Sunday, 29 September 2013

Trading Places - Excel Markets Week Review and Preview

Ralph Shell, Excel Analyst

Most of this past week, the market has been obsessed with a countdown for the commencement of Obamacare in conjunction with the need for a real resolution to fund the geometrically-growing US Government.  Fearful the government will shut down and the massive deficits will disappear, at least temporarily, equities and the USD have turned soft.

Excel Markets EQUITY : DRAWDOWN Demo Account ContestBut how often do government shut-downs really happen?  Does government spending ever decrease?  Hardly.  Do government employees ever take pay cuts?  Not really, they are reserved for the private sector.  This does not imply there will not be some meaningful money changing hands next week - there will be, but these concerns will likely prove temporary.
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Thursday, 26 September 2013

Looking for Trading Patterns That Repeat

Ralph Shell, Excel Analyst

Quite often there are trading pattern that seem to repeat, not precisely, but in a similar pattern.  The catalyst may or may not be a repeat.  Sometimes it is a false signal, and it will need volume and price action to confirm a movement is about to commence.

Excel Markets EQUITY : DRAWDOWN Demo Account ContestRemember, we are dealing in currencies whose values are determined by their relationship to another currency.  Often, the difference between the two currencies is subtle, especially if the two countries are located very close to each other.

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Australian Dollar Surfs US Nervousness

It has long been our contention that markets move in the direction of the money flow. 

Granted, the flow of money is not always visible, especially in the short-term when disguised with the use of derivatives and invigorated with leverage.  Usually, the total size of a market will increase, and the market will trade lower when there is new short selling. 

Conversely, with new long buying, the open interest goes up, as does the price.

Looking at the weekly chart of the AUDUSD for the period of 28 April 2013, the closest corresponding period for the COT was April 30th 2013.  On that date, specs were long 33,084 contracts.  On the way down this massive 1500 pip move, specs have flipped to over a 100K contract short, in addition to selling their long - that means they were sellers of over 100K of new contracts.

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Wednesday, 25 September 2013

Merkel's Second Campaign Battle Begins

Ralph Shell, Excel Analyst

The victory celebrations after Angela Merkel's landslide victory in last weekend's election have just ended but now the speculation is beginning who is going to become part of her coalition needed to form a stable government. 

She fell five seats short of the seats needed to achieve an absolute majority in the Bundestag, and her former partner the FDP failed to receive the needed 5% threshold needed  for parliamentary representation.

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Tuesday, 24 September 2013

Speculators Sell Out Long USD Positions

CFTC Commitments of Traders (COT) Report 17 September, published 20 September 2013, Technical Analysis.  Not since the last week in February of 2013 has the composite USD long position been this small. Last week it was 314,182 futures and delta-adjusted option contracts. This week it is down to 189, 074 contracts, and on 26 February 2013 it was 178, 781 contracts.

There are a variety of reasons for the decline in the popularity in the USD. Remember, there had been largely unprofitable positions, at least in the recent trade in the Australian Dollar and the British Pound, versus the USD. In addition, it looks like there was buying of the euro versus selling of the USD which may have pressure the USD as well as September contract liquidation.

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Friday, 20 September 2013

Excel Markets Week Review and Preview

Ralph Shell, Excel Analyst

Excel Markets Week Review and Preview By far the overwhelming news in the forex markets this past week was Bernanke and friends' decision to postpone the anticipated taper of the $85B monthly bond purchases. 

Bernanke said it it was because the economy was slowing. 

Two days later the Fed's Bullard, a voting member on the Fed Committee, said he expects a tight October taper vote.  How is this possible?  Was he attending the same meeting?

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Thursday, 19 September 2013

Fed Sticks to Stimulus and Cuts 2013 US Growth Forecast

Ralph Shell, Excel Analyst

Excel Markets Analysis The much-anticipated commencement of the Fed's taper has been postponed as the economic expansion in the second half of the year has been reduced to 2% from 2.3%; this will be the third reduction for the year. 

