FXstreet.com Live Sessions Archives

USA Trade Balance data, and its historical influence over EUR/USD

Expert:  Fernando Dirazar, Trader College 
 
Topics that will be covered for above session are: 

•    Fundamental Analysis vs. Technical Analysis
•    What is Trade Balance?
•    Publishing frecuency and important data
•    Historical influence in EUR/USD

Who is Fernando Dirazar?

Marketing Lic. Universidad Católica Argentina. Forex trader since 2004, working with Trader College. Managing clients accounts for IFX Markets. Neway Fx Director. 

Speech Material:

What is Trade Balance?

The trade balance of a country is the difference between the Exports and Imports that take place in a country or certain region. 

It is, together with the Account Current Balance, one of both components that integrate a country balance of payments. The exports as opposed to indicate the improvement or the deterioration of the competitive position of the country with the outside, whereas the imports are an indicator of the health of the internal demand. The information of this indicator is available one time a month, historical since January of 1992.

The volatility of the data of the trade balance has a great influence on the estimations of the PIB for the following trimesters.

Like all the macroeconomic indicators this data can throw as much as positive or negative results, although these are very relative depending on the forecasts that the experts also waited for on the report and of the comparison with the results of previous periods. If the balance of the exports exceeds to the balance of the imports we are speaking of a commercial Surplus, on the contrary, if the balance of the exports is smaller to the balance of the imports we are speaking of a Commercial Deficit.

It is exactly what’s happening to the USA in the last years. In the last periods the USA it comes throwing month to month very negative balances of Trade Balance, and this was one of the main causes of the fall of the Dollar as opposed to the Euro since end of 2004.

Publishing frecuency and important data

Publication of this data is monthly and it is published in the middle of the month (approximately between the 10 and the 20 of every month), gathering the statistic of the month. It has an average factor of revision; the information is reviewed all the months and reflects the commercial situation of two months ago.

Two sources exist in the USA that publishes this data:

A) Bureau of the Cencus
B) Bureau of economic Análysis of the Commerce Department

What to watch of the report?

- Outer balance with Canada, Mexico, the European Union and Japan, economic blocks with which it maintain particularly intense relations commercial.

- Growth of the exports versus. Growth of the imports.

Historical influence in EUR/USD

This investigation consists on evaluating, month to month, how it repelled in the past, the publication of the report in the quotation of the price of the Euro, during and after the publication.

The publication of this type of information usually causes in traders very particular psychological reactions.

This way we will be able to evaluate the react of the market before awaited publications or publications with surprise results and be able to be more prepared at the time of operating with future publications.

In fact the objective of this investigation is to be able to find a TRADING system based on the publication of the data of trade balance in the USA and to find out the most efficient schedules of entrance and exit to the market.

Next we start evaluating historical publications:


Click image to enlarge
   
Here we see a case in which data throw an equal result to which was awaited for the specialists:


Click image to enlarge

As we see in the chart the quotation of euro hours before the publication of the trade balance of the USA was in ascent.

The two candles previous to the publication already caused certain indecision in traders; we realize this seeing the superior shades that they formed in them.

At the time of the publication we see as the first impulse went of 20-25 points up, it corrected down quickly and finally become stabilized almost in the same price of opening of the candle.

The later candle of the report (we can denominate it as last impulse caused by the data) shows a clearly bearish candle to us with a fall of 50 points in the price with an important volume and will reflect the day tendency motivated by the data.

As conclusion we can say that previous to the report the Euro was bullish slightly, with previous and the exit of the report the traders became undecided until the publication and after the publication the price fell.

Price 1 hour and average before the report: 1.2960.
Price 1 hour and average after the report: 1.2908.

If you want to see the investigation of the following months you can download the complete work of http://spanish.fxstreet.com/ (Balanza Comercial de USA).

FXCM Live Market Analysis

Expert:  Boris Schlossberg, Senior Strategist at FXCM 
 

Topics that will be covered for above session are: 

•    Do not miss your opportunity to be updated in your trading needs this week.
•    Boris Schlossberg brings his view point of the forex market for coming week.
•    Discuss market reaction to news.
•    Enjoy his currency pairs predictions.
•    Must have FXtrading information for a succesful trading week

Who is Boris Schlossberg?

Boris Schlossberg serves as Fundamental Analyst at Forex Capital Markets. He has been an independent trader since 2000. He is also a frequent contributor to SFO Magazine with articles focused on risk management.

Speech Material:

Talking Points

• Kiwi Trade Balance blows by estimates
• Japanese Trade shows better domestic demand
• UK GDP in line * investment offsets drop in consumption
• US GDP * 6%?

