sell?

Hi Everyone,

The Euro smashed through the 1.3000 level and is now trading around 1.3135 against the US dollar (ticker: USDOLLAR). That's over a thousand pips above it's July lows and just 400 pips from it's highs for the year. Is now the time to sell? That's the question asked by DailyFX.com Quantitative Strategist David Rodriguez in his article today. Below is an excerpt of his analysis:

Cons against selling Euro against the US Dollar

• Fundamental developments prop up Euro as Spain nears reform package
• US Federal Reserve KO’s the Dollar as it announces open-ended Quantitative Easing

Pros in favor of selling Euro against the US Dollar

• The 1.3100 – 1.3145 range represents HUGE resistance on Euro/US Dollar
• Despite announcing indefinite QE, Fed raises forecasts for US Growth

Click here to read the full article at DailyFX.com
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[Jason Rogers]

AUD Looks Lower Ahead Of RBA

Hi Everyone,

This week the focus starts on the Asia-Pacific region with the Reserve Bank of Australia releasing their September minutes at 01:30 GMT on Tuesday morning (or Monday night at 9:30pm New York time). According to DailyFX Currency Analyst, the Australian dollar may be poised to sell off going into the central bank announcement. Below is an excerpt from his article:

The greenback strengthened against three of the four counterparts, led by a 0.51 percent decline in the Australian dollar, and the high-yielding currency may weaken further over the next 24-hours of trading should the Reserve Bank of Australia show a greater willingness to ease monetary policy further. Indeed, the RBA Minutes may highlight a weakening outlook for the $1T economy as China – Australia’s largest trading partner – faces a greater risk for a ‘hard landing,’ and the central bank may sound increasingly cautious this time around as Governor Glenn Stevens sees the resource boom coming to an end over the next 12 to 24 months. In turn, market participants are pricing a 45 percent chance for...

Read the full article at DailyFX.com​

 

[Jason Rogers]

Will the EUR/CHF Fall Like a Stone?

Hi Everyone,

With all the news lately regarding QE3 and uncertainty in the Eurozone, most of the DailyFX research that I've shared with you has dealt with major currency pairs involving trades versus the US dollar. Today, I thought it would be interesting to shift the focus for a bit to the EUR/CHF, which has been popular with position traders. Below is an excerpt from today's analysis from DailyFX.com:

Recently we have observed the upward movement of all euro pairs. They have marked more or less continuously higher highs and higher lows thanks to massive support from the central banks ECB, Fed and SNB (forget Sunday 16th).

EUR/USD between September 5 and September 17

EUR/CHF between September 4 and September 17

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The first euro pair to finish this upwards trend is traditionally the EUR/CHF. Friday’s weak industrial production and Monday’s bad NY manufacturing data, let investors doubt that the US recovery thanks to “QE ∞“ will really take place.

Apart from gold, the Swiss franc is the safe-haven that is closely associated with rising oil prices and inflation fears caused by quantitative easing. The CHF saw today a lower low, but also a higher high. This lower low breaks the rising EUR/CHF channel.

Traditionally a fall of EUR/CHF comes some time before EUR/USD or EUR/JPY go south...

Read the full article at DailyFX.com​

 

[Jason Rogers]

Latest SSI readings Dollar Bearish as Crowds Buy Greenback

Hi Everyone,

It's Thursday, which means our research team published the latest reading from the Speculative Sentiment Index (SSI) on DailyFX.com. This is a contrarian indicator which means it looks at what the majority and takes that as a signal to do the opposite. And right now retail forex speculators remain long the US Dollar across the board against other major currencies. Below is an excerpt from today's report:

Retail forex speculators remain long the US Dollar (ticker: USDOLLAR) against the Euro and other currencies, but an important shift in sentiment serves as early warning of a potential Dollar turnaround. We’ve recently called for continued US Dollar losses across the board as retail crowds bought into Greenback weakness. Our FXCM Execution desk data shows that the majority of traders remain long, but many are actually now selling into the Dollar bounce.

