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Attachments: $ For The Week of 12/26
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$ For The Week of 12/26

  • #1
  • First Post: Dec 22, 2006 5:43pm Dec 22, 2006 5:43pm
Hope you're having a great holiday season!!

Fundamentally, the GBP (and the Eur to a lesser degree) should be much stronger against the $ then they are now. Being that it's the holiday season, there are several reasons for that not to be happening now and trying to time when they'll start getting stronger is tricky, but I believe at some point in the not so distant future, they will. There's just too much fundamental data for them not to.

You just have to be ready to trade. I know that I would prefer for everyone to take a holiday until after the new year, but that's not likely to happen. The only reason I can see for the $ to be supported at all is that energy prices have edged up, but if the rumored diversification out of the $ should continue or if energy prices should top out for a week or two...I really think the $ will get hit hard.

Stay ready.
  • #2
  • Dec 22, 2006 6:58pm Dec 22, 2006 6:58pm
There was an Interview I watched over at CNBC.

The resource person run a statistics of major economies and the effects of their currencies.

GBP and EUR did not strengthen according to the resource person. USD weakened instead. And with that he said, an abrupt depreciation of the USD in the past caused a major drop in the stock market anytime from a week to 4 months.

He also pointed out that US's stock market Bull lasts about 1-2 years time. UK's stock market bull lasts only 3-6 months. UK's market has been in rally for several months now. He opined that it is about time to slow down.

What does this all mean?

US market is stronger and bigger (thats an understatement) than UK. Though it is true that GBPUSD went up to 1.9800+; we may see it retest that level then fall back down. EURUSD likewise is in a high note and EUR is complaining about it.

Should EUR went up to 1.3500, I;d short it there. But for GBP? I dont know; it is currently being supported by GBPJPY carry traders. Only an failure of a rate hike in Feb would kill GBP.
  • #3
  • Dec 23, 2006 8:58am Dec 23, 2006 8:58am
Interesting-we've all seen where the resistance has been (the market can't hide-that's one of my favorite quotes) and while there's no garuntee a re-test will break thru the first time, I would look for a couple of repeated efforts without a large re-trace to signal a possible break thru.

There's so many forces working in forex-when they're at cross-purposes currencies range trade. When the wants and needs of CB's line up the same way with global corporations and the major speculators, the big moves happen.
  • #4
  • Edited Dec 24, 2006 11:04am Dec 23, 2006 2:44pm | Edited Dec 24, 2006 11:04am
A couple of interesting chart patterns-could be that the fundamentals and some simple patterns are lining up for a big break out. Maybe a good tech system like the Vanessa 4HR will give a signal too. I welcome any comments from you tech/chart people...
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  • #5
  • Dec 23, 2006 3:08pm Dec 23, 2006 3:08pm
Quoting NewstraderFX
A couple of interesting chart patterns-could be that the fundamentals and the technicals are lining up for a big break out. I welcome any comments from you tech/chart people...
Descending flag on the daily is a continuation pattern so I would indeed be watching for a break up. It is also interesting to note that what the bears gain in 4 days the bulls take back in 1-2. So based on this if I had to pick a side it would be bullish. However i will be ready to change my opinions if the technicals change or sugest different.
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Stubbornly persistent
  • #6
  • Dec 23, 2006 8:18pm Dec 23, 2006 8:18pm
Makes sense sergiu. I'm in the flag playing range. Waiitng for a break now is a waste of pips!
  • #7
  • Dec 23, 2006 8:42pm Dec 23, 2006 8:42pm
Quoting JodyOng
Waiitng for a break now is a waste of pips!
It depends on how you trade! I do not mesure my performance in pips only. I aim for 50-75 pips a week so i only look for high probability setups with a low risk and potentialy high reward.
Sergiu
Stubbornly persistent
  • #8
  • Dec 23, 2006 10:10pm Dec 23, 2006 10:10pm
Yea it's up to your own style. Maybe I'm being greedy =\
  • #9
  • Dec 23, 2006 11:40pm Dec 23, 2006 11:40pm
Triangle by NewsTraderFX, Flag by sergiu both suggests to me an imminent break through either up or down.

Remember, M&A plays a big part of the currency movement - not just economic news. And UK's Vodafone is eyeing an Indian Telco for a huge USD13B - larger than the GBP2B it sold in swisscom (which was the reason why GBP rallied last week).

