Forex trading around the news is not for the faint of heart. Nor is it for the inexperienced or undisciplined. We have recently seen several big news items that have crossed the wires, that have produced muted responses. this is interesting considering where we currently stand in the make-up of the total retail trader population. More retail traders have closed their accounts in the last 60 days than at any time on record. But just as fast as they have folded up their tents and gone home, new traders have filled their void. These new traders have not seen a volatile news report. Although the recent round of profit taking...250 pips in the sterling in just over 24 hours...is pretty breathtaking.
But perhaps lulled into a false sense of security that there are a lot of "chicken-littles" when it come to news trading, they may be ready to pounce on the announcement today. The recovery, as I have been saying for some time, is not what it has been cracked up to be. Where there are no jobs, there is no recovery. Repeat that to yourself every day, and it will keep your head clear about where the US is headed as an economy. And please remember, Government created jobs DO NOT COUNT. This is why the stimulus failed the first time. Government cannot create jobs. It cannot create wealth. No one can spend their way to riches. Any plan that calls for more spending as the solution is a crock. The more you spend, the deeper in debt you go. You do not get richer. Stimulus, if it is hinted at today or employed in the not too distant future will only hurt the economy in the longer term. Like cocaine to the addict, or alcohol to the drunkard, it will ease the pain for a while, but it only reinforces the fatal spiral. We know this to be a fact.
However, what we don't know is what the market reaction will be. Typically, I would look for the use of stimulus to cause a sell off on that currency. Stimulus means more debt, and it also means a longer period of time until interest rates are raised. this is the death knell for a currency. Therefore, as such, more stimulus should lead to a sell-off for the USD. But these are not normal times. The market may very well respond with a USD rally. Why? Because stimulus gives the "people" money to spend (supposedly). But I'll ask all my American readers, did you get more money to spend form the record breaking amounts of stimulus in 2008? I sure as heck didn't. I wouldn't look for this time to be any different.
But it is the perception that will move the market. if traders feel that the US is finally doing enough to turn the corner, they will begin buying the dollar. And as it has a nice jump start on the move and bounce off of April lows in the USD index, that might really fit the bill. For me, the better part of wisdom says stand aside today.
Happy Trading!
Bill
www.thefxtradingmasters.com
Tuesday, August 10, 2010
Friday, August 6, 2010
Forex and the August NFP
A shock to the system!
Amid prognostications for a better than expected employment report...on hopes that the private sector had done enough hiring to offset the 150 census jobs lost in the government...believing that the stimulus was finally settling in and having it's effect...we get a whopping surprise to the downside with only 70K private hires (versus 90 expected) and -131K jobs (versus the 65K expected).
Recovery? Doesn't look like it here from my view in the cheap seats. In my private alert service this morning I outlined several reason why we could have gotten a strong surprise to the upside in the jobs report today.
1. Planned layoffs fell by nearly 60% from the previous month according to Challenger Gray and Christmas.
2. ADP (the private payroll people) reported an increase of 42K private sector jobs, well above the 19K for last month. Also, as ADP has undershot the private sector hiring from the government report for 7 of the last 10 months, we had a good "bet" that they did it again!
3. The service sector of the ISM data jumped from 53.4 to 54.8, a big move, and the employment index broke above the 50% expansion figure!
So I asked my readers..."does this guarantee an upside surprise in the NFP?" The answer? NOT HARDLY. And not hardly is what we got.
The real question that traders will be asking themselves now is, What does this mean for the "recovery". I have maintained loud and long that I believed this recovery was more shadow than substance. You can't have a recovery without jobs. And while it appeared for a while that the economic jobs engine might be sputtering back to life, the last two months have given us an entirely different picture.
