FXCM/DailyFX Signals and Strategies

EUR/USD pushes above 1.26 and gold falls below $1200.

Jamie Saettele's tech analysis has indicated a possible push to the 1.2779 level in his technical analysis.

http://www.dailyfx.com/export/story-...1727798528.gif

http://www.dailyfx.com/forex/fundame...nce__Gold.html


And on the gold front, Sumit Roy from DailyFX sees gold possibly dropping down to $1166:

http://www.dailyfx.com/export/story-...062010gold.png

http://www.dailyfx.com/forex/fundame...nce__Gold.html

Thanks Jason !!

Thanks Jason! Worked great...no lag at all now!

Good to hear!

Following up on last week's USD/JPY post, SSI confirms that traders are still trying to pick a bottom in USD/JPY as it continues to drop further with USD/JPY now testing the 87 level. Here's the SSI reading as of this morning:

http://img130.imageshack.us/img130/1760/usdjpyssi.png

An SSI reading of 4.85 means that there are 4.85 long orders for every short order (or roughly 80%+ of traders are long usdjpy). The previous low in USD/JPY was made back in November 2009 when it reached 85.

http://img203.imageshack.us/img203/6...djpybottom.png

The correlation report was updated yesterday on DailyFX. See below. A reading of +1 means the two currencies are positively correlated (meaning they move together). A reading of -1 means the currencies are negatively correlated (meaning they move opposite each other). And a reading of 0, means they move randomly to each other, uncorrelated.

http://www.dailyfx.com/export/story-...0-07-07-01.gif

One of the more interesting deviations from the common risk theme this past month is from the dollar itself. Against high-yield currencies, the greenback is still a consistent safe haven currency; but we have seen this role diminished in recent weeks for EURUSD and it has certainly dissipated for more questionable risk-based pairs like USDCHF. A remarkable slip in correlation comes through one-month correlation between EURUSD and USDCHF through June (-0.60). Just a few months ago, this period reading was far greater (above -90) and we can even see over a longer period that the relationship has been far greater (-0.86 over the past year).

Read more: DailyFX - Currency Correlations Show Risk Appetite Trends Yielding to Fundamental Concerns http://www.dailyfx.com/forex/fundame...#ixzz0t6BOHU00

EURUSD traders, mark your calendar for July 23! That's the date the EU regulators are scheduled to release the stress tests for 91 banks and their exposure to sovereign debt. Here's a quick read from Bloomberg http://www.bloomberg.com/news/2010-0...onfidence.html .

EURUSD continues to remain in an upward channel on the 60 minute chart. Here is Jamie's elliott wave analysis.

http://www.dailyfx.com/export/story-...1727799515.gif

Here is this week's schedule for the DailyFX live trading events:

 

1. Tue (Jul 13th, 10:00 EST) – Trading the Dollar, Equities and Gold with John Kicklighter
2. Wed (Jul 14th, 8:30 EST) – US Advanced Retail Sales (JUN) with John Rivera
3. Thu (Jul 15th, 18:45 EST) – New Zealand CPI (2Q) with Ilya Spivak
4. Fri (Jul 16th, 9:55 EST) – UofM Consumer Confidence (JUL P) with David Song

Live coverage starts 10 minutes before the economic release. Exception being the one on Tuesday which begins promptly at 10am. http://www.dailyfx.com/calendar/trade_the_news/

Take a look at the most recent SSI data from this afternoon.

http://img8.imageshack.us/img8/4397/nzdusdssi.gif

NZD/USD has a reading of 3 so traders are trying to pick a top at this level. If you look at a 4 hour chart of NZD/USD, you can see exactly what traders are looking at. The market tested this level 3 times back in June failing to go higher. Watch for a possible push higher:

http://img38.imageshack.us/img38/1289/nzdusdchart.png

Continuing with NZD/USD from yesterday, we saw a push higher but the market stalled at 0.7200. I checked SSI just now and the reading is at -3.14 which is still significant. (Anything over +/- 3 is considered significant by DailyFX.) Taking a look at the tech analysis for NZD/USD on DailyFX, the next significant level seems to be 0.7333. Maybe we will see a test?

http://www.dailyfx.com/export/story-...1727798522.gif

Looking ahead to tomorrow, we have the US Retail Sales report coming out at 8:30am EDT. Make sure to join DailyFX for live trading coverage starting at 8:15 am EDT http://www.dailyfx.com/calendar/trade_the_news

Is there a chance that there is a log somewhere that would give a history of when the Breakout2 signal has been called for the past year or six months and at what price?