Yen and Euro Churn Churn Churn

Major currencies continued to move nowhere fast as consolidation remained the name of the game in the FX market. USD/JPY backed off its attempt to push beyond the 113.00 level but found support nearby at 112.50 as traders positioned themselves for the marquee event of the week * Japanese CPI data due 23:30 GMT tonight. The inflation level in Japan is likely to be the deciding factor in whether the BOJ lifts the ZIRP sooner or later. In eco news overnight, Japanese Trade Balance surplus printed smaller than expected, though some traders were encouraged by the increase in imports suggesting that Japanese domestic demand may be gaining strength. However, that assumption may be suspect as higher energy costs clearly played a part in April’s results.

With many European markets closed today, trading may continue to range quietly unless the US GDP data shows significant surprise either way. With most markets participants holding such lofty expectation for upward revisions, the event almost begs for a disappointment as positive projections appear to be baked into the price. The other major release of the day * Existing Home Sales * may have a much larger impact on order flows in EUR/USD. US housing data remains of primary concern to the currency market and yesterday’s New Home Sales report while better than expected is also known to be notoriously inaccurate, subject to vast revisions. Therefore, today Existing Home Sales data may provide a much better picture of true housing demand in US.

'How to Become a Thriving Trader?’ Series: Part V The Psychology of Trading

Expert:  Robert Nowak, CEO of www.dailyforexanalysis.com
   
Topics that will be covered for above session are: 

•    Inside successful traders mind
•    Bad habits that can develop exposed
•    Real life experiences shared

Part V: The Psychology of Trading

Psychology of the market and oneself is the basic building block for a successful trader. Traders must exercise discipline and patience to trade effectively. Mr. Nowak will go in depth and discuss various psychological aspects of a successful traders mind and contrast that with the bad habits that an ineffective trader can develop. Mr. Nowak will share real life examples of winning and losing psychology.

Who is Robert Nowak?

The key of Rob Nowak’s trading plan is the ability to determine market direction based on institutional accumulation and distribution and recognizing signals based on the correlation of technical indicators and the use of intra-day pivot points and levels.

FXCM Live Market Analysis

Expert:  Jamie Saettele, Technical Analyst of FXCM 
   
Topics that will be covered for above session are: 

•    Do not miss your opportunity to be updated in your trading needs this week.
•    Jamie Saettele brings his view point of the forex market for coming week.
•    Discuss market reaction to news.
•    Enjoy his currency pairs predictions.
•    Must have FXtrading information for a succesful trading week

Who is Jamie Saettele?
Jamie Saettele is the Technical Currency Analyst at FXCM. In addition to writing daily technical commentaries on the seven major currency pairs as well as currency crosses, he is also responsible for trading strategy development at FXCM. As a former lead FX Power Course Instructor, Jamie has extensive knowledge of technical analysis and is deeply involved in developing and backtesting automated trading systems. His keen understanding of the quantitative framework behind a variety of technical indicators allows him to offer a unique perspective on price action to the readers of dailyfx.com. Jamie was a graduate of Bucknell University where he helped to manage a portion of the school’s endowment. He is also an active currency trader employing both discretionary and systematic approaches to the FX market.

Speech Material:

• Euro Consolidates
• Japanese Yen Weakens
• British Pound Dives Below 1.8900
• Swiss Franc Headed Towards 1.2200
• Canadian Dollar Can’t Take 1.1100
• Australian Dollar Reverts To Weakness
• New Zealand Dollar Testing Bearish Head and Shoulders Neckline

EUR/USD – It appears as if the pair has completed the first corrective wave as a zigzag from 1.2970 to 1.2700. Current price is resisted by the 38.2% of 1.2970-1.2700 at 1.2803. The current rally is a correction of the larger correction but it is possible that it trades all the way to the confluence of the 61.8% fibo of 1.2970-1.2700 / downward sloping trendline from 1.2970 at 1.2866 before resuming the larger corrective move (of the uptrend). A break above 1.2866 would negate these bearish implications and probe the 1.2970 high. Also of note is that the pair closed below the 10 day SMA yesterday for the first time since 4/14 – price then was at 1.2111.

USD/JPY – USD/JPY made one more leg down before correcting back towards 111.00 and breaking it to nearly challenge the 5/11 high at 111.55. Like EUR/USD the drop from 111.33 is a correction of a correction and will likely be slow choppy. Immediate supports are at the 38.2% and 61.8% fibos of 108.96-111.33 at 110.43 and 109.88. Further, yesterday’s large outside day supports a material correction – to possibly the 38.2% or 50% fibos of 118.87-108.96 at 112.75 or 113.91. Immediate resistance is at the confluence of the 23.6% fibo of the decline from 118.87 / 5/17 high at 111.29/33.

