Gold prices have taken a break after a sharp rally last week - gold soared from $1,137 oz on November 27 to all time high at $1,1226 on December 4, to retreat after upbeat U.S. employment figures, reaching levels at $1,135 oz low on Monday's European session, the Dollar, meanwhile, has soared across the board shrugging off previous weakness.
EUR/USD which has been rather correlated with Gold prices, reached 1.5141 high November 3, four pips short of 15-month high at 1.5145, and the pair dropped about 260 pips after U.S. NFP figures, reaching a session low at 1.4820, which has been broken today, with the Euro hitting a fresh one-month low at 1.4755.
AUD/USD, another gold-related cross, reached 0.9325 high on December 3, and the pair plunged on U.S. session from right below 0.9300 to 0.9110 low, to extend downwards on early European session, reaching 0.9050 low.
GBP/USD dropped on Friday from 1.6675 high on Friday to 1.6420 low on widespread Dollar strength after U.S. NFP figures were released, and the pair has weakened further on early European session to 1.6330 low.
USDCHF stays in a trading range between 0.9917 and 1.0222. Further rise to test 1.0222 resistance would more likely be seen later today, a break above this level could signal another bounce to 1.0300 zone. Key resistance is located at 1.0338, only break above this level will indicate that the longer term downtrend from 1.1021 (June 24 high) has completed at 0.9917 already.
EURUSD Analysis.
EURUSD continues to trade in range between 1.4801 and 1.5144. Lengthier sideways movement in the range is expected in a couple of days. Support is located at 1.4801, below this level will signal deeper decline to 1.4700 zone.
GBPUSD Analysis.
GBPUSD has formed a short term cycle top at 1.6721 level on 4-hour chart. Deeper decline towards 1.6271 previous low is now in favor. Resistance is at 1.6565, as long as this level holds, downtrend from 1.6721 will continue.
USDJPY Analysis.
After breaking above the falling trend line on 4-hour chart, USDJPY bounced sharply to as high as 90.76 level. Further rally is still possible later today and next target would be at 91.50-92.00 area. Support levels are at 89.25 and 88.85.
WORLD FOREX: Dollar Falls Vs Yen As Japan Exporters Take Profits
TOKYO (Dow Jones)--The dollar fell against the yen in Asia Monday, as Japanese exporters took profits on Friday's sharp rise in the greenback on the back of stronger-than-expected U.S. employment data.
The dollar fell about three-fourths of a yen to an intraday low of Y89.76 Monday, compared with Y90.50 in New York late Friday. At 0450 GMT, the dollar stood at Y89.84.
Traders said the dollar could fall further if Japanese manufacturers keep selling dollars ahead of their planned book-closing at the end of December, or if long-term interest rates in the U.S. increase, hurting the nation's stock markets and economic growth.
"Because many Japanese companies have set their in-house foreign exchange rate at the Y90 mark, there seems persistent dollar-selling pressure around that level," said Yuzo Sakai, a foreign-exchange manager at Tokyo Forex & Ueda Harlow.
Although Friday's U.S. jobs data added to signs that the U.S. economy is improving, Sakai said the dollar could fall to as low as Y89.50 in the near term.
Foreign exchange market participants are also paying close attention to the U.S.'s planned auctions of government securities this week. Weak demand for bonds could lift long-term U.S. rates, which could darken the outlook for the U.S. economy and possibly dent demand for the dollar, dealers said.
"The dollar may come under even stronger selling pressure if the U.S. bond market sees a bad rise in long-term yields due to oversupply concerns," and if such yield gains cause U.S. share prices to fall, said Yuji Saito, head of foreign exchange at Societe Generale.
The U.S. government is slated to auction $40 billion worth of three-year notes on Tuesday, $21 billion in 10-year notes Wednesday and $13 billion in 30-year bonds Thursday. The 10-year U.S. Treasury yield stood at 3.474% as of 0450 GMT.
While most dealers expect the dollar to fall in coming days, some in the market warn that the greenback could get a boost if U.S. Federal Reserve chairman Ben Bernanke sounds optimistic about the nation's economic outlook in his planned speech later in the global day. Bullish remarks from the Fed chairman could fuel speculation that the bank may change its super-easy monetary policy stance, possibly lifting its policy rate by the end of June, those dealers said.
Meanwhile, cross-trading pressure from the dollar's decline against the yen caused the euro to fall against the Japanese currency. The single currency touched an intraday low of Y133.68 compared with Y134.29 late Friday in New York.
However, the common unit was slightly higher against the dollar at $1.4890, compared with $1.4847 in New York.
Interbank Foreign Exchange Rates At 23:50 EST / 0450 GMT
Latest Previous %Chg Daily Daily %Chg
Dollar Rates 2150 GMT High Low 12/31
USD/JPY Yen 89.84-89 90.27-33 -0.48 90.38 89.77 -0.84
EUR/USD Euro 1.4890-94 1.4851-53 +0.26 1.4898 1.4852 +6.52
GBP/USD Sterling 1.6482-86 1.6424-30 +0.35 1.6505 1.6425 +12.69
USD/CHF Swiss Franc 1.0143-47 1.0165-71 -0.22 1.0173 1.0142 -4.93
USD/CAD Canadian Dlr 1.0553-56 1.0562-65 -0.09 1.0578 1.0534 -13.25
AUD/USD Australian Dlr 0.9157-59 0.9132-35 +0.27 0.9171 0.9116 +29.46
NZD/USD New Zealand Dlr 0.7173-78 0.7150-55 +0.32 0.7188 0.7147 +22.93
EUR/JPY Yen 133.79-84 134.05-09 -0.19 134.35 133.68 +5.65
Foreign exchange bankers reacted with alarm yesterday to proposals from Barney Frank, the powerful chairman of the House financial services committee, that would require trades in currency derivatives to be processed through a centralised clearing system.
