EUR/USD EUR/JPY USD/JPY
The Euro pushed higher against the Dollar today as there was USD weakness across the board except against the Yen. The Yen pairs were being sold, pushed higher by USD/JPY in expectations of the senate passing the bill to extend the debt ceiling. When the bill passed, USD/JPY immediately pushed higher (from 91.55 to 91.80 in 6 minutes.)
The move higher in EUR/USD was more from the USD weakness than Euro strength today, which can be proven by looking at the cross rates. In the European & US sessions EUR/GBP traded sideways/down, EUR/NZD & EUR/CAD fell, and EUR/AUD traded sideways. It's worth a note that this is the second day in a row the European equity indices have fallen. Most notably the FTSE MIB down around (-3.50%) yesterday and the Ibex (-2.45%) today. EUR/USD could be vulnerable to a pullback IF (and that's a big IF) we see some USD strength come into the market.
NZD/USD
Yesterday we had a rate statement where the RBNZ chose not to cut rates due to strong HPI data. That gave the currency strength throughout today, and was further bolstered after RBNZ's Wheeler made positive remarks about the economy in a speech today. Ironically, Wheeler wants a much lower exchange rate but regularly causes the Kiwi to strengthen with his remarks. If he possessed adequate knowledge about how the markets functioned, he would realize that he could cause his currency to depreciate simply by jawboning without actually having to take concrete steps to devalue it. He's scheduled to give a speech on currencies on Feb. 20th. Maybe he'll figure it out by then.
AUD/USD
We just had Chinese PMI released, and there was a surprising divergence between the government's PMI number and HSBC's PMI number.
8:00pm CNY Manufacturing PMI Actual 50.4, Est. 51.1, Previous 50.6
8:45pm CNY HSBC Final Manufacturing PMI Actual 52.3, Est. 52.1, Previous 51.9
Out of both numbers, we think the government's PMI number carries more weight, because they are typically suspected of tweaking the number to slightly above positive, and would probably not release a print lower than the consensus estimate unless they wanted to keep the number they were releasing and the actual number in the same ballpark. This should cause the Aussie to further weaken across the board going into February's RBA rate decision. AUD/USD is currently in an uptrend, and may be forming a bottoming pattern above the 200 day EMA on the daily chart. If the bottoming pattern does hold, then we favor the Aussie higher through the 1.0650. The number to watch on the downside is the .618 fib at 1.0370. If that breaks, then 1.3050 should follow quickly and the 200 day SMA at 1.0315 should temporarily serve as support.
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Thursday, January 31, 2013
Wednesday, January 30, 2013
BeamFX's Managed Forex CTA "Iron Fortress" Returns 18.64% in 2012
In what many consider to be a difficult year for forex trading, Iron Fortress FX USA's G10 FX Program returned 18.64% to investors in 2012.
Iron Fortress came in 7th place on Autumn Gold's Top 50 CTAs Trend Followers List, and 40th place in the overall standings for the quarter ending December 2012 on a YTD basis. Autumn Gold's Reports Include NFA Members Only.
This marks another successful year for Iron Fortress, having returned 22.69% to clients in 2010 and 44.17% to clients in 2012 on an annualized basis.
To learn more about our managed forex program contact us at support@beamfx.com
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. For full details see our Risk Disclosure Statement.
Iron Fortress came in 7th place on Autumn Gold's Top 50 CTAs Trend Followers List, and 40th place in the overall standings for the quarter ending December 2012 on a YTD basis. Autumn Gold's Reports Include NFA Members Only.
This marks another successful year for Iron Fortress, having returned 22.69% to clients in 2010 and 44.17% to clients in 2012 on an annualized basis.
To learn more about our managed forex program contact us at support@beamfx.com
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. For full details see our Risk Disclosure Statement.
RBNZ backs up kiwi dollar jawboning with $199 mln sell down
Straight from the Business Desk over at "Scoop News" for anyone who trades NZD/USD:
Thursday, 31 January 2013, 11:37 am
Article: BusinessDesk
RBNZ backs up kiwi dollar jawboning with $199 mln sell down
Jan. 31 (BusinessDesk) - The Reserve Bank is putting its money where its mouth, selling down its holdings of New Zealand dollars last month as governor Graeme Wheeler continues to call the currency overvalued.
The bank sold a net $199 million in December when the trade-weighted index was an average 73.92, adding to the $64 million sold in November, according to Reserve Bank figures published yesterday. That's the biggest monthly sale since mid-2008 when the kiwi dollar plunged going into the global financial crisis.
Wheeler today said the kiwi dollar, which recently traded at 83.59 US cents and 75.17 on a trade-weighted basis, is overvalued and is the main reason inflation is tracking below the bank's target band.
Mike Jones, currency strategist at Bank of New Zealand in Wellington, said the central bank is backing up its heightened rhetoric with some action, and is signalling a TWI at 75 is too high.
"The bank is walking the talk by selling the kiwi dollar a little more aggressively," Jones said.
Since taking the Reserve Bank reins in September last year, Wheeler has criticised the strength of the kiwi dollar, calling it overvalued and saying it's holding back the economic recovery. He has previously ruled out intervening in currency markets, which he says wouldn't have a sustainable influence on the kiwi.
The central bank last intervened in currency markets in 2007 when it sold more than $2 billion to ease the last peak in the kiwi dollar.
The bank manages foreign exchange reserves to allow for efficient intervention and crisis management, and had an intervention capacity of $9.14 billion, as at Dec. 31.
The last major monthly movement in the Reserve Bank's foreign reserves was $525 million of net purchases in March 2011 in the wake of the Canterbury earthquake when then-governor Alan Bollard made an emergency cut to the official cash rate. The TWI was an average 67.72 that month, 11 percent weaker than the average sale last month.
Jones said the central bank has been running more of its foreign exchange programme unhedged, which is more expensive than running a hedged programme.
"The bank made a whopping big profit in the GFC, but since then, it's been haemorrhaging cash to fund its net short positions," he said. "They're hoping they can smooth the peaks and troughs, and can make some money to offset currency costs."
