Daily Currency Analysis

EUR/USD

The dollar was generally weaker in Asian trading on Monday as markets continued to analyse last week’s payroll data which raised fresh doubts over the US economy.

The dollar was also undermined by the weekend G7 meetings where there was no additional support for the US currency. European policy makers continued to voice their support for a strong dollar in comments on Monday with ECB President Trichet stating that there was no need for the dollar to weaken against the Euro. Markets will want a more decisive stance in favour of a US currency, especially from the US administration, before making any decisive shift in sentiment towards the US currency.

The Euro-zone Sentix improved to -12.6 for October from -14.6 the previous month which pushed the index to a two-year high, although it was again slightly weaker than expected. There will be further fears that any recovery in GDP growth will falter quickly given the underlying weakness in consumer spending. There was also some fresh over the situation in Latvia which is liable to unsettle the Euro to some extent. There will also be caution ahead of the ECB policy meeting on Thursday even though an unchanged policy looks likely.

The US ISM index for the non-manufacturing sector rose to 50.9 from 48.4 the previous month and this was the strongest reading for over 12 months, although there was still evidence of underlying vulnerability. Although risk appetite staged a cautious recovery following the US data, there was still an underlying mood of uncertainty with notable volatility in the commodity markets.

The dollar edged weaker following the data as underlying sentiment remained negative with the Euro pushing back to test dollar support above 1.4650.

Source: VantagePoint Intermarket Analysis Software

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Yen

Domestic comments on the yen will remain a key focus in the near term. Over the weekend, Finance Minister Fujii warned that Japan could intervene if currency moves were excessive. The remarks will reinforce speculation that the government will not tolerate rapid yen gains from current levels given fears over the economy’s health. Following the comments, the dollar was able to consolidate above 89.50 against the yen in Asia on Monday despite underlying vulnerability.

The US currency was again unable to make a serious attempt at pushing above the 90 level as it remained generally on the defensive and the yen was probing dollar support levels close to 89.50 later in the US session with narrow yen ranges.

Sterling

Sterling pushed above the 1.60 level against the US dollar in early Europe on Monday, but again hit tough resistance above this level. The services-sector PMI index was stronger than expected with a move to a two-year high of 55.3 for September from 54.1 which will should underpin confidence towards the economy to some extent.

Nevertheless, overall sentiment towards the currency remains fragile and there will be unease that the currency failed to take advantage of a rally in equity markets.

There will also be caution ahead of Thursday’s Bank of England policy meeting. Markets will be expecting the central bank to hold policy steady, but there will still be a reluctance to hold long Sterling positions ahead of the meeting.

As Sterling confidence wilted it remained trapped below 1.60 against the dollar and also dipped to re-test support close to 0.92 against the Euro later in the US session.

Swiss franc

The dollar failed to make any impression on the franc during Monday and there was a renewed decline to near 1.03 later in the US session. The Euro was unable to make any headway against the franc for much of the day, but did edge higher to 1.5125 in New York

The Swiss currency is still proving resilient in global markets even when risk appetite is firm and there appears a continuing reluctance to sell the franc. The recent industrial survey evidence will continue to provide some support and ease fears over the competitive position.

The National Bank policy actions will remain an important focus, especially if the Euro re-tests support below the 1.51 region.

Source: VantagePoint Intermarket Analysis Software

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Australian dollar

There were further Australian dollar gains on Monday as the US unit remained on the defensive with a high near 0.8750. Commodity prices also looked to rally after recent losses. Overall Australian dollar confidence is liable to remain firm in the near term with a close focus on the Reserve Bank interest rate decision due on Tuesday.

Although a rate increase looks unlikely, the Australian currency will tend to remain firm if there are hints over interest rate increases by the central bank. There are still important vulnerabilities surrounding the global economy which will pose a potential threat to the Australian currency. A weaker US trend was a key factor in New York and the Australian dollar rallied to highs above 0.8780.

