Brilliant market selling to end the week and month
The rollercoaster market that we forexers crave returned this week and the putrid whiff of fear is again wafting through both Wall Street and Main Street. The big news of the week was released yesterday with the US Gross Domestic Product release at 0830am, spawning a fresh load of buying and pushing the Dow up 199 points, the GDP data did slightly surprise to the upside to 3.5%. This after three days of a moderate slide in stocks, and continued dollar weakness. After yesterday, traders were excited that price action would likely continue up and up, at least for a time. Friday brought in the sellers. The important level to watch is 2712 on the Dow, which was September’s close. But with the -250ish point fall, the monthly Dow candle will be quite a nice wick and doji. Why all the selling today? Could be the consumer data today showing spending fell in September now that Cash for Clunkers in finished. This may be the beginning of truth coming out in the numbers as the economic stimulus wears, afterall jobless rate continues high and people here just cannot sustain the go-go-go spending that kept the US humming for so long. The jobless data next Friday will be big, either way. Question is, was today’s selling only end of month profit taking or the beginning of something much bigger? Meanwhile, I was happy to snag about 100 pips on the GBPJPY today, selling. Here is something to consider: The daily GBPJPY certainly points to further downside, but even with today’s action the weekly GBPJPY is still neutral to buy. Check it out: The 5ema has crossed the 8sma back down on the daily chart, indicating further selling. But the 5ema crossed the 8sma upward last week on the weekly chart and will close this week firmly in control. Lets see if we can get a drop to the 146 region to begin buying this pair again, near the 61% retracement, looking for a return to 155.00 and maybe even 162.00 level. Good luck.
Weekly GBPJPY chart
Forget China, time to move to Australia
Something really unprecidented would have to happen to get me to pack up my lovely Manhattan apartment and move out of the United States. But it is no secret that the once super power of the 1950s to the 1990s is certainly on the decline while emerging market countries such as China, Brazil, India, and Russia are coming into their own. I enjoy listening to investor gurus such as Jim Rogers discuss his reasoning behind why he moved himself and his family from New York to Singapore in 2007 and how it was the best decision he ever made. I mean, as I am quite comfy sitting here and trading and enjoying an American life, aren’t my hard-earned pips in my USD account slowly losing value against most other major currencies? Yes. But the thought of moving to China or Brazil or Russia gives me a little shiver of uncertainty. This week we learned just how strong Australia is, being the first of the major Central Banks to emerge from interest rate holding and actually RAISE their rates .25% to 3.25%. Their Aussie dollar jumped in correspondence to this surprise move, ending the week above 0.9000. I suspect the AUD may again reach for parity with the USD soon and even overtake the not-so-mighty dollar. This would alas not be new territory, the AUD was stronger than the dollar in the 1980s. Australia also posted an improving jobless rate to 5.7%, compared to the US’s continuing worsening in unemployment, now at 9.8%. Times are turning quicker down under. What, not too interested in shrimps on the barby? How about Canada. Canada, too, posted its second consecutive month of improving employment data this week adding 31,000 jobs in September, bringing its unemployment down to 8.7%. They have yet to raise their interest rates but I suspect that they will quicker than the US does. What do these two nations have in common? Both the AUD and the CAN dollars are commodity currencies: Australia is closely tied to gold while Canada is tied to oil. While commodities like these will only continue to rise in value, it is the main reason why countries that export these products will continue to grow. Unfortunately, the US is the consumer, not the producer, and thus will likely remain in a weakening state. Oh how fun fundamental analysis is! Some US traders are moving their savings to Canada in order to take advantage of a stronger currency. Australia is a good bet too. It is not too late. Even better: you do not have to move to take advantage of the weakening US dollar. Check out Everbank, you can open a savings account in several emerging market currencies without hassle or airline tickets.
The fundamentals, the technicals of JPY
As quoted from BBCnews: “Japan has come out of recession after its economy grew by 0.9% in the April-to-June quarter.
The growth comes after four consecutive quarters of contraction.
Correspondents say the rise is due to a huge government stimulus package and it is unclear whether the momentum will be sustained when this is concluded.
Recent figures show other economies coming out of recession, including Germany, France and Hong Kong, a sign the global slowdown is easing.”