Article Link
Thursday, 31 January 2013, 11:37 am
Article: BusinessDesk
RBNZ backs up kiwi dollar jawboning with $199 mln sell down
Jan. 31 (BusinessDesk) - The Reserve Bank is putting its money where its mouth, selling down its holdings of New Zealand dollars last month as governor Graeme Wheeler continues to call the currency overvalued.
The bank sold a net $199 million in December when the trade-weighted index was an average 73.92, adding to the $64 million sold in November, according to Reserve Bank figures published yesterday. That's the biggest monthly sale since mid-2008 when the kiwi dollar plunged going into the global financial crisis.
Wheeler today said the kiwi dollar, which recently traded at 83.59 US cents and 75.17 on a trade-weighted basis, is overvalued and is the main reason inflation is tracking below the bank's target band.
Mike Jones, currency strategist at Bank of New Zealand in Wellington, said the central bank is backing up its heightened rhetoric with some action, and is signalling a TWI at 75 is too high.
"The bank is walking the talk by selling the kiwi dollar a little more aggressively," Jones said.
Since taking the Reserve Bank reins in September last year, Wheeler has criticised the strength of the kiwi dollar, calling it overvalued and saying it's holding back the economic recovery. He has previously ruled out intervening in currency markets, which he says wouldn't have a sustainable influence on the kiwi.
The central bank last intervened in currency markets in 2007 when it sold more than $2 billion to ease the last peak in the kiwi dollar.
The bank manages foreign exchange reserves to allow for efficient intervention and crisis management, and had an intervention capacity of $9.14 billion, as at Dec. 31.
The last major monthly movement in the Reserve Bank's foreign reserves was $525 million of net purchases in March 2011 in the wake of the Canterbury earthquake when then-governor Alan Bollard made an emergency cut to the official cash rate. The TWI was an average 67.72 that month, 11 percent weaker than the average sale last month.
Jones said the central bank has been running more of its foreign exchange programme unhedged, which is more expensive than running a hedged programme.
"The bank made a whopping big profit in the GFC, but since then, it's been haemorrhaging cash to fund its net short positions," he said. "They're hoping they can smooth the peaks and troughs, and can make some money to offset currency costs."
Article Link
Tuesday, January 29, 2013
What Will Happen When the Markets Crash?
What will happen when the market crashes?
This has as much to do with the currency markets as it does equity markets, because when stocks begin selling off in a fervor led by high frequency trading (HFT) algorithms that jump in front of orders and accelerate the sell off, the currency markets will follow suit. What does this mean for us the FX market? The textbook answer derived from the crises last year is that when the stock market drops money will flow into the "safe haven" currencies such as the USD, Yen, and Franc.
However, since the market last had a substantial drop the possible scenarios of what might happen in the event of a future sell off have changed dramatically due to recent actions taken by central banks. The question that needs to be asked is: in the next major crisis, will the safe haven currencies of choice be the same as last year? We don't think so.
When it comes to the Yen, why would investors choose to put their money into a currency that they know the Japanese are dead-set on destroying? Various market participants have told us that Japan's economy will ultimately implode, with Kyle Bass's prediction of this event happening 18 to 24 months from now being a fan favorite.
The Swiss National Bank has been directly intervening in the FX market to keep their currency weak and has even gone so far as to have some Swiss banks implement capital controls (customers are CHARGED interest rates on their deposits.)
That leaves the U.S. Dollar. With quantitative easing expected to come to an end in 2014 and interest rates set to rise sometime in the next 12 months after that, we believe that the U.S. dollar will be the primary beneficiary of the next crisis.
So when will the markets crash?
Trying to call the top or bottom of a market and trading it before receiving confirmation from price action is one of the most common ways traders lose money and/or blow up their accounts. My philosophy for trading turns in the market is simple: if I know what I'm looking for when a major turn in the market happens, then I'll know when I see it. Playing a move prior to letting price action confirm my hypotheses has rarely ended well for me.
So for everyone frantically trying to call the top of this market on CNBC, please just chill out. When we get a large exogenous shock, whether it's from political BS in Washington, people realizing the economic reality of the continuing Eurozone crisis, or Israel taking out Iran's nuke sites, it will show up in price action. Trying to trade an event that may or may not even happen is gambling. It's not trading.
This has as much to do with the currency markets as it does equity markets, because when stocks begin selling off in a fervor led by high frequency trading (HFT) algorithms that jump in front of orders and accelerate the sell off, the currency markets will follow suit. What does this mean for us the FX market? The textbook answer derived from the crises last year is that when the stock market drops money will flow into the "safe haven" currencies such as the USD, Yen, and Franc.
However, since the market last had a substantial drop the possible scenarios of what might happen in the event of a future sell off have changed dramatically due to recent actions taken by central banks. The question that needs to be asked is: in the next major crisis, will the safe haven currencies of choice be the same as last year? We don't think so.
When it comes to the Yen, why would investors choose to put their money into a currency that they know the Japanese are dead-set on destroying? Various market participants have told us that Japan's economy will ultimately implode, with Kyle Bass's prediction of this event happening 18 to 24 months from now being a fan favorite.
The Swiss National Bank has been directly intervening in the FX market to keep their currency weak and has even gone so far as to have some Swiss banks implement capital controls (customers are CHARGED interest rates on their deposits.)
That leaves the U.S. Dollar. With quantitative easing expected to come to an end in 2014 and interest rates set to rise sometime in the next 12 months after that, we believe that the U.S. dollar will be the primary beneficiary of the next crisis.
So when will the markets crash?
Trying to call the top or bottom of a market and trading it before receiving confirmation from price action is one of the most common ways traders lose money and/or blow up their accounts. My philosophy for trading turns in the market is simple: if I know what I'm looking for when a major turn in the market happens, then I'll know when I see it. Playing a move prior to letting price action confirm my hypotheses has rarely ended well for me.
So for everyone frantically trying to call the top of this market on CNBC, please just chill out. When we get a large exogenous shock, whether it's from political BS in Washington, people realizing the economic reality of the continuing Eurozone crisis, or Israel taking out Iran's nuke sites, it will show up in price action. Trying to trade an event that may or may not even happen is gambling. It's not trading.
