Thursday, June 30, 2011

Trader of The Month - May 2001 - Dukascopy Bank SA

Forex Daily Briefings: Risk Appetite?

Coming Up Today (all times GMT)
  • GBP - Manufacturing PMI (08:30)
  • USD - ISM Manufacturing PMI (14:00)
Markets globally continued to rally in response to the easing tensions with regards to Greek bonds and debt. The DJIA closed 1.25% higher adding 150 points. Crude Oil recovered to $95 a barrel. Overnight Chinese PMI Manufacturing missed estimates to the downside pressuring the AUDUSD.
The EURUSD rose as high as 1.4535 as a global asset rally gained force. The pair has since weakened to 1.4465 as we search for direction at the key 1.4500 juncture. Social protest or the lack of it in Greece may affect the Euro in coming weeks.
Support/Resistance: 1.4400/1.4535
The cable found support at the 1.60 level which has been a pivot point for a significant period of time. The GBPUSD rose to 1.6045 and then faded off as a lack of momentum was clear. The pair is poised for a directional trend after tinkering below and above the 1.60 level this week.
Support/Resistance: 1.5875/1.6150
Published: 1 July, 2011
written by: Andrew Economou , Fx Analyst , 

Economic Calendar

Forex Daily High/Low

The Personality of Stock Market Waves

The Personality of Stock Market Waves

Elliott waves don't merely reflect prices plotted over time. Each wave
has its own "personality." Listen to this video by EWI's Wayne Gorman
to learn more about the psychology behind the waves and how it affects your
investment decisions.

This video was taken from the free Club EWI video series: Learn the Why,
What and How of Elliott Wave Analysis. This 3-video series is a great way
to get started with the Wave Principle. You can get these videos free with
a Club EWI Membership.
Watch your free videos now >>
Already a Club EWI member? Access
the video series Learn the Why, What and How of Elliott Wave Analysis here

Wednesday, June 29, 2011

A Four-Chart Lesson in Spotting Trade Setups

You can find low-risk, high-probability trading opportunities by trading with the trend. The trick is to find the end of market corrections, so you can position yourself for the next move in the direction of the trend.
This excerpt from Jeffrey Kennedy's free 47-page eBook How to Spot Trading Opportunities explains where to find bullish and bearish trade setups in your charts and how to zero-in on these opportunities. If this lesson interests you, the full 47-page eBook is free through July 6.

On the left-hand side of the illustration below, there are two bullish trade setups. As traders, we want to wait for the wave (2) correction to be complete so we can catch the move up in wave (3) – this is the trade. What we are trying to do in this bullish trade setup is anticipate the potential for profits on the buy-side as prices move up in wave (3). Another bullish trade setup is at the end of wave (4).

As traders, we are looking to buy the pullback and position ourselves within the direction of the larger up-trend. Remember, three-wave moves are corrections, which means that they are countertrend structures. On the other hand, five-wave moves define the larger trend. As traders, we want to determine what the trend is and trade in the direction of the trend. Our buying opportunity to rejoin the trend is whenever the trend pauses and forms a correction.

Now, let’s look at the right-hand side of the illustration where we see two bearish setups. When a five-wave move is complete, it is retraced in three waves as a correction. The end of the five-wave move presents the first trading opportunity that we can take advantage of the short side (or the sell side) as the wave (A) down begins.

Notice the second bearish trade setup gives us another shorting opportunity as wave (B) tops.

So, within the classic wave pattern of five waves up and three waves down, we have four high-probability trading opportunities in which we are either positioning ourselves in the direction of the trend or identifying termination points of a trend. I want to share with you some tricks I have picked up over the years about how to analyze corrective waves and their termination points. The single most important thing I’ve learned from analyzing corrections is that corrective or countertrend price action is usually contained by parallel lines.

As shown above, draw the parallel lines by beginning at the origin of wave A and going to the extreme of wave B. You draw a parallel of that line off the extreme of wave A. So basically you have a small, slightly angled downward price channel. This will show you the containment region for wave C. It also shows you an area toward the bottom of the lower trend line where you can expect a reversal in price.

Here is another example. Again, you draw the parallel lines off the origin of wave A, the extreme of wave A and the extreme of wave B.

Toward the upper end of the upper trend line, you will usually see a reversal in price.

This example shows how countertrend price action is contained by parallel lines in the British pound, 60-minute, all sessions. Why is it important to know parallel lines contain the corrective or countertrend price action? Number one, it will increase your confidence that you are indeed labeling a countertrend move properly. Number two, it identifies areas where you will likely see prices reverse. For example, we see this reversal up near the top.

Improve Your Success with 14 Actionable Lessons in Trading This brief trading lesson is just a small example of the opportunities you can find once you learn to identify key market patterns. Learn more in your free 47-page eBook, How to Spot Trading Opportunities. This valuable eBook is regularly $79, but you can get it free through July 6. Download your free copy of How to Spot Trading Opportunities now.
This article was syndicated by Elliott Wave International. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.