So back to the real question. If the US is not recovering, and it is becoming clearer that China will not take its' place (as it has followed the same failed economic policies), will we be in for another turn down in the depression? Yes, rates will stay low. But that has not helped the stock market with its relatively thin run up. Will the Fed issue more stimulus? How can it not? It shouldn't, but NO ONE there has the backbone to say what needs to be said and do what needs to be done. It is the massive debt, public and private which has brought all this upon us. And the only way out is to work off the debt. And that does not mean by raising taxes on an already overburdened capital system. The very best thing that the government could do, right now, to effect a change, is to bring home all of our soldiers (each one overseas cost more than 1 million dollars per year), cut the federal bureaucracy in half, cut spending by 50% across the board for everything, eliminate the progressive income tax (for starters), and cut 50% of all other taxes and fees, eliminate the multitude of wasteful programs and departments that are NOT mandated by the US Constitution, and stop welfare entirely. Lots of folks think that would lead to riots in the US. And they're right. So we'll have to put some of the savings into law enforcement. But rioting people eventually stop. At some point they have to eat. And in order to eat, they have to get a job. And believe me, when people and corporations are saving under my plan...jobs will explode! There will be plenty of work for any one who wants it. The problem remains that there are plenty of people who DON'T want to work. St Paul offers this government free solution; "If a man doesn't work, he does not eat". Cruel? No. Effective? Yes. Of course, the government may have to have a gun giveaway program so that homeowners can protect themselves. It might be the only government giveaway I would ever support.
Granted, this is a pretty broad outline, and very basic. It requires a tough on crime approach for those who still refuse to work and would rather steal and pillage for a living. The 3 time loser law of the old west would be effectively restored. It means the gov't would live on a fixed income, while the rest of us have the chance to earn as much as we want without being penalized for it.
To make a long rant short, the gov't had better cut the private sector loose if they want to see job creation. Eliminate ALL taxes on business. Only individuals would pay, and everyone would pay an equal amount. Period. This is the only way out from where we are.
All that being said, we are now looking to see if the rest of the world is going to sell off the dollar in the weeks to come, or if fear of another leg down is going to enter the market. Exciting times!
Happy Trading!
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
Amid prognostications for a better than expected employment report...on hopes that the private sector had done enough hiring to offset the 150 census jobs lost in the government...believing that the stimulus was finally settling in and having it's effect...we get a whopping surprise to the downside with only 70K private hires (versus 90 expected) and -131K jobs (versus the 65K expected).
Recovery? Doesn't look like it here from my view in the cheap seats. In my private alert service this morning I outlined several reason why we could have gotten a strong surprise to the upside in the jobs report today.
1. Planned layoffs fell by nearly 60% from the previous month according to Challenger Gray and Christmas.
2. ADP (the private payroll people) reported an increase of 42K private sector jobs, well above the 19K for last month. Also, as ADP has undershot the private sector hiring from the government report for 7 of the last 10 months, we had a good "bet" that they did it again!
3. The service sector of the ISM data jumped from 53.4 to 54.8, a big move, and the employment index broke above the 50% expansion figure!
So I asked my readers..."does this guarantee an upside surprise in the NFP?" The answer? NOT HARDLY. And not hardly is what we got.
The real question that traders will be asking themselves now is, What does this mean for the "recovery". I have maintained loud and long that I believed this recovery was more shadow than substance. You can't have a recovery without jobs. And while it appeared for a while that the economic jobs engine might be sputtering back to life, the last two months have given us an entirely different picture.
So back to the real question. If the US is not recovering, and it is becoming clearer that China will not take its' place (as it has followed the same failed economic policies), will we be in for another turn down in the depression? Yes, rates will stay low. But that has not helped the stock market with its relatively thin run up. Will the Fed issue more stimulus? How can it not? It shouldn't, but NO ONE there has the backbone to say what needs to be said and do what needs to be done. It is the massive debt, public and private which has brought all this upon us. And the only way out is to work off the debt. And that does not mean by raising taxes on an already overburdened capital system. The very best thing that the government could do, right now, to effect a change, is to bring home all of our soldiers (each one overseas cost more than 1 million dollars per year), cut the federal bureaucracy in half, cut spending by 50% across the board for everything, eliminate the progressive income tax (for starters), and cut 50% of all other taxes and fees, eliminate the multitude of wasteful programs and departments that are NOT mandated by the US Constitution, and stop welfare entirely. Lots of folks think that would lead to riots in the US. And they're right. So we'll have to put some of the savings into law enforcement. But rioting people eventually stop. At some point they have to eat. And in order to eat, they have to get a job. And believe me, when people and corporations are saving under my plan...jobs will explode! There will be plenty of work for any one who wants it. The problem remains that there are plenty of people who DON'T want to work. St Paul offers this government free solution; "If a man doesn't work, he does not eat". Cruel? No. Effective? Yes. Of course, the government may have to have a gun giveaway program so that homeowners can protect themselves. It might be the only government giveaway I would ever support.