Australian Dollar - Pressure to Cut Rates
Written by Enda Curran - Wall Street Journal
SYDNEY--Australia's Prime Minister Julia Gillard added pressure on the central bank to cut rates in a speech to be delivered Wednesday saying that managing the strong Aussie dollar is beyond the control of the government.
"We cannot control a number of factors that have kept our dollar strong, like the weakness in the global economy, the close-to-zero interest rates of many nations and the increasing view that Australia is something of a safe haven," Ms. Gillard will say, according to extracts of a speech she is scheduled to deliver later Wednesday in Canberra.
Her remarks will add to pressure on the Reserve Bank of Australia, or RBA, to again cut rates in an effort to ease the strength of the currency, which is making Australian exports less competitive and hurting areas of the economy such as manufacturing and retail. The RBA is scheduled to meet on Feb. 5 to decide on rates after 1.75 percentage of cuts since November 2011 failed to dampen demand for the Aussie dollar. Rates in Australia remain high by international standards for developed nations at 3.00%.
Ms. Gillard's remarks are out of step with some members of the bank's board who argue that more aggressive action needs to be taken to moderate the currency. In an exclusive interview with Dow Jones Newswires last week, RBA board member Heather Ridout said that the economy needs more "active management" from policymakers to offset the impact of the strong currency.
In the speech, Ms. Gillard says there was likely to be little immediate respite for local businesses from the strong exchange rate.
The article is located here
SYDNEY--Australia's Prime Minister Julia Gillard added pressure on the central bank to cut rates in a speech to be delivered Wednesday saying that managing the strong Aussie dollar is beyond the control of the government.
"We cannot control a number of factors that have kept our dollar strong, like the weakness in the global economy, the close-to-zero interest rates of many nations and the increasing view that Australia is something of a safe haven," Ms. Gillard will say, according to extracts of a speech she is scheduled to deliver later Wednesday in Canberra.
Her remarks will add to pressure on the Reserve Bank of Australia, or RBA, to again cut rates in an effort to ease the strength of the currency, which is making Australian exports less competitive and hurting areas of the economy such as manufacturing and retail. The RBA is scheduled to meet on Feb. 5 to decide on rates after 1.75 percentage of cuts since November 2011 failed to dampen demand for the Aussie dollar. Rates in Australia remain high by international standards for developed nations at 3.00%.
Ms. Gillard's remarks are out of step with some members of the bank's board who argue that more aggressive action needs to be taken to moderate the currency. In an exclusive interview with Dow Jones Newswires last week, RBA board member Heather Ridout said that the economy needs more "active management" from policymakers to offset the impact of the strong currency.
In the speech, Ms. Gillard says there was likely to be little immediate respite for local businesses from the strong exchange rate.
The article is located here
Monday, January 28, 2013
Forex Trading: Arbitrage
The USD continued to gain or consolidate against most of the major currencies. Notably, GBP/USD and NZD/USD have been under pressure since the market opened Sunday night (currently down 84 and 54 pips respectively.) The Euro has been trading sideways against the U.S. Dollar as the demand for Euros in terms of GBPs has been propping the Euro side of the equation up. [Remember the concept of arbitrage: if EUR/GBP moves up by relatively the same amount that GBP/USD moves down, then EUR/USD will remain constant (in practical terms this means consolidation.) ΔEUR/GBP+ΔGBP/USD=ΔEUR/USD] There are computerized automated systems all over the world that are in and out of trades in milliseconds and profit from performing arbitrage to keep this equation in balance. Once you understand the concept of arbitrage, it's easier to identify which side of the equation is driving price action.
In fact, you don't even need to look at a EUR/USD chart to see how price action is unfolding! You can tell how price is moving on a chart of EUR/USD simply by watching the EUR/GBP and GBP/USD charts.
So when will EUR/USD move and in what direction? For the last couple of trading days there seems to be both broad strength (broad = key!) in the U.S. Dollar and the Euro across the board. I'll be looking for one of them to start exhibiting weakness against the other major currencies (GBP, AUD, NZD, CAD), and then I'll know whether its the USD or the Euro I want to short against the other.
In fact, you don't even need to look at a EUR/USD chart to see how price action is unfolding! You can tell how price is moving on a chart of EUR/USD simply by watching the EUR/GBP and GBP/USD charts.
So when will EUR/USD move and in what direction? For the last couple of trading days there seems to be both broad strength (broad = key!) in the U.S. Dollar and the Euro across the board. I'll be looking for one of them to start exhibiting weakness against the other major currencies (GBP, AUD, NZD, CAD), and then I'll know whether its the USD or the Euro I want to short against the other.
Thursday, January 24, 2013
Forex Trading - Market Update
The Aussie and Kiwi continued falling today as the bloodbath in Apple's stock continued and the S&P briefly broke a couple points above the psychologically important 1500 figure and then got hammered back down and closed unch.
AUD/USD
There appeared to be two main drivers to the Aussie weakness today. First, there was strength in the Euro across the board. The EUR/AUD cross was up approximately 185 pips on the day, putting downward pressure on AUD/USD (closed 105 pips down on the day.) Second, the weekly U.S. unemployment number beat the consensus estimate by a wide margin - for the 2nd print in a row. Actual: 330K, Est: 359, Previous: 335. This has caused some market participants to adjust the predictions for the next NFP report and unemployment rate print on Friday, February 1st. This in turn affects speculation about when QE might end. Remember, a lower then expected unemployment print means that our stimulus addicted market will get its last fix sooner then expected. To understand what that means for the currency markets think about the effects that QE has previously had and simply reverse them: a weaker USD and higher commodity prices (stronger AUD, NZD, CAD.)
Additional factors from Monday included the lower than expected CPI reading and the RBA's Treasurer saying that another rate cut was possible. China's HSBC manufacturing PMI came in better than previous on Wednesday (actual 51.9, previous 51.5) but market participants were expecting it to come in better, so it didn't have much of an impact.
