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Monday, January 16, 2017

Forex Watchlist: Where to Short GBP/USD?

I believe that even though the Fed will likely have trouble sticking to their plan to raise interest rates thrice this year, the fact of the matter is that they ARE tightening their policies while other major central banks are busy making stimulus rain for their respective economies.
This is why I got tingles (the good kind) when I saw Cable’s 4-hour and daily time frames. Okay, maybe I was also watching Ryan Gosling gush about “his lady,” but GBP/USD’s setup also looked pretty good to me.
As you can see on the daily chart below, GBP/USD is forming a possible double bottom around the 1.2100 major psychological area with the “neckline” lining up around 1.2700 – 1.2800 zone. Oh, and look at the bullish divergence on the chart!f we zoom in on the 4-hour time frame, we can see that the bulls have actually defended the 1.2100 (which is near the bottom weekly ATR, btw) not once, not twice, but THRICE in the last couple of months. Will the bulls continue to hold the fort? Or is the third time the charm for pound bears?
A quick look at the forex calendar tells me that there are at least three speeches that could push the pound in either direction. I’m seeing scheduled speeches by BOE’s Mark Carney, Fed’s Janet Yellen, and today’s presser by President-elect Trump. Uncle Sam’s retail sales report scheduled on Friday could also fuel any dollar move especially if Trump manages to rock the market boats significantly.
In the U.K.’s camp, I’m counting on more Brexit-related headlines to push the pound lower. Unless Theresa May and/or Mark Carney reassures market players that there won’t be a “hard Brexit,” I believe that market players will continue to equate the Brexit process to uncertainty.f the pound does see a bounce over the next couple of hours, then I’ll be watching the 1.2300 (which lines up with the 100 SMA) and 1.2400 (which lines up with the 200 SMA and last week’s high) areas of interest closely. And if the pound rally gains steam, then I’ll keep close tabs on the 1.2700 area, which is near a previous high.
But if more forex traders price in their uncertainty (like I’m about to do) over Brexit in the next couple of days, then we’ll likely see Cable drop to new lows instead of bouncing. In this case, I’ll be ready to scale in and start building my short orders. Maybe after it breaches the 1.2000 mark?
That’s it for my watchlist today! I’ll add details of my entry and exit strategies depending on the strength and direction of the pound’s move, but for now, I’m looking for ways to start building a long-term short position.

Wednesday, November 30, 2016

Top 3 Life Lessons from Forex Trading

1. Trading encourages discipline

Contrary to the “Get one million pips in a month” ads we’ve seen, trading is far from easy. Just like professional sports and other high performance careers, trading is a craft that must be honed day in and day out. And just like other professions, trading requires discipline.
Developing discipline requires planning, tons of practice, and turning those planned tasks into habits. In trading, discipline is acquired by taking the time to study the fundamentals and charts, sticking to the trading plan, and even logging in trade journals. Remember that there’s a name for trading without discipline – gambling.

2.Trading pushes us to go beyond our comfort zone

For most people, risking money is very uncomfortable because after all, nobody wants to lose their hard earned cash. This leads to common uncomfortable trading scenarios such as “cutting winning trades in fear of them turning into losing ones,” or “not cutting losing trades quickly in hopes that it will turn into a winner.” In other words, it’s more comfortable to hold on to losers and cut winners quickly–the exact opposite of what traders are supposed to do!
As the great trading psychologist, Dr. Brett Steenbarger, once said, “Your growth always lies on the other side of your discomfort. Whether it’s in the weight room or career decisions, you’ll never develop yourself by staying in your comfort zone.

3. Trading teaches us about emotional balance

I’m sure that many of you have gotten burned by overconfidence. You believe that you’re on a roll and that you can’t lose, so you end up taking trades without taking the time for proper analysis. You end up taking dumb trades, or risking way more than you should, and before you know it, your account gets hit with a massive loss.
I’m also sure that more than once, you’ve found yourself paralyzed by the lack of confidence. You spot a great setup that you would normally take, but because you’ve lost your last 5 trades, you decide not to take the trade. And of course, the pair ends up going in your direction and hitting your take profit point. Yikes!
In trading we learn that we can’t get too caught up when we’re winning, nor should we be too hard on ourselves when we’re losing. Eventually, all traders also learn that the best state of mind is one that is both even-tempered and relaxed.
This is true in other aspects of life as well. People make poor decisions when they wear their emotions on their sleeve. They get taken advantage of when they are overconfident, or miss out on good opportunities when they are scared.