EUR/USD a bit tired; dips below 1.47 before bounce

EUR/USD was unable to challenge session highs despite a surge to fresh records highs in gold, nore was Aussie able to break 0.8900.

A modest dip was seen below the 1.4700 level to squeeze out some of the late -comers to the party.

US equities are opening firm but are lower than the highest prices of the pre-market session. The S&P is up a robust 0.8%.

EUR/USD a bit tired; dips below 1.47 before bounce

EUR/USD was unable to challenge session highs despite a surge to fresh records highs in gold, nore was Aussie able to break 0.8900.

A modest dip was seen below the 1.4700 level to squeeze out some of the late -comers to the party.

US equities are opening firm but are lower than the highest prices of the pre-market session. The S&P is up a robust 0.8%.

EUR/GBP Daily Chart — October 6, 2009

(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; 50-period simple moving average in light blue.)

10/06/2009 – EUR/GBP – As shown on the EUR/GBP daily chart, after making a minor bearish correction in the current steep uptrend, the euro has begun to resume its dominating position over the British pound. Price is currently approaching the 0.9300 high (almost a 6-month high) that was reached early last week with a clear shooting star candle. After that high was reached, the minor bearish correction that followed bottomed out at a key 38.2% Fibonacci retracement level (the low-to-high retracement span being measured from the low on 9/11/2009 to the noted high on 9/28/2009). In the event of a substantial breakout above the 0.9300 uptrend high, price could potentially shoot for further key resistance in the important 0.9500 price region. Current downside support within the context of the strong prevailing uptrend continues to reside in the key 0.9075 price region.

Dollar tumbles after Australia raises rate

NEW YORK — The dollar tumbled Tuesday, hitting a 14-month low against the Australian currency and circling year lows against the euro, after an interest rate increase from the Australian central bank signaled other countries might increase their rates.

A report in a British newspaper — and subsequent denials from officials — that Arab states, along with China, Russia, Japan and France, were in talks to move away from using the dollar for oil trading also hurt the greenback, analysts said.

The Australian dollar rose as high as 89.11 U.S. cents in morning trading, its highest point since August 2008, from 87.94 U.S. cents late Monday in New York.

Meanwhile, the 16-nation euro rose to $1.4732 in New York morning trading, up from the $1.4661 late Monday. The Britishpound slipped to $1.5927 from $1.5947, and the dollar fell to 88.65 Japanese yen from 89.51 yen.

The Reserve Bank of Australia unexpectedly raised interest rates to 3.25 percent from a 49-year low of 3 percent Tuesday. It is the first major economy to increase the cost of borrowing.

Raising interest rates can boost a currency, as the higher yields make it more attractive to investors. The Federal Reserve has kept the U.S. federal funds rate, on the other hand, at a record low near zero.

UBS analyst Geoffrey Yu said Australia's move raises expectations for other central banks to raise interest rates.

He cautioned, however, that Australia "may prove to be an isolated case." It was the only one of the Group of 10 major economies to avoid a "technical recession," or two straight quarters of declines in gross domestic product.

South Korea, Sweden, Norway and New Zealand will likely raise rates early in the first quarter of 2010, "a prospect that would only exacerbate the outlook for the dollar," said Ashraf Laidi, chief market strategist at CMC Markets, in a research note. "A wave of rapid (dollar) selling is inevitable once the (European Central Bank) and (Bank of Japan) start to give 'real' signals (beyond mere rhetoric) for higher interest rates, especially if these are not matched by the Fed."

Fed officials have given conflicting signals lately as to when, and how quickly, they intend to raise interest rates. The ECB meets on Thursday to set rates.

Analysts also said the dollar's weakness Tuesday was partly due to an article in Britain's Independent newspaper that Arab states, along with China, Russia, Japan and France, are in talks to end using the dollar for oil trading and moving instead to a basket of currencies including the yen and Chinese yuan, the euro and gold.

