$ For The week of 10/23-With Some Trade Ideas

I managed to catch a USD Index on TV; it was moving down since 10EST . SO I shorted USDJPY for a 20 pip profit.

Question:
Where do I get an online USD INdex?
It seems very accurate predicting strength of USD in the short term

PCE is a confusing indicator because there is a monthly PCE and a quarterly PCE. the quarterly one is part of the GDP report (which we have listed on calendar).

another confusing thing is that there is a PCE and a PCE Index. the "index" one measures price changes, while the other measures how much was spent. the reason we dont have the PCE Index listed is because we have the GDP Deflator listed, and that is the main measure of inflation from the GDP report.

anyway, we are open to changing our proceedure for GDP listings, if you can give me a bit more clarity on what exactly you are looking for, PCE or PCE index.

to make this easy, check out the last GDP report...
http://www.bea.gov/bea/newsrel/gdpnewsrelease.htm

exactly which number are you wanting to know from this report? notice that the only place the Core PCE Index is listed in in Appendix A (all the way at the bottom).

your feedback is much appriciated man!

There's a core PCE and a PCE deflator...I'm a bit confused by this too but I think they all come out Friday 8.30 EDT anyway...more work for u Merlin, but it might be nice to list the results separately...

BK, is this the kind of this you are after?

http://www.netdania.com/ChartApplet.asp

Just scroll down 'Instruments' and select USD Index. It's worth noting that it is just a composite of other exchange rates (EUR/USD will feature heavily).

We saw a nice push against the $ off the Richmond Fed report-which came out really weak-just goes to show that the fundamentals are often the best indicators...

Speaking of Fundamentals:

The NZ numbers later have a huge potential for a short trade-NZ has increased over 7% vs the $ in the last 3 months based on a NZ rate incre-that might not happen now at all and if the CPI is weak...a big sell off could occur...

Of course, you'll need to watch the number...I just have a feeling that the CPI will be low-transportations are a big part of the number-that means energy-which has gone way down...energy makes up part of their CPI-there is only a separate food component, unlike the US core CPI which excludes food and energy...another important fundamental component is the fact that NZ would love it's currency to devalue, as this would boost exports which are a big part of their GDP...

Overall, I tend to think that CB's tend to follow the US lead-and given that no chance exists for a rate incr here...

LOL yeah they all come out on friday so they tend to get lumped together.

i think what you are after is the inflation component of GDP. right? i assume so because you are plotting on how this will effect the fed. my advice is to look at the GDP Deflator aka GDP Price Index. this is the overall inflation reading for expenditures accounted for in GDP. there is no "core" reading, but because it is a quarterly gauge, the core number is not cared about because there is no need to supress volatility of food and energy over a quarterly timeframe. GDP Deflator is one of the Fed's favorite inflation indicator, or so they say, because it is the most broad reading of inflation. the fed also likes the monthy Core PCE (but thats not the one coming out this friday) and the CapUte (capacity utilization).

Thanks for the info Merlin-Here's what's posted on the FXCM calender:

GDP Annualized 3Q Ann
GDP Price Index 3Q Ann
Personal Consumption 3Q Ann
core PCE QoQ 3Q Ann It's this number that I believe is the Fed's preferred inflation gauge

im pretty sure you are thinking of monthly Core PCE Price Index (aka Core PCE). that is the one where we have the cliche of "the fed's favorite indicator". that aint the one released friday! like i said, PCE is one of the most confusing/confused indicators

this one its about spending, how much consumers spent. no link to inflation here.

this one does have to do with inflation (rate of inflation on said expenditures ex food and energy) , but it's far overshadowed by the GDP Deflator.

Whew!! Thanks Merlin

I should have sticked with my original plan to short USD 2AM EST!

All this Hawkishness stayed me to the sideline and prevented, as of this writing, 30 pips win.

Oh well. Thats what I call "indecisiveness" on my part.

BTW. India's TATA corporation is buying UK's CORUS for some GBP 6B; and it is rumored to have driven GBPUSD up in early London session.

Here is something from my favorite crystal ball broker:


Bullish USD sentiment?

Kind of a Flat Feeling Into the FOMC
The earlier trade this week based on a hawkish Fed statement has come and gone. Everyone expects that now-so it won't be any big surprise; I don't expect much movement immediately following the FOMC. I still have a feeling that a very hawkish statement indicates higher readings in friday's GDP and core PCE QoQ numbers since the Fed is aware of how these numbers look. Let's wait for the tone of the statement for a trade there.

We have seen mortgage apps up this morning and we know the Fed is depending on a continued slowing in the housing market (specifically continued slowing in new construction) to moderate the economy. Existing home sales could be an important number that may acutually contribute to the tone of their statement later.