EUR/USD
Remains locked in its trading range of 1.3400 - 1.3250, and seems to have been driven up today more from the arbitrage affect of strong demand for EUR/JPY than from fundamental demand for EUR/USD. The SNB seems to have temporarily stopped selling Francs to buy Euros, but the franc pairs deserved to be watched closely in case SNB's Jordan gives his traders the green light again.
USD/CAD
Appears poised for a continued move to the upside if the Canadian CPI number tomorrow comes in lower then expected. The US New Home Sales number is also coming out at 10:00 AM EST and usually has a decent impact on the CAD as well. (Canada exports a lot of the raw materials used in construction and manufacturing). The CAD is already significantly weak after a surprise dovish stance from the BOC on Wednesday, and took a slight breather today as the Aussie ripped down today so it has decent potential to the upside on Friday.
AUD/USD
There appeared to be two main drivers to the Aussie weakness today. First, there was strength in the Euro across the board. The EUR/AUD cross was up approximately 185 pips on the day, putting downward pressure on AUD/USD (closed 105 pips down on the day.) Second, the weekly U.S. unemployment number beat the consensus estimate by a wide margin - for the 2nd print in a row. Actual: 330K, Est: 359, Previous: 335. This has caused some market participants to adjust the predictions for the next NFP report and unemployment rate print on Friday, February 1st. This in turn affects speculation about when QE might end. Remember, a lower then expected unemployment print means that our stimulus addicted market will get its last fix sooner then expected. To understand what that means for the currency markets think about the effects that QE has previously had and simply reverse them: a weaker USD and higher commodity prices (stronger AUD, NZD, CAD.)
Additional factors from Monday included the lower than expected CPI reading and the RBA's Treasurer saying that another rate cut was possible. China's HSBC manufacturing PMI came in better than previous on Wednesday (actual 51.9, previous 51.5) but market participants were expecting it to come in better, so it didn't have much of an impact.
EUR/USD
Remains locked in its trading range of 1.3400 - 1.3250, and seems to have been driven up today more from the arbitrage affect of strong demand for EUR/JPY than from fundamental demand for EUR/USD. The SNB seems to have temporarily stopped selling Francs to buy Euros, but the franc pairs deserved to be watched closely in case SNB's Jordan gives his traders the green light again.
USD/CAD
Appears poised for a continued move to the upside if the Canadian CPI number tomorrow comes in lower then expected. The US New Home Sales number is also coming out at 10:00 AM EST and usually has a decent impact on the CAD as well. (Canada exports a lot of the raw materials used in construction and manufacturing). The CAD is already significantly weak after a surprise dovish stance from the BOC on Wednesday, and took a slight breather today as the Aussie ripped down today so it has decent potential to the upside on Friday.
Wednesday, January 23, 2013
Forex Trading - Market Update
The HSBC Flash Manufacturing PMI reading out of China came in better than generally expected at 51.9, with a previous print of 51.5. There was little initial reaction. However, at 9:00 P.M. on the dot risk took off like a rocket, which coincidentally was somewhat quelled an hour later by North Korea threatening to launch an actual rocket.
EUR/USD & GBP/USD still remain stuck in their respective ranges (1.3400 - 1.3250 and 1.5900 - 1.5800), but exhibited signs of weakness today as the IMF cut both the Eurozone's and the U.K.'s growth forecast. If EUR/USD drops to 1.3250, our target is 1.3150 based on the price inefficiency. If the Euro does break down tomorrow morning over the PMI numbers due to be released (here) then it's reasonable to expect EUR/GBP to follow it down, and give some support to GBP/USD. (Perhaps a bounce off of the .50 fib at 1.5790?) Also, if you're trading EUR/USD make sure you keep an eye out for government intervention in the EUR/CHF and EUR/JPY.
As we stated in yesterday's blog post, the best high yielding currency to go long in a 'risk on' play would probably be the Kiwi. Sure enough, AUD/NZD continues to barrel to fresh lows instilling strength in NZD/USD and keeping downwards pressure on AUD/USD. The first major piece of event risk that should impact the AUD/USD tomorrow is the German PMI at 3:30 A.M. If that print is bad, European equities could start to dump (especially after the downgraded growth forecasts today.) That could in turn bleed over into the U.S. stock market session. Speaking of stocks, keep an eye on Apple (you can check the futures here.) It's unknown what effect the massive dumpathon in AAPL is going to have on U.S. stocks at 9:30 A.M. tomorrow; but I imagine it won't be pretty. The futures don't look good at the moment (track them here) and the gap lower could cause margin calls. Lastly, keep in mind that the 8:30 A.M. weekly U.S. unemployment number could generate another "omg QE is ending" moment if it comes in much better than expected.
EUR/USD & GBP/USD still remain stuck in their respective ranges (1.3400 - 1.3250 and 1.5900 - 1.5800), but exhibited signs of weakness today as the IMF cut both the Eurozone's and the U.K.'s growth forecast. If EUR/USD drops to 1.3250, our target is 1.3150 based on the price inefficiency. If the Euro does break down tomorrow morning over the PMI numbers due to be released (here) then it's reasonable to expect EUR/GBP to follow it down, and give some support to GBP/USD. (Perhaps a bounce off of the .50 fib at 1.5790?) Also, if you're trading EUR/USD make sure you keep an eye out for government intervention in the EUR/CHF and EUR/JPY.
As we stated in yesterday's blog post, the best high yielding currency to go long in a 'risk on' play would probably be the Kiwi. Sure enough, AUD/NZD continues to barrel to fresh lows instilling strength in NZD/USD and keeping downwards pressure on AUD/USD. The first major piece of event risk that should impact the AUD/USD tomorrow is the German PMI at 3:30 A.M. If that print is bad, European equities could start to dump (especially after the downgraded growth forecasts today.) That could in turn bleed over into the U.S. stock market session. Speaking of stocks, keep an eye on Apple (you can check the futures here.) It's unknown what effect the massive dumpathon in AAPL is going to have on U.S. stocks at 9:30 A.M. tomorrow; but I imagine it won't be pretty. The futures don't look good at the moment (track them here) and the gap lower could cause margin calls. Lastly, keep in mind that the 8:30 A.M. weekly U.S. unemployment number could generate another "omg QE is ending" moment if it comes in much better than expected.
