FXCM/DailyFX Signals and Strategies

Some food for thought. How much money does Japan need for JPY intervention to have lasting impact on the Yen? According to Deutsche Bank...$500 Billion!

The yen’s weakness may be short- lived as Japan would need as much as $500 billion to intervene in markets just to match its previous efforts to curb the currency’s strength, according to Deutsche Bank AG.

An intervention of that magnitude will add about 10 percent of gross domestic product to Japan’s record debt level, wrote Deutsche Bank analysts including Bilal Hafeez, its head of currency strategy, in an e-mailed note. The bank based its estimate on previous moves by the Bank of Japan and the size of the currency market.
http://www.bloomberg.com/news/2011-0...bank-says.html

EUR/USD

And finally to wrap up the week, take a look at the EUR/USD trading signals on DFX+. Breakout1, Breakout2, and Momentum2 are long (Breakout2 being on hold).

http://img853.imageshack.us/img853/7...01120724pm.png

Watch for a possible test of the 1.4250/80 level during next week's trading session.

Have a great weekend!

The final forex tax webinar of 2011 is being held this Thursday at 4:00pm ET. Topics for the next webinar include:

 

1. Basic Tax Information for Forex Traders
2. How new CFTC forex regulations may impact forex tax treatment
3. Live Question and Answer Session

Here's where you can register: http://forexforums.dailyfx.com/forex...ertax-com.html

We look forward to seeing you there!

If you missed Friday's episode of Money in Motion on CNBC, one of the trades for the week was a short EUR/USD setup. Here's a video going over that EUR/USD short position by Jeremy Wagner of the DailyFX+ Course.

This morning's SSI update on DailyFX+ is warning of possible further upside for GBP/JPY. Nearly 90% of traders were short the pair as of the reading at 7:00am ET (11:00 GMT).

http://img189.imageshack.us/img189/9...01190313am.png

The Momentum2 signal has been long GBP/JPY since 127.035 and is still showing an enter now indication despite being up by over 500 pips.

http://img696.imageshack.us/img696/5...11111158am.png

The DailyFX+ trading signals and SSI updates can be accessed through DailyFX+ with your FXCM live account username and password. The login page is found here https://plus.dailyfx.com/login/loginForm.jsp . If you don't have a live account, you can register for a free trial here http://www.fxcm.com/forex-signals.jsp

Traders seem to be showing caution about further EUR/USD upside in anticipation of the vote in Portugal over austerity measures. Here's an overview of the situation released by DailyFX earlier today:

Finance Minister Fernando Teixeira dos Santos told parliament that a 10-year yield above 7 percent is unsustainable for Portugal in the medium and long term. In fact, Greece and Ireland were forced to seek bailouts soon after their respective bond yields crossed the 7 percent mark. Mr. Teixeira further warned this week that failure to enact the austerity measure would push the country closer to following Greece and Ireland to an EU-led bailout package. Risks to the Euro are relatively clear. The Euro’s reaction to the Ireland bailout warns that similar action on Portugal could sink the fast-rising currency.

http://media.dailyfx.com/illustratio..._Picture_4.png

The full article from David Rodriguez and Ki Kim of DailyFX can be found here: http://www.dailyfx.com/forex/market_alert/2011/03/22/Euro_Strength_at_Clear_Risk_Ahead_of_Portugal_Austerity_Vote.html

Strategy Trader: Custom Indicators and EA's

I have setup a new thread for Strategy Trader where I will post a library of custom indicators and EA's being created by the programming team. All of the indicators and EA's are free to download and import into the Strategy Trader platform. Plus, feel free to modify the code in the strategy or indicator to your own liking. The thread is in its beginning stages, but I anticipate it will grow quickly. Here's the location: http://www.forexfactory.com/showthread.php?t=285492

-Jason

Take a look at the AUD/USD SSI chart below (compliments of David Rodriguez. In case you haven't seen AUD/USD within the past 20 minutes, it is trading above the record high set on Dec. 31, 2010. Nearly 88% of AUD/USD positions were short as of this morning's SSI release, and David posted a chart showing SSI in real time. Look at the circle I highlighted at the bottom. The red line shows number of short positions, and the green line shows number of long positions. Short positions are at their highest point for the entire chart period going back to June of 2010, and short positions have grown substantially since mid-March.

http://img825.imageshack.us/img825/4...ssi3252011.png

The only question is how high does AUD/USD go? Will traders increase their shorts to average in to their losses? The Breakout2 signal for AUD/USD is currently on hold whereas the Momentum2 signal has a trailing stop rather than a set limit price.