Granted, this is a pretty broad outline, and very basic. It requires a tough on crime approach for those who still refuse to work and would rather steal and pillage for a living. The 3 time loser law of the old west would be effectively restored. It means the gov't would live on a fixed income, while the rest of us have the chance to earn as much as we want without being penalized for it.
To make a long rant short, the gov't had better cut the private sector loose if they want to see job creation. Eliminate ALL taxes on business. Only individuals would pay, and everyone would pay an equal amount. Period. This is the only way out from where we are.
All that being said, we are now looking to see if the rest of the world is going to sell off the dollar in the weeks to come, or if fear of another leg down is going to enter the market. Exciting times!
Happy Trading!
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
Thursday, August 5, 2010
Forex and trading the NFP's
As this is Thursday evening August 5, tomorrow, (the first Friday of the month) will bring us one of the biggest reports that each month has to offer...the Non Farm Payrolls report.
This data will tell us how many jobs were estimated to be lost or gained in the last 30 days. A strong report, will generally send a currency shooting up as traders want to be a part of a strong economy.
A poor report will generally get a currency trashed, as traders fear that there will be no increase in rates coming forth any time soon.
As of this past Wednesday, when the ADP report (the temporary hiring folks), it looked as though there was employment building n the economy. Also the employment portion of this weeks ISM survey was a huge surprise upward and really boded well for this Friday report. However, today, with the unemployment numbers from last week, we were greeted with a nasty surprise, a large unexpected increase in those filing unemployment claims. so now the whole NFP report tomorrow appears to be in doubt.
But we do need to remember this: The NFP is data from the last month. The weekly jobless claims is more recent...just last week. The ISM report also reflects data from last month. In other words we may see a nice pop in the NFP tomorrow based on hiring from the last month. That is speculation only---no prediction.
But either way, we will be prepared. Most of us are already short the euro and sterling, and we'll continue to hold to hold as outlined in the alerts. It is hard to predict what tomorrow my bring in terms of the data, but if you want to trade the release, here is a decent set of parameters to do so.
If the release surprises to the upside,, the dollar is likely to get a real boost. Watch the price action for the first 5-15 minutes after the release. If a clear direction is showing, enter in the direction of the "trend" and see what you can get.
If the release surprises to the downside, do the same thing. Just remember, surprises generally force the price action one way or another, but not always. The euro and sterling are both in multi-week trends, that are actually reversals of longer term bear trends. Both have extended themselves into important resistance areas in terms of Fib numbers. So watching the price action will be paramount before entering.
I should also mention, that there are numbers of good traders who never trade the NFP because of it's volatility. There are many more who don't trade on Friday at all because of its' low liquidity when the rest of the world closes and only New York is open.
Happy Trading!
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
This data will tell us how many jobs were estimated to be lost or gained in the last 30 days. A strong report, will generally send a currency shooting up as traders want to be a part of a strong economy.
A poor report will generally get a currency trashed, as traders fear that there will be no increase in rates coming forth any time soon.
As of this past Wednesday, when the ADP report (the temporary hiring folks), it looked as though there was employment building n the economy. Also the employment portion of this weeks ISM survey was a huge surprise upward and really boded well for this Friday report. However, today, with the unemployment numbers from last week, we were greeted with a nasty surprise, a large unexpected increase in those filing unemployment claims. so now the whole NFP report tomorrow appears to be in doubt.
But we do need to remember this: The NFP is data from the last month. The weekly jobless claims is more recent...just last week. The ISM report also reflects data from last month. In other words we may see a nice pop in the NFP tomorrow based on hiring from the last month. That is speculation only---no prediction.
