FXCM/DailyFX Signals and Strategies

Jamie Saettele is now adding technical analysis for gold to his daily Ellliott Wave updates. Check out todays...nice trendline on the 60 minute chart showing resistance at $1110.

http://www.dailyfx.com/export/story-...1727798554.gif

If you trade XAU/USD (Gold) use caution with your lot sizes. Gold can be a volatile pair. This morning we saw it move $20 within a two hour span.

http://www.dailyfx.com/technical_analysis/elliott_wave/

hi Ifee,

I have another Elliott Wave Oscillator you can use. It's more conventional and easier to use and customize if you want to give it a try.

The website www.fxcodebase.com has custom indicators you can load into Marketscope. The Easy-to-Read Elliot Wave Oscillator displays a histogram instead of a line. See screenshot below:

http://img64.imageshack.us/img64/463...oscillator.jpg

With this setup, the bullish or bearish wave 3 is associated with the highest or lowest point of the oscillator.

Now, to get this indicator in the platform, here is what you do. Download the indicator from the website here http://fxcodebase.com/code/download/file.php?id=158

Once you have it saved to your desktop, open the Marketscope chart. At the top of the chart click on Chart > Manage Custom Indicators. A window will appear. In that window, goto the bottom and click on Load, and find the EWO1.lua indicator file you saved to your desktop. Press OK and the indicator will now appear in your Marketscope indicator list.

Cheers,

Jason

Today's highlights...

Swiss Franc

EUR/CHF, some spikes over the past couple of hours which have been rumored to be the Swiss National Bank intervening, but it really hasn't caused a change in direction.

http://chart.ly/assets/4wm8fw.jpg

Euro-Zone GDP

Euro-zone GDP was released this morning. The numbers were not that hot. Here's a graph taken from the Economist comparing some of the countries GDP figures. (The Economist always has great graphs) And a nice article accompanying it http://www.economist.com/businessfin...ry_id=15521489

http://img15.imageshack.us/img15/464...omistgraph.jpg

China

Lastly, China surprises everyone by raising reserve requirements...again. This time by 50 basis points effective Feb 25th. Basically, the Chinese central bank is trying to remove excess liquidity they see building up.... are they afraid of a bubble?

From Marketwatch: After the hike major banks will be required to set aside 16.5% of deposits. Smaller banks are currently required to set aside 14% of deposits. http://www.marketwatch.com/story/chi...k=MW_news_stmp

A new weekly report coming out from DailyFX: "China Weekly"

Here's a preview of this weeks report:

What was shaping up to be an unexciting week in China ahead of the week long New Year’s celebration was turned on its head on Friday, with the unexpected hike in bank reserve requirements. The increase in banks’ reserve ratio is the second of the year and will take effect on Feb. 25. The hike of half a percentage point now brings the amount of deposits banks need to keep in reserve to 16.5%, reflecting a feeling in Beijing that the brakes need to be applied harder. Estimates by analysts at Barclays Capital indicate that the half point hike will drain about 300 billion yuan from the banking system.

Standard Chartered head of research Stephen Green in Shanghai said “the timing caught everyone by surprise” and that the action appeared to be of a technical nature. Designed to mop up some excess liquidity that had been pumped into the system ahead of the week long holiday, when the industrial economy virtually shuts down and tens of millions of people return to their home provinces.

Despite all the talk of tightening in recent weeks, sparked by the earlier reserve requirement hike in mid-January, banks still managed to lend an astronomical 1.4 trillion yuan last month. The official target for lending in 2010 is 7.5 trillion yuan ($1.1 trillion), a fifth of that total was lent in one month. The uncertainty over what other tightening measures are in store threatens to make it a bumpy start for the Year of the Tiger. Investors will have a few days to digest the news since Hong Kong only returns on Wednesday and Shanghai is closed for trading the whole week.