Tuesday, January 22, 2013
Forex Trading - Market Update
Market Update
The U.S. stock market made fresh five year highs today as the uptrend in price action continues. Unless a meaningful catalyst arises which sparks a sell off, the market should continue grinding higher. There are plenty of potential catalysts out there, but it's dangerous to trade them before they come to fruition.
Currencies
Australian CPI has come in lower than expected: Actual 0.2%, Expected 0.4%, Previous 1.4%. That should make AUD/USD the best currency pair to short if the market turns lower. Alternatively, NZD/USD should be the most attractive pair to go long if the market goes higher. Stops have accumulated above the swing highs on the daily charts in both of these currency pairs, so if the market begins to explode to the upside it would be dangerous to short these pairs before the stops get wiped out. Also, it pays to keep an eye on USD/JPY and the Japanese stock market. If Japanese stocks begin selling off, risk appetite in Asia should be dampened quickly leading to selling pressure on the Aussie and Kiwi. (Remember, there almost as many retail FX traders in Japan then in the rest of the world combined! They can have a significant impact on price!)
Potential Catalysts This Week
- U.S. political strife. The House Republicans are scheduled to vote their "no budget, no pay" bill through tomorrow. If Harry Reid says the bill has no chance of passing the Senate, traders may begin to price in gridlock.
- Earnings. (Apple reports tomorrow.)
- Chinese or German Flash Manufacturing PMI. (The print would have to be very bad.)
- US unemployment claims: Last week's print was 34K better than estimated. If we see another really good print the market could focus on the 6.5% unemployment rate tied to the end of QE.
- A possible flare up in the dispute between China and Japan over the Senkaku islands.
The U.S. stock market made fresh five year highs today as the uptrend in price action continues. Unless a meaningful catalyst arises which sparks a sell off, the market should continue grinding higher. There are plenty of potential catalysts out there, but it's dangerous to trade them before they come to fruition.
Currencies
Australian CPI has come in lower than expected: Actual 0.2%, Expected 0.4%, Previous 1.4%. That should make AUD/USD the best currency pair to short if the market turns lower. Alternatively, NZD/USD should be the most attractive pair to go long if the market goes higher. Stops have accumulated above the swing highs on the daily charts in both of these currency pairs, so if the market begins to explode to the upside it would be dangerous to short these pairs before the stops get wiped out. Also, it pays to keep an eye on USD/JPY and the Japanese stock market. If Japanese stocks begin selling off, risk appetite in Asia should be dampened quickly leading to selling pressure on the Aussie and Kiwi. (Remember, there almost as many retail FX traders in Japan then in the rest of the world combined! They can have a significant impact on price!)
Potential Catalysts This Week
- U.S. political strife. The House Republicans are scheduled to vote their "no budget, no pay" bill through tomorrow. If Harry Reid says the bill has no chance of passing the Senate, traders may begin to price in gridlock.
- Earnings. (Apple reports tomorrow.)
- Chinese or German Flash Manufacturing PMI. (The print would have to be very bad.)
- US unemployment claims: Last week's print was 34K better than estimated. If we see another really good print the market could focus on the 6.5% unemployment rate tied to the end of QE.
- A possible flare up in the dispute between China and Japan over the Senkaku islands.
Bank of Japan Votes to Expedite Japan's Economic Collapse
In a move derived from an attempt to win political points and the ignorance of monetary history, members of the Bank of Japan decided to embark on an open ended asset purchasing program and adopt a 2% inflation target. The vote was 7-2 in favor of the measures, as apparently a minority on the council realized that actually reaching a 2% inflation level would cause a rise in interest rates and make the process of refinancing their debt completely unsustainable. Also, there's the small issue of the entire Japanese banking system collapsing as banks are the primary holders of JGBs.
Monday, January 21, 2013
Why the Euro is Going Lower - Round 2
In my last article located here, I had shorted EUR/USD with a stop at 1.3375. As usual when getting stopped out, I asked myself what had gone wrong. My conclusion was that price action can easily give misleading signals when multiple central banks are intervening in the market and distorting prices. (Points finger at the BOJ and SNB.)
I still like EUR/USD lower to 1.3150. After I got stopped out, I analyzed the situation and re-shorted the Euro at 1.3370 and now have my stop loss in front of my entry so that I won't lose money if various central banks around the world decide they want to continue buying European government bonds and price rips up towards Ashraf Laidi's 1.3500 EUR/USD party.
What To Watch For
I'll be keeping a close eye on the following currency pairs:
EUR/CHF - Will the SNB continue selling francs?
USD/JPY - If this pair continues to climb then it's a positive for equities (Japanese stocks rip higher and the effect bleeds over into the other stock markets.)
EUR/JPY - If USD/JPY goes higher than what's everyone's favorite yen cross? So far it's been EUR/JPY. When you have such a parabolic move in a particular currency pair such as the Yen, arbitrage plays a very distinct role. >> (check out EUR/USD, EUR/JPY, and USD/JPY going back to 11/14/2012)
Why the Euro is going lower - Round 2
My three fundamental reasons behind originally shorting the Euro:
1. There's far too much complacency in the market. I don't see an obvious reason for the correction; but with equity markets pushing record highs, the VIX plunging to lows, and general sentiment being complacency, I think the most amount of people would get hurt by the markets falling - therefore I consider it likely. The negative effect on risk appetite should cause EUR/USD to fall.
2. I thought the hyperactive traders buying Euros and selling francs over at the SNB would take it down a notch. Not so. EUR/CHF spiked up from 1.2370 on 1/17 to 1.2570 on 1/18, a 200 pip rise corresponding with EUR/USD's re-test of 1.3400. It just so happens that when a central bank begins devaluing their currency with a passion, it can give price action a parabolic shape.