Forex Daily Briefings: Euro Rises to 1.4500

Coming Up Today (all times GMT)
  • GBP - Nationwide HPI m/m (06:00)
  • EUR - ECB President Trichet Speaks (07:00)
  • EUR - Greek Gov Debt Vote crisis (Tentative)
  • CAD - GDP m/m (12:30)
  • USD - Unemployment Claims (12:30)
The Euro rose and stocks and commodities gained as German Banks draw closer to agreeing to a plan to support Greece. The US dollar weakened as Rating Agencies S&P and Moodys disclosed that they will cut the US AAA credit rating if the US debt ceiling is not raised.
The pair dipped to a low of 1.4325 before breaching the 1.4400 level. After breaking through 1.4400 the EURUSD has rallied above 1.45 to set a current high of 1.4515. The Euro has benefited from the commitment shown in Europe to bail out the bankrupt Greek state.
Support/Reistance: 1.4375/1.4600
The cable broke through the 1.60 barrier and has set a high of 1.6117 supported by optimism that the European debt crisis is being addressed by European government leaders rather than by the ECB. The pair has strong support around the 1.60 level and upside targets are 1.6450 and 1.6700.
Support/Resistance: 1.5975/1.6215

Published: 30 June, 2011
written by: Andrew Economou , Fx Analyst,


Tuesday, June 28, 2011

Greece is the Word on Traders' Lips

Forex Trade of the Week by Mario Sant Singh:

 28 June 2011

SELL USD/SGD at 1.2385
SL: 1.2446  TP: 1.2335
The volatile movements in the Forex Market seem to be telling the same story – that traders are only fixated with the outcome of the Greek saga.

Last week, Greek Prime Minister Papandreou survived a no confidence vote when lawmakers voted 155-143 in support of the Prime Minister.

This week, he is hard at work trying to gain support for a EUR28 billion Austerity Program that will last 5 years. This program is crucial in determining whether the EU and the IMF will dispatch its next tranche of funds to aid Greece.

After the EU and the IMF pledged to "do all they can" to help Greece, this pivotal Austerity Program is a show of confidence from Greece that they are "doing all they can" in response to the support from the EU and the IMF.

On Wednesday, the Greek Parliament will vote on the Austerity Program. Internally, they have a deadline of 30th June to obtain Parliamentary approval for the bill. 

This is just 3 days ahead of a meeting involving the Eurozone Finance Ministers, which happens on 3rd July. 

Not surprisingly, the finance ministers have also given Greece the deadline of 3rd July to pass the bill, failing which the next bailout payment will not be released.

Let's consider the outcome of the vote.

a. Austerity Program Accepted

If the Austerity Program is passed, risk aversion will start to subside and safe haven flows will recede. This means that traders will move into currencies with higher yields, typically the Aussie (AUD), Kiwi (NZD) and the Loonie (CAD). Other currencies which will stand to benefit include the Euro itself and the British Pound.

b. Austerity Program Rejected

If the Austerity Program fails to gain acceptance, a possible Greek default could very well turn into a reality. Major central banks around the world have warned that a Greek default could trigger the next financial tsunami. This will push traders to traditional safe havens like the Swiss Franc, Japanese Yen and the US dollar.

Although a small country with no major contribution to world GDP, the fact remains that many European banks are heavily exposed to Greek debt. The domino effect of default could take place and the panic attack could trigger the next major sell-off not seen since the collapse of Lehman Brothers 3 years back.

Could this happen? At least one man seems to think so.

"There's no arrangement for any countries leaving the euro, which in current circumstances is probably inevitable. We are on the verge of an economic collapse which starts, let's say, in Greece, but it could easily spread. You need a Plan B and there's no Plan B at the moment," said George Soros in Vienna yesterday.

Top News This Week

Canada GDP m/m. Thursday, 30th June 2011, 8.30pm. I expect figures to come in at -0.1% (previous figure was 0.3%).

Trade Call

SELL USD/SGD at 1.2385
On the 4-hourly chart, USD/SGD is moving in an expanded range. A level of resistance is detected at 1.2441. A good short setup is spotted if prices bounce off the resistance and head downward.
We will go short when prices retrace to 1.2385. The stop loss is placed 5 pips above the previous high of 1.2441, and we will have 1 profit target on this trade.
SELL USD/SGD at 1.2385


by Mario Sant Singh

CNBC Market Analyst and
FXPRIMUS Director of Training & Education



What Will Happen to the Stock Market When QE2 Ends?

Club EWI's free "Independent Investor eBook, 2011 Edition" offers you an unorthodox view of the Fed's quantitative easing program June 28, 2011

By Elliott Wave International

The second round of the Federal Reserve's quantitative easing program, better known as QE2, will expire this week.

The QE2 policy was officially announced on November 4, 2010, and has been widely credited with subsequent stock market gains. And now, according to rumors, the end of this "experimental" program will kill the stock rally -- with potential impact across all markets.
Let's think about that.

For starters, there is little "experimental" about QE2. As EWI's November 2010 Elliott Wave Financial Forecast pointed out to subscribers, "In Japan, the very same remedy the U.S. is applying today -- rate cuts followed by quantitative easing -- finds its stock market still down more than 75% from its December 1989 peak."

Also, this chart, from EWI president Robert Prechter's January 2011 Elliott Wave Theorist, shows "the effect" the first round of quantitative easing (QE1) had on the market:

Stocks Crashed Right Through QE1

But investors have short memories. And even many of those who remember how powerless the Fed was during the 2007-2009 crash are convinced that "it's different this time."

What do the facts and the evidence say? Read the expanded, 2011 edition of our popular free Club EWI resource, The Independent Investor eBook

From the very first pages, the charts and graphs will show you that the Fed’s QE programs are far less powerful than is commonly presumed.

