FXCM/DailyFX Signals and Strategies

Thinking out loud here...

As the day progresses, I keep seeing more and more headlines appearing surrounding currencies and increased tension between China and the US/Eurozone regarding the Yuan appreciation. Keywords and phrases (mostly negative) appearing such as currency wars, protectionism, intervention, upheaval etc. which is really putting a negative mood into everything especially going into this weekend's IMF meeting.

If things get really heated, maybe it will mark a turning point from USD weakness to USD strength due to a flight to safety? We will see...

DailyFX released the weekly SSI report today, and the headline says "Euro Hits $1.40 but Forex Crowd Sentiment Points to Reversal". Their argument for a reversal is that traders haven't continued to add to their short EUR/USD positions as the market has moved higher, so there is a divergence here indicating a possible reversal. Here's where you can find the report released today http://www.dailyfx.com/forex/technic...e_story_1.html

Here's a chart from Bloomberg showing NFP results over the past 5 years. I drew a green line at 0 so you can see positive increases in jobs vs. losses. The spike up to 400k earlier in 2010 was due to the increase in temporary census workers.

http://img207.imageshack.us/img207/8...rtfrombloo.png

Here's what DailyFX had to say in their short update:

The data does not bode well for the world’s largest economy as concerns regarding QE measures linger. Spending going forward will likely scale back as consumer’s fear further declines in the labor force, while credit conditions remain tight. It is worth noting the massive drop in census workers; however, there are only approximately 6,000 census workers that remain on payrolls.

Source: http://www.dailyfx.com/forex/market_alert/2010/10/08/U.S._nonfarm_payrolls_declines_95000_in_September.html#ixzz11mO8uLLz

Now that NFP is over, let's take a look at the week ahead:

The first very important event you should be aware of is the IMF meeting this weekend. If you are leaving positions open this weekend, please be VERY VERY careful due to the potential for gaps at the start of trading if anything substantial comes about due to the meeting. There's been lots of discussion this week about currency wars and the appreciation of the Yuan, so there could be debate at the IMF meeting over a proper course of action.

Here's a list of the economic events given "High" importance by the DailyFX team:

http://img407.imageshack.us/img407/2...arwekeahea.png

The complete calendar can be found here: www.dailyfx.com/calendar


Here's one trade to watch out for next week from Jamie Saettele:

British Pound 16000 Double Top?
http://media.dailyfx.com/illustratio..._IC_Screen.png

Near term, there is the specter of a small head and shoulders top on the hourly. I am cautiously bearish against the high and looking for weakness towards 15670 and maybe 15500/40.
Source: http://www.dailyfx.com/forex/technic...s_gbp-usd.html

Have a great weekend!

China Weekly from DailyFX.com
Written by Jonathan Granby

With its long national holiday now over, China has returned to center stage as comments from European officials last week indicate that pressure is mounting on China to act on the yuan. The pressure heaped upon Chinese leaders by US leadership over recent months is well known though US jaw-boning has had very limited real effect on the yuan. Their European counterparts gave it a go last week with ECB President Trichet leading the charge saying that the yuan’s appreciation “is not exactly what we would have hoped” for, expressing his disappointment with the extent of the yuan’s appreciation since China ended its two-year peg to the dollar in June. Various other European Union and European Commission added their own version of Trichet’s comments as the week wore on. In response, China’s central bank head Zhou Xiaohuan defended his country’s decision to only allow the yuan to strengthen gradually, saying an alternative “shock therapy” approach would be dangerous. It appears that officials are set to continue to exchange comments in the media as fears of an all-out currency war begin to grow. Officials are quick to blame China for the recent tensions surrounding the currency market since it is the largest and most effective administration pursuing interventionist policies. Not to mention China’s huge export sector, which has fueled much of the stellar growth seen in China over the last three decades, and Chinese officials protect by keeping the yuan artificially under-valued making their exports more competitive causing problems for countries trying to export their way out of recession.

