VeriteFX Blog tag:veritefx.com,2009-01-26:/veritefx_blog//1 2010-05-07T20:32:28Z Movable Type 4.23-en Great/ tag:veritefx.com,2010:/veritefx_blog//1.226 2010-05-07T20:31:48Z 2010-05-07T20:32:28Z VeriteFX http://veritefx.com Market Update 26 Jan 2010 tag:veritefx.com,2010:/veritefx_blog//1.224 2010-01-26T21:19:20Z 2010-01-26T21:26:00Z Equities steadied early NY helped by a decent Consumer Confidence number and some more good Earnings Reports following more fears of Chinese credit tightening overnight, which hit Equity Futures during the Asian and early Europe session. With the usual Dollar... VeriteFX http://veritefx.com Equities steadied early NY helped by a decent Consumer Confidence number and some more good Earnings Reports following more fears of Chinese credit tightening overnight, which hit Equity Futures during the Asian and early Europe session. With the usual Dollar and Yen strength accompanying when the risk trade is off. 

S&P did lose its gains and more in the afternoon, Equities still do look weak as uncertainity about the issues that effected the market late last week persist: Bernanke's renomination, potential Chinese tightening measures and Obamas' planned Bank Trading regulations; tomorrow is FED day though.

UK GDP came in well below expection 0.1% vs 0.4%E .. the Pound had already lost considerably before the release, GBPYEN down almost 300pips, and really didnt give us anything to short and i certainity didnt feel conformable going long with the equity markets in their apparent precarious state, on top of that weak GDP number, even if GBPYEN was in its higher band of average daily ranges. Cautiously looking to short rises may be play on that pair until Equities do find some conviction.  

Fed Rate Announcement/Statement - Wednesday 14.15 EST. 

FOMC announce their latest interest decision. The market again expecting no change to the very low rate band. Main focus will be on wether or not the 'exceptionally low rates for extended period' rhetoric will be altered in anyway to a more hawkish stance. Personally i doubt it, but there has been a few Fed Heads coming out with slightly more hawkish tones of late, so we do have to be aware of that potential. If that were to occur, the Dollar should strengthen and Equity markets will most likely take a hit which would put a lot of pressure of the Yen crosses. The last couple FOMCs' seen the Dollar strengthen significantly post announcement, almost in spite of what the Fed had to say in that statement, and this could happen again.

We also have inflation data out of Germany, Sales data out of the UK, and more (likely ugly) housing data out of the States tomorrow.  

C.
]]> Market Update 25 Jan 2010 tag:veritefx.com,2010:/veritefx_blog//1.223 2010-01-25T22:48:55Z 2010-01-25T23:50:22Z VeriteFX http://veritefx.com
Equities did find some composure today, helped somewhat by good demand for Greeces' bond issue, some decent corporate earnings reports and 'bargain' hunting, even in spite of US existing home sales tumbling 16.7% in December. I dont think we are out of the woods just yet though. I haven't made a trade this week as I just dont feel comfortable about where these markets want to go near term. 

Currencies were broadly quiet, EURUSD especially so, ahead of F.O.M.C on Wednesday. The Pound did continue to make slow but sure gains against both the Yen and Dollar and that may continue overnight into the UK GDP release tomorrow morning. (more on that below) 

We have 2 important numbers tomorrow for both the Euro and the Pound. 

German IFO Business Climate - 400am EST

With worries that the German recovery has slowed significantly in Q4 2009 and Q1 2010, 
added to by last weeks dissapointing ZEW surveys .. this number will be closely watched 
either confirming or dispelling these fears. 

UK GDP - 4.30am EST

We are likely to see confirmation the U.K has finally emerged from recession in the last quarter of 2009. The pound will be especially sensitive to this data, particularly any surprise to the downside, given its firming up over the past few weeks. If we do get that surprise i will certainly being looking to short it against the Dollar or the Yen. 

We also have Consumer Confidence, Manufacturing and Housing data out of the U.S early in the NY session. 

Almost forgot to mention BOJ monetary statement, rates will stay unchanged and it may largely be a non event. Just have to watch for any cues as to any potential further monetary easing such as buying more Government debt. 


 ]]> Market Update 24 Jan 2010 tag:veritefx.com,2010:/veritefx_blog//1.221 2010-01-25T00:35:43Z 2010-01-25T00:43:07Z VeriteFX http://veritefx.com We closed out last week with fear again sweeping the markets, Stocks taking heavy losses and closing near their lows. With risk firmly taking a back seat, we seen significant gains for the Yen and the Dollar against the higher yeilding currencies. The Dollar did however get sold some on the Obama Bank trading announcement, possibly on a fear of capital leaving the U.S in the light of it. 

That fear was fed by the new Chinese lending restrictions undermining the outlook for the global recovery and commodity demand. Softer German ZEW surveys and continued focus on the mess in Greece weighed on the Euro and broader risk appetite. Mixed Q4 earnings, then Obamas plans to limit Bank trading operations and the doubts over Bernankes' future just created a maelstrom of uncertainty that the market just did not like. 

