Best Thread FXCM/DailyFX Signals and Strategies

[Jason Rogers]

OIL PRICES BREAK SUPPORT, HINTING BEARISH MOMENTUM TO ACCELERATEies

Written by DailyFX Analyst Ilya Spivak

Oil prices have broken below major support at the bottom of a falling channel established from October’s high above $80. A rising trend line from the lows in February has also fallen by the wayside. The bears will now have to work towards the lower boundary of the $72.86 – $75.13 congestion region, with a break below that opening the door for a run to test the psychologically significant $70 level. On the fundamental side of things, crude inventory data from the American Petroleum Institute is the only item of significance on the economic calendar. The overall trajectory of risk appetite and US Dollar are also not to be overlooked.

Full Report Found Here

 

[Jason Rogers]

British Pound Testing Head and Shoulders Support Line Read more: DailyFX - British P

The USD remains strong and the GBPUSD is testing the neckline from a head and shoulders top that has been underway since mid-October. A break lower exposes Fibonacci extensions at 1.6115 and 1.5735.

Price action in the GBPUSD since mid October may be carving out a head and shoulders top. From a wave standpoint, moves since the top at 1.7050 (August 5th) are in 3 waves. As such, either a triangle, flat, or leading diagonal is underway since then. All 3 patterns point lower near term. A Fibonacci extension is at 1.5735.

Read more: DailyFX - British Pound Testing Head and Shoulders Support Line http://www.dailyfx.com/forex/techni...ish_Pound_Testing_Head_and.html#ixzz0Z8I0mmOD

 

[Jason Rogers]

US Dollar: Post-NFP Rally Could Continue on Trend Breaks Read more: DailyFX - US Dol

US Dollar: Post-NFP Rally Could Continue on Trend Breaks

Written by Terri Belkas of DailyFX

...Going forward, though, it’s necessary to keep in mind that with 10 percent of the population unemployed (or 17.2 percent if you count marginally attached workers and those employed part time for economic reasons), there still isn’t as much impetus to fuel consumption growth as there has been over the past 26 years, especially when taking tighter credit conditions into account, suggesting that any economic expansion that occurs going forward may be mild from a historical perspective.

From a technical perspective, the DXY [dollar index] closed Friday just above the 50 SMA and falling trendline resistance, both of which have been capping prices since July. This may ultimately indicate a change in trend for the US dollar, but uncertainty lies in the fact that closing prices were just barely above the noted resistance points. Furthermore, the currency’s move was fundamentally driven, but we’ve seen in the past that the currency often goes back to trading as a “safe haven” asset the following trading week. http://www.dailyfx.com/forex/fundam...-04-2341-US_Dollar__Post_NFP_Rally_Could.html​

See the below chart of the US Dollar Index (chart created using NetDania). The index has broken the downtrend dating back from July.

 

[Jason Rogers]

Forex Sentiment Points to US Dollar Gains

Written by DailyFX Analyst David Rodriguez

Our sentiment-based forex trading strategies have bought aggressively into the US Dollar’s recent reversal against the Euro and British Pound, and the sharp shift in sentiment favors further EURUSD and GBPUSD losses. The clear danger in this forecast is that markets fail to break the US Dollar out of its recently-narrow trading range, as our Speculative Sentiment Index (SSI) tends to produce inaccurate trading signals through range market conditions. Suffice it to say, the impressive 90+ percent weekly jump in EURUSD long positions gives us contrarian signal to go short, but it will be critical to watch whether the pair breaks below key support at 1.4700.

EURUSD – The ratio of long to short positions in the EURUSD stands at 1.47 as nearly 59% of traders are long. Yesterday, the ratio was at 1.51 as 60% of open positions were long. In detail, long positions are 3.1% higher than yesterday and 92.4% stronger since last week. Short positions are 6.3% higher than yesterday and 25.9% weaker since last week. Open interest is 4.4% stronger than yesterday and 14.3% above its monthly average. The SSI is a contrarian indicator and signals more EURUSD losses.

