EurAnalysis

I get sent that fro fxpro aslo..

Hey Swissy. I seem to have missed this post from you. Sorry about that.

I have been following the E/J pair from a macro perspective and I am tilted more towards a bullish perspective on all Yen crosses, including the EUR/JPY. The prospect of possible BOJ intervention and further easing supports my macro view here. I am not convinced enough to make a call yet, but that is where I am currently leaning.

From a technical perspective, I see a mid term correction up to the 103.50 area before I can consider any direction on this pair. I could be wrong but as you can see form the daily chart, we're currently in muddy waters.

No problem buddy. Yeah it looks pretty muddy and consolidating between the 23.6-38.2 fib. I'm not sure it will go up that high but you never know with the BOJ intervention. Thanks for the input.

on the first 26 pips.


on the sconed 50 pips.

not to shabby

http://www.merkfunds.com/merk-perspe...-06-20-insight

June 20, 2012
Growth Versus Austerity: A U.S. Dollar Perspective

Axel Merk, Merk Funds
June 20, 2012

Austerity versus Growth? Which economic model is sustainable? If it weren’t for those pesky bond vigilantes, it may be only politics. Let’s not get too excited that either path will work. Let’s look at the implications for investors with a focus on the U.S. dollar.
http://www.merkfunds.com/images/2012...ity-growth.jpgWhite Papers
Merk White Papers provide in-depth information into currency as an asset class.
Portfolio Benefits of The Currency Asset Class
The Currency Asset Class: A New Era of Investment Opportunity

The Archive:
Merk White Papers
To have budgets sustainable is as simple as matching revenue and expenses. Almost. Politicians have figured out that running a deficit may still yield a stable debt-to-GDP ratio, assuming there is economic growth. When U.S. politicians brag their budget forecasts bring down the absolute level of the deficit, it’s the debt-to-GDP ratio at best that may improve, assuming their rosy projections of economic growth prove correct. In the Eurozone, governments have – theoretically – committed themselves to running no more than 3% deficits, suggesting that such deficits lead to sustainable debt-to-GDP ratios. Not quite. Our research shows that, in order to achieve a long-term debt-to-GDP ratio in the low 50% range, deficits of no more than half of GDP growth may be run. If GDP growth is 3% a year, the deficit ought to be no higher than 1.5%. If 3% deficits are allowed, but GDP growth is only half of that – a more realistic assumption for many countries in today’s environment, the debt-to-GDP ratio will stabilize at above 200%. For a visualization of where the debt-to-GDP ratio will peter out given different growth and deficit scenarios, consider this table:
Average annual deficitAverage GDP growthLong-term debt-to-GDP1.5%3.0%51.5%3.0%3.0%103.0%3.0%1.5%202.9%Why do we care about debt-to-GDP ratio? Allowing a high debt-to-GDP ratio is akin to playing with fire. Just look at the housing bust for an illustration as to what’s so dangerous about piling up too much debt: when interest rates are low, life feels great, the standard of living has gone up. But when interest rates move up, those with a higher debt load have to make disproportionate cuts to their standard of living to service their debt. According to the Congressional Budget Office (CBO), the U.S. paid an average of 2.2% of GDP in interest from 1972 until 2011. In its “Extended Alternative Fiscal Scenario” that assumes current policies, as opposed to current laws, remain in place, net interest payments will soar to 9.5% of GDP in 2037. In 2011, $454.4 billion in interest was paid in a $15 trillion economy; that is, 3% of GDP was spent in servicing interest payments. If the U.S. were to spend 9.5% of GDP to service its debt rather than 3%, it requires a cut of 6.5% of GDP in other services. It dwarfs the fiscal cliff (the reference to Bush era tax cuts running out coupled with spending cuts, absent of Congressional action) that might put a 3% to 5% dent on GDP.

The pessimistic CBO outlook assumes what we judge to be an unrealistically low 2.7% average interest rate on debt payments. Should the market demand more compensation – generally referred to as bond vigilantes holding policy makers accountable – financing the deficits may no longer be feasible. Just ask Greece; or Spain.

With 10 year Treasuries yielding 1.6% in the United States, some argue that higher deficits are warranted. As the discussion above shows, the logic behind the view is fundamentally flawed, if not reckless. In the U.S., we differentiate between discretionary and mandatory spending. Mandatory refers to contractual obligations, the entitlements, most notably regarding Social Security and Medicare. Put simply, it may not be realistic in the long run to finance thirty years of retirement with forty years of work. As interest payments take a bigger chunk of GDP, discretionary spending is squeezed out. Be that an infrastructure project at the federal level; teachers at the state level; or firefighters or animal shelters at the local level.

