GU, GJ and EU Analysis Thread

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Yes, I am 'watching', but I'm not in a trade on it alas for some reason, and I spent all day on Monday coaching someone on why selling the pair (plus the nzd/usd) was a good idea - yep, go ahead and 'shoot me with an imaginary dart' but good luck to all who went short, including my buddy who's taken to texting me every day to tell me she's still short on the aussie.

Still grappling, in this autistic mind of mine, with the concept of having 1 trade in profit, and one potentially in drawdown till it goes in my intended direction, open at the same time, but I will get there. This is my first successful attempt to get in at the bottom and hold for a swing to the top (i.e. my long on the Swissy running from 0.9340) and when we got to 1.0165 on the swissy, and I went short, I moved my SL to break even far to quickly as I didn't want to see my swissy trade in the green, with my aussie trade potentially running at a loss.

I need to build my mind up and not get scared of opening another parallel order when in profit.

I'll be reviewing all charts again this weekend, looking at which one has the potential to provide the most gains (including any potential retracement on the Swissy) and next week, I'll actually trade my thoughts (I promise).

Only 220 pips weekly pip count on cable this week so far. What awaits us this afternoon?

i

Why grapple with the concept IbKA? This uncertainty of yours is only the result of applying a concept you have no idea whether or not it works, you've just been told or heard. Test it and then test it again! Things will become apparent to you and your mind will be quieted. You will take on and apply the concept with confidence.

During some market conditions, instrument correlations are low (usually in the case of forex, this is USD or JPY weakness) and you can buy dollars against one currency while selling them against another without any worries.

During other conditions instrument correlations are high (usually in the case of forex, this is USD or JPY strength) and you only really need to be in one position at a time anyway.

Working out the correlation yourself is really really simple in a spreadsheet program. I use =CORREL(A1:A20) (20 period correlation) in OpenOffice as an example for you. Same formula works in MS Excel.

If you can't be bothered to work it out yourself, use this

http://www.mataf.net/en/tools/01-01-correlation

After a while you get an idea of which it will be and some of us will just look at the USDX chart and take a rough eyeball guess (although this is based on experience) at whether instrument correlations will be high or low across the next trading period we are interested in

Yes, just stupidity on my part - but I will get there, and I'll view the spreadsheet - but my problem is less about understanding correlation than about not wanting to give anything back to the market.

I can view any pair or commodity, and give a good guage on what it's going to do but I like to be there watching when things hit my trigger point and if I'm at work or in a meeting when it hits my trigger, I don't feel comfortable placing a pending order and stop loss and then 'walking away' (that's the hardest part - walking away).

I will get there and, for now, when unsure I tend to place trades on my demo account instead of my live one -& wow, how that account's grown!!! The WALK AWAY bit is the next learning curve for me, specially if I'm trying to evolve into a swing (or is it 'trend') trader now, to stop me from tampering with things and closing out too early.

So, going forward the plan is to go through all the charts over the weekend, select two to three trades which have the highest probability of being successful then, place the trade at the right time during the week and 'walk away'!

Most lessons in life are learned over a lengthy period of time & it's taken me a long time to learn the lesson of 'patience', and then to plan each trade rather than jump in on the spur of the moment if I've missed an opportunity. Now, all I need is the faith to trade my plan and consistent practice as you've said, and I'll be there.

Thanks, again, for all your hardcore lessons; that's what I like about this particular thread i.e. the hard knocks and prods are intended to enable all of us to evolve into better traders than we currently are. It's working for me, thanks to you all.

i

Following on from this submission:

http://www.forexfactory.com/showpost...&postcount=859

...not too surprised to see price kiss the 50 FE. Of course, events in Egypt probably helped. I wait to see what effect, if any, the news from China next week has on the Dollar.

Am I concerned about capital flight from the Middle East? Yes, and would be very interested to see the books of banks within the US and Europe concerning this.

There are two weeks to go until the elections in Ireland - nicely timed, some would argue, with the March rumblings expected to come from Europe.

I am concentrating on UC at present as it is my quick reference to USINDX. Something that a few here are paying close attention to.

Taking a look at this due to events in the Middle East, level on the indices and Chinese considerations.

...and because IbKa brought the instrument to my attention this last week.

I have busied myself this weekend with reading through the plethora of posts concerning the recent events in Egypt, and prior to this, Tunisia. The media coverage of Egypt is, well, its typical self in sensationalizing a lead story, with almost every journalist daring not to go against editorial remit, and thus cry that this is a real show of democracy in action and led by the people.

Hmm, obviously, I look at these events as a trader of currencies, and although somewhat cold in manner, I have to try and think of how one can profit from these events. Don’t anyone here reprimand me for this, as we are all doing the same.