We do have to be cautious here and I wont be rushing into any trades early this week. Of course the issues mentioned above havent magically disappeared over the weekend.. but considering Bernankes' non renomination isnt actually a reality yet, the details of Obamas' plans on Bank trading are as yet largely unknown and Chinas plans to cut lending is just to try to head of inflation exactly because its economy and its demand for commodities is growing so strongly! Maybe as some more information in these areas comes to light, the market can regain some composure and the latest round of panic should subside. I wont be betting my house on that happening early this week tho, and we may have to look at further downside on equities and correlated pressure on the Yen crosses and EURUSD until the market can find that something to build some composure upon. 

Tomorrows' highlights include U.S Existing Home Sales @ 1000 EST and German Consumer Confidence @ 0200, then Monetary Policy Statment out of Japan overnight. Kicking off a very busy and inevitably volatile week. 

Be careful out there! 

C.


]]> Market Update 21 Jan 2010 tag:veritefx.com,2010:/veritefx_blog//1.220 2010-01-22T00:49:52Z 2010-01-22T00:51:56Z VeriteFX http://veritefx.com The Chinese data did print hot overnight (4th QTR GDP +10.7%, higher consumer inflation of 2% and Retail Sales up 16.9%. HOT!). We did ultimately get much of a repeat of the yesterdays risk averse trade, with the Dollar and Yen winning out against the high yeilders for much of the day. Any chance of some kind of significant recovery killed off by Obamas' speech on wanting to introduce limits to Bank's trading. 

During the speech we seen the Dollar spike lower with the equities plunge, action which is at odds to the pattern we have been getting recently. I assume the market viewed the potiental new regulation as hurtful for the U.S economy and thus also the dollar, the yen being the big winner in the markets flee from risk following Obamas' comments.  S&P finished down 22 
points and the DOW dropped 213 points, its worst loss since Oct 09. (putting it in the red for the year.)

I really dont have much more to add to that, how long will the risk aversion continue? how serious will the market deem Obamas' plan's to reign in Bank trading practices? How much of an impact will Chinas' impending rate hike really have on the risk trade? I dont know. Market may have some stuff its needs to work out at this juncture before it can make its move back up.

Tomorrow is quiet on the scheduled data release, with only GBP Retail Sales personally noteworthy, of course that doesn't mean we wont see more volatility heading into the weekend. I will be looking to tighten up and limit my risk exposure as much as possible over the next few hours. 

]]> Market Update 20 Jan 2010 tag:veritefx.com,2010:/veritefx_blog//1.219 2010-01-20T21:24:33Z 2010-01-20T22:50:16Z VeriteFX http://veritefx.com Today was a big 'risk off' day. With the perceived decision by China to try to curb bank lending and control the pace of credit growth this year, amid rumours that they could raise the actual lending rate as soon as this week, stopping yesterdays late 'risk on' rally in it tracks during the Asian session. This spilled over to Europe and NY,  with crude getting hammered on lesser demand concerns and sparked a 'fear spike' (VIX up 10% today at one stage), all this helping the dollar and yen northward. With the Euro hampered by budgetery issues in Ireland, Portugal and Greece still polluting news flow.. coupled with the negative German PPI number this morning, the EURUSD and EURYEN just took a beating. They really didn't stand a chance.  

UK employment printed better than expected, and the Pound did weather the storm relatively well. These UK, Eurozone and Dollar themes we have seen throughout the last week or so, and i dont think they are going to go away anytime soon. 

Overnight we will get some significant data out of China (9pm E.S.T), GDP & Retail sales amongst others.. if these come in hot, the market may choose to remain spooked by the spectre of further fiscal tightening from the PBOC and we may get an action replay of todays events, overnight at least. It is possible the market has just been adjusting to the prospect these potential PBOC moves before the fact. Its a tough call that I don't really want to make. 

Markets have always ultimately proved resilient when we have seen these bouts of risk aversion and i really dont see that changing because of Chinas' foresight in trying to reign in its' economy from overheating. How long will this round of risk aversion last? I dont know, but I dont think the low yeilds from having your investments held up in 'safe havens' like the U.S and Japan will satisfy bolder investors for very long. 

Manufacturing data out of the Eurozone and the States amongst more corporate earnings data tomorrow. 


Good trading.

C.
]]> Market Update 19 Jan 2010 tag:veritefx.com,2010:/veritefx_blog//1.216 2010-01-19T21:35:43Z 2010-01-19T21:45:31Z VeriteFX http://veritefx.com Sorry for the lack of update the last couple of nights. 


Today the dollar made further gains during our 'risk off'  european session; Equities did make a strong recovery during NY (S&P finishing on close to 18 month highs), but the dollar held most of its gains, this could be a pretty telling signal and I think we may well see further dollar gains near term. I refered to this potential last Sunday as we seem to be seeing a pull back in dollar funded carry trades. Sentiment does appear to continue to be dollar bullish. 

Germany posted some horrible ZEW economic sentiment numbers, which aided the EURUSD sell-off. The U.K posted some strong inflationary numbers this morning falling in line with the pattern of stronger British data that we have seen recently and should continue to see (they do have a hell of a lot of room for improvement!). This all pushed EURGBP down to multi-week lows.

Yen crosses still bouncing around relatively range bound. There is a nice strong correlation again with equities which does make them easier to trade (this wasnt the case during long periods late last year). I hold my GBPYEN long @ 147,10 and think we could well see some further upside during tonights Asian session. 