In real life, there are some added complexities: we all fight for our benefits, take them for granted once granted and will fight vigorously to retain them. Also keep in mind that emergencies, such as natural disasters or wars, are typically not reflected in budget forecasts, as they might be considered “one off” items; even if that were correct, emergency spending adds to the deficit.

As debate rages whether austerity or growth is the solution to the plight of the developed world, keep in mind that there is a history spanning centuries, if not millennia, of governments spending too much money. In the old days, neighboring countries were “taxed” to fill domestic coffers: taxation, as in conquering other countries and taking treasures and slaves. Debt is a modern form of slavery, except that it is voluntary servitude. If history is any guide, don’t get your hopes up too high that these issues will be resolved. But investors may be able to navigate the waters, mitigate some of the risks or even profit from opportunities that arise in this environment.

The growth camp suggests that, with enough growth, a high debt load can be carried. That may be the case if such growth is not financed through debt. In recent years, trillions have been spent to achieve billions in growth – not exactly a recipe for sustainable budgeting.

The austerity camp suggests that, with enough austerity, books can be balanced. Except that, as services are cut, the economy is at risk of entering a downward spiral, increasing, rather than decreasing deficits.

And while these two ideologies are being discussed, central banks struggle to either keep the banking system afloat (as in the Eurozone) or are helping to finance the government deficit (as in the U.S.). Indeed, the key difference between the U.S. and European model is that U.S. Treasuries appear to be backed by a) the taxing power of Congress and b) a lender of last resort, the Federal Reserve (Fed) with its printing press; whereas European sovereign debt is backed only by the taxing power of the national governments. The European Central Bank (ECB) has made it clear that its role is to support the banking system, not the sovereigns. In contrast, the Federal Reserve (Fed), while not admitting to outright financing of government deficits, has shown a willingness to do so in practice. As such, European sovereign debt is trading more like municipal bonds trade in the U.S., with weak “municipalities” (think Spain) paying a huge premium.

To be fair, the growth camp wants more than deficit spending; and the austerity camp wants more than cost cutting. Indeed, in a recent analysis Saving the Euro, we argued policy makers should instead focus on competitiveness, common sense and communication. Ultimately, both camps believe their philosophies should attract more investment as confidence is increased. In practice, the proverbial can is kicked down the road. By the time the can reaches the end of the road, it may be very beaten up. Indeed, an increasing number of investors are spreading their investments across multiple “cans” – we refer to these “cans” as diversified baskets of currencies, including gold.

What’s different between the U.S. and Europe is that the U.S. has a significant current account deficit. In our experience, countries with current account deficits tend to favor growth oriented strategies as they need to attract money from abroad to finance their deficit and, as such, to support the currency. While a bond market in shambles is a major drag on growth in the Eurozone, the Euro has been able to hold up reasonably well given the fact that the Eurozone’s current account is roughly in balance. A misbehaving bond market might have dire consequences for the U.S. dollar, even if one disregards the odds that the Federal Reserve may make U.S. Treasuries even less attractive by financing government spending (when a central bank buys a country’s own debt by printing money, such securities are intentionally over priced, potentially weakening the currency).

Please make sure to sign up to our newsletter to be informed as we discuss global dynamics and their impact on currencies. Please also register for our upcoming Webinar on June 19. We manage the Merk Funds, including the Merk Hard Currency Fund.

Top 10 Ways New Forex Traders Lose Money

https://fxtrade.oanda.com/wandacache...4fce1ff0c9.jpg

Lack of Experience

Forex trading - like any new initiative - has a learning curve. However, unlike learning a new skill such as learning to play guitar for instance, you are not risking your entire savings while discovering the difference between a major and minor chord. Learning about the currency markets and basic trading principles solely on a trial and error basis is not a recommended approach for gaining the skills necessary to be a successful forex trader.

Unreasonable Expectations

First off, stop believing all the “get-rich quick” hype still perpetrated by some forex dealers. Yes, there are those that do get rich trading forex but some people also get rich selling houses. In either case, it does not happen overnight and it might take years to gain the experience and insight to turn forex trading into a full-time, successful occupation.

Absence of a Sound Trading Plan

Next to having unreasonable expectations with regards to the risks associated with forex trading and the amount of time required to be successful, a common mistake made by new traders is the lack of a forex trading plan. In reality, there are two aspects to this plan; an overall objective for your trading activities and a plan for each trade you make.

