November 19, 2008
Loonie down in currency tradingThe Canadian currency continues to fall in FX trading as oil prices hurt the economy. The loonie relies on oil prices to support it in currency trading, and the support just isn’t there. Export revenue is falling, and equity declines around the world aren’t helping the risk appetite situation.
A year ago, the loonie was enjoying near-parity with the U.S. dollar, and even managed to gain the upper hand on some days. Now, however, the Canadian currency has declined quite a bit in FX trading, and is once again nowhere near parity.
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November 19, 2008
Ruble struggles on FX marketThe Russian ruble has begun to depreciate on the FX market, with some help from the government. But external forces aren’t helping the place of the ruble in currency trading much, either.
One of the biggest factors affecting the Russian ruble in forex trading is the fact that oil prices are falling. Much of Russia’s wealth is based on oil, and with the global recession curbing demand, it is no surprise that the ruble is falling as well.
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November 19, 2008
Exports are more important than the yen in currency tradingFor years, the Bank of Japan and other Japanese officials have made it clear that exporters are more important than the strength of the yen in currency trading. Indeed, the BOJ has been largely content with a weak yen in order to ensure that its exports remain competitive.
Now, though, the yen is appreciating at a rapid rate. While there are some thoughts that next year could see a decline in dollar/yen, there is still the question of the unwinding carry trade, risk aversion and flight to safety.
As a result, the Bank of Japan is seriously considering intervening to do what it can to slow the yen’s appreciation. FX Street reports on the possible yen forex trading forecast:
Traders are speculating the Bank of Japan will need to send a serious message to the Forex markets at this time. This could come in the form of a massive selling of Yen coupled with an increase in money supply to assure the intervention takes hold. This action should have a strong dilutive effect on the Yen.
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November 19, 2008
Sterling gains in forex tradingThe U.K. pound saw a bump in currency trading on the FX market following the news that the Bank of England may cut interest rates further. Additionally, the minutes from the last BoE meeting show that the decision to cut rates by 150 basis points was unanimous.
Sterling is seeing some gains in forex trading, and appears to be holding steady after its surge. The bump has taken many by surprise, but others are viewing the unexpected jump by the pound as evidence that some traders think that the moves by the government will stimulate the British economy and provide support in currency trading.
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November 19, 2008
Greenback could be getting ready for another surge in currency tradingThe U.S. dollar is showing some stability in FX trading on the currency market today. It has been fairly even the last couple of sessions, in a marked departure from recent volatility.
The greenback could be gearing up for another surge in currency trading, however. The Fed is looking to inject even more cash into the markets, and this could provide a catalyst for the U.S. economy by improving liquidity (and maybe combating deflation).
What the Fed is doing, however, is injecting an element of uncertainty that could cause some confusion. Additionally, the move could mean the end of the Fed Funds rate as the most important monetary policy-maker.
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November 19, 2008
Sears Holdings (SHLD) is a large retail stock I tend to follow from time to time, but today I noticed just how far the stock has fallen this year and since 2007. Let’s take a look at the devastation long-term SHLD investors have endured recently.
SHLD Weekly Chart:
Price reached an all-time high at $190 in April, 2007 before breaking weekly EMAs and switching its trend officially from up to down (lower lows and lower highs) which has not changed as we step into the present new lows beneath $30.00 per share.
It would seem that a counter-trend move up may be likely, but that doesn’t change the pervasive down-trend structure.
A casual look at the weekly chart shows key EMA resistance holding at mostly the 20 week EMA, with the most recent counterswing up taking us to EMA resistance via the falling 50 week average.
One thing I wanted to highlight was the multi-swing positive momentum divergence that continued for almost a year as price continued its journey lower. The divergence was only good enough to give us a move from $70 to $100 per share before the downtrend took over and became the dominant structure.
Price has now made a new momentum low and the divergence pattern has worked its way through price and no longer has any effect at the moment.
