Best Thread FXCM/DailyFX Signals and Strategies

[Jason Rogers]

Exotic Currencies Reviving the Carry Trade

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.

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?

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:

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

 

[Jason Rogers]

USD Outlook Turns Bullish, Index Eyes Key 9,950- JPY Oversold

By David Song, Currency Analyst at DailyFX.com

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.

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.

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.

 

[Jason Rogers]

Dollar Maintains Bullish Trend Ahead Of FOMC Rate Decision

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

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​

 

[Jason Rogers]

SSI Points to Further Dollar and Yen Declines

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.

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.

Read complete analysis including individual currency sections at DailyFX.com​

 

[NVP]

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/forex/160932-strongest-g8-currency-q4-competition.html

 

[Jason Rogers]

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/forex/160932-strongest-g8-currency-q4-competition.html

Hi N,

Cool thread, I posted my two cents

Jason

 

[Jason Rogers]

Dollar To See Volatility on Key Data as NYSE Reopens

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

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

 

[Jason Rogers]

US Dollar Forecast Brightens as Sentiment Shifts

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.

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:

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

 

[Shakone]

This thread is called signals and strategies. Have you given clear signals, and if so what is the current record of your signals? It's daily signals so should be one every day I guess.

Have you given any strategies? And how are they doing?

 

[michael45]

This thread is called signals and strategies. Have you given clear signals, and if so what is the current record of your signals? It's daily signals so should be one every day I guess.

Have you given any strategies? And how are they doing?

I don't know about signals , I am new to T2W. Can you help me?

 

[Jason Rogers]

Dollar at Risk if US Election Yields Decisive Outcome

The US Dollar is likely to face selling pressure if the US general election yields a decisive outcome, opening the door for a re-focus on resolving the “fiscal cliff” fiasco.

Talking Points

• All Eyes on US Election, Forex Traders to Welcome Any Decisive Result
• Euro, Pound May Suffer as Data Boosts Bets on ECB and BOE Stimulus
• Aussie Dollar Leads Comm Bloc Higher as RBA Leaves Rates Unchanged

All Eyes on US Election, Forex Traders to Welcome Any Decisive Result Euro, Pound May Suffer as Data Boosts Bets on ECB and BOE Stimulus Aussie Dollar Leads Comm Bloc Higher as RBA Leaves Rates Unchanged A busy European economic calendar is likely to be overshadowed as traders await the outcome of the US general election. Financial markets appear broadly chipper, which likely reflects hopes for an easing to the deadlock in Washington DC in the months leading up to today’s ballot. Indeed, a decisive victory by either candidate that opens the door for the current President and legislature to shift their focus toward addressing the fast-approaching “fiscal cliff” – a set of automatic spending cuts and tax hikes slated to trigger at the turn of the calendar year that may tip the US back into recession – is likely to be seen as broadly supportive for risk appetite. Indeed, S&P 500 index futures are pointing higher, warning the safe-haven US Dollar is vulnerable.

On the data front, the spotlight is on the final revision of October’s Eurozone PMI Composite reading. Expectations call for confirmation at a 40-month low, an outcome that may put downward pressure on the Euro as forex traders consider deepening recession to increase the probability of additional easing from the ECB. UK Industrial Production is likewise on the docket, with forecasts pointing to another contraction in September. The result may weigh on the British Pound as markets consider the possibility of a QE expansion after the BOE completes the latest round of asset purchases this month.

The so-called “commodity bloc” currencies outperformed in overnight trade as risk appetite firmed across financial markets. The MSCI Asia Pacific regional stock index rose 0.2 percent, pulling the growth-geared Canadian and New Zealand Dollars higher against their US namesake. The Australian Dollar outperformed its counterparts after the Reserve Bank of Australia opted to keep rates unchanged at 3.25 percent. RBA Governor Glenn Stevens said that while “risks to the outlook are still seen to be on the downside…prices data [turned out] slightly higher than expected and recent information on the world economy slightly more positive.” Stevens added the effects of past rate cuts continue to filter into the overall economy, hinting that will offer ongoing stimulus even without an additional reduction this time around.

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

 

[Jason Rogers]

Upcoming Chinese CPI, Impact on Aussie Dollar

Upcoming News Event: Chinese CPI
Time: 8:30 pm EST (01:30 am GMT)
Currency Pair to Watch: AUD/USD

Below is a chart that illustrates the correlation between Chinese CPI and the AUD/USD exchange rate.

As you can see, Chinese CPI is currently at 3 year lows. Song Guoqing an advisor to the PBOC, China's central bank, has suggested that CPI could fall even further with growth expected be "relatively slow" in the fourth quarter of this year and the first quarter of next year.

If CPI comes in lower than expected, look for the Aussie dollar to sell off as the market will expect further rate cuts from Australia's central bank, the RBA.

 

[Jason Rogers]

Impact of Fiscal Cliff on Euro

Over the last 4 years, we’ve found ourselves in a crisis management environment that continues to drag EURUSD lower. This weekly chart shows a down trend that started with the Global Credit crisis in 2008 only to be followed by the sovereign debt crises coming to head with many key European economies.

With more bad news coming out and the dark cloud of the US fiscal cliff looming overheard, more traders could make a run for US treasuries and out of the European economy which could bring us down another leg. One thing is for sure, when fear rises the EURUSD drops.

Get more fundamental analysis at DailyFX.com​

 

[Jason Rogers]

Low Volatility Means Potential Weakness for Aussie Dollar

A strongly negative correlation between AUD/USD and the implied volatility prices of AUD/USD options warns that Aussie Dollar strength may ultimately prove unsustainable on a shift in forex market conditions. A bearish short-term technical forecast and uncertain fundamental outlook likewise warn of potential AUD weakness.

