US New Home Sales

November 28, 2012 

US New Home Sales usually follows the trend of Existing Home Sales, therefore we´re likely to see similar release today.

Here is the forecast:
10:00am NY Time New Home Sales Forecast 385K Previous 389K
DEVIATION: 70K (BUY USD 455K / SELL USD 315K)

Definition
“Measures the annualized number of new residential buildings that were sold during the previous month. A rising trend has a positive effect on the nation´s currency because the housing market is a leading gauge for the overall economy. A high level of housing activity signals that the construction industry is healthy and that consumers have the capital to make large investments. More importantly, new housing activity creates an economic ripple effect as home owners buy goods such as appliances and furniture for their homes, and builders buy raw materials and hire more workers to meet demand.”

The Trade Plan
We´ll trade this release using a deviation around 70K; if the release is lower, it would strengthen USD aversion sentiment and we should look to SELL USD. A stronger number could provide temporary support for the USD and we may see a slight rally therefore we should look to BUY USD.

We´ll be looking for a possible after-news retracement trade. We need to wait for the release, then wait for the market to spike, and wait for decent retracement.

Recommended Pairs :  EURUSD, NZDUSD, USDJPY

USD/JPY - US Dollar / Yen

Resistances : 

Weekly 82.85 ; 

Daily 82.3 ; 

Hourly 81.95

Supports : 

Weekly 81.05 ; 

Daily 81.4 ; 

Hourly 81.7

BOOKS

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UK MPC Meeting Minutes

November 21, 2012 

MPC Meeting Minutes is scheduled to be released today and since it´s customary for BOE (Bank of England) not to release a statement along with its interest rate decision (2 weeks ago) if there were no changes to either rate decision or APF (Asset Purchasing Facility, UK´s quantitative easing program); today will be the first time for a glimpse into what took place during this meeting, here is the forecast:

4:30am NY Time UK MPC Minutes
Rate Forecast 0-0-9 Previous 0-0-9
APT Forecast 0-0-9 Previous 0-0-9
DEVIATION: 2 Votes (BUY GBP on 2 votes of rate hike / BUY GBP on 2 votes of APT Increase)

Definition
The MPC meets every month to set the interest rate. Throughout the month, the MPC receives extensive briefing on the economy from Bank of England staff. This includes a half-day meeting known as the pre-MPC meeting which usually takes place on the Friday before the MPC’s interest rate setting meeting. The nine members of the Committee are made aware of all the latest data on the economy and hear explanations of recent trends and analysis of relevant issues. The Committee is also told about business conditions around the UK from the Bank’s Agents. The Agents’ role is to talk directly to business to gain intelligence and insight into current and future economic developments and prospects.

The monthly MPC meeting itself is a two-day affair. On the first day, the meeting starts with an update on the most recent economic data. A series of issues is then identified for discussion. On the following day, a summary of the previous day’s discussion is provided and the MPC members individually explain their views on what policy should be. The Governor then puts to the meeting the policy which he believes will command a majority and members of the MPC vote. Any member in a minority is asked to say what level of interest rates he or she would have preferred, and this is recorded in the minutes of the meeting. The interest rate decision is announced at 12 noon on the second day.

 Recommended Pairs : GBPJPY , GBPUSD 

GBP/USD - British Pound / US Dollar

Resistances : Weekly 1.596 ; Daily 1.5935 ; Hourly 1.591

Supports :    Weekly 1.582 ; Daily 1.5835 ; Hourly 1.5875

BOOKS

The Little Book of Currency Trading: How to Make Big Profits in the World of Forex - Kathy Lien - EUR 12,93 

Lien does a really good job of explaining the basics of the forex market and some topics that are usually avoided in other books such as the biggest scams in the market and the top 10 mistakes (which I have been guilty of at one point or another!). For those of you that are a bit more advanced like yours truly, the Bollinger Bands were an interesting and practical tool. I actually backtested it with some relatively good results.

