Analytics for beginners

[FXdudy]

USD

The American dollar is updating historical minimums of almost all currencies. Its decline has become a matter of some concern. If in the previous year EUR/USD declined by 10.6%,over the past two months the decline has substantially become stronger, but the decline of the second month exceeds the first month. (see chart of EUR/USD).

The decline can be due to one of two reasons: the first is a recession in the United States will be very deep, although many analysts expect that in July - August decline in the rate of economic growth will reach its bottom, after which growth will be strong, and the second reason – it is U.S. decision to abandon the strong dollar.

In favour of the second cause, the fact is that EUR/USD is falling over 6 years, having completed only one year of growth (2004-2005), when it were the United States which first began to raise interest rates.

Probably, no one expected such a strong decline. But if we forecast what will happen in the nearest future, it seems to us that in order to maintain trade balance of eurozone Jean-Claude Trichet will urge the United States government to strengthen the dollar, and in 2-3 months inflation in the euro area should begin to decline, hence there will be strong expectations of reduction of the interest rate in the euro. This will lead to the collapse of EUR/USD in the area of 1.46 (the closure of this year, closing the third three-year cycle).

Another factor of the collapse of EUR/USD can be rumors that the correction is not so strong than the economists picture, that also leads to a sharp strengthening of the American currency.

Today’s pair of movement can not be predicted with the help of fundamental factors. Price is in before-sold condition, but further speculative growth can be continued, then correction may happen against the background of the closure of long positions.

Among the statistics attention should be paid to the rate of unemployment - Unemployment Rate in the United States which although increased, but remaining at good mark, as well as to the number of new jobs. This figure is expected to grow significantly.

The source of information: http://blog.poltekfx.com/?agent=24263

[FXdudy]

EUR,GBP

Yesterday the main news was the decision by the European Central Bank and Bank of England to maintain the interest rates at the same level of 4% and 5.25% correspondingly. Although the decision was expected by 99%, the dollar was once again under pressure.

Commenting on the rate decision, ECB President Jean-Claude Trichet said that there were buoyant risks to inflation as well as the risks to price stability over the medium term. Growth in money supply and credit remain very high and economic indicators eurozone is sustainable.

In his opinion, there is a strong short-term buoyant pressure on the consumer price index as well as unusually high uncertainty regarding the economy prevails.

The ECB would be “very closely” monitoring the situation on the whole. The containment of inflationary expectations is a top priority. Bank seeks to prevent the materialization of the secondary effects of inflation.

The current direction of monetary policy meets the conditions. Reports of dispositions signal that economic growth in the first half is continuing. Internal and external demand should support economic growth. Consumption and investment will also support the growth. According to the forecasts of economists ECB, eurozone GDP in 2008 should grow at 1.3% -2.1%, while the CPI in the euro zone will grow to 2008 g at 2.6% -3.2%. ECB predicts the average inflation in the euro area in 2009 in the area of 1.5% -2.7%

There are bearish risks to economic growth. Financial conditions are becoming less favorable. Forecasts suggest the limited secondary effects of inflation. The ability of companies to dictate prices may be enhanced more than expected. The main thing is to avoid exhibition of secondary effects of inflation from the part of wages.

Representatives of U.S. leadership say that the strong dollar is in interest of of their country. ECB is attentively following the comments of the United States on dollar. ECB Governing Council does not guarantee the forecast of economists of the central bank. In case of need, the banks may be provided with additional dollar liquidity. There were no appeals to the increase or decrease in interest rates.

GOLD

The prices of gold are continuing to rise. After a small correction, which is because of the level of $ 990, the price once again is approaching to this intermediate level. It is expected that very soon it will test $ 1000 mark, and fixation of positions and reducing of some prices are expected after that.

The main fundamental reason for the rising of the cost of gold lies in the decline of USD.

