EurAnalysis

Bit of Friday's fundamental

I am just back from 5-star Movement final speech of Grillo in a major square in Rome.The movement is getting traction and could get a 20% in Parliament. This means a more fragmented Parliament in Italy but also the start of something new that Italy never saw before.
Fundamentally that should be bearish in the short and mid-term, but honestly it is about the future of people in Italy and this is going to be much more important that what the market are going to do...

.... big changes ahead...

Hello lumesh
I cannot promote my blog here but if you google 'How HFT and program trading are relevant to my trading method and can be in yours' you can read a 2-part article and you should get quite a good picture of what I mean with program trading and how I see and use the edge.

Hope that helps.
Cheers

Will do, thanks a lot.

Thank you Fibstalker

AMEN on the big changes ahead... for all of us. Trade accordingly.

Hi rekon,

Zero.

I had a take on it 1,5-2 years ago when i wanted to be long that pair and thought it would a good mid-longer term idea. But what do you know, despite the japans econ and fiscal outlook investors thought the jpy was the best safe heaven.

Anyways i killed the trade with a loss and from that on begun the journey of what makes a market move and why fundamental and fair values are just illusions and that market value is the real deal with all its stupidity and irrationality. But it was just the start...and it was the jpy...not a great pair, but hey, it all depends what you do. Many trade jpy crosses very successfully but on totally different logic.

I have very sloowly shifted from fundamental trading to what is "my style". It's often weird and just feels wrong to go against old school common sense but if i don't i'm more likely to lose money.


Point is, jpy SHOULD have weakened a long time ago and yet it didn't. Now i know there is no such a thing as "should" in the marketplace. Everyone is better off not to ask why this or this move is happening. Just plan your trade and trade your plan. And if it has a grain of irrationality in it, the better. It's a fundamental fact that irrationality has to win in the market.

Btw, i don't trade the jpy pairs anymore.

Take care.

Good Afternoon

Your post prompted me to comment on your trading thoughts.

There is much more logic and common sense in the Forex market than most traders realize.

I agree with you that sometimes why a currency such as USD/JPY moves against the economic fundamentals may be hard to understand. In the case of USD/JPY until recently it was a safe haven currency that money flowed to when we had Risk Off. The Dow went down 150 and as MONEY flowed out of the Equity Markets it went into the US Bond Markets.

This caused the USD Dollar index to get stronger while the USD/JPY was also getting stronger. This weakened EUR/USD as it did EUR/JPY as EUR/USD makes up 57.6 % of the US Dollar Index.

MONEYFLOW AND CORRELATION along with other factors at times give a logic to the direction of the various currencies.

Your comments are welcomed and it is only through understanding can you have a good idea of what will propably happen.

Of course Forex is never 100% so a Excellent Risk Management Plan is KEY to making profits and holding onnto them.

Thanks Lumesh and CM.

As my dear mom used to tell me...Mine is not to question why... Mine is to do or die... Little did I know she was talking about my future career in FX

As my signature says Trade Smaller than rational because the Market is Irrational.

AMEN x 2 CM

One liquidity flows. Money is like water it flows and noticing the flow is an advantage.

And the other is for your comment on RM. My MM software has enabled me to survive bad entries and still be around to cash out when the market moved my way eventually. MM more than entry cannot be stressed enough.

EUR USD is currently on the top of my trade list. Will trade this as a counter trend bounce, depending on what Draghi says on Monday. I don't understand the way that feedback works on these threads. Do we just spew are views and wait for feedback?

So far, the Forum system has been disappointing.

I got a bit upset when one post mentioned that aud/usd would open up higher "for sure" on Monday....nothing is for sure (for sure).

My reason for writing here is that I'm looking to make a few friends with common interests.

I'm a day trader...I watch EUR USD as a major indicator...but only trade it when it reaches an extreme...

No guess work involved...next pivot is at 1.30. I'll buy into it for a bit...we'll see what happens on Monday.

The four hour chart is showing some promise...and the daily is showing a bit of support...

The day trade 10 minute is a bit flat...so might go down a bit before it goes up...

However....I'll be buying into it..depending upon news..

Tried to go to Action forex web page and got this pop up from my antivirus program.

Hi S.H., There are a lot of good treads here. I think this is one of the better ones. But before you "Spew your views", you might want to go to page one and read The Rules and Objectives that PipTrapper wrote when he started this thread.

Good Luck to you.
D.B.

Hello Sailing Home

The thread that you posted on is one of the best threads that you will find on Forex Factory. Everyone here is entitled to have their opinion and we can disagree without making any personal comments.

You posted the following;

No guess work involved...next pivot is at 1.30.

What makes you so certain that next pivot is at 1.3000 ? I just ask to understand your reasoning.