Data released on Thursday is thought to have spurned the Chinese government into hiking the reserve ratio, however, despite some staggering figures reported, no one expected the authorities to turn around quite so quickly and hike the reserve ratio, and as mentioned above, the move took everyone by surprise. CPI climbed 1.5% in January compared with a year earlier and PPI was 4.3% higher. The key release was that banks had extended 1.39 trillion yuan in loans in January, more than three times the 379.8 billion extended in December and 18.5% of the full-year lending target. Money supply, as measured by the M2, was up 25.98% also higher than expectations. Despite a rebounding economy and solid data coming out of China, the Shanghai Composite is now among the worst performing benchmark indexes in Asia so far this year, having lost about 9.5%. The Hang Seng China Enterprises Index, a benchmark tracking performance of large-capital Chinese shares listed in Hong Kong, has even sharper losses, having dropped 12.5%, while the Hang Seng Index has given up around 9% so far in 2010. This underperformance from Chinese stock markets is reflective of concerns investors have about Chinese policy tightening.


Read more: DailyFX - China Weekly 02.15 http://www.dailyfx.com/forex/market_...#ixzz0fcPkkDR0

Here's a look at the USD/CNY over the past couple of years. It's basically flat lined since July 2008:

http://img534.imageshack.us/img534/1273/usdcny.jpg

Well, well, well. Speaking of the CNY, this comes out from Bloomberg.com


Goldman’s O’Neill Says ‘Something Brewing’ in China on Currency
“I have a strong opinion that they’re close to moving the exchange rate,” O’Neill said in a telephone interview from London after China’s central bank told lenders on Feb. 12 to set aside larger reserves. “Something’s brewing. It could happen anytime.”
http://www.bloomberg.com/apps/news?p....3x_gAo&pos=11

The newest correlations table from DailyFX shows the recent increase in correlation between the forex carry trade and gold prices.

Forex Correlations Summary
Forex correlations against Oil, Gold, and the S&P 500 for the past 30 calendar days:

http://www.dailyfx.com/export/story-...10-02-15_1.gif

Recent sharp declines in the US S&P 500 and other financial market risk barometers have pushed cross-market correlations sky-high through recent trade. All leveraged markets have been moving much in the same direction through recent episodes of financial market distress—emphasizing the level of interconnectedness across key markets. A glaring example is the record-correlation between the FX Carry Trade and Gold prices. These two seemingly unrelated markets are both highly leveraged and have seen impressive gains through recent months. With a sharp episode of financial market deleveraging, they likewise fell in unison against the resurgent US Dollar. It will be critical to monitor any and all turmoil in financial markets and its effects on the US Dollar.

Upcoming FXCM Expo in Las Vegas....www.fxcmexpo.com

http://img716.imageshack.us/img716/5880/fxcmexpo.jpg

DailyFX is calling for a pullback in the USD. This doesn't seem unreasonable considering the magnitude of the USD strength over the past couple of weeks. Take a look at the two EUR/USD charts below. I used the ruler tool in Marketscope to compare the uptrend with the downtrend. It took about 144 days for the market to move up 1600 pips.

http://img404.imageshack.us/img404/1...usduptrend.jpg

Compare this to the downtrend. It only took the market about 52 days to drop the same 1600 pips.

http://img705.imageshack.us/img705/4...ddowntrend.jpg

The unwinding of a trade and opposing trend is typically much more severe than the previous trend. Other examples you can look at are the GBP/JPY carry trade unwinding, stock market bear run during the credit crunch, etc.


Here's more of what DailyFX has to say on the USD direction:

Forex futures and options markets have aggressively bet on a US Dollar recovery against the Euro and other key counterparts, leaving scope for a short-term correction in the context of a broader Greenback recovery. Indeed, CFTC Commitment of Traders data shows Non-Commercials hold a record notional net-short position in the Euro against the US Dollar, leaving relatively little room for further selling.