Despite this all looking rather bleak from wherever you are sitting progress is being made, albeit in especially small increments. The WSJ reported last week that the yuan may soon be traded electronically by banks in the US and Europe. Currently ICAP and Thomson Reuters allow trade of the yuan on their electronic platforms, which supports trade with Chinese and foreign banks located in Hong Kong. The platform however, could be expanded beyond the city’s limits in what would mark another step toward the currency being traded in the global market. The report said that talks are ongoing with US and European banks about using the new system, until recently Hong Kong banks have been trading the yuan between themselves using over-the-counter (OTC) transactions or brokers. Electronic dealing would provide open pricing and volume data, key to enhancing the transparency, and would connect a larger pool of market participants.


Read more at: DailyFX - China Weekly; Yuan in Focus After IMF and G7. http://www.dailyfx.com/forex/fundame...#ixzz123wl9PqY

Here's a chart of the USD/CNY from NetDania. You can see the Yuan began to appreciate again in June of this year:

http://img801.imageshack.us/img801/5...ny10112010.png

Source: NetDania

Here's an interesting new strategy for Marketscope created by www.FXCodeBase.com.

Moving Average Stop
This strategy allows you to have a stop loss order automatically placed at a moving average line, and your stop loss automatically changes as the moving average line changes.

If you take a look at the image below, I have added the moving average stop to a EUR/AUD trade as an example. The chart is a 60 minute chart of EUR/AUD and I have 3 short positions. I have added a 100 period simple moving average and this moving average line acts as the stop loss. An actual stop loss order is created automatically by the strategy. If the market reverses and touches the moving average line, my stop loss order will execute.

http://img181.imageshack.us/img181/2...veragestop.png

Also take a look at the 60 minute EUR/USD chart below(very nice uptrend ) and you will get a great idea of how the moving average stop acts very similarly to a trailing stop. If you have a long position, the stop loss order will be located at the moving average line as it follows the trend. If the market turns down and touches the moving average line the stop order will execute.

http://img708.imageshack.us/img708/6...veragestop.png

How to set this up?

Pre-Setup Note: I recommend installing the Marketscope 2.0 AutoTrading Patch before using this strategy. My Marketscope was initially crashing when trying to add the new strategy, and it is now running smoothly http://www.fxcodebase.com/code/viewt...hp?f=31&t=2337 .

1. Download the Strategy. The strategy is not pre-loaded into Marketscope, so you will need to download it from FXCodeBase and then add it to the custom strategy list. Here is where you will find the download http://www.fxcodebase.com/code/viewt...hp?f=31&t=2339 . Download the file onto your Desktop or somewhere where you can easily find it later.


2. Add the strategy to Marketscope. Now that you have the strategy downloaded onto your computer, you can now add it to the Marketscope strategies list. Here are the steps (with image further below):

 

1. Step 1: At the top of Marketscope, click on Strategies > Add Strategy
   
2. Step 2: In the window that appears, click on Manage at the top right
   
3. Step 3: Another window will appear. Click on the Load button and find the strategy file saved to your desktop.

http://img830.imageshack.us/img830/2...yloadsteps.png

3. Using the Strategy

You should now have the strategy in your strategy list. The moving average stop strategy is called "Set stop by Moving Average". Let's take a look at the Strategy Properties for the moving average stop.

http://img409.imageshack.us/img409/4...strategypr.png

Please make sure to fill out all of the details in the properties window such as symbol, moving average parameters, and **very important** the specific ticket you want the moving average stop applied to.

Let me know if you have any questions!

Take a look at the latest signals being generated on DailyFX+ for the GBP/USD. Both Breakout2 and Momentum2 have generated short signals. Also of note, SSI positioning for GBP/USD is now net long. Ever so slightly at 1.22 as of this morning's reading, but net long nonetheless.

http://img186.imageshack.us/img186/1...ls10122010.png

New Marketscope Indicator: Multi Time-Frame Moving Average

Have you ever wanted to transpose a moving average based on one timeframe onto another chart time-frame? For example, I want an hourly chart 50 period moving average displayed on my 5 minute chart.

FXCodeBase created a multi time-frame indicator for Marketscope which will allow you to do this. You can find the indicator here FXCodeBase.COM: Forex Chart Indicators and Development • View topic - Multi Time Frame Moving Average

How does it work?