Forex Preview: Canada’s Jobs Report

If you’re looking for a likely catalyst for the Loonie after the OPEC meeting, then just know that Canada will be releasing its jobs report this Friday (Dec. 2, 1:30 pm GMT). And if you need to get up to speed on what happened last time and what economists are expecting this time, then today’s write-up will help you out.

What happened last time?

  • Jobless rate: steady at 7.0% as expected
  • Net employment change: +43.9K vs. -10.0K expected, +67.2K previous
  • Labor force participation rate: ticked higher from 65.7% to 65.8%
I wrote in an earlier article that with regard to Canada’s October jobs report, economists “seem to have streaks when it comes to forecasting.” I also noted that “in the past few years, economists have been underestimating their forecasts, which is why the actual readings has been coming in better-than-expected.”
Well, it turns out that economists underestimated their seasonally-adjusted forecast again, since net employment in October came in at +43.9K. This is obviously better than the expected net loss of 10K jobs.

True, the headline number looks awesome, but delving into the details does reveal some weakness. To be more specific, full-time employment actually suffered a net loss of 23.1K jobs, which is the first loss in full-time jobs after two straight months of increases. The fall in full-time jobs was offset by the 67.1K increase in part-time jobs, though, which is why net employment still printed an increase.
Looking at the other indicators, the jobless rate held steady at 7.0% for the third month in a row. And it’s apparently a healthy sign, since the labor force actually increased by 149.3K to 19,525.7K, which then caused the labor force participation rate actually ticked higher from 65.7% to a six-month high of 65.8%. This means that despite the influx of workers who joined (or rejoined) the labor force, the Canadian economy was able to absorb them, which is good. However, the fact that all of the job gains were part-time jobs removes some of the shine from the Canadian economy.
Overall, the jobs report was pretty positive, with the exception of the loss of full-time jobs of course. As such, the initial reaction was to try and buy up the Loonie. Unfortunately for Loonie bulls, the release of Canada’s jobs report coincided with news that Saudi Arabia and Iran were butting heads again, which sent oil prices tumbling very hard. In the process, the Loonie also got weakened and lost ground to its forex rivals.

Wednesday, November 16, 2016

HLHB Trend-Catcher System Update

As you can see on the chart above, EUR/USD was on a VERY tight range before and after the U.S. elections took place. Luckily, the HLHB caught some of the euro rally right until Trump was declared the winner. Then, much like signal #6, signal #7 also caught a huge chunk of the dollar’s rally until Friday’s new signal. The gains from signals 6 and 7 helped push the HLHB’s net weekly gains to 218 pips by the end of the week. Woohoo!GBP/USD wasn’t as action-packed as EUR/USD during the elections. Though the pair traded on tight ranges, it lacked the big moves that we saw in EUR/USD while the elections were ongoing. In fact, only signal #4 managed to catch serious pips. Unfortunately, Cable also sported tons of fakeouts throughout the week. By the end of the week, the small little losses added together and put a 33-pip dent on the HLHB’s coffers.

Friday, October 21, 2016

Australia’s September Job Reports

The report showed that a net of 9,800 workers lost jobs in September, which is far from the 15,200 job gains that market players were expecting. And what’s worse than weak reports? Downward adjustments to last month’s already weak numbers, of course! August’s unemployment rate was revised higher from 5.6% to 5.7% while the net job losses was revised from 3,900 to 8,600. Yikes!
The only bright spot was the decrease of the unemployment rate from 5.7% to 5.6% and even that was taken with a bucket of salt. See, the labor participation rate also fell from 64.7% to 64.5%, the lowest in almost two years. With a net job loss for the month, this means that the decrease in unemployment rate was mostly due to workers giving up on their job prospects instead of finding them.

Part-time means hard time for Australians

If we look closely at the 9,800 job losses, we’ll see that it’s due to 53,000 workers losing their full-time jobs. This marks the biggest monthly drop since April 2011! What’s more, this is only partially offset by the 43,200 gain in part-time work.
So far the 162,800 part-time jobs added this year is the biggest gain on record going back to 1978. Meanwhile, the 112,100 full-time jobs cut in the same period marks the worst since 1991 when the economy was in recession.
To add insult to injury, the underemployment rate, or the portion of those who are employed but want to work longer hours, is now at a record high of 8.7%, a huge gap from last year’s 7.8%.
So while the unemployment rate is at its lowest in three years, we know that it’s partly due to potential workers giving up on looking for jobs and partly because workers are now accepting part-time jobs and are working for less hours than they’d like.
The prospect is worrying investors who believe that the understatement of Australia’s labor market problems will lead to limited household income growth. Already ratings agency Moody’s warned that underemployment was a major cause of rising mortgage repayment arrears, which are at a three-year high nationally and record levels in Western Australia, Tasmania and the Northern Territory.