Another green shoot from Japan? Though a very good point that it may be only the government stimulus that is working over there, and maybe in other parts of the world too. Meanwhile, the JPY has been strengthening against all odds most of the summer, against most major currencies. This strong JPY has created quite a large divergence with the Dow, normally the Dow and USDJPY run in very similar lines. But not for some months now have we seen any such typical correlation between these two, which is making traders scratch their heads, and making it a bit more difficult to trade because of it. I had recently written an article about this type of divergence in the past and how divergence with the USDJPY has signaled major reversals in the Dow and S&P 500. Could this summer’s price action be another such sign? After exhaustively looking around the usual places on the net for a reason for the JPY strength, I still have no good reason for why this divergence is occurring. Key price levels to watch on the USDJPY are 93.70, and then 92.50 which is the 61% retracement on the weekly chart. Below there could be something. Also of note: the USDJPY remains in the bear channel on the weekly chart, despite that spike above it just two weeks ago during that NFP spike. So, I must remain a USDJPY bear until price can truly break out of that channel. Good trading!
GBPUSD is stuck
If there is any doubt about how stuck the market can get during the summer, check out the GBPUSD pair on the daily chart. Since June 10 this currency pair has been in a tight range from 1.6200 to 1.6600, that is nearly 3 weeks. Even in summer quiet trading these currency pairs cannot stay in such a tight range for very long. I expect there will be a breakout soon, possibly this week since we have the U.S. Non-Farm Payrolls data on Friday, the mother of economic news releases. Also of interest is the weekly pivot point at 1.6445. This point has already posed a decent support in early Asia trading on Monday, it is possible that a new base will start building in this area in order to create momentum for a break to the upside. So is the USD ready to re-engage its recent weakening trend? The last few weeks the USD has been stuck, trapped against a very important support line on the dollar index chart at 79.00. Any significant break below this will help to confirm a breakout to the upside for the GBPUSD. But wouldn’t it be more feasible that the USD will actually strengthen, since it is so weak against the majors currently? Yes, I understand that the U.S. government is printing money to dig the country out of its economic ditch, which in theory should weaken the currency significantly. But technically speaking, as a trader I have to think that the dollar is still king, even in this horrid little depression. So I find it more feasible for the dollar to strengthen over the next several months and continue in this range that it has built on the dollar index chart, as long as it remains above the all important 79.00. Range trading is most probable until we actually see the break. Therefore, if this theory is correct, the GBPUSD is more likely to breakout to the downside, possible retesting the 1.5900 level, where the daily 50ema is currently. Of course, anything can happen. I hope we get some nice market moves this week..
Recession proof: Trading the foreign exchange market
As unemployment soars in the US and elsewhere some are looking in unconventional places for income. Since the recession began over one year ago more than 6 million jobs have been lost in the US alone. With more and more people looking for work, its becoming increasingly difficult to land one of the fewer jobs that are available. Competition is fierce. But some individuals are looking beyond the want ads and have found the foreign exchange market, a seemingly recession-proof means of income, if you know how to trade it. After all, you would be your own boss. But trading the markets is not for everyone, and the foreign exchange market (forex) is the biggest and fastest moving market on the planet. Over $2 trillion is exchanged on this market every day. It can be just as easy to lose your investment as it is to win gains.
How do you know forex trading is for you? Online trading in any market is really not for the faint of heart. But it is also not for gamblers. Trading should be treated just like any business that you would consider entering. Here’s some things to consider before jumping into the forex market:
1. You need an investment of at least $2000 for your trading account if you expect monthly returns that you can apply to your living expenses. You can certainly open a forex trading account with much less, even $25 in some cases. But it will take many months to build your account up to something substantial. Realistic monthly profit is typically 5% - 30%.
2. Learning to trade the forex market yourself takes time and money. You need a minimum of 3 months to really get a grasp of what the forex market is all about. There are many training and education firms out there that specialize in intensive forex training.
3. If you do not want to trade your own account, you can have a professional do it for you, but you need bigger bucks in order to do this. Typically professional traders require at least $10,000 initial investment to open an account with them. There is a fairly new option in the managed account arena, check out zulutrade.com. You can open an account with only $1000, then you choose from over 1500 different available expert forex traders to “follow” their trades, the ZuluTrade software automatically will trade your account with the experts’ buy and sell trades.