All you need to read this important 118-page eBook online now is to create a free Club EWI profile. Here's what else you'll learn:
  • Why QE2 was a major tactical error
  • Why interest rates don't drive stock prices.
  • Why rising oil prices are not bearish for stocks.                      
  • Why earnings don't drive stock prices.
  • What inflation has to do with the prices of gold and silver
  • Why the problem with the Fed is its very existence.
  • Why central banks don't control the markets.
Keep reading this free report now -- all you need is a free Club EWI membership.
This article was syndicated by Elliott Wave International and was originally published under the headline What Will Happen to the Stock Market When QE2 Ends?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

EUR/USD Intraday Technical Analysis & Possible Scenarios - June 28, 2011

Bullish bounce of the lower limit of the DAILY triangle.

This rebound delivered the pair up to the short-term resistance level 1.4300 - 1.4360.

On 4H chart , The area of resistance 1.4300 - 1.4360 mentioned above is obvious.
This resistance is a confluence of : 38.2% Fibonatcci Level + 61.8% Fibonatcci Level + Short Term Down trendline.

At this time, the pair failed to break this resistance level with a reversal shooting star.
This may bring the pair down to 1.4250 - 1.4210 at least with observation of 1.4230-1.4200 levels for a rebound for a possible LONG positions.

Based on the Previous analysis:

- Failure of break of this level gives the SHORT signal at 1.4300 - 1.4330 with TP at 1.4250 - 1.4210 - 1.4190 - SL should be 4H closure above 1.4350.

- Direct break of 1.4350 gives the LONG signal with TP at 1.4430 -1.4500.

Performed by Mohamed Samy, Analytical expert
InstaForex Companies Group © 2007-2011

GBP/CHF Ichimoku Technical Analysis - June 28, 2011

H4 : As expected, on the GBP/CHF market a consolidation began after a continuous decline. During yesterday’s trading session the bulls tried to recover the rate and the pair advanced to the 4-hour Rotation line (3) which is directed horizontally at the moment. The price tested the 1.3365 level.

All Indicator lines (1, 2, 3, 4) are parallel to the time axis and indicate sideways movement.

Nevertheless, in the long term bearish sentiment remains on the market: the Ichimoku Cloud still has a downside character. Therefore in the nearest time another bearish attack and an attempt to refresh the low are possible.

H1 : In 1-hour graphs the trading is located below the Ichimoku Cloud near its lower limit.

The downtrend is likely to be continued as the Gold cross (5) formed by the Tenkan-sen and the Kijun-sen does not look strong enough yet – the Rotation line (3) started to turn to the downside.

Given the general downside market sentiment we can suppose that the Kijun-sen will not manage to prevent the price from further downfall. If the support turns out to be strong, an entry into the Cloudiness zone and a recovery to 1.3400 are possible.

Performed by Vadim Idrisov, Analytical expert
InstaForex Companies Group © 2007-2011

Mirror Trader Highlights and Features

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Indicator, oscillators and chart studies are available in one click. In addition you can see the distribution of open “buy” and “sell” position of users and strategies.
Live Signals Filter
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A stream of all the “buy” and “sell” signals generated by the strategies providers. You can choose specific trades you want to “mirror” and execute it in your account. You can use these signals to support your trading analysis.

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The smart and custom filters will identify suitable strategies according to your trading criteria.
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Forex Morning Overview - Forex Market Expectation

Previous session overview
The euro held steady against the dollar and the yen in Asia Tuesday as growing optimism that Greece will approve a package of austerity measures Wednesday prodded traders to refrain from making fresh bets. 

Earlier in the day, short covering that triggered stop-loss purchases above USD1.4300 sent the single currency as high as USD1.4330. But the gains were eroded later due to the absence of fresh news related to the Greek debt crisis. 

At 0450 GMT, the euro was at USD1.4298 from USD1.4283 late New York trade Monday. The dollar was at JPY80.82 from JPY80.89, while the euro was at JPY115.55 from JPY115.53. 

European governments said Monday they want private creditors to roll over as much as EUR30 billion of Greek government bonds that come due by 2014.

The proposal drafted by French banks and insurers calls for half of the proceeds from maturing Greek bonds to be reinvested in 30-year Greek bonds. Furthering the credibility of that plan, the European Central Bank said it is receptive to the French proposal on Greece, if it is voluntary.

The U.K. pound was at USD1.5973 from USD1.5988 late Monday. The dollar was at CHF0.8353 from CHF0.8355.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 75.278 from 75.314. 

The Australian dollar was slightly higher late Tuesday but markets remained cautious ahead of a vote in Greece this week on austerity measures needed to underpin an international debt bailout for the beleaguered country. At 0530 GMT, the Australian dollar was at USD1.0447, up from USD1.0414 late Thursday. Against the Japanese yen, the Australian dollar was at JPY84.39, up from JPY84.08.
Market expectation
The EURUSD erases earlier gains but the downside is likely to be limited amid growing optimism that Greece will approve a package of austerity measures this week. Positive news regarding Greece Tuesday and a rebound in the stock market are making it tough to sell the euro against the dollar, say dealers.

The Pound, now mixed, is likely to hold in narrow ranges against the dollar and euro pending more news on Greece and hinging on how risk-taking develops during the session. Several U.K. events, including gross domestic product data and the Bank of England governor's evidence to MPs on the Inflation Report, could also tip sentiment.

