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Ron Finberg
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I'm a former equity trader who has entered the world of Forex.
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Forex Magnates
My blog:
SwiftTick
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  • Non Farm Payrolls Preview
    Originally posted on SwiftTick
    The fun continues on Friday with the release of the Non Farm Payrolls Employment report.  In recent years the figure has led to the biggest moves in with Forex currency pairs, even outdoing FOMC Meetings.  The best part about the Non Farm Payrolls, is that it occurs after a week’s worth of prior employment numbers, therefore, there is always this nice buildup before we get to the actual data.

    The Non Farm Payrolls often set the tone for the following week, with a worse than expected number triggering pressure on the US dollar. In recent months though, the figure has taken a back seat to the EU’s credit crisis and post news moves have been either erratic, with traders, especially in Forex not really knowing where the next move will be, or negligible. Nonetheless, even after Wednesday’s coordinated central bank moves and the markets nonstop watch of sovereign debt yields, the coming Non Farm Payrolls appears ready again to pack a wallop. This is due to Wednesday’s much better than expected ADP Employment figures that have raised outlook for the Non Farm Payrolls data.

    Before delving further into possible Non Farm Payrolls trading ideas, a look at the previous employment numbers of the week.

    • ·         ADP Employment Change: +206K vs 131K forecast – This marked three straight months of better than expected figures.  Also, both October and November numbers received positive revisions.
    • ·         Initial Claims: 402K vs 390K forecast – After four straight weeks of sub-400,000 numbers, Claims were once again back above 400,000.
    • ·         ISM Manufacturing (Employment Segment): 51.8 vs 53.5 last month.
    • ·         Non Farm Payrolls: 120K consensus expectations vs 80K last month.  Last month’s figure of 80K was below 97K expectations. However, in the previous announcement, October figures were revised from 103K to 151K.

    Looking at the numbers, the upward surprise in the ADP figures reflects the overall positive improvement in November’s Initial Claims data. The question is whether this will be seen in the Government’s official Non Farm Payrolls.  The answer could be yes. As, although there is often a lack of symmetry between the ADP and Non Farms, the combination of the Initial Claims data foreshadowing a strong ADP supports a stronger NFP.  Also, with the positive revisions that have taken place in the Non Farms, the government figures are catching up to the private sector surveys.

    The next question is what to trade.  This is often confusing, as fundamentally, a strong number would be positive for the dollar. However, this often isn’t the case as the news can trigger an overall rally in riskier currencies that would lead the dollar lower.  As such, it makes sense to focus on other safe havens.  One possible example would be purchasing the USDJPY. The pair was well supported at 78.00 earlier in the week before falling lower on Wednesday’s central bank actions.  Nonetheless, it remains in an upward trend and could see 78.50 if it gathers any momentum from the Non Farm Payrolls release. 

    One asset to avoid trading before the news is Gold.  In the past, prices of Gold have tended to fall on positive NFP results.  This is due to the premise that strong employment growth would limit the need of further FED stimulus, and thus would be non-inflationary. On the other hand, a worse than expected Non Farms payrolls would be expected to send Gold higher.  However, recently, prices have reacted to the overall risk sentiment of the market and have rallied during periods of risk buying, rather than acting as a true safe haven.  Therefore, it makes sense to first see which direction Gold is taking after the news, and then follow the momentum.

    Tags: UDN, GLD, forex, gold
    Dec 02 3:05 AM | Link | Comment!
  • Forex Trading Analysis - Dollar Flexes Muscles

    Well, its official, Germany’s sovereign debt has entered into the EU Debt crisis picture.  It is nowhere near the PIIGS stature, but its once glamorous position is waning.  Yesterday, yields on 10 year Bunds rose above those of 10 year UK Gilts (2.21% vs 2.19%). Forex traders reacted to the news by dumping Euros.  The action in German bonds overshadowed another PIIGS downgrade, as Portugal’s debt was cut to junk by Fitch.  Elsewhere, Japan’s economy and massive Debt/GDP levels were under greater scrutiny as credit agency S&P warned that a credit downgrade was possible.  With that backdrop, the dollar was higher across the board yesterday.  In early morning trading, Forex traders continue to chase the momentum, as the greenback continues to gain ground as it moves to new week highs against major currencies.

    EURUSD  

    In overnight trading, the EURUSD hit a new week low as it traded to 1.3299 and is trying to find support at the 1.3300 figure (see chart).  If it fails to hold the next log could take it down to 1.3225.  Euro buyers appear to be stepping back and waiting for prices to keep falling before jumping in and providing support.  Another hindrance to the pair could be the coming weekend, as Forex traders may not want to hold long positions and risk further headline risk when markets are closed. We continue to follow yesterday’s opinion to sell on any rally, with stops at 1.3405.