LEFT Brain Trading - the right mindset and technique for success in Forex: 2012 revised edition - Olga Sheean - EUR 20 

LEFT Brain Trading technique can help improve trading confidence and performance through a process of self-discovery coupled with a revolutionary new way to set up charts to reveal the universal framework that governs all currency movements. This full-colour, illustrated book describes how mental programming can affect trading and how this can be changed for the better. It also introduces a new way to use the Fibonacci ratios to provide the trader with a one-time framework set-up; easier identification of trading opportunities; a means of identifying the size of a trade; and improved risk management. Purchasers of this book are invited into a dedicated online forum and a video channel at youtube.com/leftbraintrader. Trading appears be a good way to generate wealth. For many traders this isn't their experience. We are all driven by our subconscious programming, and much of it is negative. At an early age, we take on beliefs about ourselves and about the way the world works that have a huge impact on how we live our lives. Because this dynamic is largely subconscious, we don t realize it is happening, nor appreciate its impact on our ability to generate success or happiness. Spending time on techniques, books and positive affirmations can, ironically, make matters worse by increasing the internal conflict between our subconscious programming and what we want. In Forex we know that the candlesticks move to patterns, so the patterns must exist behind the candlesticks. It makes sense to find the pattern on the charts, rather than in the resulting currency movements. The Absolute Fibonacci Framework shows this. It is applied to charts permanently and can be used in conjunction with any trading system. For more, see Customer Discussions and Amapedia below the reviews. Set your charts, take some time to watch them and see the patterns.  

US Core CPI

November 15, 2012

We´ll be trading US Core CPI m/m release tomorrow. CPI or Consumer Price Index, also known as the “true cost of living”, is what drives Central Banks to raise/cut interest rate, therefore this release will be widely watched. Here´s the forecast for the CPI:

8:30am (NY Time) US Core CPI m/m Forecast 0.1% Previous 0.1%
DEVIATION: 0.2% (BUY USD 0.3% / SELL USD -0.1

DEFINITION:“CPI, Consumer Price Index, is a statistical estimate of the movement of the prices of goods and services bought for consumption purposes by households. Its computation uses price data collected for a sample of goods and services from a sample of sales outlets in a sample of locations for a sample of times and estimates of the shares of the different expenditures in the total covered by the index which are usually based upon expenditure data obtained for sampled periods from a sample of households wikipedia).” It is also known as the “True Cost of Living”.

The Trade PlanOur minimum tradable deviation for this release is 0.2%; if the release number (core) decreases to a minimum -0.1% then we will SELL USD; if the core release is 0.3%, we’ll BUY USD. Historically even at a difference of 0.1%, market is likely to exaggerate its move, therefore if our tradable release is hit, there is about 80% of chance market will move 50 pips within the next 90 minutes or so. 

Recommended Pairs: EURUSD, USDJPY

USD/JPY - US Dollar / Yen

Resistances : Weekly 81.7 ; Daily 81.4 ; Hourly 80,95

 Supports : Weekly 80.1 ; Daily 80.5 ; Hourly 80.7

EU ECB Interest Rate

November 8, 2012

ECB (European Central Bank) will be rendering its rate decision today, and it will have a pivotal short term impact on the Euro dollar. However, it is widely believed that ECB will keep rates unchanged at 0.75%… Here´s the forecast:

7:45am (NY Time) EU ECB Rate Decision Forecast 0.75% Previous 0.75%
Deviation: 0.25% (SELL EUR 0.50%)

Definition:The rate at which the European Central Bank (ECB) charges banks in EU member states to borrow money. The minimum bid rate is an important tool in the ECB’s monetary policy and changes in this rate affect other interest rates in the EU banking system. The Minimum Bid Rate is also the The lower limit to the interest rates at which counterparties may submit bids in variable rate tenders.; The Main Refinancing (Refi Rate) is the rate on the main refinancing operations, often referred to as the refi rate. The level is determined by the ECB Governing Council. The Deposit Rate is the Interest rate at which credit institutions may at all times place overnight deposits with the national central bank. The deposit rate is normally 100 basis points below the minimum bid rate, thereby setting a lower limit on short-term money market rates.

The Trade Plan
ECB rate decision comes in two part, the first one is the 7:45am rate announcement followed by the 8:30am Press Conference where ECB chief Draghi issues the official statement on this rate decision. Since it is extremely unlikely to get a surprise from ECB (we stand corrected as Draghi has surprised the market twice during his first three rate meetings), there is usually no volatility following this release.

However, in the unlikely event that ECB surprises the market by cutting rates 25 basis points or more, then expect market to go into a selling frenzy and we should jump in immediately on a spike trade because no matter what the slippage or spread is, we will end up making positive pips. Of course, if ECB decides to keep rates unchanged to as expected at 0.75%, then we should see relatively no change in the market as this lack of move is expected… Please follow the recommendations above ONLY if ECB surprises the market.