Read more: Forex Sentiment

 

[Jason Rogers]

Daily Trading Lesson

Written by DailyFX Powercourse Instructor Thomas Long

Many times I get asked by new traders how to handle a certain situation they find themselves in when trading.

These traders may have opened five or six lots in a trade and have seen the market move in their direction. But now the market starts to move sideways or even move against them and they ask for help in what to do. My first question to them is what their plan was before entering the trade. You know….before you had money on the line and you could think clearly. First of all, if you are asking somebody else what you should do, this usually means that you have lost your way. When you have lost your way, the decisions you make are based on emotions rather than solid analysis. This is what can get you into trouble almost every time. When in this situation, there are two options….get smaller or get out. If you don’t know whether you are bullish or bearish on your current trade, you should no longer be in that trade so you should get out. If you still want to be in the trade, but feel uncomfortable with the risk, you should get smaller. This means closing part of, but not all of your position. Naturally, if you only opened one lot, this is not an option. But if you have multiple lots open, there is no rule that states that you have to close them all out at the same time. Closing part of the position locks in some of the profit. If you move your protective stop on the remaining position up to the breakeven level, which means moving it up to your entry, you are in the enviable position of already having a profit on the trade while still being able to further profit on a continuation of the move. That is good trading.

Read more: DailyFX - Get Smaller or Get Out.

 

[Jason Rogers]

Crude Oil Suffers its Worst Bear Trend in Three Years Read more: DailyFX - Crude Oi

Written by John Kicklighter

Oil’s aggressive plunge eased through Thursday’s session; but the reserved pace wouldn’t be able to avoid the unfavorable trend and records set through the past week’s slump. A seventh consecutive decline for the commodity marked the most extensive bear trend since September of 2006. Furthermore, the net loss on this series is an impressive 7.8 percent and the pull back from October’s swing high at $82 totals well over 11 percent. Over the past few months, the balance between fundamental and speculative influences has grown closer in line. However, in this sharp decline, we finally see risk appetite removing its support of market that is otherwise plagued by a massive overhang of supply. This past week’s inventory figures maintain the discrepancy between current price and supply-and-demand fundamentals. The US Department of Energy’s crude inventory figures reported a 3.823 million barrel decline; but stores in the Cushing, Oklahoma region (storage for the NYMEX’s West Texas Intermediate grade) surged 8 percent for the sharpest increase since January 2nd to the highest level for stockpiles since early August. Furthermore, gasoline inventories grew 2.253 million barrels to levels not seen since April. On the other side of the market, total fuel demand averaging 18.5 million barrels per day through the four weeks ending December 4th is off 3 percent from the same period a year ago. Without a significant increase in energy consumption, global producers’ reluctance to hurt revenues and reduce output will make for a slow rebalancing.

Heading into the end of the week, this maturation of oil’s bear trend comes into question. The correction from October’s highs is considerable; but there is still an argument to be made that the commodity’s value is still well above what fundamentals would suggest. However, as before, the prevailing market price for crude rests more with risk appetite than the natural demand for the natural resource. On this front, we may actually see the market put in for its first advance in eight trading days. The past 48 hours has seen the US dollar and investor sentiment in general stall without a clear driver or coordinated sell off in the wide range of risk-sensitive markets. However, taking measure of speculative interest in the market; volume of the active crude contract on the NYMEX is at its highest level since February 6th and the four-week average is at levels not seen since June 2008. This points to a building interest in taking the market down even if sentiment is holding up.

Read more: DailyFX - Crude Oil Suffers its Worst Bear Trend in Three Years

 

[Jason Rogers]

The big story last week was the decline below 14625 on Friday. A trendline, channel support, and pivot lows (14800 and 14625) have been broken-the evidence supports the larger bearish wave count. The next potential support is 14410/50. Near term structure is somewhat elusive. Immediate trend is bearish under 14780. Above there exposes 14820, 14910, and 14970 as resistance. Listen to additional thoughts regarding the EURUSD.