Bankers said the proposals would introduce systemic risks into the financial system and that the sheer size of the market would dwarf the risk that could be sustained by any clearing house.
About $3,200bn of currency is traded daily around the world. About two-thirds of that trade is in derivatives that are used frequently by companies during the normal course of business to hedge the risk that currencies move sharply between a deal being struck and completed.
Bankers say that companies would face higher costs for these hedges under centralised clearing and that potentially they could be required to post extra collateral.
However, some large users of currency hedging said yesterday they were unconcerned by the putative change, having calculated that the potential increase in cost would be "marginal" and outweighed by greater security and price transparency.
The proposals was made by Mr Frank, outlined in an interview with Risk magazine, as lawmakers and regulators tussle over the detail of legislative proposals governing the vast over-the-counter derivatives market.
Some companies have shrugged off entreaties from their banks to lobby members of Congress over derivatives reform, concluding that their interests could be better served by the broad shift to central clearing and exchange trading.
Others, such as Caterpillar this week, have argued they face costly margin requirements under some versions of the regulatory reforms now under way.
Mr Frank said that mooted exemptions for foreign exchange trades from the OTC market reforms being considered by US Congress would not be adopted.
"The administration had asked for that amendment, but we are going to take away the exemption for foreign currency [swaps and forwards]," he said. Mr Frank's office confirmed that he would seek to remove the exemptions.
As the Forex Market is so big, there must be room within it for you to make a profit especially as there are so many so-called great trading tools and techniques available.Unfortunately, this is not the case and you need to view this business in a different way to understand why.
As stated, the daily turnover of the Forex Market exceeds well over $3 Trillion dollars. This colossal figure is the total sum of all the transactions traded worldwide on any given day that are initiated by a massive number of participants, each having their own agenda. In addition, some of these Forex traders are large corporations and governments who have substantial budgets at their disposal that may well exceed billions of dollars. They can generate, just on their own, very large movements in currency pairs (spikes) by the sheer size of their transactions and can do so without providing any prior warning to the rest of the market.
How does this affect you? Well, consider this sequence of events as an example. Supposed you have initiated a Forex trade, which after a number of hours of hard work, is proceeding in your intended direction as planned. You decide to take a break and maybe even brag to your partner about your latest success. After 10 minutes or so, you return to your PC station only to discover that a massive reversal has occurred completely obliterating your position including any potential profit. This type of event can happen frequently with no prior warning of any type.
Now suppose you decide to enter the fray with the princely sum of $1000 (one thousand dollars), you would quickly realise that the Forex Market is the equivalent of a hurricane tossing you about like a rustic leaf. One famous Forex advert used to say that if you do not trade Forex then you are leaving someone else to pick up $5 bills of the marketplace floor. In reality and if you had been actively trading in those days, the aforementioned $5 dollar bills would more than likely have been yours.
In fact, after trading for a while, you can quite easily become paranoid developing a feeling that Forex is haunting you personally awaiting to crush your next move without mercy. So, is it possible for an individual with limited resources to make profits trading Forex? Yes, it is but to do so you may need to fundamentally change the way you view the Forex if you have not achieved any success to date.
This article is one of a series comprising a course that is designed to show you how to achieve this task and also how to produce your own successful Forex Trading System. One article a day will be posted on the DailyForex.
A trading system is a set of rules, usually based on technical indicators, that defines when a trader enters and exits trades. In addition to increasing profitability and limiting risk, a trading system removes emotion and subjectivity from trading decisions.
All traders should use a trading system. However, no one system works in all types of market conditions. As a result, the Forex trader needs two or three systems at their disposal and must know when to switch among them.
The main types of trading systems are trend-following, counter-trend or range, breakout or counter-breakout, and pattern recognition.
Trend following systems are the most common type of system that traders use. They can be very profitable because within a strong trend, moves are often large ones. Trend following systems buy high and sell higher as prices move upwards. One example of a trend following system is a moving average (MA) crossover approach. A trader would buy when a faster MA crosses above a slower MA. In this example on the three-hour Euro chart, you can see three buy points as the 20 EMA (in purple) crosses up above the 50 EMA (in red). You also have one sell point where the 20 EMA crossed below the 50 EMA. All these trades would have been profitable had you trailed your stop.
While trend following systems work well within a strong trend, they cause whipsaws when the market is moving sideways. Notice the circled area on the chart in November. Following the system would have resulted in four unprofitable trades.
In a market moving sideways, the trader needs to switch to a range or counter-trend system. Ranges can be horizontal, ascending, or descending, but they all have a definable top and bottom. There’s greater risk in this approach because you’re trying to pick tops and bottoms—in other words, you’re trying to buy-low and sell-high. Counter-trend systems often involve the use of such indicators as RSI, MACD, and the stochastic, looking for overbought and oversold conditions. They can also use divergences between price and indicators, or crossovers in Bollinger Bands.
Look at the Euro chart below. I’ve added Bollinger Bands to the same three-hour chart during the sideways period in November. Here you’d sell when price touched the upper band and buy when it touched the lower one. It looks simple enough. Remember, though, that counter trend trading carries significantly more risk. As a result, you should always look for other, confirming evidence. (Frankly, even with trend following systems I look for additional evidence for entries.) In this case, note the difference in candle behavior on the last trade that failed. Instead of the upper shadows that the prior candles displayed when they touched the top of the bands, you see stronger candles forming with no upper shadows.
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