Here´s the link to watch the Webcast Live at 8:30am EST – Highly recommended!
http://www.ecb.int/press/tvservices/webcast/html/webcast_121108.en.html

Recommended Pairs : EURUSD, EURNZD

EUR / USD - Euro / U.S. Dollar

Resistances : 

Weekly 1.2875 ; 

Daily 1.284 ; Hourly 1.278

Supports : 

Weekly 1.2655 ; 

Daily 1.271 ; Hourly 1.2735

BOOKS

Forex Price Action Scalping: an in-depth look into the field of professional scalping - Bob Volman - EUR 30,69  

Forex Price Action Scalping provides a unique look into the field of professional scalping. Packed with countless charts, this extensive guide on intraday tactics takes the reader straight into the heart of short-term speculation. The book is written to accommodate all aspiring traders who aim to go professional and who want to prepare themselves as thoroughly as possible for the task ahead. Few books have been published, if any, that take the matter of scalping to such a fine and detailed level as does Forex Price Action Scalping. Hundreds of setups, entries and exits (all to the pip) and price action principles are discussed in full detail, along with the notorious issues on the psychological side of the job, as well as the highly important but often overlooked aspects of clever accounting. The book, counting 358 pages, opens up a wealth of information and shares insights and techniques that are simply invaluable to any scalper who is serious about his trading.

Forex Price Action Scalping: an in-depth look into the field of professional scalping - Bob Volman - EUR 30,69  

AU RBA Interest Rate

 November 5, 2012

RBA (Reserve Bank of Australia) is expected to keep its borrowing costs unchanged at 3.50% as per general market consensus, this is following last meeting’s decision to also keep the rates unchanged…

Here´s the forecast for this news release:
10:30pm (NY Time) AU RBA Rate Decision Forecast 3.00% Previous 3.25%
DEVIATION: 0.25% (SELL AUD 2.75% / BUY AUD 3.25%)

Definition:Australian interest rate is often refers to as the “cash rate target”, also called the official cash rate (OCR) or cash rate. This is the Australian base rate. Banks pay this interest rate when they take out a loan with a maturity of 1 day from another bank. By buying or selling bonds and other securities issued by the government the RBA can influence the money supply and thus the cash rate target. A rise or fall in the cash rate often also leads to a change in the interest rates for mortgages, loans and savings.

The Trade Plan
If RBA decides to cut interest rate, we will stay out… If RBA decides to keep rates unchanged, we’ll BUY of AUD as market expects a cut. Ultimately we are neutral to slightly bullish on the AUD as AUDUSD has risen from recent low levels and could continue after today’s rate decision, especially considering the potential for more economic stimuli from China. With China likely to cut its RRR or benchmark interest rate soon, RBA has slight higher probabiliby of an upside move after the decision today, regardless of the outcome…

Recommended Pairs : AUDUSD , GBPAUD, AUDJPY

AUD / USD - Australian Dollar / U.S. Dollar

Resistances : Weekly 1.042 ; Daily 1.0395 ; Hourly 1.0365

Supports : Weekly 1.0235 ; Daily 1.0305 ; Hourly 1.033 

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THE BEST OF BOOKS

Currency Trading and Forex 100 Success Secrets - 100 Most Asked Questions on Becoming a Successful Currency Trader - Frank Brill - EUR 14,73 

Currency Trading in the Forex and Futures Markets - Carley Garner - EUR 28,69 

Carley Garner has created the perfect book for anyone interested in getting started in currency trading. Whether you are an experienced trader of stocks or options looking to diversify markets you can trade or you are completely new to trading in general this book will get you on the right path very quickly.

The book warns novices of both the dangers and possible rewards of trading currencies. "The goal is to give you a realistic idea of what to expect in order to avoid becoming a statistic".

The author takes you through currency trading step by step from understanding the difference between FOREX and currency futures to how to trade them. The reader will get an understanding of each currency pair and a table with each three letter abbreviation for currencies and the order in which they are paired. You are advised to stick with the currency 'majors' for liquidity and avoid the 'minors' so you are not hurt with the wide bid/ask spreads in low volume markets.
Currency pair values per contract are $100,000 per standard contract, $10,000 per mini contract, and $1,000 per micro. The book also has a table for currency futures contracts.

While FOREX traders are able to leverage their trades with 50 to 1 margin the author warns traders about the dangers of leverage and how it can wipe out your account. There is always an equal downside risk for every possible upside profit with leverage and currency traders would be wise to trade appropriate position sizes that does not put their entire account at risk in one trade.

Carley warns readers that many FOREX brokers that claim to be commission free are really just taking the other side of your trades as off exchange trades instead of executing your trades on the open market like currency futures brokers do through a centralized and regulated exchange. Many FOREX brokers make their money through the bid/ask spreads that you buy and sell at when getting in and out of trades. Also FOREX trading has counter party risks while currency futures trading is guaranteed by the exchange to make all parties whole.