The coming week sees only minor news on the table. So I dont think there will be any huge movement in the currency market other than volatility caused by the thinning of the volume. I'd wait for January's ISM and NFP. I think ISM should recover but NFP? thats the problem - seesm like the market trades the Revision instead of the NFP..
  • #10
  • Dec 24, 2006 2:15am Dec 24, 2006 2:15am
Vodaphone is a british company is it?
  • #11
  • Dec 24, 2006 6:47am Dec 24, 2006 6:47am
Quoting sergiu
Descending flag on the daily is a continuation pattern so I would indeed be watching for a break up. It is also interesting to note that what the bears gain in 4 days the bulls take back in 1-2. So based on this if I had to pick a side it would be bullish. However i will be ready to change my opinions if the technicals change or sugest different.
I used to think when a big up cancle (I call it big guy) with small few candle corrections, bullish sign. But I changed this thought after I uses time frame. As of your charts, 2 big up candles with 4 down candles( also lower low) is bearish for me, and the last green candle with 3 red ones is bullish but bulls need quickly pull up for next 1 or 2 candles, or we might be in trouble for longs. Overall, this chart is neutral for me.
  • #12
  • Edited 7:05pm Dec 24, 2006 7:41am | Edited 7:05pm
Quoting BurgerKing
Triangle by NewsTraderFX, Flag by sergiu both suggests to me an imminent break through either up or down.

Remember, M&A plays a big part of the currency movement - not just economic news. And UK's Vodafone is eyeing an Indian Telco for a huge USD13B - larger than the GBP2B it sold in swisscom (which was the reason why GBP rallied last week).

The coming week sees only minor news on the table. So I dont think there will be any huge movement in the currency market other than volatility caused by the thinning of the volume. I'd wait for January's ISM and NFP. I think ISM should recover but NFP? thats the problem - seesm like the market trades the Revision instead of the NFP..
Actually, I think the interpetation of both chart patterns suggests a continuation of the original rallies in the Eur and GBP. Couple that with the markets interpetation of the data, which to my thinking is the Fed holding thru March and the BoE and ECB more likely to increase rates then not sometime before then, is a confirmation of this.

I'm also not too sure of the part that foreign investment in the US markets plays in the forex market. According to the TIC data, 80B of foreign capitol came in the US market in Oct. The $ lost about 30 pips against the Euro and about 120 pips against the GBP for the month, although it did stregnthen a bit temporarily. Then when Equities and bonds continued to rally in Nov, the $ really tanked. Maybe that capitol came from other countries...

I have to strongly disagree that a big move isn't possible during next week. I think anything is possible and there's a need to stay ready. There's no way to time this precisely and besides, with all the programed trading, things can happen really fast. Waiting for those Jan numbers could be a case of "u snooze, u lose"...

Predicting is a mostly losing occupation anyway. I have an opinion, but I'm not married to it and I'm not in any positions now based on my idea of what's gonna happen. Timing market moves is even more difficult. Actually the only prediction that I think is worth anything is that the market will move. That we know will happen.
  • #13
  • Dec 25, 2006 3:06pm Dec 25, 2006 3:06pm
I'm looking at the various patterns that seem to be forming-and I think they're open to a bit a interpetation. Triangle, Pennant or Flag-they're all pointing to the same thing-a breakout. Yes these patterns are simple to see and interpet, but many times the simplest things work the best. Many traders will see them, therefore momentum is easy to build once it gets going. Traders trade and avoid paralysis by analysis.

What I don't do is try to predict when the breakout may occur. Yeah, I have an opinion that the breakout is gonna occur to the upside based on how I see the fundamentals, but there's no need to make a bet on that at this time. And if it turns out they break down, i'll go that way instead. What I can say for certain is that a breakout is gonna occur.

I think the hardest part of trading is figuring out when to take a profit. I see so many good ideas regarding when to enter a trade-developing a system for exiting a trade at or near a maximum profit seems to be much harder to do. Personally, if I get profitable I close out 50% when my gut tells me to and set SL=BE for the rest. If it continues to go, I move the stop up. If I wind up closing too early-I just consider that a good problem to have. It's like a baseball team with too many pitchers-having to cut a pitcher is much better then having to look around for one. Cuttin a profit too early beats cutting a loss too late every time...
  • #14
  • Dec 26, 2006 10:29am Dec 26, 2006 10:29am
Quote
[15:32 US ECON: Dallas Fed Chimes in with Weak Mfg Results for Dec] Boston, December 26. Like the regions covered by Philadelphia and Richmond Federal Reserve District Banks, factory activity in Texas slowed markedly in December. The Dallas Fed consists of only one whole state (Texas) and portions of two states (Louisiana and New Mexico). This survey covers only Texas. Nevertheless, Texas produced $126.8 bln worth of manufactured goods in 2005, 8.3% of the US total.
Texas ranks second behind California in factory production and first as an exporter of manufactured products. Texas turns out 29% of US production of petroleum and coal products. The state also has nearly 10% of the nation s output of computer and electronics products and nonmetallic mineral products, such as brick, glass and cement.
Manufacturing activity contracted in December; most indexes were negative, including production, capacity utilization, volume of new orders and shipments. Manufacturers continued to be optimistic about future business, however. Nearly two-thirds of responding firms expect increases in production and volume of new orders six months from now.
The production index fell from 8.5 in November to 5.2 in December, the lowest reading since the series began in 2004. The percent of business leaders indicating increases in production was roughly unchanged from last month, but a larger percentage of firms reported a production decline than reported an increase. About 10 percent of firms switched from reporting no change in activity in November to reporting production declines in December.
Sentiment on general business activity was negative in November and declined further this month. The percentage of firms reporting conditions had worsened was essentially unchanged from last month, but a smaller percentage of firms said their evaluation of the level of general business activity had improved.
In the December survey, the indexes for production, capacity utilization and volume of shipments fell negative. Indexes for new orders and unfilled orders remained negative and fell further. The index for materials inventories remained positive and increased. The index for finished goods inventories was still positive but eased slightly. The index for number of employees dropped to zero. The raw materials price index was positive and increased. The finished goods price index was positive but declined from last month. -- [email protected] [IFR Forex Watch] [SQUAWK BOX]