One note of possible bullishness is that the volume pattern has declined as if volume is not confirming these new price lows - or at least volume is setting up a potential non-confirmation. Keep an eye on that.
Let’s zoom in to the daily chart.
SHLD Daily Chart:
The daily chart shows a few momentum divergence examples along with key EMA tests in terms of how price reacted to these technical ‘nodes.’
The most recent cuonterswing formed on a positive divergence which took price only to the falling 20 EMA before reversing and resuming the dominant downtrend in price. Watch to see if price can form a positive momentum divergence off these levels and if so, it would indicate more risk remains on the short-selling side than the long side - at least in the near time frame.
Sears Holdings (SHLD) helps remind us not to bet against prevailing downtrends and privides a few lessons for us in terms of basic chart analysis.
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November 19, 2008
As we head into the ‘lunch’ period, I wanted to show a fascinating price structure occurrence that led to a couple of high-probability, low risk trading opportunies this morning. It includes a Daily R1 Pivot Point, a negative momentum Divergence, and a possible complete Elliott Wave minor count. Let’s see them in action.
DIA 5-min chart:
The market actually opened without a gap this morning - fancy that.
Price initially surged to meet confluence resistance via the falling 20 period EMA and the “Daily Pivot” (blue dotted line - autogenerated). Price failed to overcome these levels and then fell but did not make a new low on the day. Notice that had it done so, it would have likely made a major positive momentum divergence. As such, price formed a doji just above support from yesterday’s low (a retest) and headed higher, breaking the two key EMAs only to fail at the upper Bollinger Band before swinging back down.
Price then found support at the 61.8% Fibonacci retracement of the prior Wave 3 before forming a mini-Elliott 5-wave impulse higher which completed the 5th Wave in my chart. Keep in mind that Wave 4 gently entered the price territory of the previous wave 1 so keep that in mind.
Price made new highs on the day on a precarious note - price tested the daily R1 (First Resistance) Pivot (again, auto-generated using yesterday’s price data via TradeStation) on a clear negative momentum divergence. That was a sufficient signal to exit any long position and set-up an aggressive ’scalp’ short which targeted the EMAs.
Price ultimately failed at EMA support and plunged now to new lows on the day. Of interest, the day’s S1 (First Support) pivot - not shown - is near $81.80. We could see a move down temporarily pause there or reverse if a positive momentum divergence develops.
This represents a quick example of how to combine multiple methods into trading decisions throughout the day.
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November 19, 2008
Currency trading with the kiwi and the AussieIn currency trading, the kiwi and the Aussie are having trouble right now. The down under currencies are declining in FX trading as risk aversion remains, and as the global economy continues its descent into recession.
Both the kiwi and the Aussie are commodity currencies, and they rely on equities and raw materials prices to support them in forex trading. As the global recession slows demand and confidence, there is less demand for the products that help the down under currencies.
Interventions have not been helping the Aussie, and risk aversion means that the Japanese yen carry trade is unwinding to the benefit of the yen.
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November 19, 2008
Understanding what it means to be on the spot marketOften, currency trading in real time is referred to as a "spot trade." When learning forex trading, it can help to understand what such terms mean.
Spot trade
Basically, a spot trade is a currency trade (it can also apply to commodities) that takes place "on the spot," or immediately. It means that the currency is "delivered" now, as opposed to some point in the future (known as a currency future).
It is also worth noting that futures contracts that expire within a month are consider spot, even though, technically, the delivery takes place in the future.
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November 19, 2008
Loonie declines in currency trading on the FX marketThe Canadian dollar continues to weaken in forex trading on the currency market. As global stocks decline in response to a worldwide recession, and as oil prices continue to struggle, the loonie finds itself weaker in currency trading.
Because the Canadian dollar is a commodity currency, it relies on the global economy to support it. Equities and commodities show signs that global demand for materials is decreasing, and as a supplier (especially of oil), that is affecting the loonie.
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Manage it or lose it.