Lack of Discipline

A plan is only of value if you actually have the patience and the discipline to follow it. While this can be difficult, it is necessary if you expect to be successful, and it is this very reason why developing a plan prior to the trade is so fundamental. As rates fluctuate, you can easily get caught up in the market and it is only human nature that you will begin to second-guess your actions. If, for instance, the rate moves up surpassing your original take profit point, you may be tempted to hold out for an even higher return; alternatively, if the price drops below your limit level but you believe there is a big rebound just around the corner, you may be tempted to keep the order open on the hopes of a reversal.

Failure to Include Stop-Loss and Take Profit Instructions

When you place a market order and leave it open – that is, enter a trade at the market price without instructions to close the order – you are in effect, gambling with the total value of your account. For this reason, you should consider adding stop-loss instructions to all open positions.

Excessive Leverage

Depending on your experience level, trade leverage can be a powerful tool to help you maximize returns, or it can be the cause of your downfall. It is not something to be taken lightly and if you do not understand how it works, don’t trade until you do understand.

Holding Too Many Open Trades

Fighter pilots call it “helmet fire” and it happens when too much is happening around you too quickly for you to react. In the cockpit of a jet fighter, it can get you killed – as a forex trader, you may not end up dead but you will probably end up broke.

Holding Losing Positions Too Long

One of the things that really separates seasoned forex traders from those just starting out is their ability to determine when a losing trade is not going to reverse the trend. Rather than “hold and hope”, disciplined traders will take the loss and get out much more quickly.

Ignoring Rate Spread Fluctuations and the Impact Spreads Have on Profitability

Exchange rate spreads – the difference between the bid and the ask price – are of utmost importance and directly affect the profitability of each trade. You need to be aware that spread differentials can fluctuate wildly during the day – sometimes to the point of turning a profitable trade into a loosing one.

Thinking About the “Big Win” More Than Effective Cash Management (AKA Greed)

This one is pretty straight-forward – greed; or more correctly, how greed can cause you to enter into ridiculous trades. This must be the same gene that causes some people to keep “doubling-down” even when the odds are so against them that it make no sense at all. If you want to gamble, go to Vegas.

Whats up guys, red count dead... We need to finish this wave 5 and then breakdown just two paths remaining. Targets, 1.275, 1.278, 1.281...

I'll be happy to update you thought the process (maybe not with the result).

Is this what we're about to see after the big news today?


By the way PT. which event will bring the "impact"? The FOMC statement or the FOMC Economic Projection one? Or maybe the press conference? Thanks in advance

Thank you for your token of confidence. I value it and I will do my best to keep it.

T

Futures board this morning is a first for me with so many 0.0 readings ... Clearly undecided market!

First impact will be the rate statement.
The economic projection will contain forecasts for GDP and employment etc. and may have some impact.
However, the final direction will be confirmed by how Bernanke answers certain questions and what additional comments he makes, regardless of what the statement and projections indicate.

We have a market that is starving for hopium. So any indication from Benny that QE3 is still on the table will get the hopium addicts salivating.

My view is that he will disappoint, but I could be wrong, in which case we get a strong E/U rally which we could probably start fading once the EZ reality comes to light again. If he does disappoint, my hammer is ready.

Hi PT whats your source for this info?

PT, I've read this twice now and although I'm still working on my second espresso, this could be interpreted as "I'm ready to go long" by the statement "If he does disappoint, my hammer is ready".

I know your position is to not take longs during this corrective leg and just want to make sure that I (and maybe others on the board) don't mis-read you. Is your intention still to hold your sell limits at their current levels and hope that they get hit as the market raises?

Thanks,

Stopped out all positions for this beautiful pair. Now sitting on hands and waiting for Benny Cakes enlightenment

Agreed with PT, if he even hints about possible QE then i can see this pair going even higher perhaps around 1.2850/1.29, otherwise again like PT i will be ready to short if he squashes any truth about QE.

Wait n see for now..

Happy Trading Guys!!!

good afternoon everyone.i had two long position since yesterday at 1.2680 and tool partial profit on half of it. remaining position will take profit anytime if price stall.these are scalping trade i am up about 1% on equity.the leverage i used was about 1:5 and after profit booking it stand at 1:2.7
i am waiting for 1.2760 and above to start my campaign of shorting the markets and my orders are already in place in cresendo fashion and when they all trigger my leveragre will be 1:3 and say if position move my way i am going increase my leverage quite agressively may even take it upto 1:50.
i think the real move will start probably tommorrow afternoon in ny session till then it will be positioning.

add:i locked about 33 green pips about 0.5 % up on equity.last 5 weeks i am up 4% on equity

Is there anyone having problems with FXCM. I'm not receiving any quotes for the last five minutes?

Never mind, its all better they must have heard me

If helicopter Ben doesn't deliver on QE, we could possibly take a hammer also on A/U and N/U. They are extremely overbought.

You're rocking here Doc!