I doubt it, but best bet is to check with David Rodriguez of DailyFX to see if he has a log or information. Here is his email [email protected] .

EURUSD is pushing higher and a test of the 1.2800 level is looking like a real possibility. Why the strength for the Euro? Well the weak retail sales report is one factor, but also the possibility of sovereign debt crisis out of Portugal and Greece is diminishing with both of their recent bond issuances. See this from Reuters:

Portugal sold 1.68 billion euros (1.4 billion pounds) of government paper, more than expected, a day after Moody's rating agency downgraded the country's debt, with analysts upbeat despite the higher yields paid to investors.
http://uk.reuters.com/article/idUKTRE66D1XA20100714

And regarding Greece:

The debt-ridden country managed to get market funding at a slightly cheaper cost than the 5.0 percent it pays to borrow under the 110 billion euro loan that the European Union and International Monetary Fund put in place to calm a crisis that has shaken the euro zone. http://www.reuters.com/article/idUSLDE66C0DH20100713

I don't see this as a glowing endorsement of the Euro, but it gives pause to me shorting the Euro. If anything, I'll be waiting for next week's Euro-zone bank stress test results to be published for a possible negative news event.

As far as the DailyFX Signals, it looks like they're approaching some uncertainty at this point. Both Breakout2 and Momentum 1 are signalling long positions BUT the entry is not optimal. The current action is a HOLD meaning if you're in the trade stay put, but if you're not then don't enter. Here's a screenshot of the trade details:

http://a.imageshack.us/img69/9826/tradedetails.png

I have to apologize about a mistake I made in the below post from Monday July 12. I added the incorrect SSI screenshot (which was taken a couple of weeks ago). The correct screenshot showed a reading of -3.00 for NZD/USD whereas the one I posted showed +3 which doesn't make any sense at all from what I wrote. I'll start including the date information in the screenshot just to make sure my wires don't get crossed again.

An update on Strategy Trader. The platform is scheduled to launch on the website any day now.... Coinciding with the launch of Strategy Trader is a new pricing scheme from programming services if you need any indicators or strategies coded.

Simple MT4 indicator coding is $300 and advanced MT4 strategy and indicator coding is $600. Additionally, if you pay to have a strategy or indicator coded in MT4, the programming team will automatically create a compatible version coded in C# for use on Strategy Trader, at no extra charge.

FXCM Programming Service was developed to not only enhance automated trading throughout the retail trading industry, but to also eliminate the frequently contentious distance between programmers and brokers. When traders have an issue with their automated strategy, they're often stuck between the programmer who blames the brokers execution and the broker blaming the programmers coding. The goal is to make available programmers that know execution and thereby how to optimize strategy automation.

The Bank of Japan seems to be drawing the line in the sand at 85 as reported by the Wall Street Journal:

The Bank of Japan may consider taking additional easing steps to prevent the economy from worsening if the yen falls to around 85 to the U.S. dollar and stays there for a month or two, a person familiar with BOJ thinking said.

.....

"But if the yen comes to stay around 85 against the dollar for one or two months, that could have an adverse effect on the economy," said the person. If that happens, the BOJ "may do something."

http://online.wsj.com/article/SB1000...70860358.html?

This morning's SSI report shows that retail traders are piling into long USD/JPY positions by a magnitude of 5.85 long positions per 1 short position. Long positions would get some support in the event of a BOJ intervention, but as mentioned in the article, the timeframe could be as much as 1-2 months away. I assume the prospect of intervention would depend of whether we see a severe decline or gradual drop in USD/JPY. Here's the SSI report:

http://img827.imageshack.us/img827/7858/ssijuly19.png

Just a reminder that tomorrow we have the Bank of Canada interest rate decision coming out at 9:00am EDT. John Kicklighter just mentioned that the odds of a rate increase of 25 bp's is up to around 96%. Watch out for any volatility in the CAD pairs, and if you're going to be trading it, join DailyFX for live coverage starting at 8:45am EDT. http://www.dailyfx.com/calendar/trade_the_news/

Last week I mentioned that the ECB stress test results are expected to be released on July 23rd (this Friday). DailyFX has a great write up on the release which is a great read and posted in full below. From what I've heard, the report is being released after the close of European trading so expect for a release during the afternoon New York time which could cause some volatility in the markets right as trading is winding down.