On the data front tomorrow, we are choc-a-bloc, with inflation numbers out of the eurozone, which may well surprise to the downside, and later on, more inflation and housing data out of the U.S. From the U.K we have rate decision minutes and job data. We will also see a barrage of corporate earnings. All in all, quite busy and we should see a volatile day. 

C.


]]> Market Update 14 Jan 2010 tag:veritefx.com,2010:/veritefx_blog//1.214 2010-01-14T23:59:50Z 2010-01-15T00:06:27Z VeriteFX http://veritefx.com Not really much to add tonight, havent had much time to follow the market today. Aussie employment and Chinese House prices came in hot overnight helping push the yen lower  during late Asia and early Europe. However, U.S Retail Sales surprised pretty badly to the downside switching everything back to risk off and we seen the yen crosses give up the nights gains and more. Equities really didnt sell off much tho, and finished the session in the green.

ECB and Trichet was a bit of an non-event as expected. A few warnings for Greece. All a bit ho-hum. EURUSD is still stuck in a tight range around 1,4500 and seems directionless for now. X has wrote a little more on the EURO here 

Intel posted a good earnings report, after market, spiking the Yen lower again. We will have to wait and see if that will help keep equities buoyed overnight and tomorrow. Inflation and consumer sentiment numbers also come early in the NY session, maybe we will get some positive news flow that the market seems to be waiting for, following todays snoozefest. 

Personally, i still like the GBPYEN long and will just keep buying it on dips. Simple.  It is a Friday before a holiday on Monday though, so be careful out there. 


All the best.

C.
]]> Market Update 13 Jan 2010 tag:veritefx.com,2010:/veritefx_blog//1.212 2010-01-13T21:16:28Z 2010-01-13T21:27:05Z Equities moved right back up today, making up a lot of yesterdays losses, even with a dearth of any significant news flow. After a shaky start on Wall Street, the buyers were eager to get right back in following yesterdays... VeriteFX http://veritefx.com Equities moved right back up today, making up a lot of yesterdays losses, even with a dearth of any significant news flow. After a shaky start on Wall Street, the buyers were eager to get right back in following yesterdays sell off, bringing the yen crosses up nearer to the top of their recent ranges, with GBPYEN reaching my 149 target from 2 nights ago. This pattern has happened time and time again for almost a year now. You may not agree that we are on as solid an economic footing as Wall Street seems to think, but you cant argue with the bullish sentiment that still exists in the market. I believe we are primed to go higher, and we may get our catalyst with significant U.S data tomorrow and Friday. I will be holding my 147,10 GBPYEN long and look for a 150+ target for now. 

Just want to have a little word about Sterling, we had Manufacturing Production  printing a little better than expectation this morning with some hawkish words from the BOE: 'UK may have to raise rates this year and that the Bank should not increase its QE programme' - Sentance; which helped make Sterling a big winner today. I believe the pound strength will persist, the data should continue to surprise to the upside (they have pumped enough stimulus into the economy) and the market should like the seemingly inevitable new Conservative government come election time in May. So, with that in mind, I will favour POUNDYEN longs over EUROYEN longs, this Greece thing just isn't going to go away and with potential issues in Portugal, Ireland and Spain to come out which should continue to weigh on the Euro. 

The EUROUSD again failed at resistance today even with the decent swing back on equities. To be honest, I really haven't a clue where the dollar wants to go, either does the market it seems! If we do see some positive U.S data tomorrow and Friday, it will be telling to see if we do get another bout of dollar strength.

U.S Retail sales, Unemployment claims and Import prices along with the ECB rate decision means we should see a fun and volatile day tomorrow. 


c.
]]> Market Update 12 Jan 2010 tag:veritefx.com,2010:/veritefx_blog//1.210 2010-01-12T22:32:55Z 2010-01-12T22:40:11Z We seen a sell off in equities today, over earnings fears following Alcoas' miss last night and Chinas' decision to raise its bank reserve requirement by 0.5% to 16.0% furthering tightening its' monetary policy. Smart proactive moves by China to... VeriteFX http://veritefx.com

We seen a sell off in equities today, over earnings fears following Alcoas' miss last night and Chinas' decision to raise its bank reserve requirement by 0.5% to 16.0% furthering tightening its' monetary policy. Smart proactive moves by China to head off inflation concerns that loom around the corner. The Fed should really be following their example but common sense still seems a long way off for the U.S. 

The Yen adopted its' usual bid tone as risk aversion took hold throughout the day. I am still favouring picking up longs on the yen crosses with proper money management and await a return to the upside, I am currently long gbpyen @ 147,10 and 147,80 .. i will close the 147,80 if I get a chance for a few pips and hold the 147,10 for a return to the top of the range. I will keep looking for swing longs if we do keep the risk averse tone tomorrow. I can only see this dip as a buying opportunity for now. 

The dollar did not benefit much from the risk aversion like it has been doing in recent months, however, its still holding that support @ 76.25 on the usdx and resistance of 1,4550 on EURUSD. This resistance may well go tomorrow should stocks steady themselves and try and make some kind of climb back up. 