The source of information: http://blog.poltekfx.com/?agent=24263

[FXdudy]

Review of the foreign exchange market 10.03.08
USD
Over the past week, USD fell against major currencies. The decline started from the middle of the week and continued until the middle of Friday, when after reaching new absolute maximums fixing of positions started and USD completed the last day in growth.
Among the fundamental data, which have had an impact on the American currency decline, it is worth to mention Beige Book, which showed that from the beginning of the year, economic growth has slowed down, and growth in economic activity declined in more than half the regions.
In the Beige Book noted continuation of price declines in the housing market. Sales of homes fell sharply in Boston, Minneapolis, Richmond and St. Louis. Prices continued to fall, because stocks remained at a high level.
Activity in the retail sector has been weak or slowed, in particular the weakness observed in the sales of automobiles.
Mixed signals received from the commercial real estate sector. Almost all regions have reported pressure from the prices of raw materials and energy, but wage growth was moderate.
U.S. authorities are still saying that they want a strong dollar, but otherwise they would say the same. The head of the European Central Bank, Jean-Claude Trichet said in his statement that he did not give guarantees for promises their American colleagues. This statement could mean that the American currency will continue to remain above the level of 1.5 against the European currency for few months, more precisely, until the moment becomes clear that the United States have outlived a recession after which a strong correction will occur.

EUR

EUR/USD updated its absolute maximum, in an area of which continues to be at present. Negative information from the United States, as well as increased inflation in the euro contributed to the growth of a pair to new maximums, which no longer correspond to any fundamental data.
Nevertheless, this situation can not occur for good. As soon as from the U.S. data begin to arrive that the recession is minor (expected that the growth rate in July reached the bottom), all will reconsider a position on the American economy, which would strengthen the dollar.
The European economy will complete the fight against inflation very soon. Despite the fact that now the threats of inflationary growth are strong enough (against the background of increase in the prices of food and raw materials) September is likely to reach a comfortable level of inflation range so that it ill lead to reducing the rate of the European currency.
At present EUR/USD is located in the area of their maximums. The closest significant level of resistance is at around 1.56, and the nearest target level, which will have significant support pair EUR/USD is 1.46 (closing this year, coinciding with the closing of a second three-year cycle) (see chart).
It is expected that after reaching the area 1.55-1.56, the pair finds absolute maximums in the area where price will not appear within 7-10 years.
In the current situation it is difficult to recommend the opening of long-term short positions on any specific levels (all will depend on the size of recession and inflation in the euro), but, in my opinion, this will happen in a month - two, when it becomes more clearly about size of recession. In this situation the 1.56 mark looks good protection stop orders and the level of 1.46 looks like the nearest target.






GBP

GBP/USD is above the level of support 2.0080, formed by the closing half of 2007. Against the background of declining USD as well as the weakness of the British currency, the whereabouts of prices in the area make it an attractive couple maximums for Bid.
Last year Government of GB announced that the cycle of monetary policy with high rates ended and now a new economic cycle is coming which is going to be accompanied by the weakness of the pound.
This statement has turned around a pair trend, which has formed a descending trend, a rebound of price is a technical correction, which is expected to show a maximum near the mark 2.0250 (50% of the downward movement).
These attractive levels to sell the British currency will not remain unnoticed. Speculators will take advantage of this by opening the long-term short positions as soon as the first signs of a turn appear.
At the current time it is attractive to sell the pair from the level of 2.0250 with a stop order above 2.0500. The nearest target is in the area of 1.94. Further is 1.9175 (closure of the first three-year cycle)

JPY

USD/JPY is in the area of their minimums. Despite a strong decline in prices, it is expected that soon decline trend will change, which is a technical correction after a long decline.
The authorities of the country are in no hurry to raise interest rates, arguing about hesitant development of the economy, so the weakness of JPY will provide support for a long time to Japanese producers and create pressure on their currencies, but after the completion of a recession USD will begin to strengthen rapidly, which may cause correction of pair.
Approximate area which USD/JPY could strengthen to is 111.80-113.30. It is expected that turn of the trend may start as soon as possible (maximum in a month or two), but the Japanese currency trading, which is the most unpredictable among major currencies, is very dangerous, so is not advisable to open positions if they attended by a high risk.
This week there are no statistical data that can change the basic trend. The focus of the market will be on data on balance of payments of Japan and the United States as well as the statements of officials, who will demand urgent action to stabilize the situation after reaching the level of 1.54 this week.