GBP/USD – Cable’s correction of the larger uptrend has lacked the conviction of the other pairs’ corrective moves – a testament to the overall strength of the move to 1.9000+. Still, the move is corrective and additional weakness is suggested by the long reverse hammer on the daily chart. The correction on the hourly chart is taking the shape of an ascending triangle – a particularly bullish pattern and therefore another test of 1.9000 is not out of the question over the next few days. A break below the triangle pattern exposes the 5/10 high at 1.8727 followed by the 5/11 low at 1.8530.

USD/CHF – USD/CHF is very similar to EUR/USD but is of course the inverse. As such, it is slowly making its way to the lower supporting trendline from the corrective channel. This point is support and is also near the 38.2% of 1.1919-1.2186 at 1.2085. If the pair does trade to and hold that support then a bout of strength towards the 1.2187 high from yesterday is possible. A break below the supporting trendline (on chart below) would target the 1.1919 low from Monday. Longer term resistance is at the 5/11 high of 1.2304.

USD/CAD – USD/CAD was rejected at 1.1165 tonight – a resistance zone we described yesterday that was fortified by the “23.6% fibo of 1.1771-1.0969 / 5/2, 5/9, 5/15 highs / 20 SMA”. There is compelling evidence that we are very close to an interim end in this long decline. Long advances and declines can be broken into 5 waves. Dividing the wave near the end of a corrective 4th wave often projects the end of the decline (or advance) by a Fibonacci multiple (.382 or .618). The chart below shows that we are very close to the 131.8% fibo. However, a break below 1.0897 would suggest that the end of the decline is not until the 161.8% fibo at 1.0373 (calculations on the chart).

AUD/USD – The 10 day SMA held Aussie’s correction of a larger correction at bay and the pair has since reverted to weakness. The hourly chart is similar to EUR/USD in that the corrective move has taken the form of a zigzag. Support and resistance is connoted by the trendlines that form the corrective channel – about .7675 for resistance and .7525 for support. CCI is below 0 for the first time since 4/4 when the pair was closed at .7202.

NZD/USD – Kiwi has spent time in a downward sloping channel after plummeting from .6450-.6200 last week. It is still important to keep in mind that the head and shoulders reversal pattern calls for more weakness as the pair has tested its neckline twice this week. With so many tests – a break below could be violent. Support is below at the 61.8% fibo of .5991-.6217 at .6165 followed by the 76.4% fibo at .6098. A break above the left shoulder high at .6372 would decrease probability of this reversal to the downside playing out.

Visit the PDF version to see charts and images.

Download the PDF 

5 Stop-Loss Strategies for Intra-day Currency Traders

Expert: Wayne McDonell, Chief Currency Coach, FxBootcamp.com
Start: May 16, 2006 - 14:00GMT 10:00EST
End: approx. 14:00GMT 10EST

Topics that will be covered for above session are:

• Money Management Strategy
• Moving Average Strategy
• Pivot Point Strategy
• Parabolic SAR Strategy
• Support & Resistance Strategy

Who is Wayne McDonell?

Wayne McDonell is a professional FOREX trader with an Entrepreneurial spirit and a business leader's mind. He trades his own funds and trains others how to do so consistently and profitably by coaching them everyday... in the live FOREX markets. No signals or alerts are provided. Only trade planning and execution that suits the individual trader's style, comfort and risk tolerance.

Mr. McDonell has coached hundreds of entrepreneurs and executives. He has spoken at dozens of conferences around the world. He's held several senior management roles at companies from 2 - 2000 employees, including Cicso Systems and Apple Computers. As a venture capitalist,
he as invested in over 100 consumer and industrial patents. Mr.McDonell has appeared in many publications including Inc Magazine,
TechWeek, Information Week, The National Post, as well as others in Europe and Asia.

Mr. McDonell's passion is FOREX. He currently mentors currency traders who are preparing to trade currency as a career. Future plans include a book and seminar tour.

Consensus Expectations and Market Reality

Expert: Clifford Bennett, Strategist FxMax 
Start:  May 16, 2006 - 06:30GMT 
End: approx. 7:30GMT 

Topics that will be covered for above session are: 

• Where does the consensus come from?
• Consensus concentration
• Reality check the news is out

Who is Clifford Bennett?

Clifford is internationally respected as an insightful commentator and strategist on global economic trends, and Fx markets in particular. With 20 years of analysis and trading experience with some of the world’s premier investment banks, he is widely quoted in the international press, and appears regularly on Bloomberg and CNBC television.
Clifford founded FxMax in July 2002, to provide effective independent foreign exchange research and management services to institutions and individuals.

Speech Material:

Consensus Expectations and Market Reality

The world is obsessed with the next piece of economic data and what is expected. That expectation question is purely a function of what the consensus number is according to just two or three primary surveys. Everyone else merely adjusts their forecast around what those surveys say the number is. If you thought your bank or broker did a lot of number crunching to come with their own economic data forecast, think again. Unless of course you are a client of one of the major investment houses, and perhaps a few large regional banks about the place. In that case they have done some quite serious number crunching, but then again they have wondered what the competition might be up to before offering their view.

