MP FOREX ADVISORY

Archive for the ‘Forex Trading’ Category

Similar to what was seen earlier this year and late in 2008, the currency markets, and other national and international markets, are once again being battered by risk aversion and fear as investors are growing increasingly nervous about indications of a global economic slide.  Such conditions have been exacerbated by the release of news from the Federal Reserve that it will embark upon a more aggressive “dollar printing” campaign.  Moreover, recent jobs data in the US has been extremely disappointing and appears to indicate that we may be headed for a double dip recession or possibly something worse.  Several key reports will be released next week including the following:  US Unemployment Claims, US PPI, US Housing Data, Japanese GDP, the British Inflation Report, and the German ZEW Report.  All eyes are also on the sharp rise in the Japanese Yen against the US Dollar – something that is having a detrimental impact upon Japan’s export driven economy.  Rumors of possible market intervention by the Bank of Japan below the 85.00 level are rampant.

The GBP/USD and the EUR/USD both trended upwards last week in a very gradual and in a very choppy and somewhat erratic manner.  We saw more false breakouts in our model last week than we have ever seen with our breakout model.  It appears that there is substantial, although discreet, market manipulation, which has been keeping the EUR/USD at artifically higher levels and preventing it from a continued decline, which would be supported by the fundamentals.  Such efforts almost never succeed as currency pairs will eventually yield to the natural forces of the market.  However, central bank manipulation certainly can wreak havoc with technical trading models as explosive breakouts can occur at unusual spots that leaves traders relying on technical tools of analysis somewhat befuddled.  We have been spending quite a bit of time working on several enhancements to our model, which primarily are focused on dramatically improving our risk-reward ratio.  We believe that such enhancements should allow us to post strong gains even if we have weeks with lower than normal success rate.  We will begin utilizing these enhancements beginning this week.  We will keep you posted.

It was difficult to ascertain any clear sense of direction this week in the forex market – a week that was loaded with significant news announcements, including the British and European Interest Rate Announcements and Monetary Policy Statements. The EUR/USD began the week by posting its lowest price since March 2006; however, the pair reversed course and made a singificant correction during the remainder of the week, closing just shy of the 1.2100 level. The GBP/USD was far more choppy. The Cable started the week with a bearish gap, followed by a sharp V-reversal on Tuesday, which sent the pair all the way up to 1.4757. Then, the pair made another sharp V-reversal, sending the pair back down to near the 1.4500 level.  We believe that there are great trading opportunities around the corner by taking adavntage of these current levels of volatility.  We will keep you posted.

The main story in the forex market this week is centered on the EUR/USD, which continues its steep decline as it crashes towards parity with the US Dollar.  On Friday, after two weeks of consolidation, the EUR/USD broke the significant support level around 1.2143 and continued downward to close below the psychological support of 1.2000.  The next major support level is around 1.1640, which was the low that was posted in November 2005.  We believe that this continuation of the downtrend will open the way for some excellent trading opportunities in the Euro pairs over the coming weeks.  While an eventual reversal is inevitable, at this point it does not appear that the downtrend will be ending any time soon.   

The EUR/USD, while ending last week on a bearish tone, chopped up and down throughout the week not really exhibiting any clear direction.  Likewise, the GBP/USD, while faring better than the EUR/USD, also was much choppier than normal this week.  Substantial fear and uncertainty continue to be present in the market.  It will interesting to see if the EUR/USD will break support this week at 1.21453, or if it will continue to consolidate.  We will keep you posted.  Have a great Memorial Day weekend!

We had another roller coaster of a week in the forex market with both the GBP/USD and the EUR/USD starting the week strong, followed substantial weakness, followed by a V-Reversal up and lastly ending the week with a sharp V-Reversal going down.  The wild swings that we are seeing nearly across the board reminds us quite a bit of the erratic and difficult market conditions that we saw in the few months immediately following the 9-11 tragedy.  Investors continue to be extremely apprehensive about buying into the EUR/USD due to continued concerns about the debt crisis in Greece and out of fears that this one national crisis could turn into a continental crisis.  Moreover, investors also appear to lack convition to continue shorting the EUR/USD for the moment as it is already nearl 2,000 pips below its 2009 highs.  We have been working diligently on an enhanmcement to our money management formulas, which we believe will better equip us to deal more effectively with a market that is loaded with apprehension and V-reversals.  This enhancement tested extremely well in hypothetical trading, and we intend to compliment the Master Pro System with it starting next week.

We experienced a few setbacks this week particularly in trades taken in the GBP/JPY and in the USD/DKK.  The GBP/JPY chopped around more this week than we have seen all year thus far.  Wednesday through Thursday was the most difficult period in the GBP/JPY as it fell more than 100 pips, then rose more than 100 pips, then fell more than 100 pips, and then rose more than 100 pips all in about a 24 hour period.  Such choppy and erratic price action poses a major challenge when trading breakouts.  We spent an enormous amount of time over the past couple of days in adding an additional filter, which will allow us to avoid most of the choppiest market conditions and to focus on trade signals that offer us the most optimal risk-reward ratios.  We are happy to put this week behind us, and we are looking forward to beginning next week with renewed focus. 

The currency market has been extremely choppy after a dramatic gap in the price charts at the open of the week with the GBP/USD and the EUR/USD (along with several other pairs).   The EUR/USD opened the week nearly 130 pips above its Friday close while the GBP/USD opened about 120 pips higher than its Friday close.  The gap was largely attributable to the announcement that a plan was agreed upon among Euro Zone countries to bail out the Greek economy.  The news has swung back and forth so many times regarding Greece that traders appeared to be reluctant to make any decisive trading decisions.  This morning, all eyes were on the US Retail Sales data, the CPI data, and the testimony of Federal Reserve chairman Ben Bernanke.  Apart from the testimony of Bernanke, the data was fairly uneventful with the Retail Sales data coming in slightly better than expected and the CPI data coming in slightly worse than expected.  On the trading front today, we are currently holding a short position in the USD/DKK.  This trade was opened yesterday at the beginning of the Asain session.  We closed half of the trade late in the Asian session with well over 100 pips of profit.  We are holding the second half with the expectation of a continued drop in the pair this evening and into tomorrow.  A break of the 5.4360 level could open the door for a substantial drop – possibly down to the 5.4000 level before the end of the week.  We will keep you posted.