4. Watch out for scammers. Unfortunately the foreign exchange market is really not that regulated worldwide. Be very skeptical of buying “100% winning forex trading systems” over the internet. Also be skeptical of “money managers” that will trade your account for you. Get references.
5. Choose a forex broker carefully. There are literally hundreds of them. For US citizens I recommend picking one that is a registered member of the National Futures Association (NFA). Also check the Commodity Futures Trading Commission (CFTC) website for broker account liquidity. Brokers with at least $20 million in capital are a good choice.
Not everyone who is looking for a job these days can afford to become a forex trader much less expect to start making millions right away. The initial investment can be difficult. But if you have the money and the time and the will power, the sky is the limit when it comes to profits in this market.
This is posted from my newest writing endeavor: NY Markets Examiner 
Big news this week to move the forex markets
Key economic news this week is the highlight for forex traders looking for profits. On Thursday the ECB is expected to cut its interest rates by 0.50% to an all time low level of 1.00%. Most traders agree that this news is already priced into the market which has seen a Euro weakening against the USD since its major strengthening one week ago, hitting 1.3700 levels. It is interesting that the EURUSD pair has come to rest today near the brand new monthly pivot at 1.3150, very near the 50% fibonacci retracement of the move up last week. Today’s ADP employment data came out much worse than expected, which may be a clue to this Friday’s Non Farm Payroll data. As I have stated before I like to trade the yen pairs as they tend to follow the Dow index. The past two weeks we have seen very nice rallies in the Dow and S&P, both have tested the very important levels of 7900 and 830 respectively. I suspect that Friday’s NFP may be the market mover that could help currencies break out of their current consolidating levels. USDJPY, for example is consolidating in a large triangle formation with the top resistance near 99.50. But my bias for both the Dow and for the yens remains bearish, I would be surprised to see the Dow break above 7900 for any sustained period, yet. Time will tell, pips will fall. Good trading.
Behold the power of the Fed
The US Fed announced its next bold strategy in its efforts to stem the US and global economic slide Wednesday afternoon, flinging the USD to the wind. In its announcement the government plans to purchase up to $300 billion of long-term U.S. Treasury securities in the next few months and hundreds of billions of dollars more in mortgage-backed securities, bringing total expenditure from $750B to $1.25 trillion. Immediately the currency markets reacted by selling USD off hard, bringing EURUSD up 350 points to 1.3500 levels, not seen since early January. Why did the market sell the USD? Because with US Fed funds rate near 0%, means that the US is printing dollars as fast as it can in order to keep this boat afloat. More dollars in the world, means they are worth less. SELL SELL SELL ! Trading during the announcment is highly risky but now that the news is out, what can we learn about today’s price action? Looking at the weekly EURUSD chart, a nice double bottom appears to be in place at 1.2500. Price today reached the weekly 200ema, technically a very important moving average. It will be important to see where this week ends in respect to this 200ema. Connecting the tops at 1.6000 and 1.4700 brings that trendline near the 61.8% fibonacci retracement of the recent down move, now at 1.3850. Before price can reach this level, the 50% fibo retracement sits at 1.3585 near the daily 200ema. Will the markets like the Fed’s move enough to continue the Dow index moving positively and weakening the USD, that is the question. But if so, then I suspect the 1.3850 level will be possible in the next few weeks. This potential move is still considered a retracement unless and until that trendline breaks near 1.3850. Look for pull backs and enter longs as the market dictates.
The Year of the Ox, A Sign of the Forex and Economic Times
How perfect that the Chinese New Year celebrated this week is the year of the ox, a sign of prosperity through fortitude and hard work. Whether you believe in such things or not, it is fitting that this sign for this particular year of economic turmoil and continued recession to come is one of diligent work, slow and logical and methodical, enduring hardship without complaint. But it is a power sign and one of prosperity, and the ability to achieve great things. It is a sign of hope. All of these ox traits would make an excellent forex trader, by the way: calm, unswervingly patient, tireless in their work, logical thinkers, extremely systematic in their work, they speak little but are very intelligent. Tireless and systematic, definitely. Another sign of hope: Mr. Barack Obama was born during the sign of the ox in 1961. With an ox in the hot seat, maybe we do have a hope that the worldly woes can and will be worked out in the next few years.. or at least in the US.