But either way, we will be prepared. Most of us are already short the euro and sterling, and we'll continue to hold to hold as outlined in the alerts. It is hard to predict what tomorrow my bring in terms of the data, but if you want to trade the release, here is a decent set of parameters to do so.
If the release surprises to the upside,, the dollar is likely to get a real boost. Watch the price action for the first 5-15 minutes after the release. If a clear direction is showing, enter in the direction of the "trend" and see what you can get.
If the release surprises to the downside, do the same thing. Just remember, surprises generally force the price action one way or another, but not always. The euro and sterling are both in multi-week trends, that are actually reversals of longer term bear trends. Both have extended themselves into important resistance areas in terms of Fib numbers. So watching the price action will be paramount before entering.
I should also mention, that there are numbers of good traders who never trade the NFP because of it's volatility. There are many more who don't trade on Friday at all because of its' low liquidity when the rest of the world closes and only New York is open.
Happy Trading!
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
Wednesday, August 4, 2010
Forex and Range Trading
We quoted yesterday a statistic that tells us that FX pairs are in a non trending state nearly 65% of the time. That's a lot of range bound pairs. In order to make those periods profitable, a number of traders have tried various schemes of "range trading". What that means is identifying a range, then selling its' tops and buying it's bottoms. When they flash up their charts,you see price action that rolls up and down and looks as reliable as the ocean tides. Even a monkey could profit from this! But let's not jump the gun. Range trading can make you money, but spending the majority of your time looking for ranges and trading potential ones will cost you financially and emotionally. I rarely recommend range trades in the service, and here's why. Although pairs may be range bound for the majority of the time, the ranges do not remain the same. So the challenge is to be able to quickly identify a range, so that you still have time to take advantage of it. After all, if you start trading a range after it has made 3 similar tops and three similar bottoms, you will likely get burned as it will soon abandon those parameters. I find it best to look for particular set-ups that produce ranges, rather than looking for ranges themselves. This weeks action in the sterling has proven to be a good example.
The sterling had been in a multi month downtrend. It hit an extreme price and began to rise. Demonstrating a bullish determination, it broke through daily weekly and fibonacci barriers. But then it got stopped at a major fib retracement...the 68.2. It may have been the technical barrier that halted the advance, but when we calculate in the other factors of the week, we get additional framing for our picture. There's big news coming out this week, a rate announcement. Also we have new Monetary Policy Committee members who want to weigh in and could divide the decisions. Also we have the non farm payrolls due out at the end of the week. All those items working together, can produce something of a stalemate in a currency pair which is what produces the "range". So bumping against a major fib, after several days of one way price action, but having to wait for significant data, these together produce ranges. One should then look for three points to begin trading. In this case the first point would be a swing high, followed by a swing low (point 2) to establish a lower support, then look to sell if the pair has trouble upon reaching the previous swing high. Generally, if I like the set-up, I'll try to get a good sell entry, and aim for a 2/3 drop in the range then exit with a profit. If the pair struggles at the lower end of the range, I'll look for a decent entry and try to get 2/3 on the way up. never shoot for the whole range. It will always disappoint you.
Happy Trading!
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
The sterling had been in a multi month downtrend. It hit an extreme price and began to rise. Demonstrating a bullish determination, it broke through daily weekly and fibonacci barriers. But then it got stopped at a major fib retracement...the 68.2. It may have been the technical barrier that halted the advance, but when we calculate in the other factors of the week, we get additional framing for our picture. There's big news coming out this week, a rate announcement. Also we have new Monetary Policy Committee members who want to weigh in and could divide the decisions. Also we have the non farm payrolls due out at the end of the week. All those items working together, can produce something of a stalemate in a currency pair which is what produces the "range". So bumping against a major fib, after several days of one way price action, but having to wait for significant data, these together produce ranges. One should then look for three points to begin trading. In this case the first point would be a swing high, followed by a swing low (point 2) to establish a lower support, then look to sell if the pair has trouble upon reaching the previous swing high. Generally, if I like the set-up, I'll try to get a good sell entry, and aim for a 2/3 drop in the range then exit with a profit. If the pair struggles at the lower end of the range, I'll look for a decent entry and try to get 2/3 on the way up. never shoot for the whole range. It will always disappoint you.