Chances are there is another reduction coming in a month or so.  Like the sign in the bar promising free beer tomorrow, the Fed is promising growth next year, but you never know.

There was good news reported in the Telegraph: "As the wise, patient, and always self-effacing Mr Schäuble writes today in The  Financial  Times, the Euro-sceptics talk and write relentless drivel. 

"Ignore the doomsayers: Europe is being fixed" is the headline: The eurozone is clearly on the mend both structurally and cyclically.  What is happening turns out to be pretty much what the proponents of Europe’s cool-headed crisis management predicted. The fiscal and structural repair work is paying off, laying the foundations for sustainable growth. This has taken critical observers aback. It should not have, because, in truth, we have seen it all before, many times and in many places.

Despite what the critics of the European crisis management would have us believe, we live in the real world, not in a parallel universe where well-established economic principles no longer apply."

That is right if you hand-pick your facts.  For example, unemployment in the EU is over 12% while it is under 6% in Germany.  In Spain and Greece, the unemployment is over 25% and the youth unemployment is above 40%.

Southern Europe is stagnating, with Italy on the threshold of another political meltdown.  

Click to Enlarge EURUSD Daily Forex Chart
EURUSD Daily 18 September 2013, Excel Markets Analysis

The growth rate in Europe - has it really recovered from the recession?  Would it have recovered had it not been for the Fed's relaxed money supply? And how will it be should the Fed ever tighten and rates stay higher?

And on the threshold of Frau Merkel's re-election, how long will Europe enjoy the benefits of a 1.35/36-handle euro?  This should be interesting.
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Wednesday, 18 September 2013

Yen Surfs Summers End

Ralph Shell, Excel Analyst

Prior to last weekend's withdrawal by Larry Summers of his nomination for the US Fed, it appeared there was sufficient selling in the yen to revisit the 101 handle, at least.

When the controversial Larry Summers requested his name be removed from consideration as replacement for Bernanke's, it was a surprise to me that this would prove to be yen-friendly.

Yes, there might be some testy items during the confirmation hearings.  Some examples might be: he worked for large banks, and then opposed derivatives' regulations; worked for repeal of the Glass-Steagall Act (four provisions of the U.S. Banking Act of 1933 that limited commercial bank securities activities and affiliations between commercial banks and securities firms); as Harvard President, he managed the endowment fund and lost billions trading derivatives, and other assets; and expressed a view that females did not do as well in math and science as males.  Finally, in the Clinton Administration, he worked as a de-regulator and now he would be called upon to work in an administration that favors regulations.   

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Tuesday, 17 September 2013

Speculators Buy the Aussie, Sell the Yen

CFTC Commitments of Traders (COT) Report - What Is It?CFTC Commitments of Traders (COT) Report 10 September, published 13 September 2013, Technical Analysis.  Speculators have been massive shorts in both the yen and the Australian Dollar.  During the week, the reduced the short position in the A$ to 73,887 contracts, from 90,134 in the previous period.  In the yen, they went the opposite direction, increasing their short from 109,384 to 130,619.  Speculators have been hurt in both markets if they have carried these positions through this mornings markets.

For weeks now we have warned about the possibility of a short squeeze in the pound. We wonder if Monday morning's gap above the 1.59 handle may not be a blow-off needed to give us a top. 

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Monday, 16 September 2013

Trading Places - Excel Markets Week Review and Preview

Ralph Shell, Excel Analyst

Markets took different paths last week, suggesting there is much more at play than the latest posturing about Syria. 

The US Dow Jones Industrial Average (DJIA) shrugged of the Mid-East turmoil and climbed about 2.4%, but gold was hit hard, down about 6% for the week.  Crude was also lower, but down less than 2% on the week to 108.60.  The USD was slightly weaker for the week.

A partial reason for the lower USD may have been caused by some weaker numbers. 

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Thursday, 12 September 2013

How Much Longer Will Specs Stay Short the Pound?

Ralph Shell, Excel Analyst

Each week we do our COT analysis, and have been continually puzzled by the large specs' short position in the pound.  Last week, the short was slightly less than 50K contracts.  Granted, that number is far less than periods when the specs were short over 100K, but 50K is not exactly chump change. 