As I'm always looking for longer term trades in currencies looking to raise rates vs. currencies that aren't-after the smoke clears from the Fed i'll be watching the AUD/USD pair carefully. Some of the other AUD crosses might be interesting to watch also, specifically the AUD/NZD pair after the NZ rate announcement...

Australia's Central Bank to Raise Interest Rate Next Month, Economists Say Australia's central bank will raise borrowing costs next month after the government reported inflation topped the bank's target band for a second straight quarter, according to all 25 economists surveyed by Bloomberg News today.

I got long aud/nzd just before the announcement-sometimes u gotta go with ur gut...these things are hit and miss, but the hits work out well-especially when one rate is tipped to go up and one doesn't as in aud/nzd...

There were several things that contributed to me taking a long aud/nzd position prior to the report. One thing to keep in the back of your mind is that these numbers are put out governments and they have there own agendas. Numbers can be revised later and often are.

For example, the NZ finance minister has stated many times that he thinks the kiwi is overvalued. Exports are a big part of their economy and a devalued kiwi helps their exports. I got burned 2 weeks ago on the NZ retail sales report-it was tipped to go up, as retail sales have almost everywhere else because of lower energy prices. Guess what? Their gov't put out a lower number there. Could it be possible they put that number out hoping to devalue the kiwi? Maybe. Last night the NZ CPI came out lower-no surprise there because transportation (energy) makes up a big part of that number.

So we have a gov't that puts out the numbers and wants it's currency devalued. A big surprise in retail sales, especially as their housing market is very strong and jobs are plentiful. Perhaps their CB intervened as well. Whatever it was, a lot of things lined up correctly.

Let's Get Back to the $ For the Rest of the Week

The Fed statement is open to some interpetation. The Eur and GBP did strengthen somewhat after the announcement, then held. It was toward the end of the NY seesion though and traders were probably fried after all the activity. What's the future look like?

Well, the bottom line is that there isn't a case for the Fed to move either way now or probably at least into the next quarter. While they said that some inflationary pressures remain, they also said they expect economic growth to be moderate. We'll see.

What about all those numbers coming out on Friday? I'm gonna make an assumption and your free to agree or not. I don't see those numbers coming out any way that will indicate anything other then moderate growth and inflationary pressure that is no worse then what we have at present. I think the Fed knows what those numbers are and they basically told us how they're gonna look. The Fed would look pretty dumb if those numbers come out really different-do u think the Fed is dumb?

On the face of it, those numbers should be $- so some selling off of the $ should be seen-probably a soon as London opens tomorrow morning. There isn't a rate increase in the near future, so I think a negative $ is in the cards for the rest of the week. Counter to that, is that fact that equities are booming and there is tremendous foreign demand for US Gov't paper. Foreign businesses, governments and individuals will want to continue to invest here; it's safe and growth is expected to be "moderate". All this investment will cause alot of $ buying-foreigners have to convert their currencies into $'s to buy our investments.

So for the rest of the week, I feel confident (how dangerous does that sound...lol) that the overall pressure on the $ will be negative. Our interest rate is not going up and the numbers friday are bound to show moderate growth and an inflation number that so far has not caused the Fed to raise the rate (or even harshly threaten to do so). After that, things will change-as they always do.

The Markets Have spoken and the Markets Love This FED
I hope a lot of you have gotten into all this $ shorting...I sure have. What we are seeing is the market's reaction to what the Fed did and said yesterday. You really don't need an interpetation from me or anyone else; the markets not only loved what the Fed did and said-I really believe there is a firm, clear understanding in the markets of what will happen in the future and there is no better time to invest then when the future appears clear.

It's really this simple-if growth remains moderate and inflation numbers stay about where they are...no moves either way. If things don't pan out as they see it, you'll know what the future holds then as well. No need to make predictions about where these different indicators are going, just read the numbers and that will give you a good idea...maybe i'm out of a job here, lol.

For the rest of the week, some profits might get taken out, but I don't think any major $ buying will occur...the numbers tomorrow should confirm what the Fed said yesterday so there should be more room for continued rallies in the EURO and GBP.

Sometimes people say things are silly beyond believe:

U.S. Economy: September New-Home Sales Unexpectedly Increase

By Bob Willis and Joe Richter
Oct. 26 (Bloomberg) -- New-home sales in the U.S. unexpectedly rose for a second month in September as builders focused on meeting demand for cheaper homes.

Purchases increased 5.3 percent to an annual pace of 1.075 million, the Commerce Department said today in Washington. A surge in demand for dwellings in the $150,000-to-$200,000 range drove the median price of a new home down 9.7 percent from a year ago, the most since 1970.

The report suggests that builder incentives, lower mortgage interest rates and discounts will keep this year's housing slowdown from deepening. The figures, combined with a separate report today showing more business spending on durable goods, are consistent with the Federal Reserve's prediction yesterday of a ``moderate'' economic expansion.