Follow the DailyFX Real Time News feed and David Rodriguez on Twitter for occasional real time SSI updates whenever important levels are reached.

EUR/USD

The DailyFX News Feed had updates about an hour ago that there were very bullish comments coming from ECB officials which made it look as though a rate increase in April at the next ECB meeting was likely. EUR/USD has been in an uptrend since the start of 2011, frustrating dollar bulls almost every step of the way. And the test of the trendline earlier this morning was quickly reversed after the hawkish comments from ECB officials. Here's a look at the uptrend for the year on the 4 hour chart:

http://img863.imageshack.us/img863/6...11104832am.png

This weeks economic calendar has quite a few very important events, culminating with US NFP employment and US ISM manufacturing on Friday. Here's a list of the top important events from the DailyFX calendar:

http://img849.imageshack.us/img849/5...11111813am.png

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

David Rodriguez just posted the GBP/USD chart with SSI update onto the DailyFX Real Time News feed. SSI is currently net long GBP/USD (reading of 2.15) as it trades around support at the 1.59851 level. David mentioned that GBP/USD shows risk of a move towards 1.5750 due to SSI being heavily net-long. 1.5750 is also the 50% fibonacci retracement of the most recent bull move shown on the chart:

http://img849.imageshack.us/img849/4...ssi3292011.png

EUR/JPY

Not this Thursday but the next (April 7th) is the ECB rate decision. Hawkish comments from ECB officials over the past week have led to speculation that rates could be increased at the upcoming meeting. This has helped the Euro gain momentum even though fiscal issues in Portugal have been in the news. I thought Joel Kruger's analysis from today was interesting due to an important break of resistance over the past 24 hours:

http://img228.imageshack.us/img228/2...01193535am.png

Here's what Joel had to say in today's EUR/JPY Classical update:

EUR/JPY:The market has finally taken out some critical multi-week range resistance in the 116.00 area and we believe this to be a significant medium-term development. The break above 116.00 now suggests that a major base is in place with fresh upside now projected back towards the 125.00 area over the coming weeks. In the interim, look for any inter-day pullbacks to be well supported ahead of 110.00.

I find the setup interesting myself since rising interest could renew interest in the carry trade, and there's little resistance on the daily chart until you get to the 122 area. On the flip side, the JPY has been particularly volatile recently. A safer choice may be a pair such as EUR/CHF though the long term downtrend on the daily chart still looks to be fairly intact.

Be Your Own Analyst presented by DailyFX: Think you have what it takes to a be a forex market analyst? Pick your favorite chart of the week, a currency pair and film yourself while analyzing your chart setup, and your video could be featured by DailyFX. Here's where you can find details on the Be Your Own Analyst contest: http://forexforums.dailyfx.com/submi...n-analyst.html

A new video will be featured every week out of all of the videos submitted.

There are already 3 videos submitted thus far: http://forexforums.dailyfx.com/watch...arch-31-a.html

Hi Jason, any plans of adding the SSI indicatorr to strategy traders? I believe it would attract many investors just to be able to see FXCM's book in real time.

Hi kavaron,

I had heard some talk (at the end of 2010) about adding it to Strategy Trader, but not sure about progress at this point. I wouldn't expect it anytime soon. We've been working on getting the DailyFX+ trading signal automation for Strategy Trader launched first. It's currently in beta testing and I'm thinking it will be released in the 2nd quarter of 2011 (don't hold me to that ). I definitely agree with you that it would probably attract many traders, and I will certainly pass your feedback along.

Cheers,

Jason

So far so good, but when GBP/JPY will go down?