So, what are my current thoughts? Well, why would the US and Europe call for him to leave, when but a week earlier, Obama’s lacky, opps, sorry, envoy to Cairo, Frank Wisner, whilst in Munich, was calling Mubarak indispensable to democratic tradition? One thinks that perhaps events were moving faster than the analysts' pens back in Washington could scribble. Oh, hang on, it is election year, and one doesn’t want discontent in the Middle East that sees peaceful protester Joe, sitting in front of the world’s media in Tahrir Square, dragged off by the authorities to endure hell in a secret cell. It’s not good to seem indifferent/ineffective against the terror experienced all over the Middle East. Obama steps in, the world report on his intervention and subsequent ability to uphold democracy against dictatorship – let us ignore the propping up of these regimes by the conventional West momentarily – and the whole of America sees Obama as the saviour of the little man. Hey, big O has to be seen to be effective in something, right?

So, okay, great, the world is free of one more dictator – there are others still in favour with world power, so it is a long road – but what will fill the vacuum in Egypt? Not two days in, and the country is run by a military junta, who in turn are negotiating with the Islamic Brotherhood. I make no comment upon faith, but today we have seen fights and shootings in the streets of Cairo.

Meanwhile, down the road in Algeria another uprising against a dictatorship is occurring. This becomes interesting, as Algeria is not without substantial reserves of oil, and also subject to prolonged political interference from Russia.

As I wrote a few weeks ago, Russia is being blamed for stoking the fires of revolution within the Middle East in order to scare the energy market into securing a ‘safer’ source. Now, are we seeing the conventional West attempting to reassure the market by quickly moving to placate any uprising within the Middle East, in order to stabilize energy prices, and avoid having to go to Russia's store for energy? Perhaps, but we have topped the psychological $100 a barrel tag, and I think most agree that the road north can now easily be driven. Saudi Arabia is being questioned on just how much reserves it has, and if it really can turn the tap on to keep the oil flowing faster, and hence cool the price. I guess it depends on whether the house of Saud want to buy another private A380 replete with air hostesses minus Abaya and a Boshiya, or not.

When I look at what is happening in Tunisia now, all I see is the UGTT organizing strikes that keep people busy. The UGTT were the main organization behind the toppling of Ben Ali, and state that there is still some toppling to go before they will be ‘satisfied’. Hmm, I think Saddam Hussein said something very similar after being helped to power by forces other than Joe on the street. Regardless, Ennahda – the Islamist opposition party - want a role in the new government being formed by Moncef Marzouki, who in turn have stated that what is needed now is ‘discipline’, and that an alliance with Ennahda will not be ruled out. Hmm, history would suggest that these arrangements never end well. Watch that space…

Anyone else get the feeling that oil is going to shoot through the roof, and that a lot of money will be made by some in supplying the weapons that will be needed on the streets of the Middle East? Mahmoud Amadinnejad – no stranger to Russia - seems happy enough though, shouting from his turret in Iran that the events in Egypt were ‘a great blow against American interference, and a true opportunity for our brothers there’. This must have come as a veiled public support for the Islamist leader Mohamed Ghanem, who, shortly after Mubharak headed off to Sharm el-Sheikh, told the Egytpian army to “gear up for war with Israel”.

No, I’m sorry media, but I am not getting a feeling of being all fuzzy with excitement that my fellow little man on the streets in the Middle East is now going to be granted democracy. Not that we have much of that anywhere when considering what a true democracy would be. My impression is that we are about to see another round of disguises of deceit, and that Joe will be back pushing his cart before long, with even less prospect as commodities rocket, and his new leaders tell him that he must make sacrifices for the new democracy that he helped to create. Animal farm, anyone?

Currency wise, I am expecting capital flight to a safe haven, and so if the USINDX pops above resistance, I am expecting Cable and EU to be making a trip south. I still favour Cable higher and EU lower in the mid to long term, but think that with recent events, some protectionism by big money will occur whilst the situation on the ground in the Middle East stabilizes, and those that power want in power, are accepted in their new positions.

EDIT: No charts, but looking for shorts on Cable below 1.6000 and below 1.3500 for EU.

Great to see this thread alive again with some serious posters - with a few thoughts well above my "pay-grade" http://www.forexfactory.com/images/icons/icon11.gif

The clear 5 wave advance was too much to ignore and the question posed is whether cable will take the smaller grey fib retrace or the larger orange one into an ABC correction......TWT

Nice to see you back here, good Sir.

Reports of protests in Iran.

The report from New Economics Foundation on what low interests rates really mean for us and them:

http://www.neweconomics.org/press-re...idies-asks-nef

And this from Germany:

http://www.spiegel.de/international/...745398,00.html

...all make for interesting reading.