Such is the almost musical game of consensus forecasts, but let’s start at the beginning,

Where does the consensus come from?

Bloomberg, Reuters, Dow Jones, create the central surveys on economic and market expectations. The rest of the media and the market in general use one or all three of these surveys as their consensus expectations reference point.

Where do the Bloomberg etc surveys come from. Well their journalists call and e-mail the major investment banks and research firms for their forecasts. They then have a range of forecasts and an average and mean. The survey for a market price forecast usually has the highest number of participants, around 40 or 50. Surveys for significant economic data may have a far lower number of participants and/or many participants are piggy backing off the forecasts of the principle players, the key investment banks. But what has happened within those key investment houses, what has been the process that has created the forecast?

Most people just assume that there are scientific procedures followed by sophisticated bean counters using powerful computers to derive exact and powerfully accurate economic forecasts? Well sometimes, perhaps in a few places yes. Far more common place however is the infamous, well within the walls of the investment houses anyway, monthly or quarterly economists and strategists meeting. This can take a few hours to a few days, but what happens is that everyone chips in their view of what they think will happen, remember some organisations could have more than 100 individual economists and strategists around the world. Usually two principle views will unfold, a positive and a negative on what the forecasts should be. Are things getting better or worse, and then when this is decided as a group, to what degree. At the end of the whole process however there are one sometimes two most senior economists, and in the end what they say goes. The number that is decided on is then the number that every individual economist strategists provides all round the world to anyone interested enough to hear, especially the media.

As the forecasts from an individual investment house gets sent out in their market reports to their clients, suddenly the rest of the banks and brokers around the world begin to develop their own forecasts. You see the trick is, and what most people miss, is that all of the worlds banks and brokers are in fact to some degree clients of the top 15 to 20 global investment banks. In fact it could even be said that perhaps just eight investment banks dictate the consensus view on economic data and markets generally.

So that is where the consensus expectation really comes from, let’s say 8-15 compromise discussion groups at the top investment banks.

Now that is a good thing really. We are talking about well educated and in the main very experienced economists and strategists. In the real world it has been found that the more participants in a forecast, the more likely it is to be accurate, even if the forecasters are not experts. The problem here though is that global markets are so diverse, and interactive, that for just a handful of individuals to have a grip on it all is pretty much impossible. You have to remember most of these people spend most of their time marketing their view and their bank to the media and clients, not leaving much time at all for insightful actual market and economic research.

Consensus concentration

When those conducting the surveys, Bloomberg etc, receive all their responses they have a range of views. From this they deduce a single average number and that is what makes the headlines and appears in everyone’s daily and weekly “research” reports. This masks an important and crucial piece of information for the wise warrior traders however. If the expected number for GDP for instance is 2.00%, this can mean entirely different things for what the price action may be like if the actual result varies.

For instance if everyone is very confident about 2.00% and the range of expectations is just 1.8% to 2.2%, then a 2.2% number though .2% from the published consensus expectation, will result in some bullish price action but not a lot. If the result was 2.7% however, then the market would be extremely bullish immediately and would also have a lot of follow through.

On the other hand if forecasters were having a tough time with this GDP number, the range of forecasts might be 1.3% to 2.7%. the consensus number published would still be 2.0%, but is in fact a very different number in character to the one above. In this instance a 2.2% result will see very little and probably no movement at all in the market. If the market does move that will probably be given up by the end of the day. Now even a 2.7% result will not have that big an impact. The market will be bullish to a degree but probably only as much as 2.2% was in the first example above. In this case the market will overshoot to the upside and reverse by the end of the day at least half the gains. Why? Well because in the first example people were prepared to bet on the 2.00% number in advance because they had a high degree of confidence. In the second example positioning ahead of the number would have been far less. So when the number comes out there are fewer people who need to reverse out and drive the market in a panicked way. The market moves largely due to fresh buying, a lot of that day trading, which will be closed at the end of the day.

The lesson is we need to look at the range of forecasts to see how concentrated the the consensus view is, and not just the average number.

Reality check the news is out

All I will say about this is that the first 15 minutes after a data release set up the price parameters, the price range that will tell you want the real trend is going to be for the next few days. If the Euro is at 1.3000, data is released and it rallies to 1.3050 before settling back to 1.3035, then a break of the 1.3000 1.3050 range is likely to be a significant indication of what the market is really going to do despite what that data release was. The less aggressive players should probably watch the first full hour, but I tend to think around 15 minutes is enough time for a false move to be identified, or a valid move to be confirmed.