Forex futures and options markets have aggressively bet on a US Dollar recovery against the Euro and other key counterparts, leaving scope for a short-term correction in the context of a broader Greenback recovery. Indeed, CFTC Commitment of Traders data shows Non-Commercials hold a record notional net-short position in the Euro against the US Dollar, leaving relatively little room for further selling. The speed of the Dollar recovery tells us that this is the turn we have long been waiting for, but many signs point to short-term consolidation or pullbacks before the USD can continue higher.


Read more: DailyFX - US Dollar to Decline on Extreme Forex Positioning http://www.dailyfx.com/forex/technic...#ixzz0fpFuHa5d

FYI, I will be away until next Wednesday (February 24th) which means I won't be posting on the thread until then. Best of luck with your trading!!!!

If you have any pressing questions for FXCM, please contact client services, or leave a message and I'll answer first thing next Wednesday!

Back from a long break, and good to be back might I add!

The theme of the day is risk aversion. Here are the highlights of pairs I'm watching.

EUR/USD testing the 1.35 level, and it looks like 1.35 will be a tough one to break through after repeated tests over the past week. The 1.3470-1.3500 level is also the 62% retracement on the daily chart.

GBP/JPY down over 300 pips today and also testing the 62% fibonacci retracement level at 1.3565 on the daily chart. It's trading below as we speak.

EUR/JPY testing the 119 level which hasn't been tested since February '09.

The market continues to be concerned about Greece's financial stability and the rating agencies warned today about downgrading their sovreign debt. Take a look at the below graphic from the Wall Street Journal. It shows which countries banks have the biggest exposure to Greek debt along with other countries having fiscal problems.

http://img17.imageshack.us/img17/819...kdebtgraph.jpg

Source: http://online.wsj.com/article/SB1000...Tabs%3Darticle

France and Germany have the greatest exposure to Greek debt (and of other nations) so even if they don't bail out Greece and Greece ends up defaulting on their debt, the French and German economy will still be hit. Not a good situation for the Euro and therein explains the recent Euro weakness and risk aversion.

The GBP/AUD and EUR/AUD continue to be trending currencies to watch.

Below is Jamie Saettele's Elliott Wave analysis for the EUR/USD along with important trend lines to watch.

http://www.dailyfx.com/export/story-...1727798526.gif

Source: http://www.dailyfx.com/technical_analysis/elliott_wave/

The breakout and momentum strategies for GBP/JPY have been working very well with each strategy up over 650 pips.

http://img9.imageshack.us/img9/6721/gbpjpysignals.jpg

The market is right at the 62% retracement level on the daily chart so there could be some difficulty getting through this level.

http://img696.imageshack.us/img696/7980/gbpjpychart.jpg

The Range 1 strategy gave a buy signal a little over 30 minutes ago as well entering at the price 135.233 and a trailing stop at 133.396. A wide stop due to the potential for volatility in the GBP/JPY so be careful with your position size.

hi Jason,
can you please tell us what has been the performance of dailyfx plus signals during last year- I know they are in different categories
thanx

This mornings News in 60 Seconds from Sean Hyman of the DailyFX Powercourse.

Biggest % gainers: EUR/GBP up 1.30%, AUD/CHF up 0.89%, USD/CHF on CHF weakness and GBP weakness.

Biggest % losers: GBP/USD down 1.92%, GBP/JPY down 1.59%, GBP/CHF down 1.15% on GBP weakness.

Gold $1,117
Oil $80.23

GBP Manufacturing PMI better at 56.6 vs. 56.3 expected.

EUR Unemployment notches down to 9.9% (better than expected).

CAD GDP better at 0.6% vs. 0.4% expected.

USD ISM Manufacturing comes out at 10am EST today. 57.7 expected.

Aussie rate decision tonight at 10:30pm EST. Hike of 0.25% to 4% expected.

Warren Buffett says if forced to switch away from USD, the CHF looks good.