European stocks are expected to start higher Tuesday following the triple-digit gain on the Dow Jones Industrial Average, and the euro is firmer after French banks drafted an agreement to roll over some Greek debt for 30 years ahead of a crucial vote in the Greek parliament this week.

by Dukascopy Bank SA

Monday, June 27, 2011

Forex Morning Review - Euro Bounces Back

    Coming Up Today (all times GMT)
  • GBP - Current Account (08:30)
  • GBP - Inflation Report Hearings (09:00)
  • USD - CB Consumer Confidence (14:00)

The EURUSD rose sharply from 1.4100 to climb as high as 1.4328 overnight. Breaking news that Greek bondholders including European banks may be willing to rollover and extend the maturities of the holdings was positive news for equities, commodities and higher yielding currencies as the threat of an imminenet Greek default  receded.
The Euro gained against most of it peers and led a more general relief rally.
The pair held above 1.4100 maintaining the 1.40 level as a key ressistance. The 228 pip intraday move higher in the pair suggests that volatility may be heightened in days to come. Traders are said to be watching this level as a barometer for direction as uncertainty looms. There is a battle of weakness taking place between the EURO and the USD. The question is which currency will be in greater demand and in better condition in the years ahead.  
Support/Resistance: 1.4175/1.4415
The cable has weakened significantly in the last fortnight, from the lofty heifght of 1.6700 to breach below the 1.60 level once again maaking a low at 1.5940. The 1.60 level has been a strong support for the cable in recent months and has provided momentum on the way up. The 1.60 level will dictate direction. Inflation data and interest rates are important variables for the Sterling pound going forward 
Support/Resistance: 1.5880/1.6250
Published: 28 June, 2011
written by: Andrew Economou , Market Analyst ,

Can the Fed and Economists Forecast the Future? See This Startling Chart

Elliott Wave Financial Forecast Editors Kendall and Hochberg on economists, the Fed and forecasting - June 27, 2011

By Elliott Wave International

Business Talk Radio host Gabriel Wisdom recently spoke with Pete Kendall, Co-Editor of EWI's Elliott Wave Financial Forecast. Their discussion included a crucial but rarely asked question about economists and the Federal Reserve. Here's the relevant excerpt: 
Gabriel Wisdom: "Ben Bernanke, the chairman of the Federal Reserve, says the economy is slowing but there's faster growth ahead. Is he wrong?"
Pete Kendall: "Economists are extrapolationists. They tend to look at what's happening in the economy and extrapolate that forward. So here we have a situation where not just Bernanke but economists in general are looking at... what they call the 'soft patch' and somehow contorting that into growth later in the year.  
Pete's startling reply flatly contradicts conventional wisdom. Most people believe that the Fed really is able to anticipate the economic future. After all, they're the most "qualified." But what do the facts say?
Pete's Elliott Wave Financial Forecast Co-Editor Steve Hochberg recently included this eye-opening chart (from Societe Generale Equity Research) in his new subscriber-exclusive video, "Buy and Hold, or Sell and Fold: Where Are The Markets Headed in 2011?"

Analysts Lag Reality. From 'Buy and Hold, or Sell and Fold: Where Are the Markets Headed in 2011?'

The red line in the chart is the S&P earnings, and the black line shows economists' forecasts relative to those earnings. Here's what James Montier, head of equity research for Societe Generale, said about it:
"The chart makes it transparently obvious that analysts lag reality. They only change their minds when there is irrefutable proof they were wrong, and then only change their minds very slowly." (emphasis added)
That comment is spot-on. In 2002-2003, as you can see, earnings turned up despite economists' forecasts for earning declines. It took them a while to "turn the ship around" and play catch-up with the trend.
Yet in 2007-2008, earnings turned down -- despite the forecast by economists for continued increases. The devastating truth is that earnings did more than fall in the first quarter of 2008: they had their first negative quarter in the history of the S&P. As Steve said in his subscriber video, "Economists were wrong to a record degree" -- and investors felt the pain.
So what's the point? Economists do extrapolate the trend. That approach works fine, until it doesn't­ -- and you're on the hook.
Elliott wave analysis never extrapolates trends -- it anticipates them. The Wave Principle recognizes that markets must rise and fall -- and that they unfold according to changes in investor psychology, in a way that is patterned and recognizable.
Most people believe that the Fed really is able to anticipate the economic future. Now you know the facts. Uncover other important myths and misconceptions about the economy and the markets by reading Market Myths Exposed.
EWI's free Market Myths Exposed 33-page eBook takes the 10 most dangerous investment myths head on and exposes the truth about each in a way every investor can understand. Download your free copy now.
This article was syndicated by Elliott Wave International and was originally published under the headline Can the Fed and Economists Forecast the Future? See This Startling Chart.. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Saturday, June 25, 2011

When You Trade and Invest, Why Use the Wave Principle?

When You Trade and Invest, Why Use the Wave Principle?

June 23, 2011

By Elliott Wave International

The question: Why use the Wave Principle when trading or investing?

The answer: To avoid the herd that usually loses money in the markets.

