Best Thread FXCM/DailyFX Signals and Strategies

[Jason Rogers]

Stockpiles of Crude Oil Climb for Second Week

Written by Roman Kadinsky, DailyFX Research

Inventories of crude oil rose for the second week by 2.796 million barrels, the first back-to-back rise since late July. The increase proved larger than the two million barrel forecast, while inventory of gasoline surprised with a decline for the first time in four weeks. Also reported, stockpiles of distillate fuels increased at a smaller pace than expected while continued to rise to the highest levels in more than two decades. Following the release, oil prices moved back into positive territory, up more than 0.60%. Other factors affecting the move today include dollar weakness, despite equity markets down more than one percent across Europe and the US.

Since March, there has been a significant relationship between the Canadian dollar and the inventory release. The monthly correlation between the data stands at -0.956 while the daily correlation of crude and oil stands at -0.623. It is clear from this that a fall in oil prices will mark deterioration in the Loonie. Oil currently remains below resistance at approximately $68, while the USDCAD may see further upside following a recent bottom in September.

Read the Full Report Here

 

[Jason Rogers]

Nikkei and Hang Seng Test Support Lines

Tuesday, 29 Sep 2009 by Jamie Saettele

The Nikkei and Hang Seng are putting support lines from March to the test. Divergence with momentum at recent highs suggests that breaks of these support lines could mark an end to the 6 + equity rally.

Nikkei

Hang Seng

Find the Full Report Here

 

[Jason Rogers]

Broad Dollar Reversal Brewing

Written by Ilya Spivak, Currency Analyst

EUR/USD

Strategy: Remain Short at 1.4710, Targeting 1.3742

Last week, we sold EURUSD at 1.4710 after the pair showed a Three Inside Down bearish reversal candlestick pattern with added confirmation as the RSI oscillator reversed out of overbought territory showing negative divergence. Prices have indeed declined and are now testing rising trend line support established from the swing lows in March. We will remain, looking for a break below this support (now at 1.4502) to open the door for a move to 1.3742. A stop-loss activated on a daily close above 1.4847, the 9/23 wick high.

Read the Full Report Here

 

[Jason Rogers]

Currency Market to Encounter Flurry of Rate Decisions from RBA, BOE, and ECB

Here are the highlights for next week!!!

Written by Terri Belkas, Currency Strategist

• US ISM Non-Manufacturing Index (SEP) – October 5, 10:00 ET
On Monday, the ISM non-manufacturing index is projected to rise for the sixth straight month in September to 50 from 48.4, which would be the highest reading since September 2008. With 50 being the point of neutrality, anything even slightly better than expected (50.1 or higher) would signal an expansion in business activity for the first time since August 2008. That said, a sharp improvement seems unlikely in light of the fact that the Conference Board’s measure of consumer confidence slipped to 53.1 in September from 54.5, while the latest US NFP report showed that the services sector lost 147,000 jobs during the same period. Overall, it would likely take an index reading above 50 to elicit a strong reaction from the US dollar, though a surprise decline would provide equally choppy price action for the currency.

• Reserve Bank of Australia Rate Decision – October 6, 23:30 ET
The Reserve Bank of Australia (RBA) is anticipated to leave their cash rate target unchanged on Tuesday for the sixth straight month at 3.00 percent, and the Australian dollar may only respond to a change in the bias of RBA Governor Glenn Stevens’ monetary policy statement. As it stands, Credit Suisse Overnight Index Swaps (OIS) are pricing in a 22 percent chance of a 25 basis point rate hike during this upcoming meeting, and 175 basis points worth of hikes over the next 12 months, which is generally in line with what we’ve seen since early August. It was actually in early July when the RBA’s bias shifted from dovish to neutral, as Stevens removed a line from his statement noting that “scope remains for some further easing of monetary policy.” As long as we see these RBA statements continue to provide progressively optimistic outlooks, the markets are likely to remain in favor of large rate increases over the next year. However, if the RBA starts to signal a more cautious tone, this sentiment could shift very quickly and lead the Australian dollar lower.