So why would the pound drop on good numbers? If the U.K. thinks they are out of the woods, then they will stop pumping money into the economy. Traders fear that when they do that, the economy will fall on its face again and back into a recession.

Greek labour minister is proposing a freeze of all public sector pensions in 2010.

USD U.S. PCE Deflator y/y worse than expected at 2.1% vs. 2.2% expected but same as last time's 2.1%.

Sean Hyman
DailyFX Moderator

Hi shahab,

For long term performance, I do not have the statistics on this unfortunately and there is no record kept in the DailyFX Plus signal section. But, I would say the breakout strategy has been the best performing system over the past 6 months or so. The breakout and momentum strategies are partly based off of SSI which works very well when the market is trending and volatility is above average. Since mid-2007, we've seen a spike in currency volatilities which has helped these strategies. The range strategies are the ones that will underperform. Since market conditions change over time, it is possible the range strategy could come back into play. But I don't see that happening until (at a minimum) the markets calm down particularly over budget deficits in play in Europe.

-Jason

John Kicklighter had this to say on Twitter (@JohnKicklighter) just now:

Crude has tested both boarders of its $80.50 / $77.75 range for a fifth consecutive day. A breakout is nigh.

Take a look at the 60 minute chart for crude (or 1 hour for however you want to call it) taken from FXCM's CFD oil contract.

http://img17.imageshack.us/img17/5590/crudechart.jpg

The market has been ranging between $80 and $78 for the past week.

Tonight at 22:30 EST (3:30 GMT), we have the Reserve Bank of Australia's interest rate decision. Here's what BusinessWeek has to say about it:

Governor Glenn Stevens will boost the Reserve Bank of Australia’s overnight cash rate target to 4 percent from 3.75 percent, according to 14 of 19 economists surveyed by Bloomberg.
Source: http://www.businessweek.com/news/201...aders-say.html

This would be the 4th time in 5 meetings the RBA has raised rates. DailyFX will be hosting live trading coverage during the RBA announcement starting at 22:15 EST (3:15 GMT) http://www.dailyfx.com/calendar/trade_the_news/. This one could cause some market excitement!

Yesterday's CAD GDP figure greatly exceeded expectations which is giving the CAD a positive boost. The forecast was for annualized GDP to be reported at 4.2%, but the actual number came in at 5.0%. USD/CAD has dropped to the 1.03 level on the news. Fundamentally, a better trade to make would be EUR/CAD short due to the turmoil occurring in Greece. We're at levels not seen since Nov 2007.

Here's a 4 hour chart showing the EUR/CAD trend since Nov 2009:

http://img408.imageshack.us/img408/7366/eurcad.jpg

Compare this to USD/CAD since Nov 2009...much choppier trading:

http://img519.imageshack.us/img519/4241/usdcad.jpg

So how are retail traders positioned in USD/CAD? They're selling the CAD and buying the USD despite the positive GDP announcement.

http://img402.imageshack.us/img402/2...ositioning.jpg

The upper resistance level of the range is being tested. Crude currently trading around $80.70. Reasons...signs of economic strength and/or dollar weakness?

FXCM is hosting a forex trading expo in Las Vegas on May 3-4, 2010. The expo is free and all are welcome to join. (I will probably be there myself live tweeting the event ). The expo workshops will have a special focus on the MetaTrader 4 platform, in addition to beginner and advanced level workshops. Here's a preview of some of the MT4 related workshops being given:

- No Dealing Desk vs. Dealing Desk Q&A with FXCM's CEO, Drew Niv
- How to Build & Set Up an Expert Advisor
- MT4 Programming Panel
- How to Backtest and Optimize Strategies via MT4
- Intermediate MetaTrader Functions
- Blackbox Trading via MT4
- MT5: What it is and how to get ready

Members of FXCM's programming services team will be joining in the discussion
during the workshops.

You can find more details along with the complete workshop schedule and
registration information here: www.fxcmexpo.com

Nice Elliot Wave Theory explanation. Concise and to the point.