The explanation: Herding makes it difficult to follow the most useful trading advice to buy low and sell high. More often than not, what really happens is that you hear about a stock or an index and decide to buy it because it's in the news. Why is it in the news? Usually because the price has been going higher. Lots of people in the financial media say that it's doing well, so you decide to "get in now" -- even though you know the shares are not at a low. After all, why would people talk up the stock if it were headed down? And you wouldn't really want to buy a stock other people were selling ... would you?
Once you buy, one of these three things usually happens:
  1. The stock or index continues up for a brief time. You manage to hold on until just after it turns down, and sell so that you get out near the top. (You didn't buy low, but you sold it for more than you paid and made some money.) 
  2. It goes up and then down, and then up and down again -- and again -- while you agonize. You read whatever you can find to help decide whether to stay in or get out. You finally get out about where you got in. (You neither bought low nor sold high, nor did you make any money.) 
  3. It turns down after you purchase it. And it keeps drifting down until you can't stand it anymore. So you sell. (You bought high and sold low; depending on how long you held it, you lost a little or a lot of money.) 
The outcome: Either you win small, you come out even (except for brokerage fees), or you lose either big or small. What happened to the simple and elegant idea of buying low and selling high? Well, that idea vanished in the labyrinth of your quickly turning, emotional mind. When it comes to real-time decisions, it seems nearly impossible to do what you know you should to do to make the most money. The irrational mind beats out the rational mind. Welcome to the world of herding.
Elliott Wave International's educational guru, Wayne Gorman, explains it this way in the Elliott Wave Crash Course:
"The process is being driven by an emotional, unconscious response by investors who look at the market subjectively and impulsively and who must make decisions under conditions of ignorance and uncertainty.… Most people tend to engage in what we call herding. They follow the actions of others, whether those others are on the right side of the market or not. "The result is that prices move up and down according to investors' optimism and pessimism. Investors use the news to rationalize their emotional decisions, and most people lose money."
Even the big boys do it. Stock mutual funds tout their investing know-how, yet this chart shows that they also succumb to buying at tops when prices are high and selling at lows. It compares 40 years of the S&P 500's price moves with the changes in stock mutual funds' cash vs. assets ratio. When the percentage of cash is low, it means that the funds are buying stocks and keeping less cash (marked as "Bought" on the chart). When the percentage of cash is high, they are selling stocks and converting to cash (marked as "Sold" on the chart).


Gorman again: "Notice that funds are heavily invested in stocks at top of markets and little invested in stocks at major bottom. This pattern tends to repeat itself over time -- and results in losses."

The better way to do it: The Wave Principle, on the other hand, provides rules and guidelines to help you avoid the herd of investors, particularly as they react to the latest news. You can see patterns in price charts and decide when a market may be about to turn up or down; you can also plan when to trade or invest with some objectivity.

If you would like to get the full story on why it's worthwhile using the Wave Principle to trade and invest, then watch the first video in the Elliott Wave Crash Course, called, "Why Use the Wave Principle?" How to view the video: All you need to do is become a member of Club EWI. There is no cost, and there aren't any strings attached. Yes, I'd like to view "Why Use the Wave Principle?"

This article was syndicated by Elliott Wave International and was originally published under the headline When You Trade and Invest, Why Use the Wave Principle?. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Friday, June 24, 2011

Mervyn King's Spread Bet - The Bank of England won't Raise Rates

Mervyn King's Spread Bet
by Ben Traynor
Friday, 24 June 2011

The Bank of England won't raise rates until it knows it won't make a difference…

THE BANK OF ENGLAND is getting more dovish. It seems less inclined than ever to raise interest rates – despite inflation currently running at over twice the target rate.

This is bad news for anyone hoping to get a better return from their savings account. Even worse, the Bank will only start raising its main policy rate – the Bank Rate – when it is confident the rise won't be passed on.

That's what two members of the Bank's Monetary Policy Committee implied last week, when they talked about unprecedentedly high spreads between Bank Rate and the interest rates borrowers actually pay.

To see what they mean, take a look at what's happened in the UK mortgage market since the global financial crisis started:

As the Bank Rate fell in 2008 and 2009, mortgage rates didn't fall anything like as far. The result was that spreads above Bank Rate shot up – and they've barely come down since.

MPC member Martin Weale – in a hawkishly-titled speech called 'Why the Bank Rate should increase now' – explained last week that these high spreads are a key reason the Bank has kept its rate at an all-time low of 0.5%:

"The gap between bank lending rates and the Bank Rate is already much higher than it was before the crisis and our setting of Bank Rate takes that into account. If banks were, at present, lending at only small margins above Bank Rate we would need the latter to be higher than it actually is." – Martin Weale, June 13 2011.

Two days later, Bank governor Mervyn King made a similar case in his Mansion House speech:

"Spreads between Bank Rate and the interest rates charged to many borrowers remain at unprecedentedly high levels...when conditions in the banking sector return to something closer to normal, those spreads will contract and the rate at which that takes place will have an important influence on the speed at which Bank Rate will rise." – Mervyn King, June 15 2011.

The language is eerily similar, suggesting King and Weale are singing from a common Bank of England hymn sheet. The overall impression these comments give is of an MPC whose first priority is to avoid any effective monetary tightening, by only raising Bank Rate once lower spreads ensure the actual cost of credit remains unaltered.

This is understandable. The economy remains weak, and government spending cuts, however necessary, will most immediately be felt as lower demand for goods and services. The MPC clearly feels it must balance the government's tighter fiscal policy with a looser monetary one. As Weale said in his speech, "no one is proposing that monetary policy should be set to anything except a very expansionary stance".

It's also understandable on a human level. Mervyn King will hardly want to go down in history as the man who crushed the economy. At least this way he can say he did everything he could...

There are early signs that spreads are falling, as the ultra-low Bank Rate slowly works its way through the system. Falling spreads, however, do not automatically mean that a hike is around the corner.