I think I learned this on the first day of 7th grade economics: as the price of something goes down-demand goes up. Seriously no one should be surprised by this-just look at the fundamentals: people have jobs, incomes are up, prices are down-so people are buying. No big revelations there I don't think...no need to make this any more complicated then it needs to be. If you jump off a building, you're gonna go in one direction; down. If prices drop and people have money to buy (or access to cheaper credit) they'll buy. Wonder what happens as demand goes up-any ideas??

So it begs the question:

How much further can the Dollar sink? 25, 50, 100 pips? I only ask because I am really $ Long right now on 4 pairs and not sure if I should cut the losers free. Cutting them free would cut about 45% of my Small mini account off, but I would still have it. But I could also lose the rest as the if losers got worse, right? I know no one can predict where and when the market will move. I think this week proves that. I would hate to sell the losers then see the market do a 180, I am still learnning, so I would consider this a tution payment towards my FX Degree, but some payments are hard to swallow. I thought I was ok this week, Guess not!!

Rusty

price could potentially climb up to the 9000 level on increased momentum, after that level its anyones guess strong resistance should be there. But how far will price then drop we need some kind of fundamental factor to push the dollar higher at this point we will most likely see an eventual retracement of profit taking but i would say the uptrend is still intact and has not fallen back down yet... I have been in a similair situation as you.. basically if ur account can withstand the pound retesting 9150 and the other pairs as well then ok, but really thats bad risk management especially when trading spot forex, use a wide stop but do it in line with the current trend which on the 4hr turned up (i was also short cable at first and did a quick 360 at the right level ie 8733 took profits at 8890) you would expect a sharp drop after 8900 level due to profit taking but we got a burst thru this level and price has held!!

basically if ur gonna position trade trade forex look into options the most you can lose is the premium. im currently trading on an options platform demo and i have bought a call and a put at 8700 strike price so im hedged both ways the most I can lose is my premium that i put up.. in spot forex u can lose alot more and faster!! its not a joke... something I learned the hardway. Thats why Im learning to hedge longerterm ie 1month or so via the options and taking day and swing trade via spot.

In my opinion,you,ve made a couple of newb mistakes here Rusty-first with saying that no one can predict movement and 2nd with ur money management.

Traders in forex couldn't make money if they couldn't predict market movements. That's not to say that movements can be predicted at all times, but if you study the fundamentals, u will find many instances where market movements can indeed be predicted. Read back on this thread for some ideas, but the basic underlying premise is that traders will buy currencies where the interest rate is goin up and vice versa. In general, the best pairs to trade are where clear, opposite trends exist for this. Look at a chart for the AUD/NZD pair from yesterday @ 20.00 GMT to see this.

A causual review of the present news will reveal that the US rate has not only remained level, but is not likely to rise soon. The BoE is tipped in many places to be raising in November. That doesn't mean a straight line rise in GBP/USD, but the trend may be there.

As far as money management is concerned, you should never place 45% of your account at risk at any one time. That's a sure way to lose quickly. If you take a position with a SL, the SL should absolutely be no more then 10% of your account; 5% is preferable. For example-you have 2500-you take a position with a 30 SL; that SL , if hit, should be no more then 250 so at max u should trade with 8 minis, but preferably 4.

Demo trading is crucial and I believe that it should be practiced continuously-even after you have a live account. You must treat the money in your demo account as if it's real; you will not get a feel for trading if you don't. You must feel the pain of losses and missed opurtunities. That will provide discipline for further trades.

Just for practice-i'll give you a prediction. As we've seen, the dollar has been shorted about 130 pips against the pound. We could see some profits taken in tomorrow's London session-that's unpredictable. I do feel confident that we won't see the pair where it was prior to yesterday's Fed statement; profits won't be taken that far. If profits are taken down to around 60 or so-it's confirmation to me that traders think tomorrows real GDP is going to be $ neg. (I feel very certain that's what the numbers will show). I would buy there and hold it into the announcement. What if profits don't get taken out and cable is at the level of the NY close from today? That would indicate to me traders are absolutely convinced that the numbers will be very $ neg. I would still go long there prior to the announcement, but, you will have to watch this carefully. Why? There is a lot of cable longs in the market, it's Friday and traders may want to book some weekly profits. It's also close to the end of the month. We could see a pop up the the 30's then see profits taken. That's the unpredictable part, because it could get bought up to anywhere as well.

What should u do? If your in a profitable trade that starts to retrace on you-since you've had some losers already, book your profit and close your week on a winning note. Then go out and get a bit drunk!

Thats exactly what I do with my demo i take it as a real loss... to me it is.

Great advice.