Remember also when the actual number comes out it is subject to what I call the “statistical pendulum effect”. Economic data is not perfectly calculated and if the person who files the data for a large exporter is away on the last day of the month then some data may be in next months number instead of the current one. We must always remember it is a real and imperfect world out there.

Clifford Bennett

FXCM Live Market Analysis

Expert: Kathy Lien, Chief Currency Strategist
Start: May 12, 2006 - 13:00GMT 9EST
End: approx. 14:00GMT 10EST

Topics that will be covered for above session are:

• Do not miss your opportunity to be updated in your trading needs this week.
• Kathy Lien brings her view point of the forex market for coming week.
• Discuss market reaction to news.
• Enjoy his currency pairs predictions.
• Must have FXtrading information for a succesful trading week

Who is Kathy Lien?

Kathy Lien is the Chief Currency Strategist at Forex Capital Markets. Kathy is responsible for providing research and analysis for DailyFX, including technical and fundamental research reports, market commentaries and trading strategies. A seasoned FX analyst and trader, prior to joining FXCM, Kathy
was an Associate at JPMorgan Chase where she worked in Cross Markets and Foreign Exchange Trading. Kathy has vast experience within the interbank market using both technical and fundamental analysis to trade FX spot and options. She also has experience trading a number of products outside of FX,
including interest rate derivatives, bonds, equities, and futures. She has a Bachelors degree in Finance from New York University. Kathy has written for Stocks and Commodities, CBS Market Watch, ActiveTrader, Futures and SFO Magazine. She is frequently quoted on Bloomberg and Reuters and has taught
seminars across the country. She has also hosted trader chats on EliteTrader, eSignal, and FXStreet, sharing her expertise in both technical and fundamental analysis.   

Speech material:

Daily Fundamentals

• Disappointing Retail Sales Sends Dollar Bulls towards the Exit
• Euro Rallies as European Officials Continue to Talk Up Rate Hike
• Yen Slides on Intervention Warnings

US Dollar
The US dollar continues to sell-off as traders wonder when the weakness will come to an end. The original hope was that retail sales would come in strongly to help the dollar stage a much needed relief rally. This is what European and Asian traders were positioning for as they bought dollars throughout the earlier trading sessions. However once the market saw that consumers did not increase their spending as fast as they did the previous month, they sent the dollar tumbling because they realize that the ramifications for weaker spending are huge. First, it indicates that higher gas prices are really hitting the pocketbooks of consumers. With spending rising only 0.5 percent at a time when job growth is slowing, the possibility for it to hurt even more in the months to come are huge. Consumer spending always plays a major role in growth and if data continues to disappoint, the Fed has the support it needs to take a break from raising rates. At this point, 1.30 in the EUR/USD is simply an arm’s length away. We expect traders to try to test that level especially if the trade figure comes in wider than expected tomorrow. Expectations are not far from January’s all-time high in the deficit. With the market accentuating the negative and minimizing the positive, even if the trade deficit comes in ever so slightly wider than expectations, traders will shoot for 1.30 in the EUR/USD. On the other hand, we would probably need to see a deficit better than -$62B to see a meaningful dollar rally. Meanwhile oil prices are on the rise again, breaking above $73 following fresh geopolitical risks in Nigeria. The pressure on the dollar is based upon real risks these days and not hysteria which means that it can fall even further. At this point, we would need to hear a piece of extremely good news in order to relieve some of the bearish dollar sentiment.

Euro
The Euro charged ahead today hitting yet another 12 month high against the dollar. Hawkish comments continue to pour out of the Eurozone, accentuating what could potentially be a big divergence between US and European monetary policy in the second half of the year. ECB member Weber reiterated that low inflation estimates is no reason for them to pause on rate hikes. EU Economic Affairs Commissioner Alumnia also said that he felt the rise in the Euro is not concerning and in fact is helping to relieve some of the pressures of rising oil prices. Finally Dutch central banker Wellink is one of the first government officials to raise the possibility of raising interest rates by 50bp instead of 25. We think that this scenario is unlikely because it would be a very bold step for the central bank since they have never in the history of their monetary policy raised rates by 50bp. In addition, economic growth is not all that great and a larger rate hike could hurt growth significantly. As a relatively cautious central bank, they would probably prefer to spread out their rate hikes to make sure they are not taking any premature measures. GDP growth figures for the first quarter improved from 0.3 percent to 0.6 percent. Interestingly enough, it was Italian growth that saw the big rise and not German growth. German growth came in weaker than expected in the first quarter which is somewhat worrisome since German economic activity has a big sway on overall Eurozone growth and tends to lead that of other countries. Therefore if Germany begins to see slower growth, it may be likely that the others are next. This suggests that despite what European officials are saying, the strong Euro is indeed having a negative impact on the region.