...and there are some who are scrambling just to make sure their day-to-day operations aren't affected by market insanity


Do you mean Frank Wisner, who seems to have his fingers in every god-damn pie going around, and who works at PR firm hired by none other than Mubarak to represent none other than the now posthumous Egyptian Government?

Libya, Algeria, Yemen, Saudi, Bahrain, Jordan, Iran, take your pick! Mine is Iran,

* Inflationary economy
* Anything under $70/bbl and the whole economy comes crashing down
* Govt removing food subsidies across the board which have been in place for yonks. This will remove the peasant class from their support base and increase already massive inflationary pressures IMHO.

Had to cut here, to stop my post from turning into a geopolitical rant.

On the DX, playing the Nov-Dec range continues to be profitable for aggressive traders. Short term breakouts with short term stops. Otherwise, sitting on the sidelines at large. Market parameters remain identical as they have for a while. GBPUSD had the strength to close above 1.6 again on the weekly.


But, what I am most interest in currently, is the TED spread. This range breakout could be a huge market telegraph coming down the wire that something smells bad in global liquidity. Watch for weekly closes above 0.2.


I'm wondering if smikester got short GU last week.

One cannot be too surprised with the UK inflation figure published today – manipulated down, I believe – but still running at a rate that will mean that either interest rate hikes are on the cards, or inflation come the Summer may be ‘officially’ running into double digits. Gulp!

For those that read my scribbles, I do tend to pour over the ONS website:

http://www.statistics.gov.uk/default.asp

The figures confirm one thing, for me, and that is that in the UK, we buy from abroad with a broken pound. With CPI, gaining 8% since the last period of analysis, now over 5%, we have less than half way to go to 10%. Boy, I wonder if people marvel at my mathematical genius…

And so Merv will be required to write yet another note to Ozzie down in the Exchequer, attempting to explain that, well, he is a little stuffed to explain how he will combat a slumping economy set against poor employment and inflation… stagflation – the real current situation for many. The cost of borrowing will go up, the deficit will follow; thus rising import costs further – I am thinking raw materials here.

And then we have Andrew Sentence on later in the week. I’ll bet Merv ducks behind his desk when this guy speaks, as he will, I assume, again call for a rise in interest rates, which judging by today’s jump on Cable, will see further gains for the pound. Today’s gains probably being made on speculative longs by those with more than a few yards to spare. Of course, this is not good for our exports, and so Merv will be stuck between a rock and a hard place. I’m not sure what the markets will do if Merv does nothing as Andy Pandy calls for more candy, but it would not surprise me to see big money try and force him out of his foxhole by pumping up Sterling.



The charts

I'm paying particular attention to the candle formations around the descending magenta TL. I am still of the opinion that Cable will break to the upside, with 1.64 region being a not too unreasonable expectation... should the current PA sort itself out - it's been a pain. A 1,2,3 play off the magenta TL would be nice.

The 50 FE appears to have performed the duty of being support. I have an older chart with some fibs etcetera that account for some of the pokes around this line.

Yes, I've been trying not to write too much... far too much material, and if commented upon, would induce retinal reticence for many a reader.

Great charts, again.

No I didn't. I haven't seen a decent entry on this pair and most pairs seem to have been sloshing around for most of the year, so far. If you would be interested, I will post my entry, when it comes.

Thanks to you and Condor for the illuminating posts. My view is equally as cynical as Condor's at the moment but I would never put it into print, because my sentiment changes with the breeze and in any case I couldn't run a country.

How are we going to get out of this mess? Unemployment, obviously. Just stick a few million who want to work with the 1 million who don't and watch inflation fall, and productivity rise, and the whole cycle starts again.

To be truly cynical, one should not rule out that this inflation is deliberate, and that it allows governments and big money to rape the citizen from behind. A large proportion of government debts is Sterling denominated, thus assisting in inflating the debt away via the theft from the saver - be this in savings accounts, pensions, commodities etcetera.

Much better to have a little inflation than to raise interest rates; which will have a very public effect, and be very damaging to many who are standing on, for example, the property precipice.

Trying to practice scalping on 15min charts with divergence.

Let me just say, you're looking for the wrong divergence here. It's counter trend, not tradeable without some price action or S/R levels or other confirmation. Look for divergence trades that point to with the (overall) trend. Quite rare but much more reliable.

Thanks Smikester, will bear it in mind. Guess I am thinking that we are topping out for the day, and everyone is gearing up for profit taking come end of session, before the US are left alone to play.

Yes, would ideally like divergence that would suggest continuation of trend on the higher TFs... as noted in my post, this is not the case here.

Watch it drop like a stone now. LOL. But it does look a tempting trade. The trouble is, I've failed so many times trying to play those, especially on GBP/JPY, I don't try any more. Swift footed traders probably do better than I.

Is this the retest of the magenta TL spoken of earlier?