For more technical analysis visit DailyFX.com​

 

[Jason Rogers]

As the US fiscal cliff approaches, and it becomes a center of media attention, we're left wondering what currency pairs may be impacted and which way to trade. The Globe and Mail, a newspaper in Toronto, had an interested article today about how the Canadian dollar could be affected by the US fiscal cliff.

They say the fiscal cliff "would take a huge chunk out of U.S. gross domestic product and likely push the economy back into recession, taking other countries’ economies with it. Such a scenario is bad news for a resource-based currency like Canada’s as slowing economies will slash demand for oil and metals."

The Speculative Sentiment Index (SSI) on DailyFX PLUS is currently net short USD/CAD at -1.24 giving a bulling signal for the pair.

USD/CAD Monthly Chart

From a technical standpoint, if you look at the monthly chart of USD/CAD above, it’s trading right around parity and is near the bottom of its historical range.

USD/CAD Daily Chart

Ilya Spivak of DailyFX.com is also bullish on the USD/CAD and sees 1.0140 as the next target level.

 

[Jason Rogers]

Japanese Yen Tanks on Unlimited Easing Concerns

The markets got a surprise today as the Japanese yen tanked on concerns that the Bank of Japan might take action to weaken the currency.

Chris Vecchio had this to say in his article on DailyFX.com:

"Today’s dramatic drop in the Japanese Yen has nothing to do with a rebound in risk-appetite, or new prospects for a stronger US Dollar. Instead, the surprise call for elections in December by current Japanese Prime Minister Yoshihiko Noda on Wednesday, coupled with calls for unlimited easing by the Bank of Japan from opposition leader, and most likely the next leader of Japan, have dropped the Yen to its lowest value against the US Dollar since late-April."

The USDJPY has moved to the top of trend resistance near 81.15 and has broken above our key 80.50/70 level, leaving the mid-April swing high at 81.75/80 as the next major resistance level. Support comes in at 80.50/70 (former November high) and 79.10/30.

The latest SSI report on DailyFX PLUS for USD/JPY is currently giving mixed signals. The index value remains net long at 2.21 which has been the case for a long time. This is normally a bearish signal, but...

the daily change in long and short open interest indicate that a lot of traders closed out their long positions after today's up move in USD/JPY while short positions increased. This could indicate further gains in USD/JPY are possible on easing concerns.

 

[jobworld]

great

 

[Jason Rogers]

USDOLLAR on Top for the Week

The trend continues to move in the US Dollar's favor at the moment. The Dow Jones FXCM US Dollar Index broke through the significant 10,000 level earlier this week and the next major resistance level is the 10,175-10,200 level previous reached in July of this year.

The DJ FXCM USDOLLAR Index is comprised of a basket of 4 currencies against the USD including: EUR, GBP, AUD, JPY. The US fiscal cliff has been a negative for the USD, but other fundamental events this week have been a bigger drag on the other currencies such as 1) EU debt crisis, 2) surprise Japanese elections and more aggressive easing, and 3) Bank of England lowering UK economic forecast.

 

[Jason Rogers]

This Week's Economic Calendar & The Japanese Yen

This week's economic calendar is light on US releases due to the US Thanksgiving holiday on Thursday. Despite the US holiday, there are still plenty of non-US events to keep the forex market interesting. Here's a look at the economic events on the calendar ranked HIGH in importance this week:

The Bank of Japan is set to meet later today, but this Bloomberg article mentions that "All 22 economists surveyed by Bloomberg News expect the BOJ to take no action at the end of a two-day meeting today...". The article also goes on to mention that the government taking office after the December 16 election will appoint the BOJ's top 3 positions which should give them the needed majority to push through the monetary easing everyone has been talking about. The next BOJ meeting after today is on December 20th.

Moving on to technicals, here is a chart that John Kicklighter posted on his Twitter account displaying long term trend shifts that look to be occurring with the USD/JPY.

USD/JPY

I have also been watching the AUD/JPY myself waiting for a breakout to the upside. The pair was trading in a range from July through October. It looked like a breakout earlier in November before pulling back, but it has now pushed through again.

AUD/JPY

 

[Jason Rogers]

We're eagerly awaiting the results of the EU finance ministers meeting where Greece is expected to get approval for the next tranche of loans. Approval is expected to be a positive result for the Euro.

In the meantime, we have the Bank of England Minutes scheduled as the next major news item on the economic calendar set for release at 9:30 GMT (4:30am ET). Here's why the minutes are important described by DAvid Song of DailyFX.com :

Although the Bank of England (BoE) held a cautious outlook for growth, heightening price pressures in the U.K. will limit the scope for additional monetary support as the economy emerges from the double-dip recession. Indeed, we’ve seen a growing number of central bank officials highlight the stickiness in consumer price growth, and the meeting minutes may reveal a growing rift within the Monetary Policy Committee as the central back no longer sees a risk of undershooting the 2% target for inflation.

​

Trader positioning in GBP/USD is almost perfectly neutral with 51% long and 49% short, marking uncertainty about market direction. Watch out for volatility at the release! Here's a look at the most recent SSI positioning release:

The measure of 1.03 indicates there are 1.03 long positions for every 1 position short. So it's almost matched perfectly 1 for 1. In a more extreme example, you will see there are 16.52 long EUR/CHF positions for every 1 short position or put another way, 94% of EUR/CHF positions are long.