British Pound
The British pound is the day’s best performing currency as it rises strongly against the US dollar, Euro and Japanese Yen. Industrial production figures for the month of March were solid, rising by 0.7 percent compared to the market’s 0.2 percent forecast. Manufacturing production saw a similar rise confirming the market’s notion that the Bank of England has completely dropped their plans to lower interest rates and may actually be contemplating raising interest rates. Things are certainly improving in the UK which means that should economic data continue to strengthen, the Bank of England may indeed step in to close the growing gap between US and UK interest rates. The timing of this is extremely important because if the Fed ends their tightening cycle before the fall and the UK begins to simply talk about raising interest rates, we would have the ingredients for a much stronger rally in the GBP/USD as the interest cycle tips in the pound’s favor.

Japanese Yen
Finally, yen bulls are giving bears a chance to breathe. After at least four consecutive days of strength against all of the majors, the yen has sold off across the board today. Today’s move was triggered by warnings from the Ministry of Finance that it may be necessary for them to intervene in the yen. It is clear that they are becoming uncomfortable with their currency’s sharp rise and they may push for intervention if China does not budge on its exchange rate. 110 has previously been an area of concern for the Japanese so it is no surprise that it would be this time around as well. Meanwhile Japanese corporations are also adding their two cents by saying that they believe the move has run its course. If this is a widespread belief among domestic corporates, it may signal reduced hedging activity by the country’s exporters. If so, there may be less sellers left in the market to take the yen much lower.

Using maths, statistics and market memory for simple and effective trading

Expert: Valeria Bednarik, Trader College LLC and True Market LLC
Start: May 10, 2006 - 14:00GMT 10EST
End: approx. 15:00GMT 11EST

Topics that will be covered for above session are:

• Master numbers
• Numbers DO matter
• Work hard, analyze, understand

Who is Valeria Bednarik?

Valeria has been an active Forex trader for the last 2 years, specializing in the International Foreign Exchange Market. She also graduates in the Universidad Catolica del Salvador, in Argentina, as a Public Account, specializing in financials and cost managements. She actually manages an important clients portfolio for IFX Markets, Boston and is trader at Trader College LLC.

Speech material:

Master numbers

One of the first things to learn, as we start trading, is Dow Theory. Stocks, Commodities, Forex, no matter what, it’s as valid as when it was developed in 1884. But most traders, don’t want to study theories:  Traders want to trade, and WIN; but the fact is, that we don’t pay attention to the bases, the ones that could make us really win!

It’s not the subject of this work to explain it.  Let’s only see what we consider needs extra attention:
1-The market discounts everything (meaning price reflects all market forces, like for example, supply and demand, political factors and market sentiment)
2-Price moves in trends (and so we are able to identify patterns)
3-Price movements are historically repetitive (Market has memory leading us to the conclusion that human psychology changes little with time.)

We can also refresh the concept of retracement: a correction of the main trend. Is known that all trends are subject to price retracements; Charles Dow considers these retracements are 1/3 1/2 and 2/3 or in percentages: 33% 50% and 67%.

On the other hand, and studied as much as Dow Theory, we have the Fibonacci ratios. They come from numbers series, formed by adding the latest two numbers to get the next one, starting from 0 and 1: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, etc.  If we take the ratio of two successive numbers in Fibonacci's series and we divide each by the number before it, the ratio seems to be settling down to a particular value, which we call the golden ratio or the golden number. It has a value of approximately 0.618. If we do the same but skipping one number, for example 1/2 1/3 2/5 3/8, etc, we find it tends to 0.382; and then we have the 0.50 consider an important retracement ratio because it is halfway between 0.382 and 0.618.

Notice that Dow’s retracements, 33% 50% and 67% are close enough to Fibonacci ones, 38.2% 50% and 61.8%.

Finally, we have Gann.  To simplify his thoughts we can say that he believes that every price at which a stock or commodity tends to “stop” in the up or down trend was some sort of important mathematical point. These points were determined either by the division of the "circle of 360 degrees" or by the square of 12, the square of 20, or the square or halfway point of some other number.  We use this to draw a logarithmic spiral with a growth of 0,0005 that provides a link between price and time analysis, and can help in forecasting both price and time.

Giving main importance to the prices in the main horizontal and vertical line (dividing your square in four similar parts), and diagonals. You can see an example of Euro in the following graph:

Graph 1: Gann numbers for Euro

The horizontal and vertical lines, (the green ones) are the ones that matter. The diagonals, (yellow) have not the same strength but they worth too.
See in the following chart, how price react to Gann numbers in an Eur 4 hours chart. For this example, The Gann numbers are the ones in red: 1.1910, 1.2050 1.2190 and 1.2330

Ok. So now, what can we do with all this information? How can we translate all these mathematical theories to day forex trading?