Crude inventories and Beige Book tomorrow. 
]]> Market Update 11 Jan 2010 tag:veritefx.com,2010:/veritefx_blog//1.208 2010-01-11T21:22:35Z 2010-01-11T21:25:50Z VeriteFX http://veritefx.com So the dollar dropped across the board today on a combination of risk appetite helping commodity stocks, gold and crude and a hangover from the dissapointing payrolls data. USDX still holding support however at around 76.25 which coincides with 14560 ish on eurusd. Time will tell, if we break this support and if this represents a shift from the recent trend of dollar buying, and back to the dollar getting sold off with risk. We do, however, seem to have seen a shift back to fundamentals ruling dollar direction, i.e getting sold on bad U.S news and bought on good. So it's going to be interesting if and when we get some good U.S data later in the week. 

German exports beat expectation, a rise for the 3rd consecutive month, again indicating an increase in global economic activity and supportive of the morning equities rally and eurousd strength.

Yen weakened against the euro and the pound with the early morning bout of risk appetite, before coming off as equities sold off early in NY. I have picked up euryen and gbpyen longs on the dip and will add if we go any lower, targetting 149gj and 134ej for now.

Also reported today, was some kind of G7 pact to 'ensure forex stability'. Details of what was agreed are sketchy to non-existant though. so just an FYI. 

Not much else to add for now. US and UK trade balance numbers up on deck tomorrow with earnings season also getting into full swing. 

C.
]]> Market Outlook Jan 10th to Jan 15th 2010 tag:veritefx.com,2010:/veritefx_blog//1.206 2010-01-11T03:41:16Z 2010-01-11T03:55:51Z VeriteFX http://veritefx.com  
Fridays NFP report highlighted that our recovery with be long and bumpy. European unemployment has also just hit 10%, its highest since 1998. Having said that, I personally am not a fan of the theory that we will see a 'double dip' recession. I just think the Fed and other world Central Banks' will not allow that to happen. Whether or not they will have any choice in the matter is debatable but they wont let things sink back into the abyss without some kind of a fight. We will see many bumps and more shocks on our way but i believe the recovery will largely sustain.

The Dollar
========== 
I have never really been a fan of trading the dollar, i just feel there is too many disparate forces working on it and I have always found it hard to get a read on it. This is none more so than recently with a complete breakdown in its inverse correlation with equities, gold and crude. Having said that, i think we may well see further dollar strength against the Euro in particular, it really is a case of which economy is showing the better signs of at least stopping the bleeding, and it seems the market is convinced its the U.S. Fridays NFP number may just be a bump ahead of a continued dollar rebound near term. 

The Yen 
======= 
Now, somewhere I feel a bit more comfortable, the Yen. Japans' new finance minister on his first day on the job all but said he wanted a weaker yen. These types of noises have been coming out of Japan for a while now, a shocking about face from when the new govt came into power last year in apparent support of stronger yen. The markets reponse to this new jpy tact has been pretty muted thus far, which i personally have found frustrating. I do however believe real yen weakness is in the post, so i will try and prepare myself as much as possible for it. i.e looking at picking up swing long gbpyen, euryen and even usdyen positions on any sign of a large dip. A further reason why i am of the opinion of more yen weakness is that there has clearly been a pullback in interest in using the dollar as a funding currency for carry trades.. this should also help the yen down a weaker path as I remain relatively bullish on equities like I have been since the low 700s. 

China 
===== 
Just thought i would make a note of Export/import numbers posted by China over the weekend. Exports rose 17.7% and imports climbed 56% year on year. Chinese imports are now at records levels, these types of numbers are supportive that this recovery is real and that China will continue to play an increasingly significant role in it and in the broader global economic picture going foward. 
 
Pattern based trading 
===================== 
After 3 months of a dearth of 30 minute patterns, they were back last week, making at least one trader very happy. I am hoping for many more of these in the coming weeks.. and will keep anyone in chat abreast of high probability scenarios. I will trade pretty much any 90% + pattern regardless whether or not it's against my expectation of where a pair will ultimately end up. The yen crosses have been nice and volatile last week, but still largely range bound so it has made scalping based on these pattens relatively easy. 
 
The Week ahead 
============== 
Pretty full calendar of U.S data ahead, Trade balance on Tuesday, Beige Book Wednesday and then all sorts of fun on Thursday & Friday, Retail Sales, import prices, jobless claims, business inventories, (and Friday) Empire Manufacturing, consumer prices, industrial production and Michigan consumer sentiment index. Plenty of Fed heads due out jaw boning as well throughout the week. 
 
Significant week for the Euro-zone too, French industrial production on Monday.. French business sentiment on Tuesday, French consumer prices on Wednesday. Clearly Thursday, though is the big one, German industrial production, & consumer prices followed by ECB rate decision and press conference. I don't however see many surprises from Trichet and market response may well be subdued. We'll see. Euro traders should also keep and eye on Greece, their debt issues have clearly been weighing on the Euro for some time now, the ECB has been putting pressure on Greece to tighten up fiscal policy.. The Greek government has said it will reduce its budget deficit from 13% to 3% by 2012! I dont think anyone is buying that yet, so its something we are just going to have to keep an eye on. There is also sovereign debt issues in Ireland, Spain, Portugal. I don't think the EMU is under any threat , but we do need to be wary of debt and budget related negative news out of these countries as the market has been more than willing to sell the Euro off when faced with it. 
 