Hi Tal,

Looking just at the SSI data, positioning in GBP/JPY is still net short with nearly 88% of positioning to the short side. As a contrarian indicator, this signals more gains for GBP/JPY. Here's the latest SSI update from DailyFX+ this morning:

http://img859.imageshack.us/img859/1...11114055am.png

A week ago I posted a chart of EUR/JPY noting bullish potential in front of the ECB rate decision on April 7th. EUR/JPY has had quite a nice run to the upside over the past week. If only every trade would turn out like this . Here's the updated chart:

http://img135.imageshack.us/img135/3...11100719am.png

I would be cautious going into tomorrow's ECB rate announcement. The market is expecting a 25bp increase in interest rates to a target rate of 1.25%, but I wonder how much of this expectation is already being priced into the euro given its strength.

AUD/USD
In other news, there could be some excitement with the Australia dollar during the release of Australia's employment change number set for release Thursday at 1:30 GMT (9:30pm ET Wednesday). Last months release showed a decrease of 10.1K jobs, and tonights number is expected to show an increase of 24.0k jobs.

The AUD/USD is still trading near record highs (above 1.04 at the moment), and SSI positioning shows that nearly 84% of positions are short. If the number comes in below expectations it could just the thing to help the short positions. For more information on trading this event, take a look at this report written by David Song on trading the Australia employment report: http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/trading_news_reports/2011/04/05/AUDUSD_Trading_the_Australia_Employment_Report.html

AUD/USD

Great employment numbers overnight sent the AUD/USD higher with the pair touching new record levels above 1.05 during today's NY trading session. This morning's SSI update shows traders are still net short AUD/USD by a significant amount:

http://img850.imageshack.us/img850/7...01195426am.png

A trader on the DailyFX Facebook page also mentioned this morning that as long as gold continues to rally, the Australian Dollar should continue to benefit. David Rodriguez released a report earlier this week showing the correlation between the Austrlalian dollar and gold, and the benefits of trading AUD as a proxy for gold:

The Australian Dollar remains highly correlated to Gold prices, as both the AUD and precious metal represent attractive bets on and hedges against US Dollar weakness. The Australian Dollar in particular offers the advantage of the highest short-term interest rate of any G10 currency. Given that traders must in effect pay storage/carrying costs on Gold, it seems that the Australian Dollar offers an attractive proxy with which to bet on/hedge against Gold strength.
Source: http://www.dailyfx.com/forex/technical/article/forex_correlations/2011/04/05/forex_correlations_australian_dollar.html

USD/CAD

The second point I wanted to mention today is the long positioning in USD/CAD and the release of CAD employment numbers Friday morning. See the similarity between events leading up to AUD/USD yesterday and USD/CAD tomorrow? Maybe we will see a test of the 0.9500 level heading up to tomorrows employment data and a push further if the figures come out better than expected. Could be another interesting report to watch out for. Here's a look at the weekly USD/CAD chart from 2007 till now.

http://img121.imageshack.us/img121/4...11100620am.png

Here's the winning video from last week's Be Your Own Analyst contest presented by DailyFX:

Six videos have already been submitted so far this week. You can watch them here:

The winning video is featured on the DailyFX Facebook page every Friday.

Finally getting a down day on GBP/JPY

Below is a screenshot of the USD Index taken from NetDania's Finance Chart. Will give you a big picture view of the pivotal point the USD is currently at. It's testing the lows set back in Nov. 2009. A break lower could possibly test lows from back in July 2008.

http://img811.imageshack.us/img811/4...11103258am.png

The Financial Times had an interesting article on Tuesday about the return of the carry trade and the USD becoming the low-yielding currency of choice for the carry trade. AUD/USD in particular is one of the pairs highlighted and it has been hitting record highs over the past week. Here's the article: http://www.ft.com/cms/s/0/18c16660-6...#axzz1JPg1rjRo

Below is the latest SSI update from DailyFX+. AUD/USD, USD/CAD, and USD/CHF are the most extreme, and all are testing multi-year highs/lows.

http://img858.imageshack.us/img858/5...11104149am.png

DailyFX+ can be accessed with a live FXCM account username and password. The login page is found here: http://www.dailyfx.com/forex_trading_signals/