FXCM/DailyFX Signals and Strategies

This is a discussion on FXCM/DailyFX Signals and Strategies within the Forex forums, part of the Markets category; With interest rates at historic lows in most of the major currencies, there has been little talk about the carry ...

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Old Oct 17, 2012, 6:18pm   #481
 
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Exotic Currencies Reviving the Carry Trade

Jason Rogers started this thread With interest rates at historic lows in most of the major currencies, there has been little talk about the carry trade strategy in a long time. That's because the carry trade is a buy-and-hold strategy designed to take advantage of the interest rate differential between a high yielding currency and a low yielding currency. Below is a recent article by Tyler Yell, Trading Instruction on DailyFX.com, where he explains how exotic currency pairs can still be used in the current market conditions to employ the carry trade strategy.

Major currencies have slashed their overnight bank rates and rollover payout to take them out of Carry Trade consideration, so they can spur economic growth through low interest borrowing. Here are some interest rates of exotic currencies that you can take advantage of by utilizing the carry trade.


Hungarian Forint (HUF): 6.50%
South African Rand: 5.00%
Mexican Peso (MXN): 4.50%
Turkish Lyra (TRY): 5.75%
Russian Ruble (RUB): 8.25


We can look to the FXCM Trading Station 2.0 Dealing Rates to find out the payout of these currencies against lower yielding currencies.

Click the image to open in full size.


Once you've found an attractive rollover, here are two things you need to look at to see if you should take advantage of this as a carry trader.
  1. Does the rollover pay out in the direction of the overall trend?
  2. Depending on how long I’m wanting to hold the trade, is this worth it to me?

Click the image to open in full size.

The EURHUF has the highest rollover payout in the direction of the trend.

Requirement one is met because the payout pays in the direction of the trend.
This is not an uncommon play because currency strength is often dictated by interest rates.

The payout on a Sell EURHUF 100k trade is $12.00 per day on the RollS. The FXCM LLC Margin required is $7,500 with an annual interest payout of roughly $4,380 or 4.4% on the entire 100k position and more on the margin required. To date we’re in a 4,620 pip down trend which would add $21,437 onto the trade had we held this trade throughout the year.

Requirement two asks if it is worth it for you to hold on to the trade given the rollover. Notice how the RollS or rollover on the sell trade is positive. This means when I sell the pair I earn the interest. Because my interest payment and trend are aligned in the same direction I want to be a seller on this pair.

This trade was hand-picked but the purpose of the article is to build the behavior in you of looking toward exotics for a carry trade opportunity.

We do not advise trading only for the rollover even though the payout on one side of the trade can be inviting. Pull up a longer term chart and make sure you’re not trading against the overall trend.

When dealing with exotics, the trends can go on for months and move sharply. If you are on the wrong side of a strong trend you can get stopped out quickly and the interest gained on the rollover payments can be diluted quickly by the loss on the trade.

Here is a chart of the USDMXN for 2012. Notice the two large trends, one up and the other down. You’ll see why it’s not worth holding onto the trade counter trend just to pick up the rollovers available:

Click the image to open in full size.

To summarize, we only want to use the Carry Trade strategy if you’re willing to stay in the trade for the long term and if the currency pair’s trend is in the direction of the worthwhile payout.

Daily FX recommends a large moving average to identify the overall trend.


--- Written by Tyler Yell, Trading Instructor on DailyFX.com
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Old Oct 23, 2012, 2:53pm   #482
 
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USD Outlook Turns Bullish, Index Eyes Key 9,950- JPY Oversold

Jason Rogers started this thread By David Song, Currency Analyst at DailyFX.com

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Although the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) remains 0.10 percent higher from the open, the greenback may continue to pare the advance carried over from the previous week as there appears to be a bearish divergence in the 30-minute relative strength index. As the oscillator continues to come off of overbought territory, we may see a larger correction in the index, but the bearish formation may fail to take shape should as the RSI appears to be finding interim support around the 50 figure. In turn, we may see the dollar continue to recoup the losses from earlier this month, and the index may make another run at 9,950 as the economic docket is expected to instill an improved outlook for the U.S.

Click the image to open in full size.

Although the USDOLLAR looks as though its breaking out of the downward trending channel from the end of July, we would like to see a close above the 50-Day SMA (9,918) to see the reversal from 9,740 gather pace. As the recent batch of fundamental developments coming out of the world’s largest economy instills an improved outlook for growth, we may see the FOMC soften its dovish tone for monetary policy, and Fed Chairman Ben Bernanke may see a narrowing case to push for more easing as the recovery gets on a more sustainable path. In turn the rate decision on tap for later this week generate a bullish reaction in the USD, and the greenback may track higher throughout the week as the preliminary 3Q GDP report is expected to show the growth rate expanding an annualized 1.9% versus the 1.3% rise during the three-months through June.

Click the image to open in full size.

Two of the four components weakened against the greenback, led by a 0.70 percent decline in the Japanese Yen, and the low-yielding currency may face additional headwinds over the near-term as the weakening outlook for the world’s third-largest economy fuels bets for more easing. Indeed, the Bank of Japan lowered its growth forecast for the region as the recovery appears to have ‘paused,’ and the central bank may face increased pressure to intervene in the currency market amid the ongoing downturn in global trade, but we may see Governor Masaaki Shirakawa reply on quantitative easing to address the risks surrounding the region as its previous attempts to depreciate the local currency failed to have a lasting impact. As the RSI on the USDJPY pushes deeper into overbought territory, we should see the exchange rate continue to track higher, and we will look for a short-term correction once the oscillator falls back below 70.
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Old Oct 24, 2012, 5:02pm   #483
 
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Dollar Maintains Bullish Trend Ahead Of FOMC Rate Decision

Jason Rogers started this thread Below is David's Song's preview of this afternoon's FOMC Rate Decision:

The greenback is struggling to hold its ground ahead of the FOMC interest rate decision, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) slipping to a low of 9,937, and the reserve currency may continue to give back the advance from earlier this week should the central bank keep the door open to expand its balance sheet further.