Here's an example. The chart posted below is a 5 minute EUR/USD chart. The dotted red line is a 50 period moving average based on the 4 hour chart. So this indicator lets me overlay the 50 period moving average from the 4 hour chart directly onto the 5 minute chart. How great is that, and you can do this for any time period.

http://img843.imageshack.us/img843/7...emovingave.png

So by using this indicator in this EUR/USD example, I could quickly see that the market was approaching the 50 period moving average on the 4 hour chart without having to change my chart time period.


To add this indicator into the FX Trading Station II Marketscope charts, you will first need to download the custom indicator file onto your desktop and then upload it into Marketscope. The indicator file can be downloaded here http://www.fxcodebase.com/code/downl...le.php?id=1888 . Once you have the file saved to your computer, open Marketscope, goto the top of the chart, and click on Chart > Manage Custom Indicators. In the custom indicator window, click on the Load button at the bottom of the window, and find the indicator file you have saved onto your computer.

Let me know if you have any questions.

Here's another currency pair that I'm watching: EUR/CHF

If you look at the 4 hour chart, EUR/CHF has been in a downtrend and it's testing the trendline. If EUR/USD pushes above 1.40 it could give EUR/CHF a lift to move above the trend line.

http://img88.imageshack.us/img88/184...fdowntrend.png

The DailyFX+ trading signals for EUR/CHF have bearish signals, but they are now in a holding pattern due to the most recent bullish action. See here:

http://img29.imageshack.us/img29/543...10103649am.png

Here's a new strategy just released by FXCodeBase.com.

Margin Alert

This strategy monitors your Usable Marging and alerts you when it falls below a specified level. For example, if you want to be notified when your usable margin drops below 50%, you can turn the strategy on and it will alert you by email or sound on the trading station you when your margin drops below 50%. In fact, you can create up to 5 alerts at custom margin levels.


Here's how it works:

1. Download the custom strategy from the FXCodeBase website: http://fxcodebase.com/code/viewtopic.php?f=31&t=2442

2. Load the strategy into Marketscope. (Instructions can be found in this post http://www.forexfactory.com/showpost...&postcount=524).

3. Turn on the Strategy. Below is a screenshot of the strategy options window. First, you will need to specify the account number in the Parameters section and how often the margin level should be checked. The frequency is in seconds. In my example I have it set to check every 60 seconds. Second step is to indicate which level you would like the alert to occur at. The margin level is a percentage. If you have it set to 10, this means an alert will go off when you have 10% of your usable margin remaining. You can setup an alert for up to 5 levels. And lastly, you can enter signal parameters such as the sounds to be played or the email address it should be sent to.

http://img684.imageshack.us/img684/1...properties.png

The dollar is finally getting some support this morning, and in particular, take a look at USD/CAD. CAD dropping this morning because of the Bank of Canada cutting Canadian growth forecast.

http://img404.imageshack.us/img404/5...ocdecision.png

BoC Refrains From Raising Interest Rates, Slashes 2010 Growth Forecast

Read more at: Forex @ DailyFX - BoC Refrains From Raising Interest Rates, Slashes 2010 Growth Forecast http://www.dailyfx.com/forex/market_...#ixzz12oUqPMX7

The Bank of Canada refrained from raising interest rates in October, which marked the first pause since the central bank began increasing borrowing costs in June. Subsequent to the release, the USDCAD resumed its intraday northern voyage, and now looks poised to test 1.04 in the near term as the greenback as of late benefits from China’s decision to hike interest rates for the first time in almost three years.

The central bank slashed its 2010 growth forecast from 3.5 percent to 3.0 percent, and noted that household expenditures is expected to “decelerate.” Policy makers also said that the recovery is entering a “new phase,” and further moves will be “carefully considered.” The comments trailing the rate decision does not bode well for the loonie, and we could continue to see the Canadian dollar lose ground against the buck, aussie, and Japanese yen for the remainder of the day.


Read more at: DailyFX - BoC Refrains From Raising Interest Rates, Slashes 2010 Growth Forecast http://www.dailyfx.com/forex/market_...n_October.html

Yesterday, I posted about the Margin Alerter in the FX Trading Station II. I wrote a more detailed guide on how to set it up and how it works. This may make it a little easier to use.