December ISM may still be bad when it comes out next week.
  • #15
  • Dec 26, 2006 11:02am Dec 26, 2006 11:02am
Thanks for the post and happy holidays to all!

Here's an intersting article from BB showing that there's a real difference of opinion regarding the various CB's:

http://bloomberg.com/apps/news?pid=2...rHI&refer=home

The bottom line is that there's no increase expected from the Fed-no one sees that at all at this time. Probably the ECB is the most likely to raise rates, followed by the BoE and BoJ. This could remain on hold if the US economy really goes into the tank. I think that without something along the lines of an internet or housing bubble...the US will probably grow at a low to moderate rate. Right now, there's nothing really exciting happening in the US economy-we've had growth of the consumer fueled by home equity moving things along for the past couple of years. I think that if housing bottoms out, that could get re-fueled again. There still are plenty of jobs and with house prices down a bit and mortgage rates a bit lower...we could see housing edge up.

The overall population statistics still don't favor a huge rate of growth though. The baby boomers are aging out of the prime consumer range-they've bought their houses and made their other major purchases and there's just less of a consumer age population left to fuel huge demand.

That's one reason why immigration will play a more important part in the overall economy, but that can only happen as the new generations become better educated, get better jobs and increase their incomes. That was really the story of the American Century. New waves of immigrants that work in low-paying jobs, educate their children and grow their resources. It's happened before and I think it will always continue to happen.
  • #16
  • Dec 26, 2006 11:38am Dec 26, 2006 11:38am
Quoting sergiu
It depends on how you trade! I do not mesure my performance in pips only. I aim for 50-75 pips a week so i only look for high probability setups with a low risk and potentialy high reward.
Sergiu
sergiu

How many trades do you enter weekly? With 50-75 pips target weekly it appears you do not trade often. Also, which time frame do you trade?
  • #17
  • Dec 26, 2006 11:58am Dec 26, 2006 11:58am
Price on the Eur and GBP have gone thru the lines on my chart. I did a fib retrace from the low to the high-sold half my position after 30 pips and i'm targeting the .786 with the rest-we'll see how it goes...
  • #18
  • Dec 26, 2006 12:12pm Dec 26, 2006 12:12pm
Quoting showmethetrade
sergiu

How many trades do you enter weekly?
It depends on how many set ups I spot. I would say min 1 and max 5.
Quote
With 50-75 pips target weekly it appears you do not trade often.
I do not see why. GBP for instance currently has a 10 day ATR of about 140 pips.
Quote
Also, which time frame do you trade?
Given that i have a day job i trade 4h and up. Ocasiaonally i may look at lower timeframe depending on circumstances.
Stubbornly persistent
  • #19
  • Dec 26, 2006 12:14pm Dec 26, 2006 12:14pm
Quoting NewstraderFX
Price on the Eur and GBP have gone thru the lines on my chart. I did a fib retrace from the low to the high-sold half my position after 30 pips and i'm targeting the .786 with the rest-we'll see how it goes...
Did you sell the eur or gbp?
Stubbornly persistent
  • #20
  • Dec 26, 2006 3:33pm Dec 26, 2006 3:33pm
Quoting JodyOng
Makes sense sergiu. I'm in the flag playing range. Waiitng for a break now is a waste of pips!
If you trade the ranges (swing) I can respect that-but it's a more dangerous way to trade. I don't think of waiting for the break as a waste of pips at all, because many times a break will start a trend. I think when the market ranges, people are unsure about direction. A break signals to me that the market may have made up it's mind about direction, especially if there's a nice confirmation candle.

I got out of the pound with around 55 pips and i'll tell u what i'd love to see-price edging up toward the former support and hitting it a few times before going back down. That would confirm for me that support has now become resistance and i'd feel confident about shorting again. Of course, there's no garuntee that will happen, but if it goes back to range traing again, i'll just try to find a break...if the downtrend continues, I think it could go to the low 9400's and make a lower low.
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