 

[Jason Rogers]

Euro Breaking Down; But Beware of a Pullback Read more: DailyFX - Euro Breaking Down

The EURUSD has extended its decline and the next level of interest is the October low at 14480. Still, the pair has dropped over 600 pips without as much as a 30% retracement. The risk of a pullback is high.

Having continued lower with 14780 intact, the next level of interest is the October low at 14480. The EURUSD could continue lower from here but a pullback towards 14820-14900 in a corrective second wave is looking more probable at this point since the decline from just below 14900 counts well as an ending diagonal.

Full Report Found Here

 

[Jason Rogers]

Dow Remains Range Bound

Equity markets have come under pressure as rising inflation has increased the prospect that the Fed will cease stimulus efforts. The Dow failed to break above 10,500 which have served as staunch resistance keeping it confined to its current range. If U.S. consumer prices meet expectations of a rise to 1.8% then bearish momentum could continue as interest rate expectations rise. The GBP/USD may come under pressure if stocks falter unless we see an offsetting rise in the U.K. interest rate outlook. To discuss this and other fundamental data join the Economics Forum.

Trade the US30 Dow tracking index on FXCM CFD account.

 

[Jason Rogers]

Euro Forecast to Fall Further versus US Dollar

Our sentiment-based Forex strategies bought aggressively into recent US Dollar rallies as our contrarian indicators forecasted sharp USD appreciation. Substantial drops in the Euro/US Dollar and British Pound/US Dollar pairs have been met with similarly aggressive forex crowd buying, and our strategies accordingly remain long the US currency. Given such one-sided crowd sentiment, we see little reason to deviate from our Dollar-bullish stance. Yet there is always risk of short-term corrections after such swift moves, and the next several weeks may prove especially illiquid given the year-end holiday period.

EURUSD – The ratio of long to short positions in the EURUSD stands at 1.73 as nearly 63% of traders are long. Yesterday, the ratio was at 1.75 as 64% of open positions were long. In detail, long positions are 2.7% higher than yesterday and 3.3% weaker since last week. Short positions are 3.4% higher than yesterday and 13.9% weaker since last week. Open interest is 3.0% stronger than yesterday and 4.0% above its monthly average. The SSI is a contrarian indicator and signals more EURUSD losses.

The SSI is reported Every Thursday at DailyFX.com and twice every trading day inside DailyFX PLUS. In 2006 and 2007, the SSI signalled a EUR/USD rally from 1.26 until signalling a reversal near 1.60

 

[Jason Rogers]

EURCHF Range so Appealing, Even the SNB Endorses It

How stable is the EURCHF Range?

• Levels to Watch:
-Range Top: 1.5145 (Trend, 100 SMA, Fib)
-Range Bottom: 1.5005 (Range Low, Fib)

There is a clear level of support in EURCHF that is so consistent that it seems unnatural. In fact, it is. The floor that has developed at 1.5000 since March is the product of manipulation. The Swiss National Bank (SNB), seeing the impact that speculative and risk-based flows was having on the exchange rate, decided earlier this year to take an active role in holding the franc back from a growth-chocking rally. The warnings on intervention have been quite clear and consistent; but the where and when of their manipulation has not been disclosed. From the policymaker’s standpoint, this is the best approach as a level of vagueness will discourage market participants from driving the single currency higher for fear of running into a bank-derived reversal. What makes EURCHF even more attractive in this scenario is that the central bank has identified this specific pair as its primary target on exchange rate manipulation; and the impact has been clear with the current level of support. With a deep-pocketed central bank acting to back up technical support, a range setup looks unusually stable. There is still risk for a breakout (we can always refer back to the scuffle between George Soros and the Bank of England); but the probabilities are still in our favor – especially with the holiday trading hours coming. We will remove all open orders before the week closes or should spot hit 1.5075 before our entry.