Read the full SSI report at DailyFX.com​

 

[Jason Rogers]

EURUSD Rallies After Spain Approves 2013 Budget and Reform Package

Written by Tzu-Wen Chen of DailyFX.com

THE TAKEAWAY: Spain approves 2013 budget and reform package > Budget to tap pension reserve fund to help banking sector debt; suggests Spain to tackle debt crisis internally > EURUSD bullish

The Spanish Cabinet approved the nation’s 2013 budget and economic reform package today, which will see the government passing 43 new laws to reform the economy over the next six months. In a news conference following the cabinet meeting, Deputy Prime Minister Soraya Saenz de Santamaria and Finance Minister Cristobal Montoro said that the budget is designed to end Spain’s debt crisis, asserting their confidence that Spain will meet its 2012 deficit target and optimism that 2013 will mark the end of recession in Spain.

The budget will focus on current spending rather than revenues, with around 64 percent of the budget continuing to go towards “social spending” such as pensions and benefits despite the proposed spending cuts.

Amid the positive rhetoric from the Spanish ministers, there is only one key change to the budget that is worth noting, which is that the Spanish government will tap into the nation’s pension reserve fund to help its financial sector. In short, this change suggests that the Spanish government is aiming to tackle its banking debt crisis internally, rather than looking for external aid in the form of an international bailout package. However, with Spain continuing to face a deteriorating economy and a 25 percent unemployment rate, and Spanish bond yields at elevated rates, concerns remain that the government itself may still need rescuing in coming months.

 

[Jason Rogers]

Euro ready for the next leg higher?

Here's an interesting EUR/USD chart by Chris Vecchio. As you can see, the Euro has broken the recent downtrend and is also trading above its 200-day moving average. This could mean the single currency is ready to resume the longer term uptrend. A lot will depend on the ECB Rate Decision this Thursday, October 4th at 11:45 GMT. Below is an excerpt of an article by David Song on what to expect from the upcoming meeting by European policy makers:

Click to enlarge​

Although the ECB is widely expected to maintain its current policy in October, it appears that a growing number of central bank officials are showing a greater willingness to lower borrowing costs further, and the rebound in the EURUSD may be short-lived as market participants raise bets for a rate cut. As the euro-dollar maintains the range carried over from the previous week, it looks as though the exchange rate will continue to track sideways going into the ECB rate decision, but we may see the pair struggle to hold above the 200-Day SMA at 1.2820 should central bank President Mario Draghi sound increasingly dovish this time around.

Click here to read the full analysis at DailyFX.com​

 

[Jason Rogers]

Trading the ECB Interest Rate Decision

On Thursday at 11:45 GMT (7:45 am New York Time), the European Central Bank will announce the results from their latest policy meeting. While everyone is expecting them to keep rates unchanged at 0.75%, the announcement has the potential to be a market mover. Here's an excerpt of David Song's preview on DailyFX.com:

Potential Price Targets For The Rate Decision

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Trading the ECB rate decision may not be as clear cut as some of our previous trades as the central bank sticks to its current policy, but a less dovish statement following the rate decision may pave the way for a long Euro trade as market participants scale back bets for a rate cut. Therefore, if President Draghi endorses a wait-and-see approach for the near to medium-term, we will need to see a green, give-minute candle following the announcement to establish a buy entry on two-lots of EURUSD.

Once these conditions are fulfilled, we will set the initial stop at the nearby swing low or a reasonable distance from the entry, and this risk will generate our first objective. The second target will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in order to preserve our profits. On the other hand...

Click here to read the full analysis on DailyFX.com​

 

[Jason Rogers]

Trading the U.S. Non-Farm Payrolls Report

Going into Friday's Non-Farm Payroll report, retail traders remain net-short EUR/USD. The crowd has been short the Euro, since it crossed above $1.24 on August 20. As a contrarian indicator, this has coincided with Euro strength, and the single currency is now trading above 1.3000 after Draghi's post-ECB meeting press conference on Thursday.