Not since January of 2013 have specs been long the pound.

There have been periods when the specs were right and the pound sold off.  Notably, the big move came from the middle of June from a high of 1.5720 to early July when the pair plunged to 1.48 and change.  Since then the market was rallied over 1100 pips to a high of 1.5828 yesterday.

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Wednesday, 11 September 2013

Dollar Continues Gain on the Yen

Ralph Shell, Excel Analyst

The immediate threat of a US strike in Syria has been removed, and the bears are retreating.  Perhaps, however, the markets simply want to work higher, as there is no assurance this plan will work. 

Consider the opinion of Con Coughlin in the Telegraph:

"The only drawback with this otherwise responsible approach to limiting the effects of the Syrian crisis on the rest of the region is that, as with so many UN schemes, it is completely out of touch with reality. For a start, not even the Russians, with their favoured-nation status in Damascus, will be able to guarantee the safety of any teams of UN inspectors sent to dismantle the weapons stockpiles.

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Monday, 9 September 2013

Currency Specs Big Buyers of the USD

CFTC Commitments of Traders (COT) Report - What Is It?CFTC Commitments of Traders (COT) Report 03 September, published 06 September 2013, Technical Analysis.  For the past three weeks the currency specs had been reducing their USD longs.  This changed this past week when they increased their USD long to 304,975 contracts, up from last week's 254,645 contracts.

The biggest shift in positions was in the euro where specs reduced their euro longs from 34.6K to 11.2K.  Also, there was about a 10K increase in the yen and the C$ shorts.  The biggest open interest is now in the euro - 324K - and the yen and the A$, both at 217K.

Trade in the pound continues to be baffling.  Large specs are stubborn shorts and increased their short this week to 49.6K.  This morning the pound forged a new high, and is now trading at levels not seen since mid-June.  How much more will these specs take?
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Thursday, 5 September 2013

Notice of Conditions of Trading Hours

NOTICE TO EXCEL MARKETS TRADERS AND CLIENTS

Due to the low liquidity available at forex market open at 5:00 p.m. (New York) Sunday' which has had an adverse effect on available spreads, Excel Markets has decided to change the commencement of our trading hours from 5:00 p.m. to 5:05 p.m. (New York) Sunday, with effect this coming Sunday, 8th September 2013.

If you have any questions or concerns regarding this matter please contact support[at]excelmarkets.com.

Excel Markets ECN Forex Broker Support
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Excel Markets Demo Trading Account Contest Winners

Congratulations! The Winners of the most recent Excel Markets-sponsored Zero Hero Demo Account Trading Contest have been officially declared and you can see the final rankings, including the top 20, on the rankings page.  2 contestants were disqualified to get to the top 20; however, it is clear that Razor contestants are getting firmly to grips with the practicalities of trading drawdown, and we are confident that our commitment to guiding you, our Traders, to optimising your managed forex trading is paying off - for some of you in cold, hard cash. 

The contest rule that caused disqualification:
Rule 14. One entry per household and one IP.  We will track and enforce this using several tracking methods.
Click to Enlarge Winners List

We have emailed the winners to collect payment details and forward on payments asap.  If you are a winner please ensure you get us payment details within 30 days.

We realize it must be very disappointing to be in the top 20 and then get disqualified, and we realize most contests on the web don't have much moderation, if any, so this is a change; nevertheless, we aim to keep our contests fair for everyone.

...and currently registering 'til 14th September - Excel Markets Burn To Win - $10,000 - 10 Winners - hosted by the folks at myfxbook.com

Note: you must be pre-registered to participate in this contest. Unlike Forex Razor-hosted contests, you cannot register AFTER the contest starts.

The Excel Markets Burn To Win contest begins on 15th September and runs until 15th October.

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Is the Australian Dollar Due for a Rally?