How do you use EUR/USD as a major indicator ?

The Euro makes up 57.6% of the US Dollar Index. Have you ever considered using the US Dollar Index as a Major Indicator ?

I use many things to determine which way currencies will go.

The Forex Market is based on PERCEPTION and Reality. Most of the time PERCEPTIONS are wrong however as long as the PERCEPTION continues in the direction that it is going not much will change.

Fundamental NEW information usually starts to change the FALSE PERCEPTION.

We are coming up to another Non Farm Payroll day and even though the numbers are MANIPULATED they still have a BIG ROLE in continuing PERCEPTIONS or changing them.

QE or Quantitative Easing or very simply MONEY PRINTING causes the US Dollar to lose value since that is MONETARY INFLATION.

That is then another FACTOR that needs to be put into the mix.

What I am saying in simple terms is if the NEXT NFP number is GOOD say 175,000 or HIGHER then the PERCEPTION will be that the US Economy is improving even if the REALITY is that it is not. However a GOOD number will have traders think that the FED might not continue QE since the US Economy seems to be improving. What will that do to the US Dollar ? The odds are that it will go up.

Let us now look at the Scenario that the number is 100,000 or less. That will be BAD for the US Economy however the US Stock Markets will LOVE it and MONEY will FLOW out of the US Bonds, 2 Year, 5 Year, 10 Year and 30 Year since we will now have Risk On and as the US Bonds are sold for US Dollars the Yields on the US Bonds go up as the Bonds are sold to place the MONEY into other asset classes such as Oil, Euro and other currencies.

I know some will say that this is too complicated which it is really not. Awareness means investing time and energy to learn. The charts are very useful however they are not a leading indicator only a SNAPSHOT of where we are at the moment. Of course Support and Resistance or SUPPLY or DEMAND are IMPORTANT things any successful currency trader needs to know. Your 1.3000 number may well be a Pivot Point however daily NEW DATA can change things very quickly.

A good example may be the Election results in Italy today and tomorrow. Does ANY Chart that we look at tell us who will win ?

Will Japan continue to do their form of QE to weaken the Yen ? If they do then USD/JPY will continue UP towards 100 and MOST LIKELY EUR/JPY will get stronger and that in turn will most likely bring UP EUR/USD unless we have Risk Off when the Dow goes down 250 or more which causes the MONEY to FLOW back into the US Bonds for SAFETY and Yield while the US Dollars are parked there.

We are ALL Friends here and if your Interest is COMMON to making money which should be the only reason that you should be a Forex Trader then you are on the right thread since we have very knowledgeable traders here led by our friend and leader.

We have Technical Traders, Fundamental Traders and New Traders and everyone can learn something NEW everyday.

That includes myself.

Have a good trading week and Welcome Aboard.

The Currency Wars started when Japan caused the Yen to lose 20% of it's value in the last 90 days or so. Here is an excellent commentary on this subject. I just got it in my email box so there is no link. I will now post it here so that WE can all be aware of the NEW FACTOR.

The Currency Wars are REAL and it is a race to the BOTTOM as the Pound, Euro, Yen and US Dollar gets weaker as all Central Banks PRINT money which only delays the Day of Reckoning.

Pfennig and PfriendsSM Edition

“Bernanke's Bubble Going Global”: Insights from Dr. Steve Sjuggerud

In our current poll, our Pfennig blog readers have indicated that Dr. Steve Sjuggerud is a top speaker you're interested in seeing at the Global Currency Expo. So this past week, I was fortunate enough to speak with him. Steve is a long-time friend of EverBank and the big boss, Frank Trotter. Being so close to the Expo, I wanted to get Steve's thoughts and views on trends in the global currency market. Steve is editor of the True Wealth investment newsletter specializing in safe, unique, alternative investments. He will be a keynote speaker at the Global Currency Expo on April 5-7 in San Diego, California and is a must-see for attendees.

For those of you unfamiliar with his work as an independent investment analyst and writer, Steve's investment philosophy looks to identify distinctive and unique investment opportunities for his readers across numerous and varied asset classes and geographies.

Steve was indoctrinated in the investment industry first as a stock broker and then as a portfolio manager for an international mutual fund. He eventually migrated into the world of hedge funds, helping to manage assets in the billions of dollars as well as earning his PhD in finance. Steve is a thoughtful and patient investor identifying unique investment ideas possessing a fundamental, deep-value proposition. In his own words, Steve scans the global market for investment ideas that are “cheap, hated, and trending”, as “identifying a trend helps to confirm the idea”. His patience for investment ideas is indicated through his motto, “Be right AND sit tight”. He also adds, “Governments are bad at a lot of things; debasing their currency is not one of them.”