Site Update 
=========== 
I am working towards redesigning and rewriting the site and reinstating full live calls as soon as i can. I know I keep promising this, but I do intend to it, thanks for your patience and loyalty. I appreciate peoples loyalty and will try to as much as i can get some forward momentum back for VeriteFX. If you can think of anyway you can help or have any ideas for other ways we can progress, I am very keen to hear from you. The site is non-profit, a hobby and learning tool for me. Ok i will leave it like that. Have a good weeks trading, I will be in chat as usual and will make a concerted effort in getting these updates out every night. If you have any questions or ideas for what to put in the updates posts, please let me know. 

note: server was down overnight because the host had unplugged a router! seems ok now. apologies for that.

Thanks. 

Conal 
- 
fxr@veritefx.com
]]> Site Update Oct 2009 tag:veritefx.com,2009:/veritefx_blog//1.201 2009-10-21T07:08:30Z 2009-10-21T07:29:17Z VeriteFX http://veritefx.com
OK. I am going to take a little time to update people on the site. I have made a couple of decisions. With Dave/Mod gone now and any chances of him returning extremely slim. I have decided to take some time out each day to write some market commentary. 

This was a route i was unsure that i wanted to take, I didn't want to be seen to be trying to imitate Mod, because i don't feel i fully can. However, having given the issue some thought recently i have decided it may help my focus, development and discipline as a trader. 

People are free to read them or not, and i urge people to take them with at least a pinch of salt, do their own research and draw their own conclusions. As a trader, i believe in a Quantitative Analysis type approach to trading these markets, but i have to respect the fundamentals, news flow and market sentiment. The updates will serve as a means to help me stay focused on these important areas. 

Hopefully the content will prove useful to someone and improve as i gain experience in writing them. 

The updates will take much the same format as those of Mods, time permitting, with a daily commentary and a calendar for the weeks upcoming market related events. 

I hope to start these updates some time this week. 

If anyone else wants to contribute their own commentary or analysis. I can create them their own personal blog and they are free to write their thoughts on their own area within the site. 


Veritefx.
-----------
The site is a refuge for keeping alive the ideas and techniques for how Mod seen, traded and taught these markets and it will be here for as long as people come to it. Dave is continuing  to pay some bills for its upkeep and I will devote what time i can to its operation. Having said that, my prime focus is my trading, Verite is simply a mechanism to aid my growth as a trader. I have no plans for any type of monetization of the site and it remains a totally altruistic venture. 

Some input from site members will help to continue to make it a useful resource for traders, whether that be from ideas as to what can be done to improve the site, posting news articles, or talking about their own trade ideas. I am busy with my code, and other things. I really cant do all this on my own. 


Trade Calls
---------------
Yes. There has been a lack of trade calls, I just dont feel comfortable putting these out at the minute. Its a stressful venture in an already stressful discipline. I still want to offer this service at some point, as i feel it will, again, aid my trading focus and discipline.

In these tough markets of recent weeks and months, I just need time to become fully comfortable putting them out again. 

**


I guess thats all i really wanted to say. I am in chat close to 24/6 to feild any questions or suggestions.

Thanks & Good trading.


- Conal.
fxr@veritefx.com
]]> Site Update tag:veritefx.com,2009:/veritefx_blog//1.200 2009-08-03T11:30:27Z 2009-08-03T11:52:19Z VeriteFX http://veritefx.com With the recent departure of Moderator/David from the website. He is unlikely to be coming back anytime soon. It is important to keep the community up to date.  

People have asked for VeriteFX to stay, so we will not be taking it off-line.  Obviously with Mod gone we will lose the excellent in-depth daily market commentary and key level updates. Its pointless me even trying to replicate that analysis, its not an area i am admittedly not particularly strong in. However, I am happy to  announce that I will once again be sending out live trade calls. Most of my calls will be on the Yen pairs as before. I won't rule out calls on other pairs like EURUSD and GPBUSD should any pertinent patterns present themselves. 

I (fxr) have created some trading tools inspired by how Mod see's the market, these tools are capable of producing reliable high probability trade calls/scenarios. Effective immediately we will reinstate the live trade calls using analysis from these tools but with respect to current news flow and underlying fundamentals.  These trade calls will be announced live in the chat and SMS/email when the high probability scenarios present themselves.  In the light of the recent changes we have cleared the SMS/Trade call database, so if you wish to receive the new trade calls, please sign up again.  If you need help signing up, contact one of the mod's in the chat, or send us an e-mail. 

Don't be expecting a glut of calls, I am happy to wait for these high probability scenarios. These scenarios have dried up a little in the past few weeks during the lower summer volumes. As regards stops and drawdown, I dont use stops but I do take ocassional losses. I feel much more comfortable holding short dollar and short yen positions throughout whatever drawdown is thrown at me, I am convinced, barring some kind of systemic shock these markets are ultimately headed higher. I will therefore, be quicker to take losses on long dollar and long yen positions.  

I use around 0.5% entries and i may stack upto 3 trades on any high probability scenario. Please ensure you have solid money management rules and that before taking any calls, they agree with your own analysis. You take them at your own risk. I tend to trade from just before London/Europe open, all the way through to early Asia.  

In time, i may consider opening up some of my price tracking and statistical analysis tools for members of the site to look at. The site also needs a little work, a redesign and a rewrite. I do get quite busy so please be patient while I work upto looking at these issues.  