A major reason spreads are coming down, to the small extent that they are, is because more and more mortgage holders are coming off fixed deals that have higher, pre-crisis interest rates.

Back in 2007, more than half of all UK mortgages were fixed rate deals. That figure has fallen to less than a third. This means a greater proportion of mortgage holders are directly exposed to a rise in Bank Rate. Combine that with a central bank worried about hurting the economy, and we have a recipe for inaction.

This doesn't bode well for savers, who have seen deposit rates fall along with the Bank Rate:

Yes, a positive spread has opened up. Banks are, after all, scrambling to recapitalize, so they need to offer some sort of carrot. But with annual consumer price inflation running at 4.5% in May, savers are still nursing losses in real terms.

The minutes from the MPC's Junes meeting, published this week, show that the number of members voting to raise Bank Rate has gone from 3 out of 9 down to 2 out of 9, long-time hawk Andrew Sentance having left. And those who voted for a hike – Weale and Spencer Dale – only wanted a quarter of a percentage point.

The MPC has an entrenched inflationary bias. It has shown itself prepared to tolerate persistent above-target inflation rather than risk hurting growth. And even when it does eventually raise Bank Rate, it won't necessarily follow that the rise will be passed on.

So Sterling savers will have a very long wait before they actually start seeing positive real returns on their money – which is probably why more and more of them are buying gold...

Ben Traynor

Gold value calculator   |   Buy gold online at live prices

Thursday, June 23, 2011

Bank of Canada: Comments on Greece and Canadian Economy

Bank of Canada: Comments on Greece and Canadian Economy

Though Bank of Canada’s chief Mark Carney called yesterday the situation in Greece “manageable” in the context of the European Union, he warned that in case the euro zone’s debt crisis escalates, Canada will be exposed trough indirect links with banks in other countries.

So, Carney joined Finance Minister Jim Flaherty who had earlier proposed to create a “firewall” around Greece to ensure the nation won’t contaminate the global financial system.

Carney projects Canadian economic growth to slow and inflation to remain above 3% (BoC target is at 2%) in the short term. Later this year the nation’s economic should gain pace, says the central banker. It’s also necessary to note that Carney underlines that Canada’s central bank retains the flexibility to hike interest rates if necessary.

The Fed (US Federal Reserve) Leaves Door for QE3 - 23 June 2011

The Fed (US Federal Reserve) Leaves Door for QE3

The Federal Reserve completes this month its $600-billion QE2 program. However, the Fed’s Chairman Ben Bernanke left open door for new round of monetary stimulus in case American economy doesn’t rebound. 

According to Bernanke, US will soon get rid of constraints from elevated energy prices and disruptions to manufacturing caused by Japanese earthquake. 

However, the nation is still facing such severe issues as declining home prices, high unemployment and weaknesses in the financial system that pose risks for its recovery in the longer term.

The Fed’s head also said that the prospects of American economy depend on what will happen to Greece as the country’s default will affect global financial markets.

The Fed left yesterday its benchmark interest rate in range of 0-0.25% where it’s been since December 2008. Bernanke pointed out that borrowing costs will remain low for an extended period that means at least for another 2-3 FOMC meetings.

US economic growth slowed down from 3.1% in the final quarter of 2010 to 1.8% in the first 3 months of this year. The unemployment rate rose to 9.1%.

daily eurusd 15-00 

Gold Drops 1.3% after QE3 "Disappointment", But Faber says "Don't Trust the Fed"

London Gold Market Report
from Ben Traynor
Thursday 23 June, 06:30 EDT

Gold Drops 1.3% after QE3 "Disappointment", But Faber says "Don't Trust the Fed"

U.S. DOLLAR gold prices continued falling Thursday morning in London, hitting $1538 per ounce – a 1.3% drop from Wednesday's high, and nearly back to where they started the week.

Stock and commodity markets fell and longer dated US Treasury bonds rose after US Federal Reserve chairman Ben Bernanke made no specific reference to QE3 – a third round of quantitative easing – at a press conference on Wednesday.

Silver prices fell to below $36 per ounce – just above where they began the week – having rallied late Wednesday.

"We reiterate that our consistent bullish view on gold is not reliant on QE3," says Marc Ground, commodity strategist at Standard Bank.

"The current environment of increased government sufficient to push global liquidity, a major causal driver of gold, higher," and should see gold prices maintain their longer-term upward momentum, he adds.

Gold prices have found it "a bit difficult to perform" over the last couple of days, reckons Ole Hansen, senior manager at Saxo Bank, adding that summer is "not a favorable time of year" for gold.

"[Now] QE3 is out of the question... Bernanke is in no hurry to raise rates and, at the same time, rising inflation is beginning to be a bit of a concern."

The Federal Open Market Committee voted Wednesday to keep its main policy rate of interest, the federal funds rate, between zero and 0.25%. It is likely to stay there for an "extended period", Bernanke told a press conference after the decision was announced.

The "headwinds" facing the US economy "may be stronger and more persistent" than previously thought, Bernanke said.

"Part of the slowdown is temporary and part of it may be longer lasting."

While QE2 will end as planned on 30 June, the Fed is "prepared to take additional action... if conditions warranted," Bernanke said.

"That the Fed and Bernanke didn't really allude to any future QE3...probably prevented gold from pushing higher and heading towards its record," says Darren Heathcote, head of trading at Investec in Sydney.

