FXCM/DailyFX Signals and Analysis

[Jason Rogers]

Hi Everyone,

It's Thursday which means our research team has published its weekly update of the Speculative Sentiment Index (SSI) on DailyFX.com. Below is an excerpt of from Quantitative Strategist David Rodriguez's analysis of the latest readings from the index which point to further drops in the Euro:

Forex trading crowds have aggressively sold into overnight US Dollar (ticker: USDOLLAR) strength against the Euro and other major currencies, and the shift in sentiment suggests the EURUSD may have topped at $1.2440. Timing major currency turnarounds is always especially difficult, but a recent shift towards retail crowd EURUSD buying gives us contrarian signal that the Euro may trade towards fresh lows...

Read the full article at DailyFX.com

[Jason Rogers]

Hi Everyone,

Today ends a relatively quiet week in the markets, and many analysts have been using one word to characterize the current low volatility environment: complacency. In the article I want to share with you today, Jamie Saettele, Senior Technical Strategist at DailyFX.com discusses the implications on the US dollar:

You may have heard ‘complacency’ thrown around recently with respect to the current low volatility environment. The next 4 charts highlight this phenomenon. Capital markets underwent a major shift in volatility in 2007 and 2008. Simply, market volatility (uncertainty) increased and registered extreme levels in October 2008. Volatility has reverted to 2007-2008 levels. Is this another shift? Are we in for an extended period of low volatility or does this decline in volatility serve to correct a ‘bull market in volatility (uncertainty)’ before the next wave of high volatility? Viewed in the context of price pattern and other technical considerations such as momentum and sentiment, markets are on the cusp on an explosion in volatility. The implications are USD bullish and ‘risk’ bearish but trades must be structured with risk as the primary consideration. Conviction in an idea might be high but what could happen doesn’t mean it will happen.

How to Read These Charts:

-Black lines are plots of weekly close for the specific currency pair
-Green lines are 1 week volatility
-Blue lines are 1 month volatility
-Dark Red lines are 3 month volatility
-Red lines are 1 year volatility
-Red dots indicate that that week’s volatility was equal to or lower than this week’s volatility AND that this week’s volatility was the lowest so far this year

EURUSD


Read the full article at DailyFX.com

[Jason Rogers]

Hi Everyone,

Today the Dow and S&P finally snapped at 6-day winning streak albeit slightly, as volumes and volatility continue to remain low in global markets. As we have discussed in the past, gains in the equity markets have a high degree of correlation with other "risk on" trades in the currency markets such as the buying the Euro and Australian dollar. In the article I want to share with you today, John Kicklighter, Senior Currency Strategist at DailyFX.com looks at a few other important correlations between stocks and currencies in regards to volatility and what that can mean for currency trades going forward particularly with AUD:

Here we have both the VIX Volatility Index and the volume reading for the S&P 500 Index. Whether it is a rebound in volatility that stirs volume or vice versa, the correlation is clear. What makes the presence circumstances more unique than what we see in this limited look-back period is that this is the lowest non-holiday volume reading since before the Great Recession and financial crisis. With the knowledge that activity levels are at extremes and more likely to revert with each day that passes; it is worth establishing the likely direction that results from that rebound in activity...

Read the full article at DailyFX.com

[Jason Rogers]

Hi Everyone,

After covering the Australian dollar extensively this past week, I thought it would be good to share some news with you about the Japanese yen. Since testing the 79.000 level, the USD/JPY has fallen off. Jamie Saettele, Senior Technical Strategist at DailyFX.com, believes this could present an opportunity to go short. Here is an excerpt from his latest article:

USDJPY – Daily Bars

The USDJPY is in play today. After trading to its highest level since 7/18, the pair reversed sharply following the US CPI print. The pop above 7900 comes following the lowest 5 day range since mid-January (and lowest 20 day range since late December). Similar 5 day ranges were registered in December and October. Each time, the initial move was wrong and completely retraced. This is a function of the false breaks that accompany markets undergoing a shift in volatility expectations. Combined with former support turned resistance above 7900 and the 3 wave (corrective) advances from 7556 (record low) and 7765, the USDJPY is vulnerable...