At VeriteFX, we remain committed to providing an upbeat, friendly and knowledgable forex trading communitity and we thank all those who have remained with us, and welcome any new members.  We will continue to keep everyone updated on the future of the site.

X from the chat and long standing member has wrote his thoughts on EURUSD fundamentals for the following week. Thanks to him for that and I may include more member contributions as we go forward:

"

*EUR/USD Fundamentals for the forthcoming week:* 


This could be another crazy week. It's the first trade week of the month, we have a Euro Rate Decision in conjunction with Trichets' press conference shortly after on Thursday and Non-Farm Payrolls out on Friday morning. We need to keep these events in mind as they draw closer as we will most likely see increased volatility and they can set the tone for the few weeks that follow. Although those are the big market moving events, we do still get possible market movers earlier in the week. 


Monday 0200 Est. German Retail Sales 
Monday 1000 Est. ISM Manufacturing PMI 
Tuesday 1000 Est. U.S. Pending Home sales 
Wednesday 0500 Est. Eur. Retail sales 
Wednesday 0815 Est. ADP Non-Farm 
Wednesday 1000 Est. ISM Non. Manufacturing PMI 
Wednesday 1030 Est. Crude oil Inv. 
Thursday 0600 Est. German Factory Orders 
Thursday 0745 Est. Euro Min. Bid Rate 
Thursday 0830 Est. ECB Press Conference 
Friday 0600 Est. German Industrial Production 
Friday 0830 Est. Non-Farm Employment Change 

This week, as usual, I will be monitoring how the equity, commodity and bond markets are reacting to the list of fundamental events above, since we all know these correlated markets tend to influence the forex market greatly. 

As far as trading during these events is concerned, I will most likely try to be flat heading into the release of any of major news events because I really need to observe how the correlated markets react to the data, especially because other markets are in peculiar spots. 

See, I find coincidence in any market hard to believe. What I mean is this, how is it that on the most anticipated week of the typical month we are lingering at such key levels? The S&P is nearing the psychological 1000 level, Gold is trying to sustain its break over $950, moving its way to $980 then $1000, and Crude, as I write this, is trying to sustain back over $70. 

As the week progresses, the data released will cause these markets to either break through these levels or come back down, most likely bringing the Euro with it. These are the tones I will be looking at and thinking about as I prepare to enter the market. 

X. "

I can be reached at fxr@veritefx.com or the chat if you have any questions. 

Thanks.

- C.


]]> Forex and Financial Market Weekly Outlook Jul 19 to Jul 24 2009 tag:veritefx.com,2009:/veritefx_blog//1.199 2009-07-19T19:44:35Z 2009-07-19T19:44:42Z VeriteFX http://veritefx.com
Last week approximately 25% of earnings were released but over the next two weeks we get the other 75%, so do not expect any change in how those events act as the catalyst in the Forex market and Forex's correlated markets. Over-the-top earnings from the likes of Goldman Sachs, Intel, IBM, JP Morgan, and Bank of America led to a 7% gain on the S&P 500 and the Dow surging up 7.3%. The strong upside gains on the US and European equity markets sent crude oil up 6%, gold up over 2%, and Treasuries to their first decline in 6-weeks.

Market participants sent their money-flows out of Treasuries and back into equities with measured conviction as we saw the yield on the 10-year note rocket up 34bps. In this weekly outlook I'm going a little more in-depth about Treasury yield curves, specifically between 2-year and 10-year notes, because the spread and yield curve between those two key debt issuances can often times reveal quite a bit about the overall risk appetite of market participants and how they gauge the potential for future growth of the US economy.

Last Thursday world famous market bear, Nouriel Roubini, gave participants yet another incentive to buy up equities and to sell the dollar and yen as he said the worst of the financial turmoil is behind us and he expects recovery by the end of the year. Although he did say another stimulus package would be required to combat the seemingly unstoppable rise in unemployment.

So, is any of this real? Are the global financial markets really recovering and is everything really fixed? I personally do not think so, I believe another tsunami wave could hit the equity, commodity, and Forex markets later this quarter or in Q4, but it doesn't matter because in this game perception is the reality... the recovery is as real as the markets want it to be and make it out to be. The thing I have to constantly remind myself is, the markets can stay irrationally exuberant for an indeterminable amount of time.

Fundamental events moving the Forex and equity markets this week:   

This week's fundamental and economic calendar is a little lighter than usual for US data but for European data there are a number of critical fundamental events that center on inflation, the consumer, production, and manufacturing.

Bernanke testimony--

For the US dollar the bigger fundamental events take place on Tuesday and Wednesday as Fed Bernanke testifies before the House Financial Services Committee and Senate Banking Committee in DC. Bernanke's testimony will be on past, current, and future Fed monetary policy (interest rates), the state of the US economy, inflation/deflation, the housing and employment sectors, the deficit, sovereign debt monetization, future stimulus measures and the prospects of a sustainable recovery on Wall St.

All markets and all participants will be watching the Bernanke testimony and reacting accordingly. Remember, back in mid-March it was Bernanke who was one of the main catalysts that stopped the plunge in the equity markets, turned the S&P 500 higher and sent the dollar falling back off the throne it temporarily inhabited. Bernanke coined the stupid phrase, "green shoots", and the markets ran euphorically with it. Recent Fed rhetoric has been positive, upbeat, and the FOMC has upwardly revised their growth and inflation expectations. 