"A softer US interest rate market for longer means gold is more attractive and I guess there's a little bit of disappointment that wasn't the case."

However, Bernanke "will likely hint at QE3/interest rate caps" at August's annual global central banking conference, according to Bill Gross, head of PIMCO, the world's largest bond fund, which relayed Gross's prediction as a Twitter message.

Last year the Fed chairman used the event – held at Jackson's Hole, Wyoming – to announce that policymakers were prepared to make large scale asset purchases if economic conditions deteriorated. QE2 began a few months later.

Rather than announce a new round of asset purchases, Bernanke "may be considering leaving the $600 billion in liquidity in the market as long as possible," reckons Nomura chief economist Richard Koo.

"We do have a number of ways of acting...we could, for example, do more securities purchases and structure them in different ways," Bernanke told Wednesday's press conference, without elaborating on what those "different ways" might be.

"I keep on accumulating gold," says renowned investor Marc Faber, publisher of the Gloom, Boom & Doom report.

"Not to own any gold is to trust central bankers, and that you don't want to do."

Here in the UK, Sterling gold prices set a new record of £964 per ounce at Thursday morning's London Fix, following Wednesday's publication of minutes from June's meeting of the Bank of England Monetary Policy Committee.

The majority of the MPC judges "that the downside risks to the prospects for medium-term inflation had increased" since the start of May, according to the minutes.

The minutes also state that "further asset purchases might become warranted if the downside risks to medium-term inflation materialized."

Ben Traynor

Gold value calculator   |   Buy gold online at live prices

Commerzbank: Signs of USD/JPY Recovery - 23 June 2011

Commerzbank: Signs of USD/JPY Recovery

The greenback jumped from the 80.00 area yesterday versus Japanese yen breaking the upper border of the weekly trading range at 80.35.
Technical analysts at Commerzbank claim that USD/JPY is showing initial signs of recovery. In their view, the outlook for US dollar is neutral/positive and the pair’s upward move may reach the 81.84/82.31 zone (55- and 200-day MAs) and probably the downtrend from 2007 to 2011 at 83.52. According to the bank, support levels are found at 80.05 and 79.79/57 (61.8% Fibonacci retracement of the advance from March to April and May minimum).

h4 usdjpy 12-15

by FBS Holdinds

US New Home Sales Data Release - 23 June 2011

US New Home Sales Data Release

US New Home Sales usually follows the trend of Existing Home Sales, therefore we´re likely to see a slightly stronger release today. Here is the forecast:

Release 10:00am NY Time -
New Home Sales Forecast 310K Previous 323K

The Trade Plan

We´ll trade this release using a deviation of 70K; if the release is lower, it would strengthen risk aversion sentiment and we should look to BUY EURUSD. A stronger number could provide temporary support for the pair and we may see a slight rally in USD/JPY enabling us to SELL EURUSD.

We´ll be looking for a possible after-news retracement trade. We need to wait for the release, then wait for the market to spike, and wait for decent retracement. This is the 3 "W"s of the Retracement Trading system. It´s especially important to make sure there is momentum during the spike before jumping in.

The Market

Today´s release of US New Home Sales is likely to fall inline with analysts’ expectation of around 310K. The housing market remains under pressure in May, especially with recent Employment data showing only 54K of new jobs created and Unemployment Rate moved higher to 9.1%.

The Existing Home Sales figure released on Tuesday showed slightly better than expectation figure due to the uptick in Mortgage applications in later May and early June for refinancing and home purchases… We may see a similar result for the New Home Sales figure, but not enough for a surprise in my opinion…

Pre-news Consideration

There is no pre-news for this release.

Definition of New Home Sales

"Measures the annualized number of new residential buildings that were sold during the previous month. A rising trend has a positive effect on the nation´s currency because the housing market is a leading gauge for the overall economy. A high level of housing activity signals that the construction industry is healthy and that consumers have the capital to make large investments. More importantly, new housing activity creates an economic ripple effect as home owners buy goods such as appliances and furniture for their homes, and builders buy raw materials and hire more workers to meet demand."


Henry Liu

Wednesday, June 22, 2011

How to choose a Forex signal service?

One of the most popular ways of trading is by following "signals". If you've ever heard the term "Forex Signals" but wanted to know more about its pros and cons, and whether it is suitable for you or not, this article is for you.

What is a signal service?

A Signal Service provides alerts on trading opportunities. For example, a professional trader sits at his desk, trading his account (or his company or hedge fund account). Whenever the trader enters the market, he also sends an alert to his subscribers, giving them the opportunity to enter the same trades as him. Some service also provide an automated robot, sometimes called a Trade Copier or a Trade Cloner. This robot will execute the same trade on the client's account, so clients don't need to actually go to their computer and execute the signals manually. Such service is "Vladimir's Forex Signals & Mentoring".

Why should I use a signal service?

Whether you a new or experienced trader, there are signal services out there that will contribute to your profits or set you on the right track to trading success.

For beginners: trading alone can be confusing and difficult. Like any other profession, you will not see success over night (despite what some brokers might try to lure you into believing…) So, on your first steps in this exciting but dangerous world, services such as Vladimir's Forex Signals & Mentoring, can take you hand in hand to learn the way real professionals trade. Plus, you have a chance to copy the trades of a pro into your own account, so you start trading on the right foot.

