2009 August

As the financial crisis grew in intensity the big question among economists and investors had to do with the decoupling theory, and specifically whether China would delink from what was going on in the West. The answer of course turned out to be that it wouldn’t; Chinese GDP shrunk to merely 6%, which technically was a contraction because that rate of growth cannot produce the estimated 20 million jobs per month its population requires.

These days, they’re more likely to be pondering the implications that a falling Chinese stock market have for the rest of the world. The Shanghai Composite continued its recent plunge at the start the week because there were more rumors of a planned tightening in bank capital requirements, which naturally will restrict lending and therefore liquidity.

Also hurting stocks there are concerns the government is about to aggressively unwind the fiscal and monetary stimulus measures that have helped re-energize growth. Overall, valuations are about 23% below their peak after a wild 90% surge and the press is all over the idea of a new Chinese bear market.

Things are very different in China than in Western nations in one very important aspect; when the government says lend, banks lend, and the rumors are that much of that government-created excess liquidity had been finding its way into the hands of stock speculators.

When you look closely at things, you’ll see that efforts to reign in what some are calling a bubble probably have more to do with Chinese concerns over where the dollar has been going as global equity markets rebounded this year (down) and relatively little concern about the economy overheating in any way. China has negative inflation while joblessness remains a top concern, which suggests it will be well into 2010 before policy is tightened in a more permanent way.

In the meantime, as seen earlier this year, China is indeed very concerned that the dollar will fall, hurting its huge holdings of U.S. assets as well as weakening its competitive edge on exports. China itself likely helped to weaken the dollar this year as it went on its huge commodity buying spree with its stockpiling of oil, copper and iron ore like there was no tomorrow.

You can always tell when a move in stocks (either way) has legs. The S&P fell 0.81% on Monday as investors dutifully reacted to the Chinese benchmark’s 6.7% plunge. However, most concerning was that the fall came on relatively good news; the Institute for Supply Management-Chicago said today its business barometer increased to 50, the highest level since September 2008 while the employment component increased to 38.7 from 35.3.

Another test will come on Tuesday as the ISM reports on it national manufacturing index, which is expected to show growth for the first time in 19 months. If Chinese markets take another dive overnight and the S&P falls on another good number, the correction many have been waiting for might just take hold. September is historically the worst month for equity markets and it may just be that the slight chill in the air could turn investors’ feet a bit cold towards the March rally (at least temporarily), thereby pushing them into the relative saftey of the good old greenback.

Hey fellow traders,

The first baby steps of launching a new Japanese Candlesticks course with pro trader and money manager Muhammad Azeem have proven successful enough to justify splurging on a full curriculum, expanding further on this topic.

However, instead of bulking everything together into one big course – we will offer 5 distinct ‘levels’ instead, letting YOU decide where you need to start – or simply enrol for all 5 together, at a discount.

The course material takes the original discussion of Japanese Candlesticks, and hits it right out of the ballpark – culminating in the development, backtesting, and use of your very own trading system.

Here is a brief summary of each level’s content:

Level 1 – History and Basics
Next Session: Sunday, August 30 at 7:00pm EST
Japanese Candlesticks have been in use by traders since the 17th century…
But just how well do YOU know them? If you want to learn to trade with Japanese Candlesticks THE RIGHT WAY – this is the lesson for you.

Level 2 – Advanced Candlestick Patterns
Next Session: Tuesday, September 1 at 7:00pm EST
You will learn powerful candlestick patterns that appear during the London market session on the EUR/USD currency pair.
We will discuss different technical oscillators that a trader can use, and deal with proper use of stop loss placement.
In this webinar, you will also learn a new way to use moving averages to take your trading to the next level.

Level 3 – Trade Entry and Exit
Next Session: Thursday, September 3 at 7:00pm EST
You will learn proper use of support and resistance levels on an intra-day basis.
Anyone can enter the market, but it is a “Good Exit” that determines the success of trade. So, you will learn different types of exit strategies to close your winning trades with more profit.
You will also learn how to reduce risk in trading by using different types of trailing stop and money management techniques.

Level 4 – Your Own Trading System
Next Session: Tuesday, September 8 at 3:00am EST
Everyone wants to trade with the trend but how well do YOU know how to define a market trend and how to exploit it to make profit?
We will teach several methods to help you skip bad trading signals.
Webinar Attendee will be able to connect all the bits and pieces of information that they have learned through past lessons to create a workable day trading system.

Level 5 – Perfecting the System
Next Session: Thursday, September 10 at 3:00am EST
This session is the heart of creating our own day trading system. We will design, create and test a complete trading system during our less.
We will discuss different possible scenarios that traders encounter at the time of trading, including concepts such as risk-to-reward ratio, profit-to-loss ratio and maximum drawdown.
We will also use this session to tie up any loose ends from prior lessons.