Not all the members on those congressional committees are buying into the idea of an instantaneous recovery, especially Ron Paul and Jim Bunning. What traders need to be watching is whether the overall sentiment of these testimonies is more on the positive side or on the negative side in terms of the future prospects of the US economy because the money-movers in the equity, commodity, and Forex markets will take their cue from Bernanke's messages to congress and how those congressional committees react.

Key EUR/USD fundamentals--

  • German PPI (Monday 0200 EST)
  • Fed Lockhart speech (Monday 1330 EST)
  • Fed Bernanke testimony (Tuesday 1000 EST)
  • Eurozone Industrial New Orders (Wednesday 0500 EST)
  • Fed Bernanke testimony (Wednesday 1000 EST)
  • House Price Index (Wednesday 1000 EST)
  • Crude Inventories (Wednesday 1030 EST)
  • Initial Claims (Thursday 0830 EST)
  • Fed Tarullo speech (Thursday 0930 EST)
  • Existing Home Sales (Thursday 1030 EST)
  • German Manufacturing and Services PMI (Friday 0330 EST)
  • Eurozone Manufacturing and Services PMI (Friday 0400 EST)
  • German IFO (Friday 0400 EST)
  • Michigan Sentiment (Friday 0955 EST)
Pound sterling fundamentals--

I don't usually talk about the GBP much but after looking at the UK fundamentals I see there are a few events that carry a lot of market-moving potential. If you trade the pound sterling you'll want to be aware of the following fundamental events:

  • M4 (Monday 0430 EST)
  • BOE/MPC Meeting Minutes (Wednesday 0430 EST)
  • Retail Sales (Thursday 0430 EST)
  • BBA Mortgage Approvals (Thursday 0430 EST)
  • Preliminary GDP (Friday 0430 EST)   
Also, both the BOJ and RBA release their monetary policy meeting minutes on Monday. On Tuesday the BOC has an interest rate event and monetary policy statement and traders will want to watch out for any rhetoric from the BOC to cool the CAD down. It can't really be possible to slow the CAD's appreciation as long as the S&P 500 and crude oil continue gaining but the BOC probably isn't too happy with the sharp reversal of the USD/CAD, so there is always a potential the BOC could do some verbal intervention this week.

Equity earnings reports--

Unless you've been on holiday or hiding in a cave I'm sure you're well aware of how the various earnings reports on Wall St. are moving the markets. We got just a taste of that last week and the response from market participants was resoundingly positive. Of course it's possible there's no real conviction behind the strong upside gains as volumes have been lighter overall. Plus, the potential always exists that the smart money is just waiting for higher prices to grab short positions to ride the next down move, but either way, as long as earnings meet or exceed expectations, the S&P 500, Dow, crude, and gold should continue higher while the dollar and yen remain pressured.

All week long, both before and after the bell, there are a massive amount of earnings reports scheduled for release and from big household names like Texas Instruments, Caterpillar, Coca-Cola, DuPont, Apple, Morgan Stanley, Wells Fargo... too many to even list. You can check the schedule here.

What this will likely translate to is a good deal of choppy and erratic price action on the S&P 500 futures and S&P 500 cash market, the Dow/Dow futures and then of course back into the currency market. The Japanese yen has shown extreme sensitivity to the moves made on the US and Japanese equity markets and I expect that trend to continue this week. The EUR/JPY is the benchmark currency pair that's most correlated to the S&P 500 futures and S&P 500 cash market while the GBP/JPY is moving in tight correlation with the Dow, Dow futures and USD/JPY. So, if you trade the majors and yen crosses this week be mindful of what's happening on Wall St. and with crude oil.

The yield curve and interest rate spreads -- future predictors:

The business of predicting the future of any tradeable market is mostly an exercise in futility, especially under the current environment where there is zero established trend and where the vast majority of participants alter their money-flows based on news, data, and emotional impulses.

A few weeks ago the upside break of a big moving average failed equity bulls and then a downside technical pattern failed equity bears, leaving many on Wall St. scratching their heads and hopefully a few figured out that stuff has zero to do with what moves markets. Participants who are purely fundamental have done a little better but even the strictly fundamental folks like Nouriel Roubini and Marc Faber are now changing their tune and I think they are doing so based on the trend of better headline economic numbers. But that's also a very dangerous game to play...

As fundamental as I am, I don't exactly trust any data that comes from a central bank or government agency. The way the data is compiled is a joke, it's unreliable, and beside all that, who can trust a politician or a central banker?   

In my evolution as a trader and during my quest for education on how to better understand the global financial markets and what they may do in the future, I'm learning to lean more on the bond market. Specifically, on how to use the relationship between the 2-year and 10-year Treasury note... how to gauge the future of the markets by monitoring the yield curve between 2's and 10's and what's happening with the spread between interest rates.

Yield curve--

Before I go any further I want to be clear that I am no expert on this stuff, I'm still learning and trying to gain knowledge in this regard, but I'm excited enough about this market correlation that I wanted to share it so other traders who want to learn the underlying fundamentals of what really moves markets can begin learning too. I'm a simple person so this will be a very simple explanation...