Happy Trading!
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
Tuesday, August 3, 2010
Forex and Overstretching
One of the most reliable features of the FX market is the fact that it rarely stretches too far in any one direction before snapping back. And at the same time there are estimates that say of all the time the market moves, it is only in a trend about 35% of the time. That of course depends on the length of time that you choose to measure. If you look at a current hourly chart of the euro or sterling, you'd swear they are in an uptrend. But a zoom out of a daily chart shows that they are just in a retracement from recent lows in May, to a fairly common Fibonacci retracement area in the 60% range. Also, as we've seen the sterling recently "blow-out" of its' trading channel, one has to wonder if a top isn't being put into place here. It sure feels like it to me. Especially as we reach toward the psychologically important 1.60 level.
But as the currencies stretch themselves, it is essential to remember 2 things. First, that they can continue in one direction mush longer than would be expected, and two, that they can't continue in one direction forever. Trading is the essence of these two things. We endeavor to catch a move going in the direction of the overall trend, but don't want to get into a move too late. Determining this is what makes the profitable traders different from the losers. Always remembering that there is no magic bullet or perfect set-up to make such a determination. Even profitable traders aren't right all the time. sometimes they are only right half of the time. What makes them stand out? They have bigger winners than they do losers, and they are willing to average their trading our over time. Even if we are down the last two months, the previous months were stellar (with he exception of March), and we are still sitting very pretty. The point is, trading requires patience. It requires a mindset that acknowledges losing trades and losing seasons. But it still is able to carry out the game plan.
In the overnight London Session we saw bad news coming out of Switzerland, Europe and London. But that didn't stop the mighty Euro and sterling train. Some of that appears to have settled in today, but the initial reaction was one of sending the currencies higher. Even though the sterling has been pushing the envelope, I am still very bearish on the currency. The amount of Quantitative Easing that they have pushed into their economy is frightening. At some point, everybody has to pay the fiddler. Their day will come, too.
From the fundamental side, oil has pushed into 5 month high territory. While this helped certain of the oil producing currencies like Norway, it did very little for Canada. We can however look to see it have an effect should the price continue to March higher.
Personal spending was up today, just as Big Ben Bernanke hinted at earlier this week. However, I'm not sure where he is getting his data. Unemployment is still a major risk factor for the US, and it is not improving very quickly, if at all. That translates into no rising wages, and no additional spending. Housing is continuing to suffer, meaning that the refinance money folks once spent on themselves has yet to reappear since the credit collapse. This explains why the US GDP missed its' mark. The consumer is credited with being roughly 70 percent of the weight of the GDP measurement. If such a large percentage is faltering, you can be sure that the whole thing will be looking pretty unsteady.
Later this week we will get the "official" numbers of jobs from the US. It is hard to imagine that they will be anything encouraging. We will see if this will continue the US dollar sell-off. or if it sparks a fresh round of fear driven risk aversion.
Happy trading,
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
But as the currencies stretch themselves, it is essential to remember 2 things. First, that they can continue in one direction mush longer than would be expected, and two, that they can't continue in one direction forever. Trading is the essence of these two things. We endeavor to catch a move going in the direction of the overall trend, but don't want to get into a move too late. Determining this is what makes the profitable traders different from the losers. Always remembering that there is no magic bullet or perfect set-up to make such a determination. Even profitable traders aren't right all the time. sometimes they are only right half of the time. What makes them stand out? They have bigger winners than they do losers, and they are willing to average their trading our over time. Even if we are down the last two months, the previous months were stellar (with he exception of March), and we are still sitting very pretty. The point is, trading requires patience. It requires a mindset that acknowledges losing trades and losing seasons. But it still is able to carry out the game plan.
In the overnight London Session we saw bad news coming out of Switzerland, Europe and London. But that didn't stop the mighty Euro and sterling train. Some of that appears to have settled in today, but the initial reaction was one of sending the currencies higher. Even though the sterling has been pushing the envelope, I am still very bearish on the currency. The amount of Quantitative Easing that they have pushed into their economy is frightening. At some point, everybody has to pay the fiddler. Their day will come, too.