"FX and futures traders are not buying or selling an asset; instead they are trading a liability that is dependent, or derived, from the value of the underlying asset; thus, they are known as derivatives."

She also covers different technical indicators to use in your trading and how they measure price to give buy and sell signals. You will also get the basic styles of trading and what usually works in the currency markets.

I strongly advise any trader interested in trading currency markets to first read this book by Carley Garner before you venture into those waters. 

UK Services PMI

November 5, 2012

We´ll be trading the UK Services Purchasing Manager Index today at 4:28am (NY Time). This is a leading indicator similar to the Manufacturing PMI that was released early this week, here´s the forecast:

4:28am (NY Time) UK Services PMI Forecast 52.0 Previous 52.2
Deviation: 2.5 (BUY GBP 54.5 / SELL GBP 49.5)

The Services PMI is tradable with a minimum deviation of 2.5 between the forecast and the actual release. If we get at least 54.5 or better, we could see some demand in the GBP and we will consider BUYING GBP against weaker currencies. If we get a 49.5 or lower, GBP could weaken and we should look to SELL GBP against stronger currencies.

DEFINITION:
The Chartered Institute of Purchasing and Supply (CIPS) Services Purchasing Manager´s Index (PMI) measures the activity level of purchasing managers in the services sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation´s currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company´s performance, which can be a leading indicator of overall economic performance.

Recommended Pairs: GBPUSD, EURGBP

GBP / USD - British Pound / U.S. Dollar

Resistances : Weekly 1.6135 ; Daily 1.6085 ; Hourly 1.605

Supports : Weekly 1.591 ; Daily 1.595 ; Hourly 1.6005


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US NFP (Nonfarm Payroll) Employment

November 2, 2012

We´ll be trading the US NFP (Nonfarm Payroll) Employment Change, it is the focus news release for the week. Here´s the forecast:
8:30am (NY Time) US NF Employment Forecast 120K Previous 114K
8:30am (NY Time) US Unemployment Rate Forecast 7.9% Previous 7.8%
Deviation: 70K (BUY USD 190K / SELL USD 50K)

DEFINITIONMeasures the change in number of employed people during the previous month, excluding the farming industry. A rising trend has a positive effect on the nation´s currency. Job creation is an important indicator of economic health because consumer spending, which is highly correlated with

labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.

The Trade PlanTodays NFP Employment Change release is forecasted at 120K. The Unemployment Rate is expected to tick up slightly at 7.9% after the sharp drop in September. If we get a significantly lower release on the NFP (50K or worse) and slightly higher Unemployment Rate (8.1% or more), I´d be looking to SELL the USD against stronger currencies as speculation for Feds to launch more easing should dominate the market. On the other hand, if we get a strong NFP release (180K or better) and the Unemployment Rate remains at or below 8.2%, USD could strengthen and I would BUY USD against other weaker currencies.

If we get a conflicting release, then well wait and see how the market reacts first. If there is an overwhelming sentiment driving the market, well get plenty of opportunities for an entry if we just wait for 5 minutes after the release; you´ll get a much clearer view.

UPDATE ON NOV. 1, 2012 8:30pm EST
The ADP NFP came in on Thursday at 158K vs 138K of expectation, which means we are likely going to see a slightly better NFP release tomorrow… Considering the fact that ADP just changed the way they measure these figures in October, I’d say it is possible the the ADP report could be right on the money. Looking at the revisions, which came in at 88K vs the 162K, you’d think that it was an extremely negative number, but taking account that if ADP were to use the same methodology as before, the revision would have been around 116K versus 162K instead, although slightly negative, but definitely not even in the same ballpark… and talking about the old versus new, wouldn’t the ADP release today be somewhere around 190K using the old methodology? I guess you can understand why the market was positive after the ADP today.

The ISM Manufacturing PMI also came in slightly better than expected, adding that the 4-week average Jobless Claim remains virtually unchanged, I believe NFP should be between 120K to 140K, considering we may see some public jobs cut.

All in all I stand by the plan to BUY around 190K and SELL around 50K. I believe there could be some pre-selling of JPY as a stronger USD and risk appetite boost from a strong US job’s number should help to weaken JPY… USDJPY may not be the best pair to trade, I’d probably be looking at GBPJPY or EURJPY instead (LONG).

Last by not least, with both China’s PMIs came in to the upside, I believe risk appetite sentiment is building momentum… We may see further upward breakouts in JPY crosses (short JPY) as that’s the trend now.