The yield curve is just a basic graph with a line that represents the difference in yields and the time in which the particular debt issuance matures. The benchmark yield curve for the financial markets is between Treasury debt that matures in 2-years and 10-years. 2-year notes are considered a shorter dated maturity and the 10-year note is considered on the longer end of maturity in addition to being most closely correlated to the US housing and mortgage market. In general, the longer the date of maturity, the higher the interest rate yield should be.

When analyzing the yield curve, market participants look at the slope of the curve, whether it shows a pattern of more of an upward or downward slope. Under most markets conditions the slope or shape of the yield curve should always be up or positively sloped. A down slope or inverted slope is an extraordinary situation, but we'll get to that in a bit.

How the yield curve and spread between the interest rates of 2's and 10's can be used in a predictive manner is based purely on the actual factor that determines the yield curve -- future expectations. Interest rates are the #1 key driver of all markets and the prospect of future interest rates are the #1 key driver of money-flows in and out of the Forex, equity, commodity, and bond markets.

Yield curve and economic growth--

When it comes to interest rates, market participants always put a risk premium on the future of rates. When the yield curve positively and upwardly steepens that is a sign that a greater majority of market participants have future expectations of better and rising growth. As the sentiment of market participants becomes more euphoric, more hopeful, and more positive, the yield curve steepens to the upside. This means interest rates are expected to rise because growth and economic expansion is expected.

But, with better growth and economic expansion comes the prospect for rising price pressures and greater price-related inflation. Because longer dated maturities like the 10-year devalue under an inflationary environment, market participants will force the Treasury to pay a better yield in order to take on the risk of holding a debt instrument that may devalue due to inflation. With growth comes higher rates, higher inflation, and therefore higher yields must be returned.

Yield curve and Forex--

If you see an upwardly steepening yield curve between 2's and 10's what you can glean from this is the market telling you the prospects for better future growth are rising. And what happens when prices go higher and inflationary price pressure tick up? Simple, higher prices equate to higher equity prices, higher commodity prices, lower bond prices and higher bond yields and all that translates into a weaker US dollar and Japanese yen.

Whether Wall St. admits or not, they absolutely, positively need price inflation and higher prices, and whether or not Forex traders realize it, higher equities = higher crude and higher crude + higher equities = lower dollar. Very simple.

Just last week the interest rate spread between 2's and 10's rose by a healthy 25bps. That means the yield curve between 2's and 10's upwardly steepened and maintained a positive upward slope and look what US equities did... they all gained 7% or more and the US dollar fell. If the trend of steepening yield curve between 2's and 10's remains intact I would expect to see the S&P 500 and Dow continue making gains while the dollar and yen stay pressured lower.

Inverted yield curves--

When the yield curve inverts or starts falling sharply or makes an extended downward pattern that is a sign of fear in the markets. If market participants think the economy is going to tank or fall back into a recession, the yield curve will invert. When market participants think there will be a season of devalued interest rates, which is a sign of slow or falling growth, the yield curve will invert. Also, if participants see much more deflation than inflation the yield curve can invert of slope downwardly. There is historical evidence that shows the yield curve will downwardly slope or become inverted a year or more before a recession hits the economy.

Now, this is a very rudimentary explanation of the yield curve and interest rate spreads and I'm sure there are much more in-depth commentaries on this issue, but my point is to encourage traders who want to get away from the unreliable lagging indicators to look at more reliable leading indicators for future moves in the markets.

Nothing is perfect or foolproof, but watching the 2's and 10's is something I plan on doing more in the future. Right now the future of any market is impossible to predict as participants are mostly running on the emotions of fear and greed and speculation of all sorts. I personally think we're in a deflationary environment but if the prevailing sentiment is that we're moving towards an inflationary environment then I need to trade accordingly because if that is what the market thinks, the market is always right.

Trading:

This is going to be another wild week filled with volatile price action, erratic price swings and generally choppy conditions. There is a lack of participation and a lot of very thin liquidity volumes in the Forex market, therefore, the price action in FX will be largely dictated by what's happening in equities and commodities. I expect the market to remain a very challenging environment to trade in this week.

All the markets will be opening and starting the week at elevated levels. Last Thursday the S&P 500 futures and cash market made one solid attempt at sustaining a break above the 940 level and unless we get some downside surprises fundamentally or geo-politically, I'm expecting to see 940/950/970 levels tested. The first week of June saw the S&P 500 make an attempt at busting through 950 but then crude oil fell off a cliff leading to an equities sell-off and boost of the dollar.

If crude oil can get back over $70 and make a run at $75 we shouldn't rule out the S&P 500 making a run to 980 or even 1,000. In that scenario the dollar would be under considerable downside pressure along with the yen. But in order for that type of scenario to play out, the news and fundamentals have be strong, the earnings have to exceed expectations and Bernanke and the Fed have to keep talking up the markets.   

In my view, Wall St. will remain the center of the financial universe and where participants in all markets will take their cue. Trying to even put a fundamental basis on price valuations for the euro, dollar. pound sterling, or yen is basically a waste of time at this point because their respective price valuations will be largely be based on risk appetites and sentiments in equities and commodities.

That's all I've got for now. I should be able to get back into the chat sometime mid week or as time allows. Have a great and profitable week and happy trading.

-David
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