Read the full article at DailyFX.com

[Jason Rogers]

Hi Everyone,

It's Thursday which means DailyFX.com has released its latest readings from the Speculative Sentiment Index (SSI). Quantitative Strategist David Rodriguez provides his analysis on what this means for the Euro:

Forex trading crowds have bought into recent Euro weakness against US Dollar (ticker: USDOLLAR), and a contrarian view of crowd sentiment points to further EURUSD declines. Last week we saw signs that the Euro may have set an important short-term top at $1.2440, and indeed a series of lower highs gives conviction in calls for a short-term reversal...

Read the full analysis at DailyFX.com

The SSI is reported Every Thursday at DailyFX.com.

Jason

[Jason Rogers]

Hi Everyone,

We've come to the end of a relatively quiet week in the global markets. Volatility readings hit record lows, and US stocks continued to inch up towards the previous highs set back in May. I wanted to end by sharing some analysis on the British Pound for the coming week, since there is some key data coming out of the UK culminating with the GDP on Friday at 08:30 GMT. Below is an excerpt from a preview by Christopher Vecchio, Currency Analyst at DailyFX.com:

Fundamental Forecast for British Pound: Bearish

Although the revisions are expected to show that the British economy isn’t contracting as sharply as previously thought, the Bank of England still cut the economy’s forecasts this past week, with Governor King saying that growth would remain “subdued” in the near-term. This is despite the “erratic factors” that influenced weaker growth in the second quarter, as the Bank of England noted. But we must consider, as always, the bigger picture. Inflationary pressures have fallen in the United Kingdom, with the year-over-year Consumer Price Index holding below +3.0% for three consecutive months for the first time since October through December 2009. In light of these facts, alongside the continued streak of depressed growth in the United Kingdom, we believe that British Pound’s fundamental bull run may be stymied in the coming days and weeks, as speculation and chatter about more easing from the Bank of England will arise again...

Read the full article at DailyFX.com

[Jason Rogers]

Hi Everyone,

I thought I'd start the week by providing a compilation of various articles from the DailyFX.com research team to give you a preview for all the major currencies.

• Dollar: Return of Volatility Inevitable and With it a Dollar Rally?
• Euro Poised for Breakdown, but Timing Eludes Us – Time for Plan B
• Japanese Yen at Risk for Further Weakness on Slowing Recovery
• Second Quarter GDP will Highlight Fragility of British Economy, Hurt GBP
• Gold to Threaten Range as Fed Talks Down QE3- FOMC Minutes on Tap
• Australian Dollar: Risk Trends, Nascent Intervention Threat in Focus

[Jason Rogers]

Hi Everyone,

Those of you familiar with the Speculative Sentiment Index (SSI) know that it's traditionally used as a contrarian indicator. That means when SSI indicates that the majority of traders are long a given currency pair, it's usually taken as a sign that prices could fall going forward. That's because those long positions have to be sold eventually and if the majority of traders are already long, it's unlikely there is as much demand left for the price to get bid up much further. That's the traditional thinking anyway, and while it has been useful for many of the major currencies, it has not been of much use with the Japanese yen.

Since before the start of this year, the SSI reading for USD/JPY has remained positive whether the price of USD/JPY has risen or fallen. The article I want to share with you today is by David Rodriguez, Quantitative Strategist at DailyFX.com. In this piece, he explains how SSI can still be used to get meaningful signals for USD/JPY, and what the recent changes in sentiment readings could mean for the yen going forward.

Retail Forex Trading Crowd Sentiment Pulls Back from Extremes

Retail crowd sentiment hit its most bullish USDJPY since the pair traded to record-lows in February, and such one-sided positioning has often coincided with lasting bottoms. According to FXCM Execution Desk data, there were as many as 15 retail traders long the US Dollar against the Japanese Yen for every one that was short. As of time of writing, that ratio has fallen to 3.6:1—its least net-long since the USDJPY set a noteworthy top in June. The sharp turnaround in retail sentiment warns of a lasting bottom, and indeed professional options traders are positioned for similar moves in the USDJPY...

Read the full article at DailyFX.com

[Jason Rogers]

Hi Everyone,

What does more easing mean for the US dollar? Today, I wanted to share with you another edition of Scalping with Michael Boutros. In this video, our DailyFX Currency Strategist offers current setups on the majors in the aftermath of the FOMC minutes.

Jason

[Jason Rogers]

Hi Everyone,

In today's video Ilya Spivak, Currency Strategist at DailyFX.com gives us a preview of what to expect this week in global markets including forex, commodities and equities.

--- Created by Ilya Spivak, Currency Strategist for Dailyfx.com