Setup

 

1. Download the Margin Alerter:
   I have attached the Margin Alert strategy directly to this post (as zip file) or you can download it directly from the FXCodeBase here (http://fxcodebase.com/code/download/file.php?id=2004). Save the file to your desktop or somewhere you can easily find it.
   
2. Load Margin Alert into FXTSII:
   The next step is to add the Margin Alerter to the strategy list. See the image below for instructions. 1) Click on Charts > Strategies > Manage Custom Strategies. 2) In the window that appears, click on the Load button at the bottom of the window. 3) Find the MarginAlert.lua file on your desktop and add it.

You should now have the Margin Alert feature in your Strategies list.


Creating a Margin Alert:

 

1. In FXTSII, click on Charts > Strategies > Add Strategy. In the window that appears, choose Margin Alert Signal from the list.
   
2. The Strategy Properties window should appear. This is where you set the specifics of the alert such as the margin level at which the alert will occur, whether to play a sound or issue a pop-up notification, email notification, etc.
   
3. Here’s a brief description of the main areas you need to be concerned about. Take a look at the image below for reference.

Parameters: This is where you select the account(s) for the signal as well as the frequency with which the signal should check your usable margin. I have it set to every 3 seconds in the image.

Level 1: “Use current level?” should be set to Yes in order for the level 1 signal to work. If you have it set to No, then the alert is not turned on. The margin level of 2500 is the Usable Margin dollar amount at which point the alert is generated. And lastly, Check Type let's you base the alert on the Usable Margin in dollar terms or percentage. I selected "Exact Amount" which lets you set the alert in dollar terms.

Level 2: Works same as level 1 and is where you will create an additional alert level.

Signal Parameters: This is where you indicate whether a pop-up window, sound, or email alert should be generated.

http://img207.imageshack.us/img207/5...properties.png

Margin Alert in Action


From the setup above, you remember that I created a margin alert for Usable Margin below $2,500 and $1,000. Here’s how it worked.

Margin Alert 1 when Usable Margin drops below $2,500

http://img258.imageshack.us/img258/2...below25002.png

Margin Alert 2 when Usable Margin drops below $1,000

http://img831.imageshack.us/img831/4...below10002.png

Please bear in mind, the FX Trading Station II has to be running in order for the alert to work.

An incredible 92% of open positions in GBP/JPY are long. Positioning has become so extreme as GBP/JPY has tested the 128.00 level. Also interesting to note that total open interest in GBP/JPY is now rivaling that of EUR/USD.

http://img85.imageshack.us/img85/143...py10192010.png

Now here's a bold call from DailyFX Analyst Jamie Saettele:

Long Term Euro Bear Trend Resumes:

I first showed this chart at the FXCM Expo in May (Trading Opportunities and Forecasts in 2010-slide 10). This latest top in the EURUSD will most likely prove to be the 3rd best selling opportunity of all time behind the 2008 top at 16000 and the 2009 top at 15140. While the fastest part of the decline is probably still several years away, the larger trend has likely turned back down.

http://media.dailyfx.com/illustratio..._IC_Screen.png

Read more at: DailyFX - Long Term Euro Bear Trend Resumes http://www.dailyfx.com/forex/technic...#ixzz12uBMpKxh

An interesting setup. Personally, I would like to see EUR/USD SSI positioning turn positive. Positioning has been net short for most of June 2010 until now. Here's the longer term SSI chart:

http://media.dailyfx.com/illustratio..._Picture_6.png

Green bars indicate positioning is net long, and red bars indicate positioning is net short.

Here's something that I've been watching recently. If you look at EUR/CHF on an hourly chart, it's been trading in a 200 pip range at it's widest point.

EUR/CHF 60 Minute Chart
http://img408.imageshack.us/img408/5100/eurchfrange.png

If you zoom out and look at a daily chart, there's a downtrend line which the market has been testing over the past two weeks. It looks like today's daily candle could close above the line I drew; however, we probably need a break above resistance around 1.3460 for a clean push out of the range. This one should be interesting to watch.