US Dollar Index, 1 Hour Chart
Click the image to open in full size.

As Chairman Ben Bernanke looks to encourage a stronger recovery, the central bank head may preserve a dovish tone for monetary policy, but market participants may slowly scale back speculation for more easing should the Fed raise its fundamental assessment for the world’s largest economy. As growth and inflation gradually picks up, we may see a growing number of Fed officials scale back their willingness to implement more quantitative easing, and the committee should start to move away from its easing cycle as the very accommodative policy stance heightens the long-term risk for inflation.

As the FOMC rate decision highlights the biggest event risk for the next 24-hours of trading, the fresh batch of central bank rhetoric will heavily influence the greenback over the remainder of the week, and we may see the USDOLLAR threaten the bullish trend from earlier this month should the Fed show a greater willingness to expand its asset purchases.

Watch Coverage of Today's FOMC Rate Decision in the Live Trading Room at DailyFX.com
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Old Oct 25, 2012, 4:58pm   #484
 
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SSI Points to Further Dollar and Yen Declines

Jason Rogers started this thread Retail forex trading crowds continue to sell the US Dollar (ticker: USDOLLAR) and Japanese Yen against major counterparts. We forecast further USD and JPY declines.

Click the image to open in full size.

Indeed, we believe that forex market conditions continue to favor selling US Dollar and Japanese Yen strength. There was a modest pullback in USD-long interest since last week, but as long as the majority of retail traders remain long US Dollars versus the Euro and other counterparts we remain in favor of USD weakness.

Click the image to open in full size.Click the image to open in full size.

Read complete analysis including individual currency sections at DailyFX.com
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Old Oct 29, 2012, 10:21am   #485
NVP
 
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Re: FXCM/DailyFX Signals and Strategies

Hey Jason

just a bit of fun at T2W for Q4

Can you make a call here re strongest currency for Q4 ?

comments are very welcome as well

thanks !
N

http://www.trade2win.com/boards/fore...mpetition.html
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Old Oct 30, 2012, 10:23pm   #486
 
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Re: FXCM/DailyFX Signals and Strategies

Jason Rogers started this thread
Quote:
Originally Posted by NVP View Post
Hey Jason

just a bit of fun at T2W for Q4

Can you make a call here re strongest currency for Q4 ?

comments are very welcome as well

thanks !
N

http://www.trade2win.com/boards/fore...mpetition.html
Hi N,

Cool thread, I posted my two cents

Jason

Last edited by Jason Rogers; Oct 30, 2012 at 10:28pm.
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Old Oct 30, 2012, 10:24pm   #487
 
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Dollar To See Volatility on Key Data as NYSE Reopens

Jason Rogers started this thread The New York Stock Exchange and other US financial markets will reopen for trading tomorrow, and it will be critical to watch how the US Dollar and S&P 500 react to key forex economic event risk.

The US Dollar (ticker: USDOLLAR) is likely to see significant volatility tomorrow as the New York Stock Exchange reopens for trading and key forex event risk promises sharp moves on any surprises.

The Dow Jones FXCM Dollar Index continues to hold key support at 9900, which likewise represents the 50% Fibonacci retracement of the rally from October lows. Yet forex traders will put the Greenback to the test on tomorrow’s highly-anticipated US ISM Manufacturing, Chicago PMI, and ADP Employment change results.

View key event risk via our FX Economic Calendar on DailyFX.com

Dow Jones FXCM Dollar Index Trades Near Key Technical Support
Click the image to open in full size.

The Dollar continues to hold, but we see key downside risks for the safe-haven US currency as extremely low forex volatility levels often coincide with USD weakness. Our general strategy has been to sell Dollar rallies (buy EURUSD dips), and that continues to work relatively well.

We’ll pay particular attention to tomorrow’s forward-looking ISM Manufacturing survey and any substantive surprises in ADP Employment numbers. There is pressure on the US Federal Reserve to provide further clarity on the future of its monetary policy decisions, but the FOMC officials have made it clear that their next steps would depend on key economic data.

There are few data releases more important than US labor market reports, and ADP numbers will help clarify expectations for the Fed’s next steps. We likewise look forward to Friday’s scheduled US Nonfarm Payrolls report for the same reasons, though it is unclear whether recent natural disasters in the US Mid-Atlantic and Northeast regions will affect the timing Bureau of Labor Statistics’ data release.

Our overall Euro forecast against the US Dollar remains bullish, and further clarity on the Fed’s next steps could eliminate much of the uncertainty surrounding short-term moves. Forex traders should keep a close eye on how the US Dollar trades as the New York Stock Exchange reopens for trading tomorrow—especially following key US economic data releases.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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Old Nov 1, 2012, 5:15pm   #488
 
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US Dollar Forecast Brightens as Sentiment Shifts

Jason Rogers started this thread Retail forex traders remain broadly long the US Dollar (ticker: USDOLLAR) against major counterparts, but a sharp pullback in positioning warns of potential reversals in key USD pairs.

Click the image to open in full size.

It will be important to watch US Dollar reactions to tomorrow’s highly-anticipated US Nonfarm Payrolls data release. Current forex sentiment warn that the Greenback may be near a significant turning point against major counterparts.

Weekly retail forex sentiment summary:
Click the image to open in full size.


View complete sentiment-based forecasts for major forex pairs at DailyFX.com
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