Items Tagged With march 2006

I have to admit that there are certain traders that appeal to me.  I find that this is because I can relate best to the qualities of these traders in their speech or style.  Rob Booker is one of these traders.  I stumbled upon a Q&A session with him and will highlight important parts of it:

• His favorite time frames are 1 hour, 4 hour and daily
• His favorite indicators are support and resistance
• He uses the 5/13/62 EMA for trading totally separate from S&R
• He also likes the RSI, MACD and Momentum indicators
• He uses 5 p.m. EST close to calculate pivots
• He is always willing to take a profit of 10 - 20 pips
• He targets the recent high or low for exit
• He believes that the EURO session is best for short term traders
• If you want to make money, plan your trades the night before and only take the trades you plan

It was probably inevitable: China’s foreign exchange reserves are now the largest in the world, having recently surpassed $850 Billion. The reserves are both a product of China’s massive current account surplus and the $100 Billion+ that the nation attracts in foreign investment each year. Further, experts do not expect China to slow its accumulation of reserves, which may reach $1 Trillion by the end of the year. As the majority of China’s forex reserves are held in USD-denominated assets, any slight appreciation of the Yuan causes a relative depreciation in the value of its reserves. Rediff.com reports:

China's forex reserves maintained an upward growing trend and would be beneficial to maintain the nation's and its enterprises' external credit and the stability of financial structure and to prevent and resolve international financial risks.

Read More: China's forex reserves = $853.7 billion!

I stated a couple of days ago that I would try to analyze the market as if I was a Currency Strategist.  I have no idea what it takes to be a Currency Strategist but  I made an attempt today to analyze the EUR/USD for the upcoming week.

Introduction
The EUR/USD has had 7 straight weeks of alternating price action (down, up, down, up, down, up, and down.)  The 3 weeks prior to last, we had higher highs and higher lows but last week, the EURO failed to push above the prior high of 1.2208.  The price closed on Friday at 1.2037.

Candlestick
A dark cloud occurred (which indicates that prices moved up strongly on the previous bar, opened higher, but then closed significantly lower).  This implies weakness as the momentum appears to be shifting from the bulls to the bears.

Moving Averages
We have support below from the 8 and 21 EMA's at 1.2020.  The 50 and 100 EMA's at close above at 1.2144 and 1.2133 respectively.  The 200 EMA provides longer term support at 1.1720. 

Basic Indicators
MACD - Bullish
Stochastic - Bullish
RSI(7) - Neutral
RSI(14) - Neutral
DMI - Neutral and Trendless 

Trendlines
Resistance: 1.2217, 1.2330
Support:  1.1785, 1.1868, 1.2000

TTM Squeeze
Squeeze in progress since 1/27/06.  The last exit from a squeeze was 11/11/2005.

Commitment of Traders Report
As you can see from my graph, non-commercial positions are building on the long side.

Volatility Analysis
Bollinger Bands are 41.41% narrower than normal. eur is currently experiencing very low volatility as compared to its normal range.  The probability of volatility increasing with a sharp price move is likely in the near future.   

Prediction
EUR/USD may remain in the 1.2000 - 1.2200 range.  If the psychological important 1.2000 is broken, look for furthur downside to 1.1868.

I've been missing in action most of this week.  I've been recovering from my stomach bug and been taking some time off due to a hectic schedule and other responsibilities.  I haven't dedicated nearly enough time to the currency market or the Forex Project this week.  

It seems like my beginning of the week analysis of the EUR/USD was not too bad.  For those of you that don't remember, I was going to try to improve my technical analysis by "pretending" to be a Currency Strategist.  I use the word pretend by if you really think about it, we are all our own best Currency Strategist.  So though I was analyzing the market as if I was a Currency Strategist, the simple fact is that we are all Currency Strategists.  

My prediction from beginning of week was the following:

Prediction
EUR/USD may remain in the 1.2000 - 1.2200 range.  If the psychological important 1.2000 is broken, look for furthur downside to 1.1868.

The most recent data on Japanese capital flows paints a picture of increasing repatriation of Japanese capital. In other words, Japanese people and businesses are divesting from overseas assets and parking their money in Japanese securities. Analysts have offered a couple explanations for this trend. First, yields on Japanese bonds have been growing as the Central Bank prepares to lift interest rates, and Japanese equities are approaching valuations left unseen for years. Perhaps, notoriously conservative Japanese investors are growing more confident in the strength of domestic asset markets. Second, and equally plausible, is that Japanese companies are repatriating profits earned overseas for tax purposes. Either way, the Yen will benefit. The Financial Times reports:

Data released on Friday by Japan’s Ministry of Finance revealed that Japanese investors sold a net Y1,480bn of foreign assets in the week to March 17, a six-fold increase on the week before.

The South African rand touched a four-week low against the dollar. Worry over a slowdown in capital inflows and poor trade and manufacturing data impacted on the currency. The impending sale of substantial stake in one of the nation’s primary gold fields is thought to be an influencing factor in the rand’s dismal performance. Recent reports have also indicated a faltering economy.

The country’s trade deficit has doubled in just three months. Manufacturing accounts for 16 percent of the economy and has been affected by a strong currency. Last year the economy expanded at a steady 4.9 percent. The government of the world’s top gold producer has set a target growth rate of 6 percent by 2010.

I'm alive and eating solid food! 

I was delighted and surprised to receive inspirational words from Raghee Horner the other day.  Here they are:

Hang in there...you're trying some new things and its when you are getting close that the setbacks often seem the greatest. Keep it simple...you already know that. You shared some great insight as well as your ups and downs...kudos for your frankness. Anyone who says they haven't been there too is just fooling themselves. If I can be of any help, please don't hesitate.

Yesterday, as expected, the European Central Bank (ECB) hiked its benchmark short-term interest rate to 2.5%. It's hard to believe that only six months ago, the ECB was drawing the ire of all of Europe for not acceding to political pressure to lower interest rates. In contrast, most economists now reckon Europe’s Central Bank will raise rates two or three more times in as many months. The economies of the European Union are showing signs of growth, and inflation is alive and well. As a result, many currency traders are now predicting the Euro will get a nice kick, as foreigners begin to move funds into the Euro-zone to take advantage of higher returns. The Financial Times reports:

“US cyclical support is probably close to a peak, and Trichet’s comments have bolstered a trend that was already in place,” said one analyst, who was sticking by his forecast that the euro would hit $1.25 in three months’ time.

I'm mentioning John Carter again because he is having a two-day online seminar this weekend that concentrates on trading the forex market.  I have never really paid for anything but books towards my education but I'm wondering if a paid seminar is beneficial.  ???  This is a question to any of you who have paid for seminars.  Are they worth it? 

Carter's seminar this weekend is Saturday and Sunday for a total of 14 hours.  Here is the agenda:

- Your chance to see what you missed in Las Vegas

- Review Forex Market Basics (Everything you need to know to trade them)

- Trade by Trade Analysis with Real P&L's for John’s 5K Account

- Major focus: Currency Market

- Get Insight into Key Winning Trade Setups

- Learn everyday Trading Strategies for the Currency Market

- View John’s Favorite Setups

The seminar is $995 and I cannot say that I haven't been thinking about it.  You can read more on his website.  John Carter Seminar 

I would appreciate any comments that you may have.