Numbers DO matter

Although it seems like an unknown forgotten language, is not as hard: first thing to remember is market has memory; so open your charts and try to find out where are the most important FIXED supports and resistances: first of all, check for them in the daily or 4 hours charts. Then, take a look at the Gann square: are we any close to the two main lines?, when the answer is yes, if the principal trend is bull, target will be the closest number to line at right, and if the principal trend is bear, target of the move will be the price located in the near line but pointing left. 

Then, you have to draw a Fibonacci retracement, that’s a tool almost every chart includes. After a significant price move (bull or bear), prices will often retrace a portion of the original move. As prices retrace, support and resistance levels often occur near the Fibonacci levels.

Adding Fibonacci levels, to the previous chart, you can see how the price reacts in between Gann numbers; and how, once a Fibonacci levels is broken, price tends to the following one.

Always remember: this is not an exact science: we are not able to predict the future no matter what. But we can use different tools to understand the possible behavior of any currency.

Work hard, analyze, understand, get confident!
All indicators are mathematical formulas. Most common ones, like Momentum, MACD, RSI, CCI, and Moving Averages, Simple or Exponential, ponder the past prices, and “show” us, the future PROBABILITIES. And that what this is all about: a study of probabilities. You have to choose the one that works for you, and combine it with Fibonacci and fixed supports and resistances. Then, analyze the past. Try to find out how many times, the price moves according to your expectative, and how many it doesn’t. How many pips you win, how many you loose, and how many are you able to afford as a stop loss. Make your own statistic for a certain currency, in a certain time frame, with a certain combination of indicators. But here comes the hard part: to become a good trader, you must really work. Meaning that you have to study not the last 10 or even 50 times you have “read” a trigger signal, but hundreds of them. There is a simple law that helps to understand this: The law of large numbers that refers to the principle that the probability of any possible even occurring at least once in a series increases with the number of events in the series. Find out the possibilities of your trading strategy. If the mathematical chances are over the 70 % then, you are in the right way. Take good care that this is not a short term business:  try your strategy in a demo account for at least 3 months, notice how the strategy works in the long term. And finally, trust in your work.

Pre-View on FED Meeting

Expert:  Dan Johnson, Chief dealer at Spencer Financial 
Start:    May 9, 2006 - 14:00GMT 10EST 
End:      approx. 15:00GMT 11:00EST 

   
Topics that will be covered for above session are: 

•    How to gauge the market
•    Signs to take note of
•    Samples

Who is Dan Johnson?

Dan Johnson has more than twenty years of Forex and Currency Futures experience. He began working at the Chicago Mercantile Exchange (CME) floor in 1980, and became a member of the exchange in 1985. Mr. Johnson’s many years on the CME trading floor involved trading, and execution of his own and client accounts in the foreign currency markets. He has been active in the FOREX markets since leaving the trading floor in 1992. He is currently chief dealer at Spencer Financial.

Speech Material:

The FOMC is expected to raise its fed funds target rate to 5% at its meeting on Wednesday. This would be the 16th straight meeting with a quarter-percentage point hike.
As always the focus will be on Mr. Bernanke’s statement.

Last meetings comment suggested further tightening.

The EUR/USD fall about 100 points on the news.

See chart click to enlarge:



But the rate hile didn’t have a lasting effect. Since then the EUR/USD has rallied nearly 800 points.

I think this week the comments start to suggest that the rate hikes are near the end.

Because of the recent dollar beating it’s the perfect time make such a comment.
We could see an opposite effect as we saw last time.
An initial rally in the EUR/USD and then a corrective sell off. 

Live FXCM FX Analysis

Expert:  Boris Schlossberg, Senior Strategist at FXCM 
Start:    May 5, 2006 - 13:00GMT 9EST 
End:      approx. 14GMT 10EST 

   
Topics that will be covered for above session are: 

•    Do not miss your opportunity to be updated in your trading needs this week.
•    Boris Schlossberg brings his view point of the forex market for coming week.
•    Discuss market reaction to news.
•    Enjoy his currency pairs predictions.
•    Must have FXtrading information for a succesful trading week

Who is Boris Schlossberg?

Boris Schlossberg serves as Fundamental Analyst at Forex Capital Markets. He has been an independent trader since 2000. He is also a frequent contributor to SFO Magazine with articles focused on risk management.