The source of information: http://blog.poltekfx.com/?agent=24263

[FXdudy]

USD
Yesterday USD has been trading in the lateral range. The lack of significant news for two largest economies as well as the first trading day of the week, which in many countries is day off, has led to a strong decline in the volume of trades. Nevertheless, in general, this week will be very important for the whole foreign exchange market. After a strong decline of USD which lasted several weeks, it is expected technical correction which should determine the future levels of support for major currency pairs.
Among American data attention is drawn to the trade balance - Intl Trade Balance, which will be published at 15:30. Although the market is not very interested in data on balance, probably news in the short term will have some impact taken into account that the following interesting data from the USA will be published only on Friday.
Participation in the stock indexes shows that investors are hesitant to the American economy.

EUR
EUR/USD is being traded second day with a slight decline. It is likely that the price increase will be able to turn into a correction, which will provide opportunities for the opening of speculative long positions.
Technical analysis shows that the nearest significant level of support is in the area of 1.4930-1.4850 (50% of the growth and the closure of January). The intermediate support lies in 1.5190 (February closing), but in the case of a bear's mood, this level will be beaten.
Among European data the business expectations index - ZEW EMU and the assessment index of current economic conditions - ZEW EMU current conditions will be published today, however, these figures are not of the interest at the moment.

GBP
The British pound has completed the first trading day with decline against the American currency. The negative fundamental analysis data, which supported overpriced rate of pair, provoked a decline of GBP.
GBP/USD is currently located in the area of its maximums, and there is a high probability that the price at the moment is changing the growing trend sinker. We recommend opening short positions with a stop losses above 2.0450 and intermediate target in the region of 1.9870 (closing of the second three-year period). The next goal is located at 1.94. Then a strong level of support that could stop the decline, would be at 1.9175 (closure of the first three-year cycle).
Among the statistics it is recommended to draw attention to the Primary data on the growth of GDP - NIESR GDP Estimate


GOLD
After reaching the absolute maximums, gold is forming an intermediate level of support in the area of $ 960 per troy ounce. This level coincides with a rising trend line support, which gives it extra significance.
If the price can beat it, the ascending trend will be completed. The next support will be the mark of $ 940 per troy ounce (50% of the uptrend).
Otherwise, renewals of new absolute maximums are possible this week. Strategic level of resistance is still the mark of the $ 1000 per troy ounce, after reaching which many actors will close long positions causing significant instability of prices.
The source of information: http://blog.poltekfx.com/?agent=24263

[FXdudy]

Review of the foreign exchange market 14.03.08

the source of information - http://blog.poltekfx.com

USD
American currency continues to incur losses against other currencies. The uncertainty of the American economy and inactivity of the USA monetary authorities leads to the fact that the weak dollar is threatening the economy of many countries, especially those in the Persian Gulf where currency exchange rates attached to the dollar.
The American economy will go through this recession, but the dollar will never be able to become such a popular currency which it became after World War II. Moreover, against the background of high inflation in countries which exchange rates are attached to the dollar, the monetary authorities are seriously considering the possibility of the attaching rate to the basket of currencies, in which USD will not have the dominant value.
Such a step would make the dollar more vulnerable and “green papers” scattered around the world could not remain necessary for anybody… and then massive selling of USD by all countries is not excluded so that it would hurt the American economy.
Regarding the current economic situation, it is worth to note that USD continues to decline, and the rate of decline is increasing. Such a scenario will inevitably lead to the development of inflation growth due to increase in energy prices and import costs. After the mortgage crisis it will be more difficult to get loans for business development because the banks will increase the minimum requirements, and increased inflation will force them to raise interest rates.
Among the positive points it is worth to mention that for domestic production in the United States it will be easier to compete with imports and that will promote the growth of the economy.
Today will bring us new statistics on inflationary data for February, and consumer sentiment index for March will be published. Indicators will be taken into account by the market.