Remember – the next lesson starts THIS SUNDAY (August 30), so hurry and reserve your seat before it’s too late.

You can learn more about the lessons and reserve your seat right here:

http://www.fxinstructor.com/eng/courses/jcandlesticks-reserve.php

The GBPUSD had a bearish momentum this week, after hit 10 months high since November 2008 on August 05 2009 at 1.7042, forming a minor bearish channel (red channel) as you can see on daily chart below. The daily chart below also reveals  that after had some significant bullish rally since March 11 from 1.3653 to 1.0742, the pair is now at a critical technical point, struggling around the trendline support (blue) and 23.6% Fibo retracement of 1.3653 – 1.7042 around 1.6250 area (yellow). I am expecting a significant movement in upcoming week, whether  we will have further bearish correction or bullish continuation. A clear break below the trendline and consistent move below 1.6250 should trigger further bearish momentum towards 1.5750 area (38,2% Fibo). But if the trendline support hold and price fail to consistently move below 1.6250 area, we could have bullish momentum back to the upside at least towards 1.6490 area. CCI in oversold area and about to cross the -100 line up on daily chart suggesting potential upside rebound.

I prefer a bearish scenario on the facts that UK’s economy outlook remains weak and pessimistic and there are not enough strong UK’s economy datas to support the Sterling. The BoE decision to expand the quantitative easing program also could hurt the Sterling. So, even if the trendline support hold in upcoming week, I think GBPUSD bullish momentum should be very limited. Have a great weekend and see you guys next week

EURUSD Forecast:
The EURUSD had a bullish momentum yesterday, topped at 1.4405 and closed at 1.4347. On h1 chart below we can see that the lower line of the bullish channel has provided us with a good support prevented further bearish pressure suggesting that bullish scenario remains intact. The bias is bullish in nearest term targeting 1.4446 area. CCI in overbought area and heading down on h1 chart so watch out for potential downside pullback testing 1.4290 support area. Break below that area could lead us into no trading zone.

EURJPY Forecast
The EURJPY attempted to push lower yesterday, hit my short target at 132.90 but whipsawed to the upside, topped at 134.44 and closed at 134.08. On h4 chart below we can see that after violated the bullish channel (blue) to the downside, the pair is making a new bearish channel (red) but price is now ready to test the upper line of the bearish channel. A a violation to the bearish channel should be seen as bearish failure and trigger further bullish momentum but at this phase that would be a no trading zone for me. Immediate resistance at 134.70. Break above that area should lead to further bullish momentum towards 135.85 area. Initial support 133.90. Break below that area should keep the bearish scenario intact.

GBPJPY Forecast
The GBPJPY attempted to push lower yesterday, bottomed at 151.05 but closed higher at 152.02. On h4 chart below we still have the bearish channel indicating the bearish scenario remains intact. I still prefer a downside scenario but we might have further upside correction today. CCI just cross the -100 line up on h4 chart suggesting potential upside pressure. The bias is bullish in nearest term testing 153.40. Break above that area should be seen as bearish failure. Initial support at 152.00. Break below that area should continue the bearish scenario towards 150.80 area.

AUDUSD Forecast
The AUDUSD had a significant bullish momentum yesterday, topped at 0.8417 and closed at 0.8387. On h4 chart below we can see that the trendline support (which also the lower line of the new triangle) did a good job prevented further bearish pressure. From a bigger view, we have a triangle formation indicating a consolidation with the pressure is on the upside now. The bias is bullish in nearest term but wee need a clear breakout from the triangle to confirm bullish scenario targeting 0.8500. Immediate support at 0.8350. Break below that area should be seen as bullish failure.

GBPUSD Forecast:
After three days of bearish momentum the GBPUSD was corrected higher yesterday. The pair attempted to push lower, bottomed at 1.6152 but further bearish pressure was rejected as the pair whipsawed to the upside, topped at 1.6304 and closed at 1.6268. On h4 chart below we can see that this was a case of false breakdown from the bullish channel lower line (blue). The bias is bullish in nearest term testing 1.6360 area but the bearish channel (red) remains valid indicating the bearish scenario remains intact. Immediate support is seen at 1.6250/10 area. Break below that area should trigger further bearish momentum. I prefer to stay out for now. We will have UK’s revised GDP data today. A positive result should trigger more bullish momentum while a negative result should continue the bearish scenario.

USDJPY Forecast:
The USDJPY had a significant bearish momentum yesterday, bottomed at 93.21 and closed at 93.45. On h4 chart below we can see that the bullish channel (blue) has been violated to the downside indicating bullish failure and potential bearish continuation. The bias is bearish in nearest term targeting 92.70. However CCI just cross the -100 line up on h1 chart so watch out for potential upside rebound testing 94.00 resistance area. Break above that area should lead us back to no trading zone.