Speech Material:


Daily Fundamentals (05-03-06)
• Non-Farm Payrolls Could Do Little to Reverse Dollar Sentiment
• Trichet’s Comments Has Markets Toying Between 25 or 50bp Hike in June
• China Reiterates Refusal to Budge on Yuan

US Dollar
Over the past two and a half weeks, we have essentially seen the demise of the dollar. The mighty greenback sold off 600 pips against the Euro, 500 pips against the Japanese Yen and a whopping 1000 pips against the British pound. In fact, the dollar has now given back over 50 percent of its 2005 gains and is on the path to lose even more. By now, everyone should realize the power that the G7 meetings have on the markets. As we have warned on the Monday following the G7 announcement, the initial drop was just a precursor to an even bigger move. Back then, we took a look back at the 2003 G7 meeting in Dubai, where the knee jerk reaction was a mere 150 pip slide in the EUR/USD but over the next few months, the currency pair lost another 11 percent of its value or a total of 1100 pips. Putting that into perspective, it seems that even though the dollar’s weakness seems to be overextended, it could fall even further. In 2003, there was only one retracement in the EUR/USD that could have given traders an opportunity to buy on dips, but otherwise, the move was almost a perfectly clean 45 degree angle. With ECB President Trichet’s comments out of the way, the market can turn its full focus on tomorrow’s non-farm payrolls report. Jobless claims were slightly higher today while the Monster.com online employment index dipped for the first time in four months. However, both of these reports are coming off of healthier levels and conflict with other reports that have been signaling strength such as the employment components of the ISM surveys and details from payroll service provider ADP. Triple digit gains are certainly expected with the market consensus holding steady at 200k. With no major strikes last month, it seems that nothing should hold back a stronger report. Yet whether the market will respond to a good number remains questionable. The payrolls number probably needs to come in at least 50k over or under the market’s forecast to have a meaningful impact on the dollar. Even though non-farm payrolls are traditionally a very market moving number, traders have done a phenomenal job of ignoring anything dollar positive. A great example is today’s sharp slide in oil prices. The dollar should have responded positively to the weakness as well as the big jump in unit labor costs and non-farm productivity, but it didn’t. So along that line, it could very well shrug off an in line non-farm payroll report as well. 

Euro
- As we have promised, because the market was divided on what stance the European Central Bank President Trichet was going to take on interest rates, there was nice volatility in the EUR/USD today. The currency pair broke above its previous high and climbed to the highest level that we have seen since May 13, 2005, which was nearly one year ago. The central bank left interest rates unchanged at 2.50 percent, which was as expected, but Trichet started his press conference by reiterating the central bank’s need to maintain “strong vigilance,” citing oil as the main culprit. He still believes that the economy will continue to grow as planned but it is clear that their fear for inflation seems to be overriding the central bank’s fear for what a strong Euro could do their economy. Dutch Finance Minister Zalm and German Deputy Finance Minister Mirow both said that they are not concerned about the Euro’s recent rise, but if it continues to appreciate, they could become worried. Trichet’s use of the word “strong” confirms our belief that the next rate hike will come in June. Afterwards, if economic data continues to strengthen or inflationary pressures increase, the ECB may feel compelled to bring rates even higher. One last point to note is that the word “strong” has caused some to believe that the ECB would deliver a 50bp hike instead of a 25bp hike next month. We think that it is unlikely since the central bank has never before raised rates by more than 25bp at a time. Shifting gears to economic data, reports released this morning were mixed. The drop in retail sales in the month of March caught the market by surprise and raised concerns for domestic demand while service sector PMI echoed the improvement that we saw earlier this week in the manufacturing sector. 

British Pound
The British pound continues to perform exceptionally well against the US dollar. It is worth noting again that the currency has risen over 1000 pips against the US dollar in the past 2 weeks. Like the ECB, the Bank of England also left interest rates unchanged. However stronger economic data helped to fuel gains in the currency. According to HBOS, house prices rose a more than expected 2.0 percent in the month of April while the service sector PMI index increased from 57.4 to 59.7. This follows the equally strong rise reported in the manufacturing sector survey earlier this week. Mortgage approvals remained steady, rising from 114k to 115k, but the only wrinkle in the day’s reports was a weaker rise in net consumer credit. Overall, today’s data tell us that the housing market remains steady and both activity in both the service and manufacturing sectors have been improving. 

Japanese Yen
With exporters having done their hedging on Monday, the yen continued to give back gains against all of the majors except for the US dollar, which is a trend that we are no long surprised to see. Attempted verbal intervention by Japan’s Finance Minister has done little to help bolster the yen. We wonder if a rebound in USD/JPY will not come until exporters return from their holiday next week and reverse their hedges. Meanwhile it seems that China is standing firm on not succumbing to international pressure by raising the value of the Yuan. Instead, they have chosen to take measures that would boost domestic demand and free up their markets. China’s Vice Finance Minister Li argued that a rapid appreciation in the Yuan would hurt the countries exports, imports, agriculture, and industry along with many other aspects of the economy. They also feel along with some US analysts that their large imbalance with the US is not completely their fault. Therefore they returned the pressures by calling for the US to take its own measures to boost savings and cut demand for exports