 

[Jason Rogers]

Despite the US Dollar's Rally, Underlying Risk Appetite has yet to Break

Over the past two weeks, the US dollar has surged across the board. And, considering this currency has stood as the primary funding currency to a burgeoning carry trade, it makes sense that the greenback’s performance could be interpreted as a sign that risk appetite is toppling. However, cause and effect do not connect here – at least not yet. Instead risk trends have extended the congestion that has set in since October/November; and the period of consolidation has allowed the world’s reserve currency correct speculative and fundamental extremes on its own. Yet, that should not be taken to mean that investor optimism, and the leveraged positioning it has encouraged, will not go uncontested. In capital markets’ aggressive rally throughout 2009, volatile speculative interest has overwhelmed comparatively stable investor inflows. There is a critical distinction between these two categories. Speculators (or traders) are looking for capital appreciation and will need to eventually book profit on their outright positions. In contrast, investors are looking for long-term appreciation, dividends or some other form of consistent interest income. This dichotomy helps expose the tension that has developed behind the scenes recently. Primary barometers for risk appetite like the Dow Jones Industrial Average and the Carry Trade Index - instead of correcting before the drain in liquidity that occurs at year-end - have developed tight ranges. This presents considerable tension for a market that is looking at potentially volatile conditions in the near future but not enough depth to establish a true trend.

All that is needed to tip risk trends into a tailspin is a definitive catalyst. We have plenty of potential threats to global, financial stability; but optimism or greed for greater returns has helped the markets weather most of tremors. This likely means that we need a market-based event. A particularly large withdrawal of capital from the speculative arena or the seizure of a critical node in the broader financial market could certainly spark a panic that leads to a cascade selling event. Ironically enough, the best opportunity to force the Dow below 10,250 or pitch the carry interest into a bleak bear trend is during the low liquidity-period that is approaching. While there is not enough market depth to maintain and develop a reversal; the low liquidity means it will be easier to unbalance sentiment. Therefore, we need only keep a vigilance on the already incubating fundamental troubles that have developed over the past few months and be ready for a new shock to catalyze price action itself. Among the key trends to watch, the threat of defaults on a corporate and national level is particularly troublesome. Not long ago, the IMF warned that the world’s banks have only accounted for half of the losses they will ultimately suffer from following the worst financial crisis since the Great Depression. Now, we are seeing downgrades on sovereign credit ratings that is further taxing an already fragile market that is now seeing some of its ‘safe’ assets degrading. Investors could weather this if the government maintained its support of the global economy and markets; but this safety net is already being rolled in. As stimulus and emergency aid is rolled back, the markets will increasingly have to support its own weight. And, considering how high valuations have run and the lack of true fundamentals to support recent heights; the outlook is fragile indeed.

 

[Jason Rogers]

US Dollar and FX Risk Trends to Face GDP Reports, Pre-Holiday Trading Read more: Dai

Written by Terri Belkas

The US dollar, Canadian dollar, British pound, and New Zealand dollar will all face a good amount of event risk in the coming week, but trade could also be extra volatile ahead of market closures on December 25.


• Canadian Retail Sales (OCT) - December 21, 8:30 ET
The Canadian dollar could see a pickup in volatility on Monday at 8:30 ET as retail sales for the month of October are due to be released. According to Bloomberg News, spending may have increased for a third straight month, this time by 0.7 percent. While Canada registered just over 43,000 job losses during October, the trend has been in favor of recovery since February 2009, especially since the net employment change surged by 79,100 in November. Likewise, Canada’s leading economic indicator has been on the rise over the past 5 months, suggesting that signs of growth throughout the economy may signal similar improvement in consumption. USDCAD has been trading within a range of approximately 1.0435-1.0745 since mid-November, but surprisingly strong or weak spending results could help break the pair from these parameters.

• UK and US GDP Revisions (3Q F) – December 22, 4:30 ET and 8:30 ET
Both the UK and US are scheduled to release final GDP results for Q3, but only the former is forecasted to indicate revisions. The final result of UK GDP is expected to be changed to a quarterly rate of -0.1 percent from -0.3 percent, while the annual rate may be revised to -4.9 percent from -5.1 percent as more recent output readings have been better than anticipated. That said, the British pound may only respond in a sharp manner if the quarterly rate of GDP growth is revised up into positive territory as the markets will price in the end of quantitative easing by the Bank of England.