A signal service is also suitable for people who do not have the time to sit all day in front of the computer, looking for trades. Being subscribed to a signal service means there's a pro trader sitting and looking for trades on your behalf. Saves a lot of time and headaches, plus of course the results should be better, as you're having a highly experienced professional working for you.

For veteran traders: it's a real opportunity to hone your skills, and provide an additional source of profitable trades to diversify your "portfolio" of strategies. It is also an opportunity to join a community of like minded traders who communicate (through chat and live trading rooms) during the trading day, and help each other achieve better results.

What are the disadvantages and problems with signal services?

Here are the disadvantages and common issues with signal services, which require your attention and caution:

Hidden agendas: some brokers provide free signals. You've got to ask yourself why would someone offer free signals if they are serious and profitable. The answer in most cases is that they have a hidden motive – to push you to trade more. The equation is simple: the more signals they send you, the more trades you make, and the more commissions they earn. That's why their main interested is sending as many signals as possible, not as good and profitable signals as possible. These kinds of freebie signals have made a bad name for the world of signals, but luckily there are a few rare paid signals providers who do a good job.

Time constraints: many signal services require you to be near a computer most of the day, so you can immediately enter the market whenever you get a signal. However, this issue has been overcome by using what's called a "Trade Copier", which is an automated robot that receives its trading commands directly from the signals service trader.

Good signals come from good traders: Unfortunately, the Forex industry is full of scams and dishonest vendors. Calling yourself a trader and providing signals is easy, but providing signals which actually provide profits is of course a different story. The statistics are that 95% of traders lose money in Forex. This applies to signal providers as well. So, your mission is to find one of those 5% of signal providers who actually make money in Forex.

Take Vladimir Ribakov for example. He's been around the net for several years now, which means there's a lot of feedback about him in forums and review websites. The feedback is decidedly positive so he's the perfect example of a trustworthy trader to get signals from. Visit Vladimir Website

Morgan Stanley: Currency Forecasts Revised - 22 June 2011

 Morgan Stanley: Currency Forecasts Revised

Analysts at Morgan Stanley revised down forecasts for some major currency pairs by the end of the year:
- For EUR/USD – from 1.49 to 1.36
- For AUD/USD – from 1.12 to 1.01
- For GBP/USD – from 1.62 to 1.49

The specialists note that euro area’s economic outlook has deteriorated as the leading indicators tend to decline, investments inflows are slowing down. As a result, the single currency is going to stay under pressure.

In addition, the concerns about global growth are strengthening that’s affecting pro-cyclical and commodity currencies.

According to the bank, demand for the greenback in the second half of the year will be rather high. However, US rising debt burden makes Morgan Stanley doubt whether American currency will be able to keep rebounding in 2012.

by FBS Holdinds

Daily Markets Analysis - 22 June 2011

The global economy was relieved last night as the Greek government passed the confident voting test and markets have reacted aggressively when the news flooded the media. These were good news, but the experts know that it is just a matter of time before Greek will announce for its incapability to return its depth.

Wall Street rose about 1% and it would be interesting to see the Greek crisis impact on the US stock market. Today might be an inside they, as investors will probably wait for the FOMC press conference later this evening.

The S&P 500 broke through the resistance we has set at 1280, and crossed above the target at 1290. The gap-system produced 1.5% in the large blend index.


The Japanese currency is having difficulties in breaking down the support at 80.0. It is a round number with a psychological impact on the traders, which trying to buy the USD in these levels. The descending triangle pressures the Yen down and a break-up here could be powerful. However, if the Greek crisis gets out of control, the USD might get stronger again.


Both currencies are getting stronger against the USD these days, but the Swiss is obviously much powerful. In fact, Wall Street plunging did not affect on the Swiss, which indicates for its strength.

Directional indicators are calling for oversold but no doubt that this pair is facing down. The Weekly chart shows a bear-flag pattern, and a break-down of the support at 1.36 might slide to 1.3750-1.37.


This interesting battle between these two strong currencies seems to tend to the Swiss side. The daily trend is clearly bullish, and the moving averages are moving parallel to each other, which is indicating for price increasing.

It looks like that the recent correction in the Yen against the Swiss is over and a reversal might occur. A break-up of the resistance at 95.5 will be a strong signal for that, and the price might hit the pick at 96.5.

Forex4you Pro-account Metatrader 4 One Click Trading & Market Depth

One Click Trading & Market Depth

One Click Trading script expands the functionality of MetaTrader4 Client Terminal. Traders can now benefit more from the exceptional execution speed for buy/ sell orders, acquiring an unforgettable experience of a real time trading!

The advantages of One click trading:

  • Allows creating buy/sell orders, close all positions, including hedging with just one click!;
  • Displays bid/ask indicators, Profit/Loss in pips, Total volume in lots;
  • Placing SL & TP in pips
  • Displays Market Depth (Level 2 quotes from the largest liquidity providers)

How to use it:

To activate One Click Trading & Market Depth script in your terminal:
  • Find “View” menu and open "Navigator " window or if it exists already on the left side menu, click on it
  • find the tab „Scripts”
  • choose “One click trading” script and move this script to the chart by pressing and holding the left button on the mouse.
  • now you are able to do trading with just a one click on those tools which are displayed on the chart

! Please note - trading should be first enabled in options, otherwise the script won’t work.

To use this type of trading with other instruments, simply move the script to the corresponding chart.

! Please note- The script applies only to accounts with No Dealing Desk Execution technology -Pro accounts. Other account users have an access only to Level 2 Quotes view. Visit Forex4you website