Monday, September 26, 2016

Weekly Inflection Points to Watch

Here are the major chart levels as well as possible catalysts you might want to watch out for if you’re trading major dollar pairs this week!

Open Price 1.1224 1.2964 101.03 0.9698
Last Week’s High 1.1258 1.3122 102.80 0.9820
Last Week’s Low 1.1123 1.2913 100.10 0.9660
Top Weekly ATR 1.1308 1.3123 102.27 0.9778
Bottom Weekly ATR 1.1139 1.2805 99.70 0.9618

Monday, September 12, 2016

“Feel the Market.”

It still amazes me how pros are able to produce awesome pictures from otherwise ordinary subjects. It probably took them tons of practice to know how to adjust camera settings to use the current lighting, background, or environment to their advantage. Even then, there are no hard and fast rules for each situation.
Similarly, in forex trading, one has to learn to gauge market sentiment, listen to what the charts are saying, and adjust accordingly.
More often than not, it’s also about getting the timing right. That’s why intuition plays a huge role. Not to be confused with taking impulsive trades based on gut feel, forex trading demands a special type of intuition that many refer to as “feeling the market” or “being in the zone.”
I’m talking about that specific point in your forex trading career wherein you have gained enough experience to label market behavior (trending, ranging, breaking out, or consolidating) and know what trading setup you will take to tilt the odds slightly in your favor.
Did you just turn psychic? Did this just magically happen? Heck no! Just like in any other art form, some are born with the natural talent while others acquire the skill. Either way, you arrived at this point because of constant refinement and deliberate practice.
Through these actions, you have learned to trust yourself and observe the forex market in an analytical and “artful” way, and not merely by guessing.
You have found out that trading is more of an art than an exact science, and that there really is no clear “signal” or set of rules that indicate that the market environment has changed.

Friday, September 2, 2016

Forex Brokers Guide

In the first step, you will go through some of the main questions you need ask yourself when reviewing different brokers.  Then you will take a look at different brokers and their available features. We have put together a comparison guide by taking some of the most frequently asked questions across the internet, and surveyed some of the most frequently asked about brokers out there, so that you don't have to. 

Step 1: Do your research

Before comparing brokers, do you know what to look for? No? Well, here are a few of the main questions you should ask yourself:
  1. Is this broker registered with any regulating authorities? Check to see if your broker of choice is registered with the National Futures Association (NFA) or Commodity Futures Trading Commission (CFTC) if they're based in the US. If the broker is based in the United Kingdom, check with the Financial Service Authority (FSA). If the broker isn't registered with any of these or any other recognized regulating firm, then you may want to think twice before signing up with them.
  2. Dealing Desk or Non-Dealing Desk broker? Does the broker offer fixed or non-fixed spreads? How wide are the spreads? These questions are more significant to those traders who like to take quick profits on a few pips. Large and/or variable spreads can cut into the profits of this type of trading strategy.
  3. How much or how little leverage will a broker give you?  We highly recommend you review "Leverage the Killer"before deciding on how much leverage would be suitable for your trading style. The phrase, "Less is More," can save every newbie
  4. Of course, you’re not going to start trading with real money right away, right? Well, when you do having a winning strategy and you are ready to trade live; knowing how much risk capital you have to start with makes a big difference. If you have $2000 or less to start with then you probably want to start trading "micro" lots. Not every broker has this feature.
  5. Does this broker credit or debit daily rollover interest? Some brokers either do both, deduct interest, or neither.  This information is important to traders who hold positions overnight.
  6. Does this broker offer premium services such as charting, news feeds, and market commentary? How important are premium services to my trading?

Step 2: Open demo accounts and ask questions. 

Pick at least two brokers that fits most of your criteria and open up demo accounts. Trade in different market environments. Learn all the different features of each trading platform. If you have questions, don't be afraid to ask. Many brokers have excellent customer service support and would be happy to answer your questions.
Most demo trading platforms are very similar to their live counterparts, but not exactly the same. There may be a difference in speed of execution, slippage, and platform reliability (most of the time live accounts are more reliable than demo accounts). When you do have your strategy down and you are ready to move to a live account, start off small, test the waters, and see if this particular broker will suit your trading needs.