3. Issues of a Cypriot bailout make media headlines. Again. The spread between the German and Spanish 10 yr bonds has narrowed substantially in 2012. I believe mean reversion in the near term is likely, as investor continue to pile into European stocks and bonds on the trumpeted declaration that the Eurozone is saved.
Alternative Scenario
The uptrend continues and the Euro rips higher. Be careful.
BeamFX is a Guaranteed Introducing Broker for Institutional Liquidity (ILQ). You can open a live trading account with us here.
I still like EUR/USD lower to 1.3150. After I got stopped out, I analyzed the situation and re-shorted the Euro at 1.3370 and now have my stop loss in front of my entry so that I won't lose money if various central banks around the world decide they want to continue buying European government bonds and price rips up towards Ashraf Laidi's 1.3500 EUR/USD party.
What To Watch For
I'll be keeping a close eye on the following currency pairs:
EUR/CHF - Will the SNB continue selling francs?
USD/JPY - If this pair continues to climb then it's a positive for equities (Japanese stocks rip higher and the effect bleeds over into the other stock markets.)
EUR/JPY - If USD/JPY goes higher than what's everyone's favorite yen cross? So far it's been EUR/JPY. When you have such a parabolic move in a particular currency pair such as the Yen, arbitrage plays a very distinct role. >> (check out EUR/USD, EUR/JPY, and USD/JPY going back to 11/14/2012)
Why the Euro is going lower - Round 2
My three fundamental reasons behind originally shorting the Euro:
1. There's far too much complacency in the market. I don't see an obvious reason for the correction; but with equity markets pushing record highs, the VIX plunging to lows, and general sentiment being complacency, I think the most amount of people would get hurt by the markets falling - therefore I consider it likely. The negative effect on risk appetite should cause EUR/USD to fall.
2. I thought the hyperactive traders buying Euros and selling francs over at the SNB would take it down a notch. Not so. EUR/CHF spiked up from 1.2370 on 1/17 to 1.2570 on 1/18, a 200 pip rise corresponding with EUR/USD's re-test of 1.3400. It just so happens that when a central bank begins devaluing their currency with a passion, it can give price action a parabolic shape.
3. Issues of a Cypriot bailout make media headlines. Again. The spread between the German and Spanish 10 yr bonds has narrowed substantially in 2012. I believe mean reversion in the near term is likely, as investor continue to pile into European stocks and bonds on the trumpeted declaration that the Eurozone is saved.
Alternative Scenario
The uptrend continues and the Euro rips higher. Be careful.
BeamFX is a Guaranteed Introducing Broker for Institutional Liquidity (ILQ). You can open a live trading account with us here.
Thursday, January 17, 2013
Michael Weissman Becomes a Signal Provider at Mirror Trader
After a long and strenuous evaluation period, we are proud to announce that our very own Michael Weissman has been accepted as a signal provider for Tradency's Mirror Trader program. Michael had a 67% win rate (29/43 trades) and made a net total of 424 pips during the evaluation period. You can follow Michael's trades by adding his username "beam1" to your Mirror Trader Portfolio.
If you don't yet have a Mirror Trader account yet, you can open a free demo here, or a live account here.
BeamFX is a guaranteed introducing broker for Institutional Liquidity (ILQ).
If you don't yet have a Mirror Trader account yet, you can open a free demo here, or a live account here.
BeamFX is a guaranteed introducing broker for Institutional Liquidity (ILQ).
Wednesday, January 16, 2013
Forex Trading: EUR/USD
My (short term) fundamental bias on the Euro is lower, and price action has presented me with a setup I like to play, so I shorted at 1.3340 and added at 1.3280 after the trade began going in my favor. The trade has what I consider to be a good probability of hitting the target due to what I call a price inefficiency (a rapid directional move in price without previous price action close behind it.) If the 1.3250 support barrier breaks (previous support + 200 DMA) I think the price inefficiency will get run and the 1.3150 TP will get hit fairly quickly, although price may pause at the 2nd 200 DMA around the 1.3200 figure.
My Stop Loss
I consider managing my risk to be the most important part of trading. In this case I've defined my risk at 1.3375. I put soft resistance at 1.3350. If that breaks, and we hit 1.3375, I think there's a good chance of stops being run above the 1.3400 figure. (Previous swing high is 1.3405 - not a solid stop run, although stops really hadn't had a chance to accumulate there before the move through the big figure.) So my cost average is 1.3310, with a SL 65 pips higher and a TP 160 pips lower - roughly a 1:2.5 risk to reward ratio.
Below is my 1H chart.
Alternative Scenario
If we do see a move higher to 1.3350, that level should prove crucial to directing future price action. It should either serve as stiff resistance and reject price back to the 1.3300 figure (and ultimately lower) or it should serve as a brief zone of consolidation before a move higher (past my SL at 1.3375) on its way to run stops through 1.3430-1.3440.
Note: This is not a trade recommendation. Trade at your own risk.
Monday, January 14, 2013
BeamFX Now Offers Mirror Trader!
Mirror Trader is a comprehensive trading platform, providing you
with unique tools for trading by knowledge: Live signals, sentiments,
market charts, oscillators and chart studies.
Mirror Trader uses cutting edge technology to offer a user friendly trading experience, a wide set of innovative features and robust execution. In addition, the Mirror Trader gives you an edge by providing access to a knowledge database of a wide range of trading strategies.
The Mirror Trader introduces traders to the "Trade by Knowledge" concept:
Manual Trading
Execute trades using the Mirror Trader’s charting tools, indicators and chart studies. Take advantage of the strategies signals and sentiments to support your trading decisions and open up new trading ideas.
Semi Automatic Mirroring
Active execution of signals, based on your judgment and understanding. View all the strategies’ “buy” and “sell” signals in real time and choose the trades you want to mirror to your account.
Automatic Mirroring
Automatic real-time execution, based on your selected strategies. Select strategies to your trading portfolio and the Mirror Trader will automatically execute their orders in your trading account.
Mirror Trader’s Advantages:
You can sign up for a Live Mirror Trader Account here.
You can sign up for a Demo Mirror Trader Account here.