     Intraday Support/Resistance  1.3295/1.3405

    GBPUSD

    After a failing to hold above 1.5600 support, which was also around its 61.8 Fibo retracement level of its September lows to highs, GBPUSD continues to crack.  Similar to the EURUSD, buyers don’t seem too interested in bidding aggressively and would rather let the market come to them. Nonetheless, the Pound could see demand begin to pick up if sovereign debt buyers begin to rotate funds that were earmarked towards German and French debt flow to Gilts.  As such, we would still be sellers of rallies above 1.5570 with stops at 1.5610, but wouldn’t get too aggressive with shorting at current levels.  Alternatively, shorting the EURGBP at a current 86.05 may be a good idea as Forex traders may rotate funds from Euro denominated assets to Pounds.

    (article originally posted onSwiftTick)

    Intraday Support/Resistance  1.5475/1.5610

    USDJPY

    The aforementioned remarks above Japan have caused demand in the USDJPY to pick up.  Support is clearly forming at 77.00 with a possible move towards 78.00 if 77.55 resistance is broken.  While we aren’t always bid fans of trading the USDJPY due to its sudden moves, we are watching it closely lately.  We view it as a proxy for the dollar’s strength.  As such, we view the dollar’s strength more positively if it also gains against the Yen.  With that currently taking place now, it gives us more assurance in our dollar longs.  Looking ahead, we would be buyers of any move below 77.15 and possibly buying at 77.60 as a breakout move higher could occur.

    Intraday Support/Resistance  76.90/77.55

     

    Tags: UDN, Forex
    Nov 25 3:17 AM | Link | Comment!
  • Forex Trading Review – FOMC Minutes Edition
    Typically, Mondays are light news days as there are few monthly economic releases that occur on a Monday.  Lately though, that has changed, as weekend news developments (mostly from announcements from EU leaders) has given Forex traders lots to react to on Mondays. Yesterday, the dollar benefitted from further EU related chaos as a conflicting opionions on how to solve the debt crisis sent funds back to the greenback. Currently, the question for the remainder of the week is whether trading will continue to be dictated by political arm wrestling or will economic results return to the forefront. 
     
    Currently, the Forex markets appear to focusing on the latter as US Preliminary GDP figures were revised dwon from 2.4% to 2.0%. Usually, these second and third GDP readings rarely move more than 0.2% from the Advanced (first reading). As such, today’s news has hit Forex traders by surprise, as most of them were looking past the GDP to the FOMC Minutes release. 
     
    With economic fundamentals back in play, today’s FOMC Minutes as Forex traders will be focusing on the FED’s forecasts for employment and the US economy. Since the summer, the FED has shifted between stances of stating “US conditions are slowly improving” to gloomy reports to support their monetary policies. Therefore, it will be interesting to see what they say today.
     
    EURUSD  
    After showing relative strength in mid day trading yesterday, the EURUSD fell back below the 1.3500 figure to close the US session (see chart).  We have been seesawing through the 1.3500 mark today, as the EURUSD fell to a low of 1.3475 following the GDP data, before jumping back above 1.3500. Looking ahead, the key for the EURUSD is whether it can close the US session above 1.3500, thus showing steady demand is growing.
     
    Rumors hit the market yesterday that the Euro’s strength was due to some central banks across the globe buying EU sovereign debt which in turn has created demand for Euros.  If true, this could mean that any rallies in the EURUSD will be short lived.  As a result if the pair once again fails to hold above 1.3500 it could relate that there are few serious Forex traders out there looking to accumulate Euros and the EURUSD would be vulnerable to fall back to 1.3400. On the other hand, a close above 1.3500 will do good to generate bullish interest in the pair.
     
    Intraday Support/Resistance  1.3465/1.3545


     
    GBPUSD
    After falling hard yesterday with the overall market, the GBPUSD has built a solid short term base just above 1.5600. It did briefly trade below following the US GDP figures but has since bounced back above. With the FOMC Minutes soon to hit the market, Forex traders will be watching the support base again. As mentioned above, the GDP news caught traders off guard, and any moves were erased as the day went on. A second drop below the 1.5600 base though could trigger more aggressive selling with a possible move to 1.5520. On the other hand, if 1.5600 holds, the GBPUSD could be a retracement candidate and trade back towards 1.5690.
     
    Intraday Support/Resistance  1.5575,1.5605/1.5690,1.5730

    AUDUSD
    The pair was one of the big losers yesterday as it fell nearly 200 pips.  As we have mentioned earlier, our question is whether the fall is primarily related to risk selling, or are we seeing the beginning of a longer term rotation out of the AUDUSD.  Over the past two plus years the main demand driver for the AUD has been the carry trade, however, Forex traders may be searching for safer alternatives as volatility risk in the currency has risen.  On the short term, the AUDUSD is trading just around its 61.8 fibo retracement level of its September lows to October highs.  The pair initially found support at the 50.0 level, therefore we will be watching if a repeat performance occurs again. 

     
    Intraday Support/Resistance  0.9805/0.9910

     


    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Tags: forex
    Nov 22 3:31 AM | Link | Comment!
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  • Shorting the EURAUD at 1.4685. Still negative on the Euro but believe risks are lower here than with a EURUSD short
    Apr 12, 2010
  • Buying the GBPUSD after the UK CPI release. Number shows inflation worries may be less worrisome than anticipated.
    Mar 23, 2010
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