• Bank of England Rate Decision – October 8, 07:00 ET
The Bank of England (BOE) is anticipated to leave rates unchanged at 0.50 percent on Thursday at 7:00 ET, but this won’t even be the market-moving part of the announcement. Instead, traders will be looking toward the BOE’s policy statement. This has consistently been the prime “news event” of recent rate decisions. Last month, the BOE indicated a neutral stance as they stated they would continue their £175 billion quantitative easing program, and this ultimately led the British pound to rally against the US dollar and euro immediately. A repeat of this statement is likely to trigger a similar reaction from the British pound, but on the other hand, any indication that the program may need to be expanded down the line would weigh very heavily on the currency. That said, such a scenario is highly unlikely.

• European Central Bank Rate Decision – October 8, 07:45 ET
The European Central Bank is anticipated to leave rates unchanged at 1.00 percent at 7:45 ET. Where the currency ends the day, though, may have more to do with what ECB President Jean-Claude Trichet says during his post-meeting press conference at 08:30 ET. Traders will likely focus on any comments regarding the future of interest rates in the region, including whether 1 percent should be considered the “floor,” as well as statements on exit strategies for the central bank’s liquidity programs.

• Canadian Net Employment Change (SEP) – October 9, 07:00 ET
At 7:00 ET, the Canadian net employment change may show a decline of 7,500 during September following a surprise jump of 27,100 in August. Furthermore, the unemployment rate is anticipated to have risen to match the January 1998 high of 8.8 percent from 8.7 percent. Since the employment change tends to be a very volatile release, this should have the greater impact on the Canadian dollar, with a sharper than expected drop likely to weigh on the currency and an unexpected positive result likely to push it higher.

Report Found Here

 

[Jason Rogers]

Euro Firms Following Equities Lead, But is There Weakness Ahead?

Written by John Rivera, Currency Analyst

The EUR/USD continues to see risk sentiment have the greatest influence on price action as movement in the DJIA is explaining 41% of overall direction. However, U.S. interest rate expectations are starting to increase in importance as they have become a weighing factor with a -0.24 correlation. Many expect that the Fed will start tightening sometime next year and as we get closer to that possibility traders may begin to hedge their bets developing bullish dollar sentiment. Meanwhile, the ECB has clearly signaled that it will also wait until 2010 before considering tightening which has made yield expectations for the region a non-factor in recent price action.

Read the Full Report Here

 

[Jason Rogers]

BoJ Intervention Threat May Offer Scalping Opportunity For Yen Crosses

Written by John Rivera, DailyFX Currency Analyst

BoJ Finance Minister Fujii warned at the G-7 meeting of possible intervention if the Yen saw biased price action. The Japanese government appears to be uncomfortable with recent Yen strength and the threat of involvement may generate a floor of support under Yen crosses. Therefore, we could see limited volatility from the low yielding currency increasing its attractiveness for scalping techniques.

The USDJPY was already trading in a tight 150 pip range over the past week as the potential for intervention has increased. Minister Fujii led to an extreme contraction of the price range which recently led to brief break out. Despite the recent volatility Yen crosses should see downside risks limited with the intervention threat, which will increase the chances of continued range bound price action.

Read the Full Report Here

 

[Jason Rogers]

EURJPY Cutting an Unstable Range ahead of ECB Decision

Written by John Kicklighter, DailyFX Currency Strategist

Conditions are still very unfavorable for range based trading. While more crosses and general risk sentiment itself has taken to a holding pattern; there is little respect for hard technical levels and the threat of a true trend revival is high. It is safe to say that those that aren’t comfortable with the greater level of risk should avoid range trading and employ other strategies.

• Levels to Watch:

-Range Top: 131.60 (Fib, Pivot)
-Range Bottom: 129.75 (Fib, SMA, Channel)

How stable is the EURJPY Range?

• While the euro is not among the upper echelons of the high risk / high yield field, it nonetheless acts as a straightforward counterpart to the Japanese funding currency. This will keep EURJPY price action interesting as the vagaries of sentiment drivers can spark volatility or trend at the drop of a hat. Outside of this primary driver, the economic calendar is well rounded; but Thursday’s ECB rate decision offers the greatest promise for price action.