His work on the U.S. dollar provides one of these distinguishing perspectives on the unintended consequences to currency debasement and, in this case, a positive consequence for some investors. Although Steve recognizes that the result of excess spending and debt accumulation by the U.S. Federal Reserve may ultimately have a negative affect on the value of the U.S. dollar, the medium-term consequence of what Steve describes as “Bernanke's Bubble” should have a positive influence on auxiliary assets, most notably U.S. equities and real estate prices.

In fact, contrary to many market authorities, Steve is more sanguine about the near-term future of the U.S. dollar relative to most other fiat currencies following a similar path to debasement. In essence, he identifies the global currency war as more of a ‘fight-for-survival’ race to the bottom. But from a relative perspective, the short-dollar trade does not appear to offer outsized return opportunities. Conversely, Steve recognizes that the unintended consequence of these continuing debasement efforts, specifically asset inflation, could provide investors with outsized return opportunities in global equities and real estate.

Steve's analysis of the Japanese market provides a similar investment conclusion, as Prime Minister of Japan Shinzo Abe has explicitly targeted depreciation in the Yen, two-percent inflation, and a value for the Nikkei stock market of 13,000 through monetary stimulus initiatives. Steve believes that the Japanese government will ultimately be successful in depreciating the Yen despite recent relative stability, so why fight the Bank of Japan?

In contrast to monetary regimes following the debasement trend, Steve recognizes a relative ray of hope in the Australian dollar, recently characterizing the currency as “The Next Switzerland”. And his reasoning is sound. Australia has relatively high rates of yield on its short-term government bonds, which should attract capital relative to other industrialized nations with government rates approaching zero. More importantly, however, is the fact that the Australian government owns the mineral and oil rights to Australia's vast commodity of resources. Australia is the leading global producer of lead, zinc, uranium, and nickel, as well as a major global supplier of gold, silver, and copper. Indeed, the Australian dollar appears to possess hard commodities to back their currency. Furthermore, Australia is one of the leading commodity exporters to China, which has consistently proven to have a voracious appetite for raw materials.

Juxtaposing these characteristics to the Swiss franc, it is apparent why Steve would favor investment in the Australian dollar over the traditional safe haven of Switzerland. While Australia is rich in natural resources, the Swiss government has been selling its gold reserves. Additionally, in September 2011, the Swiss National Bank announced that it would peg the Swiss franc to the Euro, and along with it committing to the debasing monetary policies being followed by the European Central Bank. So ironically, in this monetary environment, it may well stand true that assets denominated in Australian dollars may provide investors more safety than the quintessentially safe haven of Switzerland.

Dr. Sjuggerud's thoughts for the investing community are extensive and multifaceted, with currency selection representing just one in a handful of attractive investment ideas that he consistently shares with his readers. Steve's resourcefulness in identifying unique opportunities has helped his clients reap benefits from his investment acumen. For those attending the Global Currency Expo in San Diego, his presentation is not to be missed.

Sincerely,
Chris Gaffney

Hi Currency Man,

Thanks for your excellent input. I use /DXY to follow the dollar. Eur/Usd seems to work as an indicator of Risk on or Off, but as you suggest, the Dollar Index is probably a better indicator and I need to watch Bonds more closely, I haven't been watching these and could use some help in this area.

My error on the 1.30 pivot. Nobody knows where it will be. I was referring to daily support/resistance lines and was careless in my post. The next one that I have is at 1.31399...and another very close to that at 1.31263, then 1.30387, then 1.30088, 1.29975. I'll be more careful in the future.

I'll take a counter trend trades at these points to test it, but only as a day trade, depending upon news.

I also watch the Fed and signs of hawkish/dovish concepts closely, especially in regards to QE.

The Forex Factory data release page is really great and I stay tuned into it. I also post relevant data onto a spread sheet. This is probably going a little to far, but it helps me keep track of important releases, like the NFP etc.

I'm also watching the current Italian Elections.

With regards to perception, you make an excellent point. I think this thread might be helpful..and sounds like you all know each other pretty well.

My day trading is based upon perception, fundamental data and price. Counter trends are a bit tricky to trade...but I'll take them..and then get out and go the other direction for the larger move.

I'm not familiar with how to reply, since I'm new and have not gotten any replies yet. I ended up logging into the thread to read yours. At any rate, thanks for your thread and the welcome.