From the fundamental side, oil has pushed into 5 month high territory. While this helped certain of the oil producing currencies like Norway, it did very little for Canada. We can however look to see it have an effect should the price continue to March higher.
Personal spending was up today, just as Big Ben Bernanke hinted at earlier this week. However, I'm not sure where he is getting his data. Unemployment is still a major risk factor for the US, and it is not improving very quickly, if at all. That translates into no rising wages, and no additional spending. Housing is continuing to suffer, meaning that the refinance money folks once spent on themselves has yet to reappear since the credit collapse. This explains why the US GDP missed its' mark. The consumer is credited with being roughly 70 percent of the weight of the GDP measurement. If such a large percentage is faltering, you can be sure that the whole thing will be looking pretty unsteady.
Later this week we will get the "official" numbers of jobs from the US. It is hard to imagine that they will be anything encouraging. We will see if this will continue the US dollar sell-off. or if it sparks a fresh round of fear driven risk aversion.
Happy trading,
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
Thursday, July 29, 2010
Forex and the US Advanced GDP
It's fairly significant to notice as we prepare for the release of the US GDP that the we had such a surprise form the UK GDP last week. Expecting a reading of +0.6%, the data actually printed at +1.1%, nearly double the forecast.
Leading up to the release, the UK certainly had a mixed bag of fundamental data releases, nothing to make a trader expect that that the GDP would be double expectations. The same could easily be said for the US. Both are drowning in debt. Both are suffering from housing debilitation. Employment seems to be better in the UK, but not so much so that it would warrant such a surprise.
It is important to remember that Government releases are not always what they appear, and we can't always figure out why.
So we watch and wait to see how the data will post in 10 hours or so. But added to that mix is the overall report from the Bank of England, detailing further dovishness ahead. Mixing that with the recent notes from RBNZ, and falling inflation in the commodity block nations, perhaps we are starting to see the currencies beginning to misstep, and their counter move against the dollar coming to an end. Hopefully tomorrow will give us a better idea.
Happy Trading!
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
Leading up to the release, the UK certainly had a mixed bag of fundamental data releases, nothing to make a trader expect that that the GDP would be double expectations. The same could easily be said for the US. Both are drowning in debt. Both are suffering from housing debilitation. Employment seems to be better in the UK, but not so much so that it would warrant such a surprise.
It is important to remember that Government releases are not always what they appear, and we can't always figure out why.
So we watch and wait to see how the data will post in 10 hours or so. But added to that mix is the overall report from the Bank of England, detailing further dovishness ahead. Mixing that with the recent notes from RBNZ, and falling inflation in the commodity block nations, perhaps we are starting to see the currencies beginning to misstep, and their counter move against the dollar coming to an end. Hopefully tomorrow will give us a better idea.
Happy Trading!
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
Wednesday, July 28, 2010
Forex News this Week
As previously mentioned, the RBNZ did indeed raise rates from 2.75% to 3.00%. However, the tone of the news conference to follow was exceptionally dovish, and directed traders to consider that going forward the bank was going to be far less likely to raise rates. The falling inflation rates of the commodity block, have signaled that the heralded recovery may not be ready to materialize.
A good deal of risk appetite will hang in the balance with the German Unemployment data to be released later on in the European session. The US dollar failed to inspire any confidence today as the Durables Goods Orders took a hit, failing to meet expectations.
Will this eventually turn attitudes toward risk aversion and US dollar bullishness again? Only time will tell. But if the German figures are a disappointment, there is far more risk to the downside than to the up.
So we'll see what unfolds over the next several hours, and I'll be back tomorrow with a new update.
Happy Trading,
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
A good deal of risk appetite will hang in the balance with the German Unemployment data to be released later on in the European session. The US dollar failed to inspire any confidence today as the Durables Goods Orders took a hit, failing to meet expectations.
Will this eventually turn attitudes toward risk aversion and US dollar bullishness again? Only time will tell. But if the German figures are a disappointment, there is far more risk to the downside than to the up.
So we'll see what unfolds over the next several hours, and I'll be back tomorrow with a new update.
Happy Trading,
Bill
bill@thefxtradingmasters.com
www.thefxtradingmasters.com
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