• There are respectable technicals to work with on this liquid pair; but they don’t exactly hold without some sort of test through volatility. Putting recent price action into context, the late September plunge called an end to a long-term rising wedge. We are consolidating below the former support and the new floor is a confluence of notable patterns near 129.75

Read the Full Report Here

 

[Jason Rogers]

US Dollar Forecast Bearish on Forex Sentiment Extremes

Written by David Rodriguez, DailyFX Quantitative Strategist

Forex trading crowds have bought aggressively into US Dollar declines against the Euro, British Pound, Japanese Yen, Swiss Franc, and Canadian Dollar. Our contrarian algorithmic trading systems have accordingly grown aggressively short the downtrodden US currency, and current downward USD momentum shows little hope of slowing. Last week we reported that other Forex positioning measures showed US Dollar sentiment at bearish extremes—hinting at imminent reversal. Yet we were clearly premature in our call, as market sentiment can and obviously does remain extreme for extended periods of time. Given current retail crowd positioning, we see little scope for a substantive Dollar reversal through upcoming trade.

USDJPY – The ratio of long to short positions in the USDJPY stands at 3.71 as nearly 79% of traders are long. Yesterday, the ratio was at 3.53 as 78% of open positions were long. In detail, long positions are 3.2% higher than yesterday and 10.7% stronger since last week. Short positions are 1.7% lower than yesterday and 2.3% weaker since last week. Open interest is 2.1% stronger than yesterday and 4.1% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.

Read the Full SSI Report Here

 

[Jason Rogers]

Risk Appetite Growing Exuberant with Stocks on the Verge of New Highs and the Dollar

• Risk Appetite Growing Exuberant with Stocks on the Verge of New Highs and the Dollar a New Low
• How Directly does the RBA’s Policy Stance Mimic its Global Peers?
• Keeping a Tab on Growth and Financial Stability

While some of the more prominent market benchmarks have yet to produce critical breaks, risk appetite is nonetheless climbing to new yearly highs. The trend has been in place since the February reversal; but this latest phase of the record-breaking recovery in optimism has been supplied by the first inklings of a global, hawkish policy stance. But, while the Reserve Bank of Australia has moved to tighten its policy reins; is the rest of the industrialized world anywhere near this step? This is a crucial fundamental question that each investor should ask themselves before buying into increasingly expensive markets; yet it one that seems to be consistently eclipsed by expectations of steady capital gains that more than compensate for the lack of yield, dividends and other steady sources of investment income. To project where this market is ultimately destined three, six and 12 months ahead; we need to ask whether the capital that is flooding back into speculative markets is in for the long haul or not. However, before we get around to answering that question, we need to take account of the current health of key markets. Looking to the benchmarks of the speculative world, we can see that markets are trying to catch up to optimism. For FX, the carry trade basket has pushed to a fresh, one-year high to extend the now eight-month trend channel. Breaking this aggregate measure down, we see the US dollar is on the verge of collapsing to a new 14-month low on a trade-weighted basis. From funding to carry currency, the Australian dollar has at the same 14-month high against the US dollar and a 15-month high when measured up against the euro. For comparison, the Dow Jones Industrial Average is stationed just below this year’s highs and crude is just arms reach from overtaking $75 to dive into waters not tested since the financial meltdown.

Read the Full Article Here

 

[Jason Rogers]

The Interest Rate Game: What Pace Will the Fed, ECB, BoE, BoJ and RBA Take Next Year?

We are coming out of the shadow of the worst financial crisis in modern history; and investors seem antsy to put their capital back to work and recover some of the wealth lost between 2007 and 2009. After a couple months of stabilizing, however, at the beginning of the year; we have seen the market recovery set a remarkable pace. For investors and traders looking to put their money to work, it is absolutely vital to ask whether a 52 percent rally in the Dow Jones Industrial Average or record high in gold is truly reflective of underlying fundamentals. If it doesn’t, then capital appreciation on speculative interests will eventually collapse and pull the markets back in line with reality.

What is the qualifier for the fundamental health of the markets? Simply, risk versus reward. Both sides of this equation are heavily influenced by group discretion and speculation; yet there is a tangible foundation to work from on both sides. Since our primary concern in today’s markets is the factors to support a bull market, we will concentrate on expected returns. There are two sources of return on any investment, capital appreciation and yield. On the whole, the former only pays off should the markets continue to rise. In contrast, dividends and yield is the consistent income that keeps large investors and pools of wealth in a market for the long haul (if it were all short-term funds, we would see incredible volatility). And, the source of each economy’s rate of return is the benchmark yield set by its central bank.