Saturday, August 20, 2016

Australia: The devil is in the details

  • Unemployment rate fell to a three-year low of 5.7% in July
  • A net of 26.2K workers found jobs in July vs. 10.2K expected, 10.8K in June
  • Labor force participation rate unchanged at 64.9%
  • Monthly hours worked rose by 0.2%
Headline job numbers from Australia printed a strong picture, with the unemployment rate falling and net jobs and monthly hours increasing. However, a closer look tells us that the jobs increase came from 71,600 part-time workers, as full-time employment actually dipped by 45,400 for the month. Analysts also point out that the surge in part-time work might have something to do with the extended tallying from the latest elections.
The gloomy details failed to sustain the Aussie’s gains throughout the day. The comdoll ended up erasing most (if not all) of its gains against its major counterparts and is even trading at new weekly lows as of writing. Yikes!

New Zealand: New rules! : Jobs Reports

  • Unemployment rate fell to 5.1% in Q2 2016 vs. 5.3% expected, 5.2% previous
  • Employment increased by 2.4% vs. 0.6% expected, 1.4% previous
  • Labor force participation rate rose from 69.0% to 69.7%
Forex traders were careful not to read too much into New Zealand’s strong Q2 2016 jobs numbers after Statistics New Zealand reported that it redeveloped its Household Labor Force Survey (HLFS) to identify better with self-employed workers and those in the armed forces. At the same time, the revised surveys would also fit international standards better.
This is probably why Kiwi saw upward spikes and its intraday highs at the reports’ release, but also gave back most (and in some cases, all) of its post-report gains. NZD/USD ended the day at .7241, 82 pips (-1.12%) lower than its intraday highs, while NZD/JPY also sustained an 84-pip drop (-1.14%) to 72.60.

Wednesday, August 17, 2016

Asian stocks are on track for their biggest jump

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.7 percent, its biggest rise since Aug. 8, as investors took the Fed's hesitancy as a reason to increase their positions after a 14 percent rise over the last two months. Tech and telecom firms shone.
"Right now, observers think a September policy rate hike is off the table," Richard Clarida, global strategic advisor at bond giant PIMCO, wrote in a blog.
Hong Kong shares .HSI were the top gainer in Asia with a 1 percent rise, while a stronger yen, thanks to the Fed's cautious outlook, pulled Japan's Nikkei .N225 back 0.9 percent.
The July meeting's minutes published on Wednesday showed that Fed policymakers were generally upbeat about the U.S. economic outlook and labor market. But they also said they wanted to "leave their policy options open" as any slowdown in hiring would argue against near-term monetary tightening.
Market participants interpreted the minutes as moderately positive for risk-taking, with the Fed remaining divided on the timing of the next hike. Futures contracts dipped slightly, signaling a receding of bets on a U.S. rate increase.
"There is clearly strong disagreement within the Fed with regards to the timing of further rate hikes," wrote Angus Nicholson, market analyst at IG in Melbourne.
Bond markets greeted the rate Fed minutes with cautious optimism with the iShares iBoxx $ High Yield Corporate Bond ETF (HYG.P) poised to set a fresh one-year high. The yield on 10-year Australian government debt AU10YT=RR edged lower to 1.95 percent, about 100 basis points down from end-2015.
Yields on Japanese debt sunk deeper into negative territory after steady investor demand was seen at an auction of five-year government bonds. In currency markets, the dollar was down 0.2 percent at 100
03 yen JPY=, near a post-Brexit low of 99.55 hit on Tuesday.
The euro edged up 0.2 percent to $1.13060 EUR= with the common currency on track to rise more than 1 percent this week.

Thursday, August 11, 2016

NZD/CAD Trend Line Break

I thought I already missed the test of the .9550 long-term range resistance so I tried to catch the selloff on a break of a short-term trend line. As it turns out, Kiwi bulls had enough energy for another test of resistance even after the RBNZ decided to cut interest rates
Now that Governor Wheeler has kept the door open for additional rate cuts in hopes of spurring some Kiwi weakness, I’m inclined to keep this short position open. Besides, the oil-related Loonie seems to be getting some support from upbeat remarks from OPEC officials ahead of their meeting next month. According to Saudi Arabia’s energy minister, they might even discuss potential actions that could be necessary to stabilize prices.
From a technical standpoint, price seems to be forming a tiny double top pattern and breaking below the neckline at .9350, possibly sending the pair lower until my entry area. I’ll reevaluate whether I should hold on to this position around the .9200 levels or just exit early by then.
For now, I’m watching Kiwi price action closely after the upbeat quarterly retail sales release from New Zealand, but it seems as though bulls are unimpressed by the latest figures.
As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.