Talking Points
• Trichet to Meet with Banks Two Days Prior to Published Results
• Uncertainty About the Consequences Surrounding Failed Tests Remain
• EURIBOR Surpasses 0.80 Percent For the First Time Since August 2009

The result of Europe’s bank stress tests are expected to restore confidence in the financial system this Friday. However, it is not clear whether the outcome will achieve this goal as many details regarding the stress measures lingers. The tests will include 91 banks, with two thirds in the public sector, while the outstanding one third will include banks across the private sector. Furthermore, the number of banks will be comprised of a minimum of 50 percent of the lenders in each country and 65 percent of the sector in the region. Leading up to the highly anticipated announcement, Bloomberg News stated that Hypo Real Estate Holding has failed the Europe wide stress tests. On the other hand, all is supposedly well in Greece according to Finance Minister, George Papaconstantinou as he recently said that all banks in region are expected to pass.

Prior to the release of the results, European Central bank President, Jean-Claude Trichet is rumored to meet with banks on July 21st, according to an article by Reuters. The meeting is expected to discuss the consensus of publicizing the outcomes, and will evaluate whether any of the commercial lenders will need to recapitalize their balance sheets. Indeed, the tests that will be conducted will include a sovereign risk scenario, a baseline macroeconomic forecast for the rest of this year and 2011, and an adverse macroeconomic situation. In particular, the adverse scenario which assumes a 3 percentage point deviation of GDP is of some concern as economic activity may underperform the baseline by more than 3 percent if another slowdown occurs in the region as predicted by many economists as governments scale back stimulus measures to battle the ballooning budget deficits.

Additionally, the “haircut” measures have added additional weight onto the credibility of the stress tests thus far. Haircuts are percentages in which an assets market value will be reduced, regarding capital requirement for those who are exposed to debt in countries like Spain and Greece. There have been rumors circulating by Reuters that Greek debt is expected to be a haircut of 23 percent, but will only pertain to trading books. It is also worth noting that the stress parameters have not been specified of what will occur if banks fail these stress tests. Some analysts speculate that the consequences of a failed outcome will result in a minimum tier one capital ratio.

All in all, as the euro continues its northern journey, despite the pullback in the equity markets and ongoing concerns in the 16 member euro area, we may see the single currency re couple with risk if the scrutiny of European lenders fails to show that banks have enough capital to withstand another shock to the financial system. In turn, if the results are as ghastly as some market participants believe, a flight to safety across all asset classes will likely be the outcome.

http://www.dailyfx.com/export/story-...1727800541.jpg

The three month EURIBOR rate, one of the euro-zone’s principal money market indicators continues to push higher on the back of credit risk conditions, rather than lack of ECB liquidity. The EURIBOR3MD is fixed at 0.860 percent. The three month euro libor has risen above 0.80 percent for the first time since August 2009.

DailyFX - Markets Await ECB Stress Tests Results http://www.dailyfx.com/forex/fundame...#ixzz0uERRqroW

Take a look at the volatility measure I highlighted for the major currency pairs from the DailyFX Technicals section:

http://img832.imageshack.us/img832/5...volatility.png

The volatility measures for most of the currencies has fallen below 50%; except for EUR/CHF which continues to be very active. GBP/JPY volatility (not shown) is down to 25%. The GBP pairs are typically the most volatile. The these pairs seems to be in a holding pattern waiting for the release of tomorrow's ECB stress test results.

Retail traders in general perform poorly whenever the markets are very volatile. Using high amounts of leverage with volatile market conditions means there will be bigger fluctuations in profit loss, increasing the chances of being stopped out. When volatility decreases, the market also tends to move in a range which retail traders like.

Unsurprisingly, the SSI information hasn't been as great as in previous months. Just take a look at the USD/JPY SSI from earlier this morning. The reading was +5.63. Making a trade purely based on this as a contrarian indicator, one would except USD/JPY to drop further. The opposite has happened with USD/JPY bouncing off of last night's lows. Retail traders seem to be on the right side of this move. Will be interesting to see from this afternoons report if they have taken profit on those positions.

The volatility measure in the screenshot above can be found on this page of DailyFX: http://www.dailyfx.com/technical_analysis/

The market's are starting to get jittery ahead of the release of the ECB stress test results. EUR/USD was relatively quiet up until the start of London trading. Traders seem to be positioning themselves for a negative report with risk aversion being the name of the game. The EUR/JPY cross has dropped 100 pips over the past hour, and gold has been all over the place in the past couple of hours. Take a look at the gold chart below.

http://img594.imageshack.us/img594/948/goldchart.png

The EUR/USD trading signal from DailyFX+ has no open trades. The WSJ is reporting that the stress test results will be released at 12pm ET (4pm GMT).

Was just reading through the GBP/USD thread where maurofx posted this article
http://www.reuters.com/article/idUSLDE66M1FF20100723

Great article that describes the stress test methodology for those of you who like to know the details.