The interest rate outlook is generally positive in that the next move expected to come from most of the world’s largest central banks will likely be a hike. Therefore, the real consideration is when the banks will start moving and what pace will they maintain. We’ll look at those central banks that support the most liquid currencies and use this as a gauge to establish whether their markets are overbought or right in line with fundamentals.

Read the Full Report Here

 

[Jason Rogers]

Euro Pushes to New 2009 High - Is a Top in Sight?

Written by John Kicklighter, DailyFX Currency Strategist

Enthusiasm behind the general trend in risk appetite is still well off the levels that developed the aggressive trends of just a few months ago; but the general bias and short-term volatility is still high.

How stable is the AUDCAD Range?
• Levels to Watch:
-Range Top: 0.9575 (Pivot, Channel Top)
-Range Bottom: 0.9340 (Fibs, Channel, Pivot)
• It would seem from the relative price action of the Australian and Canadian dollars against their various crosses that the commodity link is a dominant fundamental driver. However, a large export of natural resources does not balance growth, interest rates and financial stability. And, when it comes down to it, the fundamental outlook for the Aussie economy is far better than that of its Canadian counterpart.
• First and foremost, there is a tangible bullish bias in AUDCAD price action for the past year. However, it is the past two-and-a-half months that has produced a definable trend. After a sharp two-day sell off, this pair has tested the bottom of its channel, which happens to coincide with a confluence of Fibs and a pivot around 0.9335/50.

Read the Full Report Here

 

[Jason Rogers]

US Dollar Slips Lower; Euro Resistance Line at 1.5000 Today

Pressure remains on the US dollar but the New Zealand Dollar is actually the weakest of the major currencies right today. A EURUSD resistance line is at 1.5000 today and bears watching if reached.

Read the Full Report Here. More Currency Pairs Covered.

 

[Jason Rogers]

A Drop in Gas Inventories Extends Crude Oil’s Rally to a Sixth Session

Crude Oil (WTI) - $75.75 // $0.57 // 0.75%
Despite the pull back in other commodities and speculative-based asset classes, crude put in for a sixth consecutive advance. This is the best trend for the market since the period through August 6th. Comparing the general level of sentiment across the markets towards speculative assets today, oil’s advance seems out of place. However, the pullback in risk appetite under most circumstances was limited; and the energy market was further responding to its own fundamentals. The delayed Energy Information Administration’s (EIA) report on inventories diverged somewhat from the API report released late yesterday. Whereas the API reported crude stocks were down 172,000 barrels; the Energy Department reported its measure was up 0.1 percent or 334,000 barrels. Yet, gasoline inventory unexpectedly plunged 5.23 million barrels (2.44 percent) last week – the biggest drop since 2008.

Demand heading into the winter (despite forecasts for one of the coldest seasons in years) seems to be relatively weak. Though distillate inventories fell 1.1 million barrels in the week through October 9th, they are still near 26-year highs. Furthermore, refineries are operating at 80.9 percent capacity, the lowest since April. Some producers have already started their response to the glut in supply by cutting shipments. OPEC is expected to ship 22.58 million barrels per day through the four weeks ending on October 31st for a cut of 0.4 percent. They are currently following a compliance rate of 62 percent.

Read the full report here

 

[Jason Rogers]

AUD/USD Elliott Wave Analysis

Written by Jamie Saettele, DailyFX Senior Currency Strategist

The AUDUSD is a beast and keeps trucking higher. The pair has slightly exceeded the midline of its channel and traded to a new 2009 high again today. Levels that I suggested one watch were .9200, .9270, and .9325 (these are former support levels from 2008). These levels make a large zone where a reversal could occur. The pair has entered that zone today so interest is piqued. What is interesting as well is that price has now touched and slightly exceeded the line extended from the top of wave A and the June high. RSI (14 day) is above 74 but not as high as it was at that June high, when it was above 75 (divergence still exists).

Read the Full Report Here

 

[Jason Rogers]

US Dollar May Be Setting Stage for Advance

Fundamental Outlook for US Dollar: Bullish

- US advance retail sales fell 1.5% in September, led by contraction in auto sales
- Fed meeting minutes indicated that Bernanke & Co. were open to expanding MBS purchases in September
- US inflation reports continue to give mixed signals, with headline CPI at -1.3% and core CPI at 1.5%

The US dollar was one of the weakest major currencies last week, with the Japanese yen beating the greenback to being the biggest loser, as market sentiment reflected increased risk appetite. This was probably best exemplified by the media’s euphoric response to the DJIA’s test of 10,000 on Wednesday and close above on Thursday, but with extreme optimism comes the risk of reversal.