EUR/CHF Daily Chart
http://img210.imageshack.us/img210/1...fdowntrend.png

More on the EUR/CHF... It's attempting to break out of the range this morning:

http://img52.imageshack.us/img52/946...eakout1021.png

The trading signals in DailyFX+ haven't generated any long positions as of yet, and the short position is currently on hold.

http://img229.imageshack.us/img229/5...signal1021.png

The Strategy Trader contest page now has a leaderboard on the website displaying the top 5 accounts, and the board updates every hour. Here's what's happening so far for the automated trading competition:

http://img576.imageshack.us/img576/9...rtop5leade.png

First place has jumped out to a big lead after only 4 days of trading. Not sure how sustainable this type of growth is considering the contest has another 43 days to go. Here's where you can find the leaderboard for the on-going hourly updates. http://www.fxcm.co.uk/automated-fore...ng-contest.jsp

By the time you posted this, it dropped back to the mean within those top 5.

Yeah, that first place strategy is out of control. Too bad we don't show trading history also. Would like to see which pairs it was trading and the amount of leverage.

Below is the most recent update for SSI. It shows that positioning in USD/JPY and GBP/JPY are still extreme, but GBP/JPY positioning has scaled back (a little).

http://img245.imageshack.us/img245/5...01041519pm.png

I wanted to highlight GBP/JPY in particular because the UK GDP figure is being released very early tomorrow morning. If the number disappoints, then look for a possible push lower in GBP/JPY. It's at a very important support level:

http://img440.imageshack.us/img440/1...01042824pm.png

Mohamed A. El-Erian of Pimco talking about Greece & the US

Just when things were starting to get quiet in Europe regarding Greece, you have Mohamed El-Erian of Pimco come out and say he expects Greece to default within 3 years. Here's a selection from WSJ.com:

Greece is likely to default, and it will be to the country's and the European Union's benefits, said El-Erian, speaking at the Buttonwood Gathering in New York.

Without an orderly restructuring, he said, Greece's economy could spiral into a lost decade of high unemployment and low growth as seen in Asia and Latin America in the past.

http://online.wsj.com/article/BT-CO-...25-715692.html

And another pessimistic outlook from El-Erian:

Federal Reserve Treasury purchases will likely spur global inflation while failing to lower U.S. unemployment, according to Mohamed A. El-Erian, chief executive officer at Pacific Investment Management Co.

Quantitative easing, the strategy of buying bonds to cut borrowing costs, won’t be enough to deliver high economic growth, he said yesterday at a reception in New York sponsored by the Financial Women’s Association. The record amount of U.S. debt is another problem for the economy, said El-Erian....
http://www.bloomberg.com/news/2010-1...isappoint.html

Turning our attention back to GBP/JPY, today's UK GDP number gave a boost to retail GBP/JPY traders who were overwhelmingly long the pair. The positioning I posted yesterday showed the ratio of long to short positions was 11:1. As of the latest update on DailyFX, the positioning now stands at 4.79:1. Traders have taken profit on their long positions as the market has moved in their favor.

Here's a look at the 4 hour GBP/JPY chart:

http://img5.imageshack.us/img5/2415/...ur10262010.png

More bad news out of Greece...

Greek bonds slid for a third day as Finance Minister George Papaconstantinou said a tax-revenue shortfall is hampering government efforts to reduce the nation’s budget deficit.

The declines pushed the yield on the 10-year bond to the highest in more than three weeks. Papaconstantinou, speaking at a conference in Limassol, Cyprus, said Greece has “serious tax compliance issues,” while the country’s budget shortfall last year as a percentage of gross domestic product after a revision by European Union authorities will be above 15 percent, more than Prime Minister George Papandreou indicated on Oct. 7.

..... “We are pretending collectively as a country to have a tax system,” Papaconstantinou said. “We don’t.”

http://www.businessweek.com/news/201...ing-short.html

This could raise concerns for the Euro, and Joel Kruger at DailyFX.com is pointing out a head and shoulders setup on the daily chart as a possible top in EUR/USD.

http://media.dailyfx.com/illustratio...l_body_eur.png
http://www.dailyfx.com/forex/technic...Classical.html