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What remains to be seen is whether the Euro can maintain this level and continue higher after the US employment report. Friday's number takes on added importance, since it's the second to last NFP before the US presidential elections in November. Below is an excerpt from David Song's analysis on DailyFX.com detailing how to trade this event:

As the developments coming out of the U.S. raises the outlook for employment, we may see the Non-Farm Payrolls report top market expectations, and a marked improvement in the labor market should sap speculation for additional monetary support as the economy gets on a more sustainable path. However, the slowdown in consumption paired with the downturn in private sector credit may weigh on hiring, and businesses may keep a cap on their labor force as the central bank maintains a cautious tone for the region.

Potential Price Targets For The Release

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Indeed, the EURUSD appears to be making another run at the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120, and the pair may continue to retrace the decline from earlier this year as the upward trend from the end of July continues to take shape, However, should NFPs dampen bets for more QE, we may see the EURUSD threaten the bullish formation, and we will look for a close below the 200-Day SMA (1.2820) to reinforce a bearish outlook for the pair.

How To Trade This Event Risk

Expectations for a faster rate of job growth certainly instills a bullish outlook for the greenback, and a positive development may pave the way for a long U.S. dollar trade as it raises the outlook for the world’s largest economy. Therefore, if NFPs expand 115K or more in October, we will need a red, five-minute candle following the release to generate a...

Read the full report at DailyFX.com​

 

[Jason Rogers]

SSI: GBPUSD Long Positions Surge Heading into Tuesday's GDP

GBP/USD long positions have surged since yesterday as the cable has tumbled. What are the implications heading into Tuesday's UK GDP announcement? Below is an excerpt of David Rodriguez's latest analysis from DailyFX PLUS.

The ratio of long to short positions in the GBPUSD stands at -1.13 as approximately 47% of traders are long. Yesterday the ratio was -2.88; 26% of open positions were long. In detail, long positions are 64.1% higher than yesterday and 38.2% above levels seen last week. Short positions are 35.4% lower than yesterday and 28.2% below levels seen last week. Open interest is 9.8% lower than yesterday and 7.4% below its monthly average. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives signal that the GBPUSD may continue higher. Current SSI is higher than yesterday and higher from last week. The combination of current sentiment and recent changes gives a further mixed trading bias.

Read the full analysis at DailyFX PLUS​

 

[Jason Rogers]

VIX Points to Possible Drop in Aussie Dollar

The US S&P 500 Volatility Index (VIX) is currently trading at levels that have coincided with Australian Dollar tops versus the US Dollar in the past. Can history repeat itself? David Rodriguez explores this question in the article below:

Correlation between AUD/USD and S&P 500 Volatility Index

Australian Dollar/US Dollar Exchange Rate (lhs)
S&P 500 Volatility Index (VIX) (rhs)​

The US S&P 500 Volatility Index (VIX) trades near multi-year lows, and current levels have coincided with important turnarounds in the S&P and the highly-correlated Australian Dollar. Indeed, current VIX levels of approximately 15% have most recently occurred at important AUDUSD tops. Why exactly?

The so-called “Fear Index” in the VIX represents how much investors are willing to pay for protection against sharp moves in the S&P 500. If the VIX is extremely low, it tells us that investors do not fear major stock market volatility. The connection to the Australian Dollar is similarly based on market sentiment.

 

[Jason Rogers]

Crowd Sentiment Calls for Continued Euro Strength

Retail traders remain heavily net-long the US Dollar (ticker: USDOLLAR) against the Euro and other major counterparts. If you've been following this thread, then by now you know that's a contrarian indicator telling us that the US Dollar can continue to fall against the Euro. Below is an excerpt from today's Speculative Sentiment Index (SSI) report by Quantitative Strategist David Rodriguez on DailyFX.com:

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Retail forex traders continue to sell aggressively into Euro strength, and indeed our proprietary Speculative Sentiment Index data supports calls for further EURUSD gains. It is worth noting that total short interest is down 7 percent from last week, but we likewise see that crowds sold aggressively into the overnight Euro bounce. Buying EURUSD against its lows lines up with our broader trading strategy bias, and indeed the Euro survived a key test as it held important price support in overnight trading. Crowds turned net-short Euro as it crossed above the $1.25 mark in mid-September, and we see little reason to stray from our contrarian call for further gains.