Looking to the week ahead, US dollar event risk will start to pick up again on Tuesday as US housing starts and building permits are projected to have risen for the second straight month in September to 10-month highs, with starts anticipated to hit 610,000 from 598,000 while permits may rise to 590,000 from 580,000. While the unemployment rate is still in the process of rising, the federal government’s tax credit for first-time home buyers of up to $8,000 is likely to remain supportive of demand through the end of the year. However, if the program expires as planned on December 1, the growth we’ve started to see in the housing sector could start to wane.

The release of the Fed’s Beige Book report may not have a huge impact on trade on Wednesday, but it will serve as a good compilation of statistics on how the central banks 12 districts are faring economically. On Thursday, the leading indicators index is projected to rise for the sixth straight month, this time by 0.8 percent. However, gains are likely to be mostly the result of stock prices and the interest rate spread, while gauges of employment and business investment should remain weak.

Finally, on Friday, the National Association of Realtors’ index of existing home sales is expected to rise 5.9 percent for the month of September to an annual rate of 5.4 million, the highest in just over two years. Other factors to keep in mind are supply levels and median prices, both of which have fallen steadily to 8.5 months and $177,700, respectively. As with housing starts and building permits, the federal government’s tax credit for first-time home buyers of up to $8,000 is likely to remain supportive of demand through the end of the year, though surprise declines, as we saw in August, are not out of the question. – TB

For more timely FX market analysis, visit our newly-launched Forex Stream Service.

 

[Jason Rogers]

New DailyFX Website!!!

A new and improved re-designed DailyFX website has been launched. All of the research posted on this thread comes from DailyFX. Take a minute to look around. Here is a screenshot of the new website:

 

[Jason Rogers]

GBP/USD - Classical

Written by Joel Kruger, DailyFX Analyst

GBP/USD - While the rally of the past few days has been impressive, the overall structure still looks quite toppish and any moves towards 1.6500 are expected to be met with solid resistance. The market already looks to have found a top by 1.6450 on Tuesday, with a break back below 1.6240 to confirm bearish resumption. Back above 1.6450 delays.

Full Article Found Here

 

[Jason Rogers]

USD/CAD Elliott Wave Analysis

After forming a low near a Fibonacci extension, the USDCAD rally has accelerated. The push above 1.0435 signals a trend change. Dips should be bought.

Read the Full Article Here

 

[Jason Rogers]

BoE Minutues Point Toward Possible Policy Change In November

GBP/USD – The BoE released their minutes from their September policy meeting showing that the MPC was unanimous in their vote to refrain from adding to their asset purchase program. The statement revealed that policy makers see growth remaining on track as quantitative easing efforts has had a substantial impact on asset prices. However, the committee warned that further bank losses “could not be discounted”. The MPC said that although company credit conditions have eased, it is difficult to assess at this time. Therefore, at their November meeting they will be able to make a more informed decision. Meanwhile, the CBI industrial trends report showed total orders fell to -51 from -48. On the bright side reported new orders improved to -12 from -29. To discuss this and other ideas, visit the GBP/USD Forum.

Fundamental Headlines

• Business Spending Looks Up – Wall Street Journal
• New Zealand Central Bank Chief Warns on Interest Rates – Wall Street Journal
• Upbeat start to US earnings season – Financial Times
• Lilly Earnings Exceed Estimates on Cymbalta, Alimta Sales; Forecast Raised– Bloomberg
• Pound, New Zealand Dollar Rise on Rate-Increase Speculation; Stocks Fall -Bloomberg

Read the Full Article Here

 

[Jason Rogers]

US Dollar Forecast Remains Bearish on Forex Sentiment

USDCHF – The ratio of long to short positions in the USDCHF stands at 2.94 as nearly 75% of traders are long. Yesterday, the ratio was at 4.03 as 80% of open positions were long. In detail, long positions are 9.5% lower than yesterday and 1.9% weaker since last week. Short positions are 23.9% higher than yesterday and 10.1% stronger since last week. Open interest is 2.9% weaker than yesterday and 6.7% above its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.

Interactive SSI Page Found Here