Today I again looked to USDCAD for my daily pips. As I stated last week I was looking for support at the daily 50ema, which has been holding support for a couple days now. Yesterday formed an inside candle on this pair, peaking my interest, as usual. But I had to rethink my strong USD mindset, when USDCAD broke the support at 1.2200 breaking a beautiful tight range to the downside. When the 5minute or 15minute chart is in such a tight range, I enter the trade as soon as it breaks, rarely will it pull back unless it is a fake out break. But this pair fell hard and fast, 150 pips. I exited with 100 pips profit. Also the 1.2070 region was past resistance which may become support. Price action below there could target the next level at 1.1800. GBPUSD did in fact retrace up to revisit that declining support line at 1.4300 area during the past three days. I exited my long position and will wait for the next direction on that pair. Good trading.
Dow is bump bump bumping along the edge of the abyss
Happy Friday traders! As I suspected in my last blog entry, this week was pretty nice for intraday traders and swing traders alike. All week the Dow has been screeching down to test and retest and then test again the “edge of the abyss” support seen around 7900. But she just will not and can not willingly fall much below there, yet. Market mavens came out of the woodwork towards the end of the week to again proclaim, “I am buying!! This is the bottom.” Truly the double bottom on the daily USDJPY is screaming “this is the bottom” or at least “This is “A” bottom”. We shall see. Meanwhile Tuesday Asia helped the GBPUSD break its descending trendline at 1.4325 and it never looked back, not even a retest of that line. I cautiously sold the up retraces that subsequently would fall back down, but now 1.3500 looks very tough to break, for now. So I am expecting some consolidation down here, with likely a retrace to indeed at least touch that previous trendline, now at 1.4290 area. The 4hour GBPUSD chart is showing some positive divergence now, to me signaling some continued up retracement from all this crazy down draft. I also found myself buying up the USDCHF once the 1.1300 broke. The inside weekly candle helped me get in on that buy. Equally, good ole USDCAD was nice for buying this week. But I did erroneously find myself in a long trade today when the USD weakened considerably. Lost about 50 pips on that trade. I should have been wary of the lower highs and lower lows this pair made the past two days. This pair interests me alot going into next week’s trades: on the daily chart this pair’s price has retraced exactly to the 50% of the last up move from 1.1770 low and closed the day and week just above there. The daily 50ema is now supporting. I still like longs on USDCAD, but will be looking for some support around the daily 50ema and for the CCI indicator to possibly bounce off the 0 line in order to indicate a true bounce north bound. Looking back further 1.2700 was important support and resistance back in 2004 and 2005. Let’s see if it does hold resistance again or if USD strength will in fact fling this pair up to 1.3000. Have a nice weekend!
End of August, end of summer, end of USD?
The meteoric rise of the USD vs. all other currencies has been spectacular this month. I have been able to profit nicely but also cautiously, since I just cannot believe how strong the USD has continued to be. So starting in September traders will be coming back from their summer vacations and bringing their big bucks with them back into the market, bringing higher volumes. The question on all of our minds is: how long can the USD sustain this strength? Looking at the EURUSD weekly chart, I see clear technical levels where this pair “should” pause and retrace and range for some time. I say “should”. These levels are from 1.4900 down to 1.4350, there was significant ranging from mid November 2007 to mid February 2008. So for September Euro trading I have marked this area and am hoping to range trade up and down through it possibly until the holidays. Meanwhile the USDJPY has remained in its up channel since April although the past two weeks has seen this trend tiring. The bottom of this channel is down at 106.50 area. Last week I found myself shorting this pair and I am wondering if this retrace down will continue to the bottom of the channel for next couple of weeks. Fundamentally, the USD has strengthened with EUR, GBP and JPY being hammered by bad economic data all month. Seems like these major world economies are racing to the bottom, not the top. The next month will be interesting and, in my opinion, rangy. To me, Range = big pips!!
Jennifer Shotts
Casey Stubbs has been trading for 14 years. He started trading in the stock market and moved to Forex. 
Richard draws from his extensive experience trading to write insightful trading articles for both fundamental and technical analysis.
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