These reports follow statements earlier this year from Chinese officials that pushed for an alternative system of reserve assets sponsored by the International Monetary Fund.

Denials from officials in several countries Tuesday following the report did not help buck up the dollar as equities gained in Europe, Asia and early New York trading.

The dollar, a "safe" bet, tends to trade inversely with equities.

The greenback also fell to 1.0261 Swiss francs from 1.0313 francs late Monday, and dropped to 1.0613 Canadian dollars from 1.0697.

___

Associated Press Writers Doug Birch in Moscow, Diana Elias in Kuwait and Pan Pylas in London contributed to this report.

ES Emini Trading: Is Your Trade Logical

I can remember years ago working on math problems in high school and coming up with odd answers and having my teacher ask “does you answer really make sense?”

Often times it didn’t.

When trading the ES Emini we often get so wound up in the myriad of oscillators and chart configurations that we through common sense out the window. You may have the perfect set-up for a long trade, every indicator screams “buy now” and you become excited about the possibility of the trade. Of course, you may not have noticed, in your excitement, that the market has been on a downward spiral all day and is trading significantly below the 89 period SMA. In my mind, anytime the market is well below the 89 period SMA I concentrate ONLY on short trades. Why? Counter-trend trades are often very low probability trades and best avoided.

And trading is like math, or like using a calculator. If you don’t include all of the variables in your trading equation, you are very likely to come up with an answer that just doesn’t make sense. The problem for me is that I am so wound up in my technical analysis, that I neglect to ask myself this very basic question….”Does this trade really make sense?”

It’s not an art, or even hard science, the process of examining what you are trading borders on common sense. Though I should warn you that common sense and the market are diametrically opposite. The market need not make common sense to be successful. But your technique for evaluating a potential trade has to make common sense within the parameters of you own trading system. It’s important to note the difference between these two definitions, too.

The market moves in a semi-random manner and, in the long or intermediate run, is very difficult to predict. Common sense is of little value in this scenario. However, you should have a distinct method for evaluating trade set-ups and, regardless of you system, you should be able to make common sense out of your trading system.

Yet we are often blinded by our over attention to our systematic approaches and leave important variable to the side. This is a recipe for disaster. Your trade evaluation needs to be thorough and complete, and then ask yourself, “Does this trade really make sense?”

I write mainly about financial topics, specifically daytrading the ES and YM emini contract, and many of my more advanced techniques can be found at my blog, The Fractal Futures Trader.

I also write an ongoing commentary, which is a bit more opinionated, at The Fractal Traders Commentary

I encourage all to read the blogs and learn how to trade, as you can add $500-1000 dollars a day to your pocket book. Best of trading to all.

Article Source:http://www.articlesbase.com/day-trading-articles/es-emini-trading-is-your-trade-logical-1292527.html

FX Daily profit October 2, 2009

Syd 07:41 GMT October 2, 2009

EUR/JPY is in the spotlight as the ECB worries about EUR strength but Japan's Finance Minister Fujii says he won't bring up JPY strength at the G7 meeting. "We expect EUR/JPY to come under further pressure," says RBC. The bank reckons that a break of 129.60 will open the pair up to a fall to 127/128.

Syd 07:38 GMT October 2, 2009

UBS has gone short of GBP/USD at 1.59 with a stop at 1.6130 and a target of 1.52. The bank says it's a short-term trade on the view that weakness in global equities will prompt risk-averse investors to buy into the safe haven of US Treasurys. The bank adds sterling itself may weaken into next week's BOE meeting while the USD may benefit from G7 comments. GBP/USD is currently at the day's low of 1.5870, that despite a buoyant Nationwide house price survey that had prices up 0.9% on the month and flat on the year.

Syd 07:22 GMT October 2, 2009

A combination of political and macroeconomic uncertainties should put commodity currencies again the backfoot, says UniCredit. The bank is looking for the AUD, NZD and CAD to defend $0.8640, $0.7080 and CAD1.0870 against the USD.