EUR
EUR is being traded in expectation of statistics on the consumer price index - Final HICP. In conditions of increased inflationary pressure the main priority of the EU monetary authorities is the struggle with secondary effects of inflation. Against the backdrop of the high cost of oil and food it is difficult to keep inflation within the limits of allowable values, but the strengthening of currency partially solves this problem.
Before the opening of European trading session EUR/USD was in the region of 1.56. Recently, the price is steadily strengthening, and the lack of history at current levels makes technical analysis virtually helpless in predicting the point of turnout. The immediate support for the pair is at 1.53. Stronger support is situated at 1.5150. Intermediate resistance is at 1.5650. The strongest level is likely to be at 1.6, however, it is unlikely that the price will be able to reach it.

GOLD
Yesterday gold set a new maximum. Increased cost of the metal caused by the decline of USD in which gold is actually quoted. Against the background of declining dollar, many investors have moved some of their capital to commodity market, and that is supporting this sector.
Prior to the opening session of the European price closely approached the psychological resistance level of $ 1000 per troy ounce, but this level of testing did not. In the condition of large speculative capital it is not recommended to open positions before correction.
At present, a strong level of support is at around $ 940 (50% of the uptrend, see chart). Intermediate support is at around $ 973 per troy ounce, but in the condition of great position fixing this level can be broken.

[FXdudy]

If USD continues to fall gold will be goin’ higher. But this speculative growth is not provided with fundamental factors. It means that at some moment when the U.S are in the phase of completion of struggle with recession USD will stop it fall and start strengthening. Then speculative funds will be took out from gold and the result will be rapid collapse of USD.

[TraderPierre]

Originally Posted by FXdudy

If USD continues to fall gold will be goin’ higher. But this speculative growth is not provided with fundamental factors. It means that at some moment when the U.S are in the phase of completion of struggle with recession USD will stop it fall and start strengthening. Then speculative funds will be took out from gold and the result will be rapid collapse of USD.

I'm trying to work out the logic in that analysis.

USD down, gold up. Yup, sounds reasonable, flight to safety/quality.
USD stops falling it starts to strengthen. Yup, logical.
Gold down, dollar collapse? Why? Where are the speculative funds from gold going to go if not back into the US when the time is right?

The US dollar will never have a wholesale collapse, central banks will intervene before that happens. Do you really think the BOJ or ECB, or even the Fed will just stand aside and allow speculators to dictate the prosperity of major economies? A dollar freefall will never happen.

There's talk of BOJ intervention at 80 Usd/Jpy, and the ECB have hinted they would be uncomfortable with Eur/Usd above 160.

Ultimately the price of oil will dictate where we all go from here, as it always has done.

[FXdudy]

Originally Posted by TraderPierre

I'm trying to work out the logic in that analysis.

USD down, gold up. Yup, sounds reasonable, flight to safety/quality.
USD stops falling it starts to strengthen. Yup, logical.
Gold down, dollar collapse? Why? Where are the speculative funds from gold going to go if not back into the US when the time is right?

The US dollar will never have a wholesale collapse, central banks will intervene before that happens. Do you really think the BOJ or ECB, or even the Fed will just stand aside and allow speculators to dictate the prosperity of major economies? A dollar freefall will never happen.

There's talk of BOJ intervention at 80 Usd/Jpy, and the ECB have hinted they would be uncomfortable with Eur/Usd above 160.

Ultimately the price of oil will dictate where we all go from here, as it always has done.

I mean Gold value will go down but USD not. USD doesn’t depend on Gold fluctuations, but Gold depends on USD fluctuations as there are much more money in USD equivalent value than in gold. That doesn’t possess any threat to ECB and Fed, quite the contrary, as the price of metals (which are as a matter of fact, raw materials) goes down then the price of production will be cheaper.