 

[Jason Rogers]

EURUSD: Trading the U. of Michigan Confidence Survey

Today we have Michigan Confidence on tap. A poor number may increase expectations in the market for more quantitative easing which would like to gains in "risk on" trades such as buying the Euro and global stocks. Below is an excerpt of David Song's preview of this announcement on DailyFX.com:

Time of release: 10/12/2012 13:55 GMT, 9:55 EDT
Primary Pair Impact: EURUSD
Expected: 78.0
Previous: 78.3
DailyFX Forecast: 76.0 to 80.0

The ongoing improvement in the labor market paired with the rebound in wage growth may prop up household confidence, and a positive development may spark a bullish reaction in the U.S. dollar as it limits the Fed’s scope to expand its balance sheet further. However, the slowdown in private sector consumption along with sticky price growth may impede on consumer confidence, and a marked decline in the U. of Michigan survey may instill a bearish outlook for the dollar as Fed Chairman Bernanke maintains a fairly dovish tone for monetary policy.

Potential Price Targets For The Release​

As the EURUSD fails to maintain the upward trend from earlier this year, the pair may continue to consolidate over the remainder of the week, and we may see the euro-dollar may another run at the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120 as the 200-Day SMA (1.2820) continues to hold up as interim support. However, as the EURUSD carves out a lower top around the 38.2% Fib, the pullback from 1.3170 may turn into a larger correction, and we may see the pair work its way back towards the 23.6% Fib (1.2640-50) should the report curb speculation for more QE.

How To Trade This Event Risk​

Forecasts for a drop in consumer confidence casts a bearish outlook for the greenback, but a positive development may pave the way for a long U.S. dollar trade as it dampens the scope for additional monetary support. Therefore, if the U. of Michigan survey...

Read the full report on DailyFX.com​

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[Jason Rogers]

Euro Could See Major Boost at Summit: Spain Asks for Bailout

There is something big on the horizon: a Euro-zone Summit this week on Thursday and Friday. And it is very possible that this Euro-zone Summit is different from anyone preceding it: the potential is very much there to make a strong statement about European unity and give the Euro another major shot of confidence in the arm at the end of the week. Below is an excerpt from Chris Vecchio's analysis on DailyFX.com:

Fundamental Forecast for the Euro: Bullish

The path to the major effort this week began in early-October. On October 2, Reuters reported that Germany signaled to Spain to wait to announce the bailout. “‘The Spanish were a bit hesitant but now they are ready to request aid,’ a senior European source said. Three other senior Eurozone sources confirmed the shift in the Spanish position, all speaking on condition of anonymity because they were not authorized to discuss the matter,” the article stated. A few days later, on October 5, French President Francois Hollande said that while it is Spain’s decision to take a bailout or not, that the issue must be “clarified” by or at the Euro-zone Summit. What does this mean and why is it bullish for the Euro?

Read the full article at DailyFX.com​

 

[Jason Rogers]

How to Trade the Declining AUD/USD Trendline

In his "Trend of the Day" article for Tuesday, DailyFX trading instructor Walker England shows traders how they can use can use a descending trendline to place new market entries on AUD/USD which has already declined 476 pips in the past trading month. Below is an excerpt:

The AUD/USD is a currency pair generally known for its long trending moves. Over the past month, the pair has declined as much as 476 pips from its September 14th high of 1.0624 to the October 8th low at 1.0148. As price moves lower, traders are left looking for opportunities to enter into this directional move. One way we can take advantage of a trending market is to look for opportunities to sell in a downtrend using a trendline. Today we will focus on identifying and trading the descending trendline of the AUD/USD.

Looking closer at the AUDUSD 4HR graph below, we can begin to notice the development of our trendline. It is important to remember that in order for a trendline to be valid, traders need to find at least two points of contact. The trendline below has been formed by connecting a straight line between the September 14th and September 27th 2012 highs. Once these points are connected the trendline may be extrapolated to find...