Mirror Trader uses cutting edge technology to offer a user friendly trading experience, a wide set of innovative features and robust execution. In addition, the Mirror Trader gives you an edge by providing access to a knowledge database of a wide range of trading strategies.
The Mirror Trader introduces traders to the "Trade by Knowledge" concept:
Manual Trading
Execute trades using the Mirror Trader’s charting tools, indicators and chart studies. Take advantage of the strategies signals and sentiments to support your trading decisions and open up new trading ideas.
Semi Automatic Mirroring
Active execution of signals, based on your judgment and understanding. View all the strategies’ “buy” and “sell” signals in real time and choose the trades you want to mirror to your account.
Automatic Mirroring
Automatic real-time execution, based on your selected strategies. Select strategies to your trading portfolio and the Mirror Trader will automatically execute their orders in your trading account.
Mirror Trader’s Advantages:
- Manual trading, Semi Automatic Mirroring, and Automatic Mirroring in one platform
- Benefit from experienced traders’ knowledge
- Control and manage real-time signals generated by worldwide strategy developers
- Back up your trading decision with market trends from strategies and users
- Exclusive features such as: Live signals and strategies detailed analysis, as well as popular trading tools: charts, indicators, oscillators, rates and market sentiments
You can sign up for a Live Mirror Trader Account here.
You can sign up for a Demo Mirror Trader Account here.
Wednesday, January 9, 2013
Australian Retail Sales Fall
Australian Retail Sales came in at -0.1% m/m versus an expected gain of 0.3% and a previous reading of 0.0%.
This follows the rather large miss in the Australian Trade Balance earlier this weak and the previous number being revised substantially lower. Actual: -2.64B, Exp: -2.21B, Previous -2.44B
These data prints coming in lower than expected should not surprise anyone. Australia's economy has recently shown serious signs of deterioration, especially in the month of December. Forex Factory shows that of 22 economic data releases in the month of December, 60% of them either missed the consensus estimate to the downside, or came in lower than the previous reading. The ones that did not miss or come in lower were definitely not good. Yet, AUD/USD continues to trend upwards. We believe the high correlation between AUD/USD and the S&P 500 is the reason why. If the U.S. equity markets were to unravel, there is a strong fundamental argument to be made for a sharp decline in AUD/USD.
Below are the Australian economic data releases for the month of December.
Actual Expected Previous
DROP AIG Manufacturing Index 43.6 45.2
DROP MI Inflation Gauge m/m -0.1% 0.1%
DROP NAB Business Confidence -9 -1
DROP Westpac Consumer Sentiment -4.1% 5.2%
DROP MI Inflation Expectations 1.8% 2.2%
DROP MI Leading Index m/m 0.1% 0.6%
MISS Private Sector Credit m/m 0.0% 0.3% 0.1%
MISS Company Operating Profits q/q -2.9% -2.8% -0.3%
MISS Retail Sales m/m 0.0% 0.4% 0.5%
MISS Building Approvals m/m -7.6% -1.8% 9.5%
MISS Current Account -14.9B -14.7B -12.4B
MISS GDP q/q 0.5% 0.6% 0.6%
MISS Home Loans m/m 0.1% 3.1% 1.1%
- Trade Balance *1 -2.09B -2.15B -1.42B
- ANZ Job Advertisements m/m -2.9% -4.6%
- Commodity Prices y/y -11.6% -16.2%
- CB Leading Index m/m 0.2% -0.4%
- New Motor Vehicle Sales m/m 0.0% -2.5%
- AIG Services Index *2 47.1 42.8
- AIG Construction Index *2 37.0 35.8
- 7:30pm Employment Change *3 13.9K 0.2K 10.2K
- Unemployment Rate *3 5.2% 5.5% 5.4%
*1: Australia's economy is driven by exports. Bad trade balance numbers have negative implications for the economy
*2: A number below 50 means contraction.
*3: Both of these numbers are not necessarily good. The drop in the unemployment rate was due to a drop in the participation rate as job seekers became discouraged and stopped looking for jobs. The rise in overall employment was good, but only due to the increase in part time jobs. Full time jobs actually dropped by 4200 in December.
This follows the rather large miss in the Australian Trade Balance earlier this weak and the previous number being revised substantially lower. Actual: -2.64B, Exp: -2.21B, Previous -2.44B
These data prints coming in lower than expected should not surprise anyone. Australia's economy has recently shown serious signs of deterioration, especially in the month of December. Forex Factory shows that of 22 economic data releases in the month of December, 60% of them either missed the consensus estimate to the downside, or came in lower than the previous reading. The ones that did not miss or come in lower were definitely not good. Yet, AUD/USD continues to trend upwards. We believe the high correlation between AUD/USD and the S&P 500 is the reason why. If the U.S. equity markets were to unravel, there is a strong fundamental argument to be made for a sharp decline in AUD/USD.
Below are the Australian economic data releases for the month of December.
Actual Expected Previous
DROP AIG Manufacturing Index 43.6 45.2
DROP MI Inflation Gauge m/m -0.1% 0.1%
DROP NAB Business Confidence -9 -1
DROP Westpac Consumer Sentiment -4.1% 5.2%
DROP MI Inflation Expectations 1.8% 2.2%
DROP MI Leading Index m/m 0.1% 0.6%
MISS Private Sector Credit m/m 0.0% 0.3% 0.1%
MISS Company Operating Profits q/q -2.9% -2.8% -0.3%
MISS Retail Sales m/m 0.0% 0.4% 0.5%
MISS Building Approvals m/m -7.6% -1.8% 9.5%
MISS Current Account -14.9B -14.7B -12.4B
MISS GDP q/q 0.5% 0.6% 0.6%
MISS Home Loans m/m 0.1% 3.1% 1.1%
- Trade Balance *1 -2.09B -2.15B -1.42B
- ANZ Job Advertisements m/m -2.9% -4.6%
- Commodity Prices y/y -11.6% -16.2%
- CB Leading Index m/m 0.2% -0.4%
- New Motor Vehicle Sales m/m 0.0% -2.5%
- AIG Services Index *2 47.1 42.8
- AIG Construction Index *2 37.0 35.8
- 7:30pm Employment Change *3 13.9K 0.2K 10.2K
- Unemployment Rate *3 5.2% 5.5% 5.4%
*1: Australia's economy is driven by exports. Bad trade balance numbers have negative implications for the economy
*2: A number below 50 means contraction.