Meanwhile, the final reading of US GDP is projected to reflect an expansion of 2.8 percent in Q3, which would be the same as the previous result but would be down from the advance reading of 3.5 percent. A surprisingly strong result has the potential to offer a boost to risk appetite, but if GDP is actually revised lower, equities and the JPY crosses could break lower.

• New Zealand GDP (3Q) – December 22, 16:45 ET
The New Zealand economy may register its second straight period of growth in Q3, as GDP is projected to rise to a quarterly rate of 0.4 percent from 0.1 percent, while the annual rate is projected to increase to -1.3 percent from -2.1 percent. However, there is one key downside risk for this reading as retail sales excluding inflation only rose 0.1 percent during Q3, down from 0.5 percent in Q2. Meanwhile, exports fell throughout Q3, but this happened in Q2 as well and didn’t have too much of an impact on the overall GDP reading. As of Friday, Credit Suisse overnight index swap (OIS) rates were pricing in 203 basis points work of increases by the Reserve Bank of New Zealand during the next 12 months. However, disappointing results could bring OIS rates down quickly, which would weigh heavily on the New Zealand dollar.

• Bank of England Meeting Minutes – December 23, 4:30 ET
The minutes from the Bank of England’s (BOE) December meeting will be released on Wednesday, and while we already know that no changes were made to the Bank Rate, which was left at 0.50 percent, or the Asset Purchase Facility (APF), which was maintained at £200 billion, the news could still impact FX trade. First, the vote count may reflect some difference in opinion amongst the Monetary Policy Committee (MPC) members on the status of the APF, as BOE Governor Mervyn King has been more dovish in this regard in the past. Indications that some MPC members are in favor of further expansions to their quantitative easing program would likely lead to a steep drop in the British pound as it would cause traders to shift their expectations for interest rate decisions in 2010. However, the decision to leave the APF at its current level was likely a unanimous one, and thus, the British pound could gain.

• US Durable Goods Orders (NOV) – December 24, 8:30 ET
The upcoming release of US durable goods orders is projected to show a 0.5 percent increase in November following a 0.6 percent contraction in October, and excluding transportation the index is forecasted to rise a solid 1 percent. There may be some downside risks, though, for the non-defense aircraft orders component as Boeing orders fell further during November. While the headline result will have the most impact on forex trading, traders should keep an eye on non-defense capital goods orders excluding aircraft, as this number serves as a leading indicator for business investment. This component fell in October by the most in six months, and a continuation of this dynamic would not bode well for growth in coming months.

See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.

 

[Jason Rogers]

GBPUSD: Aim Below 1.60 as Prices Hit Second Target

We sold GBPUSD at 1.6648. The downtrend looks set to accelerate as prices take out the bottom of a near-term falling channel having surpassed our revised target at 1.6132. We will remain short, maintaining a stop-loss at the break-even point (1.6648) and aiming for 1.5802 from here.

 

[Jason Rogers]

Australian Dollar Poised to Test 2009 High on Interest Rate Outlook Read more: Daily

The Australian dollar continued to retrace the decline from December and crossed back above the 50-Day SMA (0.9106) to reach a high of 0.9268 against its U.S. counterpart, and the high-yielding currency looks poised to test the 2009 high at 0.9408 as it benefits from the rise in risk appetite. At the same time, a Bloomberg News survey shows 15 of the 18 economists polled forecast the Reserve Bank of Australia to raise the benchmark interest rate by another 25bp to 4.00%, which would be the longest streak of rate hikes on record, while investors are pricing a 62% chance for higher borrowing costs, according to Credit Suisse overnight index swaps, and the rise in the interest rate outlook may push the AUD/USD towards parity as Governor Glenn Stevens aims to normalize policy this year.