Ralph Shell, Excel Analyst

Excel Markets ECN Forex Broker - Market Analysis
It has been a long slide for the A$ which began about the middle of April.  At that time, the A$ was trading above the 1.05 handle.  The sell-off took the market under 88.50 in early August.  Since then, the Aussie has been trying to mount several rallies which have stopped just above .92.  As we approach this level again, can we now work through this resistance?

Looking back, the Chinese-sponsored commodity boom, which enabled the Australian economy to escape the ravages of the last recession, was a mixed blessing.  The Chinese building boom, a Keynesian spending plan, designed to provide employment, expanded past the typical roads and bridges investments, but moved on to high rise condo's surrounded by ready-made cities.

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Wednesday, 4 September 2013

Momentum Buy Signal Alert on USD/CHF

The USD/CHF has been living in a 3-storied house (550 pips tall), and at this point in time we have the USDCHF climbing back up to the top of the first floor, ready to break through to the second floor channel (0.9400-0.9555). USD/CHF reached a 7-week high today at 0.9376, the pair's highest since August 15 and now the pair is consolidating at 0.9365.

The 31-period momentum crossed over zero, giving us a buy signal on this pair at close of today's bar (Sept 03, 5:00 PM EST), entry price 0.9363. At the same time the pair has crossed above its 190-SMA, indicating a bullish trend is underway.

On August 15, we had gone long this pair at 0.9351, only 11 pips lower than today's entry, but the market turned against us and we were stopped out at 0.9261 (-91 pips). Hopefully this pair will continue forwards and not give us a déjà vu head-fake. Bear in mind that the .9400 level is a major psychological resistance, with many bears positioning themselves for a sell-off down to 0.9300 or 0.9200, so be careful.

Fundamentally, the dollar has been supported by expectations that the Federal Reserve will start to unwind its stimulus program at its upcoming policy meeting on September 18. Moreover, the pair has rallied since risk aversion took hold of the markets. Today's (Monday) ISM data was much better than expected (actual 55.7 versus forecast 54), hinting that the the manufacturing sector continues to expand.

The risk-off dollar rally, fuelled by the hint of more tapering and stronger manufacturing, overshadowed the good GDP numbers coming out of Switzerland. Switzerland's GDP expanded by 0.5% in the second quarter; YoY Q2 GDP rose 2.5%, beating expectations for a 1.7% increase, news that should have strengthened the franc but did not (or at least not yet).

Click to Enlarge USD/CHF Daily Forex Chart

Strategy

Signal  Momentum Buy Signal on USD/CHF, Entry Price: 0.9363
(Generated at close of daily bar, Sept 03, 5:00 PM EST)
Strategy Logic Strategy uses Momentum, Moving Average and Price Channel to develop trade signals:
  1. Momentum strategy buys (sells) when the 31-Period Momentum is greater than (lower than) than 0. 
  2. Moving Average strategy buys (sells) when close crosses over (under) the 190-SMA. 
  3. Price Channel strategy buys (sells) when close is greater than (lower than) the highest bar (lowest bar) of the last 21 bars. 
Stop Loss When daily close crosses below 190-SMA (now at 0.9347). 
Take Profit 200 pips (0.9550)
Download MomoUSDCHF-D1_Sept03

All trade ideas and strategy setup suggestions found on blog.excelmarkets.com are hypothetical. blog.excelmarketse.com has not placed these ideas in a live trading environment. Forex Trading involves high risks, with the potential for substantial losses that exceed your initial deposit and is not suitable for all persons. Past performance is not necessarily indicative of future results.
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Tuesday, 3 September 2013

Speculators Buy the USD

CFTC Commitments of Traders (COT) Report - What Is It?CFTC Commitments of Traders (COT) Report 27 August, published 30 August 2013, Technical Analysis.  Speculators were net buyers of the USD during the period ending August 27, 2013.  Their total net USD long increased to 254,645 contracts, up from 228, 413 in the previous week.  The total USD long peaked on May 28th when it was 540,479 contracts.  More recently, the high was 431,886 on July 16th 2013.
         
Much of the USD long in the most recent week was in the so called commodity currencies.  Buying in the USD versus the C$ was especially strong, and the specs added to their short position in the A$.

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