EURUSD neural s-range for week 25 Feb

1.3133 - 1.3222

sheet update - another successful weekly projection
current periods highlighted in yellow

I have received some messages/ questions regarding trading the weekly/ monthly neural s-ranges. To all who sent these, I have not been able to respond to each one due to work commitments, though I have been intending to put together some sort of FAQ. Have some time today so here is an attempt. The questions are not literally as asked - I have combined/ reworded these to address broader issues:

FAQ EURUSD monthly/ weekly s-range
==================================

1. What the hell is this s-range and why should we care

A. The s-range is a safe trading range suggested by a neural net system trained to model the EURUSD price behavior on a weekly/ monthly basis. For each new month/ week, a high and low point are projected. These are not an attempt to forecast highest/ lowest for that period; rather, these are the price points that the system is recommending that have an extremely high likely hood of being met or bridged during the projection period or (if missed) within the subsequent 3 periods.


2. How long have you been doing this?

A. As for the projections, I completed the prototype around Jan 2012 and started doing a monthly projection. Refined further to do a narrower weekly range around August 2012. I started posting both the weekly and monthly projections around early Dec 2012 (with PT's consent).

As regarding my general background and experience in this kind of stuff: I became interested in Forex trading in 2010 and started trading a little after that. My core experience is in research and application of artificial neural nets to forecasting and imaging problem domains (20+ years). Forex price forecasting is a very interesting and challenging area for my field of interest - hence this.


3. Can you post a spreadsheet giving future projections for several periods? Why do you drip feed each week/ month?

A. No. Each projection takes into account last period's price action plus the current period open. So I have to feed these in to the system first tick of the new period to get the current period projection. I try and post these promptly in this forum as early as I can, generally little after 9:00 am of the new week/ month start (Sydney time); only exception was the week of 18 Feb where I could not get to a computer in time due to work engagement.


4. Why don't you post the system here?

A. Its part of a sponsored research that I am doing for an institution. The sponsor has kindly agreed to my posting the projections on web sites/ forums until notice.


5. Can you provide projections for other pairs and time periods?

A. Neural net based behavior models are quite accurate but require a lot of time/ effort/ investment to develop. Currently, my client/ sponsor has required only this pair. I started developing a daily projection for EURUSD and posted initial results for a couple periods here in the forum, but that part of the project was called off. So atm, EURUSD weekly and monthly is what's available.


6. What are the images and spread sheet attachments in your posts?

A. I maintain a trail of projected vs actual prices in a spreadsheet. After each period is over, I input the actual high/ low for the period to calculate deviation from the projections (ref columns in the spreadsheet). A positive deviation is good - it means that the projection was met and exceeded in the same period. A negative deviation means that the corresponding projection fell short - the deviation is in pips. If a projection falls short, the cell is highlighted in Orange. When a projection falls short, and is met in subsequent 3 periods, I mark that price in Blue. If a missed projection is not met within the subsequent 3 periods, its marked in Red. Projections/ prices that are met in the same period are left un-filled (black on white cells). The yellow highlighted cells refer to the current incomplete projection period. This sheet is maintained per guidelines from the client to provide a quick visual check regarding the efficacy of the system. I post/update a screenshot of this spreadsheet in the forum somewhat regularly, and the actual sheet from time to time. If someone needs the latest sheet pl message me.

7. How accurate are these projections?

A. Please refer to the screenshot of the latest sheet update. Briefly, out of the 12 completed monthly periods to date, all but two projections were met within the same period. The ones that fell short, one miss was by 2.9 pips only, and both misses were met within subsequent 3 periods. For the 25 Weekly projections, all but 8 were met in the same period, and 2 could not be met in the subsequent 3 periods (though 1 of these was met in the 4th period). Both I and my sponsor are fairly happy with the results thus far, though a word of caution: the number of live periods is statistically still very small to yield a fair degree of confidence.


8. Do you trade this system live? How?

A. Yes, I do trade it live. As to the 'how' that is difficult to answer. I don't want to be responsible for anyone suffering a loss due to this, so I would suggest combining the low and the high figures with some other traditional analysis/ signals that you normally use, and consider the projections as price guide for a relatively safe trade'able range.

In practice, and speaking theoretically only, a number of options come to mind as to how to trade the s-range. I personally use one or more of these, but do not recommend it for anyone else. Here's some ways that I use:

1) set limit buy and sell orders at the projected prices +- 2 or 3 pips + spread, with the target/ TP at the other end of the projection, and set to break even on reaching the mid point of the projection. Going by results thus far (with the exception of weekly projection of 9-Dec-12) this by itself (would) have yielded tons of pips. For targets not achieved by the third subsequent period, implement some sort of recovery procedure (for example average out using another periods range). Though - just doing this would result in a considerable draw down.

2) Above, except enter at market only on break and retrace into the projected range.

3) Combination of above and some traditional entry signals and some kind of MM/ stop loss/ hedge strategy.

Just some ideas to try out with a practice account...

more to come later as I get more questions/ suggestions...