Nevertheless, the economic docket for the following week could weigh on the exchange rate as market participants anticipate home loans to weaken another 0.5% in November after contracting 1.4% in the previous month, and conditions may get worse over the coming months as the government stimulus tapers-off while the RBA looks to raise borrowing costs further. In addition, the labor report due out on Wednesday is likely to spark increased volatility in the Australian dollar exchange rates as investors expect employment to increase 10.0K in December after rising 31.2K in the previous month, while the annual rate of unemployment is projected to push back to 5.8% from 5.7% in November as discouraged workers return to the labor force. As policy makers hold an improved outlook for the region and see the economy entering a “new upswing” that is expected to drive growth over the next several years, the central bank may turn increasingly hawkish as growth and inflation accelerate, and may raise borrowing costs throughout the first-half of the year as the board seeks to fulfill its dual mandate to ensure price stability while promoting full-employment. Meanwhile, as risk trends continue to dictate price action in the foreign exchange market, a rise in risk appetite should continue to drive the AUD/USD higher as the greenback remains the most popular funding-currency next to the Japanese Yen. - DS

Read Full Report Here

 

[Jason Rogers]

Dollar / Yen Nears Former Resistance below 91.00

A USDJPY drop below 9079 would create overlapping waves and suggest that the rally from 8481 is a 3 wave correction rather than the first 3 waves of an impulse.

As suggested, a 5th wave rally has unfolded and the USDJPY has made a new high. Coming under 9079 would create overlapping waves and suggest that the rally from 8481 is a 3 wave correction rather than the first 3 waves of an impulse. This would setup a bearish opportunity (to short on a rally) in coming days.

 

[Jason Rogers]

Crude’s rally from 7083 is unfolding as an impulse (5 waves). A 4th wave may be complete as Elliott channel support has held. Expectations are for a rally to a new high. Watch the upper channel line for resistance. 8440 is where wave 5 would equal wave 1 of the same degree (this is an objective). Coming under 8024 exposes 7916 and then 7802.

 

[Jason Rogers]

EUR/CHF Classical

The latest close below critical psychological barriers at 1.5000 is significant and indicative of a shift in the medium-term structure for the cross.

EUR/CHF: The latest close below critical psychological barriers at 1.5000 is significant and indicative of a shift in the medium-term structure for the cross. Look for deeper setbacks over the coming weeks back towards the 2009 lows from March at 1.4580. Daily studies are however severely oversold and we would not rule out the potential for a short-term corrective bounce back towards previous support now turned resistance at 1.5000-1.5050 before a resumption of weakness.

 

[Jason Rogers]

Australian Dollar’s Correlation With Commodities Weakens

The Australian dollar has come under pressure after China’s central bank raised reserves for banks and looks to start reigning in credit in order to head off a potential bubble. The Australian economy has been a beneficiary of the domestic growth in China as one of its main trading partners. The RBA was the first major central bank to begin tightening as concerns over inflation increases with a booming economy. Therefore, interest rate expectations are increasing in influence over AUD/USD price action, currently explaining 28% of volatility compared with 22% a month ago. However, commodity prices remain the main driver for the Australian dollar holding a .47 correlation, but the relationship has weakened from 0.67 a month ago as yields come back into focus.

 

[Jason Rogers]

Euro forecast turns bearish against us dollar

EURUSD – A strong US Dollar rally against the Euro and other key currencies has been met with similarly aggressive crowd buying, giving contrarian signal to buy into USD strength (sell EURUSD). The ratio of long to short positions in the EURUSD stands at 1.50 as nearly 60% of traders are long. Yesterday, the ratio was at 1.87 as 65% of open positions were long. In detail, long positions are 8.2% lower than yesterday but an impressive 28.2% stronger since last week. Short positions are 14.8% higher than yesterday and 13.9% weaker since last week. Open interest is 0.2% weaker than yesterday and 11.6% above its monthly average. The SSI is a contrarian indicator and signals more EURUSD losses. Indeed, three of our six automated trading strategies have sold the fast-falling pair.