*3: Both of these numbers are not necessarily good. The drop in the unemployment rate was due to a drop in the participation rate as job seekers became discouraged and stopped looking for jobs. The rise in overall employment was good, but only due to the increase in part time jobs. Full time jobs actually dropped by 4200 in December.
Tuesday, January 8, 2013
Institutional Liquidity (ILQ) Enters Australia
ILQ has recently opened a branch in Australia and obtained permission to operate there by the Australian Securities and Investment Commission (ASIC). While ILQ was able to work with non-US clients before, this move will allow them to expand their capabilities and available products which they can offer to clients. ILQ Australia offers hedging and 100:1 leverage to non-US residents.
You can open an account with ILQ Australia through BeamFX using the link here.
BeamFX is a Guaranteed Introducing Broker for ILQ.
You can open an account with ILQ Australia through BeamFX using the link here.
BeamFX is a Guaranteed Introducing Broker for ILQ.
Monday, January 7, 2013
Forex Trading - Market Update
Stock Market - Up or Down?
Yes, this is a blog focused on the FX market, not the stock market. So why do I bring equities up? There's a strong correlation between movements in the S&P 500 and currencies like the Aussie and Kiwi against the U.S. Dollar. For example, if the U.S. equity markets were to capitulate tomorrow over fears of the U.S. debt ceiling then the Aussie and Kiwi would most likely depreciate sharply against safe haven currencies such as the U.S. Dollar and Japanese Yen.
The equity markets were down today, but in the general scheme of things they have continued to grind higher. There are many pessimistic views about the market that are elaborately laid out, but the reality of the situation is that most of the people who call tops and bottoms get hurt. When it comes to U.S. stocks we're clearly in a bull market. Now, could stocks go down tomorrow and continue going down for the next 3 months? Sure. But as of right now, we're in a bull market. U.S. Stocks have been pushing higher since March 2009 - almost 4 years ago.
Not being able to define the current state of the market for what it really is because of a bias - be it from an open position or a personal opinion about the "true" economic health of a country/region can be a huge detriment to your trading. So that said, let me again repeat - we're in a bull market.
FX Market Update
The USD was sold today (and on Friday) after making some significant progress last week. See the Ice dollar index here, and the more properly weighted WSJ dollar index here. As we previously noted, we attribute the recent USD strength to the hawkish FOMC minutes that were recently released. The main reason that the USD weakened on Friday was that the unemployment rate increased, a "negative" for the probability of QE ending sooner rather than later.
That said, the idea of QE ending has been flashing across media headlines and the concept of QE ending can not be stuffed back into a box. Look for the monthly unemployment numbers to have a significant impact on markets. The weekly numbers will probably have more of an impact as well - we advise being mindful of the Unemployment Claims on Thursday - Exp: 361, Previous: 372
Yes, this is a blog focused on the FX market, not the stock market. So why do I bring equities up? There's a strong correlation between movements in the S&P 500 and currencies like the Aussie and Kiwi against the U.S. Dollar. For example, if the U.S. equity markets were to capitulate tomorrow over fears of the U.S. debt ceiling then the Aussie and Kiwi would most likely depreciate sharply against safe haven currencies such as the U.S. Dollar and Japanese Yen.
The equity markets were down today, but in the general scheme of things they have continued to grind higher. There are many pessimistic views about the market that are elaborately laid out, but the reality of the situation is that most of the people who call tops and bottoms get hurt. When it comes to U.S. stocks we're clearly in a bull market. Now, could stocks go down tomorrow and continue going down for the next 3 months? Sure. But as of right now, we're in a bull market. U.S. Stocks have been pushing higher since March 2009 - almost 4 years ago.
Not being able to define the current state of the market for what it really is because of a bias - be it from an open position or a personal opinion about the "true" economic health of a country/region can be a huge detriment to your trading. So that said, let me again repeat - we're in a bull market.
FX Market Update
The USD was sold today (and on Friday) after making some significant progress last week. See the Ice dollar index here, and the more properly weighted WSJ dollar index here. As we previously noted, we attribute the recent USD strength to the hawkish FOMC minutes that were recently released. The main reason that the USD weakened on Friday was that the unemployment rate increased, a "negative" for the probability of QE ending sooner rather than later.
That said, the idea of QE ending has been flashing across media headlines and the concept of QE ending can not be stuffed back into a box. Look for the monthly unemployment numbers to have a significant impact on markets. The weekly numbers will probably have more of an impact as well - we advise being mindful of the Unemployment Claims on Thursday - Exp: 361, Previous: 372
Thursday, January 3, 2013
FOMC minutes signal end of QE!
The Federal Open Market Committee minutes showed that Fed officials were not in agreement over when to halt the Quantitative Easing (QE) programs. Some officials wanted to continue the programs to the end of 2013, some wanted to end the programs before then, and other officials wanted to end the QE programs immediately.
Just as the bad economic numbers this year have caused the stock market to go higher (and USD lower) due to the increased chance of more QE, now good economic numbers could cause the USD to significantly strengthen and equities to drop as it signals an increased chance of the end of QE.
We believe these minutes will lead to the USD strengthening over the medium term, with a sell-off in equities likely to follow improvements in the labor market. This turns tomorrow's jobs report into a catalyst that could potentially trigger a significant move in USD.
Just as the bad economic numbers this year have caused the stock market to go higher (and USD lower) due to the increased chance of more QE, now good economic numbers could cause the USD to significantly strengthen and equities to drop as it signals an increased chance of the end of QE.
We believe these minutes will lead to the USD strengthening over the medium term, with a sell-off in equities likely to follow improvements in the labor market. This turns tomorrow's jobs report into a catalyst that could potentially trigger a significant move in USD.
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