NFP Trading StrategyLet´s talk about how to trade this release: We´ll wait for the numbers to come out but continue to hold on a trade, Even if we get our tradable figures (190K to 50K). Wait for a possible revision of the previous release number of 96K could be revised up, and market usually overreacts with the Revision and chances favor that a solid trade will present itself if we don’t get a conflicting releases between the revision and the actual release; at this point, still stay out of the market.

Then the next step is to wait for the Unemployment Rate, which is expected to be slightly higher at 7.9%. If the Unemployment Rate were to surprise higher, we’ll have to make a decision based on the market sentiment coming into this release… Of course, if Unemployment rate were to fall below 8.0%, then we should see a surge in risk appetite as traders very much like to see lower jobless rates.

After all of the numbers have been released, wait for the market to push and wait patiently for a decent retracement before getting in. Look for recent support/resistance areas for entry as a high impact news with various components are extremely volatile, and those who are patient will always get a chance to enter with a much better entry.

BOOKS

How To Make A Thousand Dollars A Day In Forex - THE RIGHT WAY (How To Make A Million In Forex THE RIGHT WAY) - Pablo Amarna - EUR 8,47 

Peak Performance Forex Trading - How Average Traders Can Consistently Achieve Peak Performance In Forex Trading - Keong Hee Yeo - EUR 8,18

NEWS BOOK

Why I Left Goldman Sachs: A Wall Street Story - Greg Smith 

GREG SMITH is one of life’s smaller big winners. His ticket out of Johannesburg came from winning a scholarship to Stanford University; insight into a computerised application system opened the way to an internship at Goldman Sachs; and an understanding of its Darwinian hiring system led to a job, luxurious perks, and high pay. His 12-year career ended with a scathing denunciation of the bank on the editorial page of theNew York Times and the publication this week of a book whose title, “Why I left Goldman Sachs”, could spark an entire genre by disaffected drones in successful organisations.

A whispering campaign of sorts has undermined Mr Smith, suggesting he never really was up to Goldman’s standards. This is probably true, although a similar criticism could be made of everyone who ever worked there. And to Mr Smith’s credit, he left on his own terms, no small feat. Of the 75 college graduates recruited from his year, only 7 were still at the firm when he departed for the last time. No doubt others left voluntarily, but one theme that keeps popping up is that Goldman is a difficult place to join, and a difficult place to stay. Critics have panned the book for being short on killer details, but it provides a rare inside look into a career path to which many aspire: from nothing to Wall Street affluence.

It will also be read because of its characterisation of Goldman’s integrity. Where once it profited from helping clients prosper, the bank shifted, Mr Smith contends, into an entity that profited from clients. This sentiment was particularly evident, Mr Smith says, in the firm’s London office, where greed and self-interest ran riot and clients were derisively referred to as “muppets”, suggesting a childlike naivety that could be exploited. Mr Smith is stunned by a colleague who says it is easier to recover a lost reputation than lost principal.

Goldman denies this portrait. It reportedly scanned internal e-mails to see how often muppets were mentioned. Nearly all referred to last year’s film about Kermit and Miss Piggy. But the old business model of merely being an intermediary acting on behalf of clients does seem to have run its course. For Mr Smith, that is to Goldman’s discredit. But his book implicitly raises another question: why clients don’t wise up.''The Economist''

Why I Left Goldman Sachs: A Wall Street Story - Greg Smith 

UK Manufacturing PMI

November 1, 2012

Manufacturing PMI is a leading indicator that is usually released early in the month. Traders pay attention to this release for surprises as this survey may help to shape the general trend of the currency for the rest of the month. Here is the forecast:

5:28am (NY Time) UK Manufacturing PMI Forecast 48.1 Previous 48.4DEVIATION: 2.5 (BUY GBP 50.5 / SELL GBP 45.5)

DEFINITION“UK Manufacturing PMI is a survey of purchasing managers in the manufacturing sector on various economic activities, including inventory, employment, orders, etc… A higher than 50 reading means expansion, or a less than 50 reading means contraction.”

The Trade Plan
We´re looking for a tradable deviation (or the difference between the forecast figure and the actual release figure) of 2.5. Since this is a leading indicator and its impact may hint the future trend of other economic indicators (such as inventory, employment, retail sales, etc..), the market usually reacts to this release with volatility if we get our deviation.

We´ll be looking to BUY GBP if we get a 50.5 or better, or looking to SELL GBP if we get a 45.5 or worse.

 Recommended Pairs : GBPUSD, GBPCHF

GBP / USD - British Pound / U.S. Dollar

Resistances : Weekly 1.62, Daily 1.6175 , Hourly 1.614

Supports :    Weekly 1.6065 , Daily 1.6095 , Hourly 1.612