USDCHF Forecast
The USDCHF failed to continue it’s bullish momentum yesterday, bottomed at 1.0527 and closed at 1.0586. On h1 chart below we have a broadening formation where price is making new highs and lows without clear direction. The bias is bearish in nearest term but I prefer to stay out for now. Immediate support is seen at 1.0527 (yesterdays’ low). Break below that area should trigger further bearish momentum towards 1.0430 area. Initial resistance at 1.0650 followed by 1.0750.

Hi again everyone,

No analysis this time, just a heads-up: we’re oFF FF! Yeap that’s right, we’re dismissed Starting tomorrow you won’t be able to read our articles & analyses on ForexFactory. Personally I think that’s for the best… You already know us and we most likely know you, we can work together just as well without any intermediaries. All you have to do from now on is to sign up for updates directly from our website & receive our articles hassle-free: http://fxinstructor.com/eng/resources/commentaries.php.

I haven’t been around FF as long as our colleague Matt Carniol (by the way Matt, I was truly impressed with your dedication & perseverence in publishing your high quality articles over the years, keep up the great work! ) but I did notice that sometimes on ForexFactory people lose sight of their objectives, judge excessively & unjustly and in general simply prefer having a good dispute with a so-called “competitor” rather than hearing the guy out & see what he has to say… It is because of this that some of us (i won’t say ALL) got a lot of out-of-the-hat fade votes & outspoken hostility simply because our last name happens to be FXInstructor. I was not offended, neither did I respond to any such provocations which simply turn me away from my work & my objectives. FXInstructor is not about that… I believe that the quality & integrity of our work speak for themselves & therefore no other answer is needed except our views on the market – that’s what most of you are here for anyway. If you haven’t already, I invite you to pay us a visit in our Live Trading Room & see for yourselves who we are, how we analyze the charts & how we trade the market.

Regardless of our relationship with FF (or lack of it starting now), I want to thank all of you FF traders who generously voted for us, sent us feedback & in general put your trust in us over the last years. I invite you to participate in our FXInstructor community & continue to actively share your thoughts & comments with us all. There are a lot of free resources for you to check out, a lot of events (free courses, Live Trading Room, guest speakers, etc) available every week, a great forum with REAL traders, lots of new & exciting news coming up with the arrival of our new website format. In one word – we’re a vibrant community of traders sharing the goal of trading together successfully, learning from each other & having fun while inevitably spending time in front of the charts

So, goodbye ForexFactory readers, wherever you are… And welcome to FxInstructor.com!

After submitting 480 articles which have garnered 6,535 useful votes, making 1589 comments, 974 forum posts and after starting 71 threads, the powers that be at the Forex Factory (FF) have decided they don’t want me around anymore. I will however continue to post articles at least twice a week right here on the FX Instructor site.

As you may be aware of, until now anyone has been welcome to post news articles on the FF news page, but that system is apparently changing. Soon, only certain news writers will be allowed to post and the list does not include me. In fact, none of the writers from FX Instructor will be able to post on the FF news page although they of course will continue posting on the FX Instructor site.

I’ll tell you a funny thing that happened though. I first heard about the new system several days ago in an email that was sent to me from the Forex Factory. In that email I was asked to join the group of writers allowed to post. The invitation said in part: “If you are getting this email it means we think you’re one of the best news providers at Forex Factory, and we want you to join.”

I indicated that I wanted to be a part of the new system and received this response: “I am glad to hear you like the direction we are going here, and that you are interested in being part of it!”

Then on Wednesday, I received the following message from FF which said in part: “For the first few weeks we are going to work with a core group of active posters, and will bring you in once we have the procedures established.  This will allow us to coordinate the launch with the fewest number of people.  I will be in touch with you soon when we are ready to bring you in.”

To the uninitiated this may sound innocuous however, I’m very initiated with the workings of FF because in 2007, FF was paying me to write articles (after being brought on board originally by Merlin). Once Merlin “retired,” FF decided they didn’t want to pay, which was fine with me. What I didn’t like about the whole thing was that I received several emails afterwards which made references to being invited back after a certain period (and so forth and so on) which of course never happened.

So, my translation of the last message received from FF is basically as follows:  For the first few weeks we are going to work with a core group of active posters, and during that time you are welcome to take a long walk off a very short pier.

Now, as I said earlier, my intention is to continue posting articles on the FX Instructor website, and at this time I would like to invite you sign up to receive their free newsletter. As always, I will continue to provide you with fresh insight and ideas which hopefully you will find useful for your trading. Each article will be followed by a comment section where you can post your own thoughts and questions that I will respond to as best I can. And as always, I welcome any and all opinions (which frequently differ from my own) because I believe that through active and intelligent conversation we can learn and grow.

The future of the markets and of the global economy is at a very unique point in history and I imagine there will be much to discuss and learn. I welcome you to continue the journey with me, as I intend to contribute to the FX Instructor site for a long time to come.