FXCM/DailyFX Signals and Analysis

Commercial Content Analysts
194

Hi Everyone,

Today’s FOMC Meeting is “one of the most highly contested events the FX and capital markets have faced in months” according Senior Currency Strategist John Kicklighter. The research team at DailyFX.com is providing complete coverage of today’s events including live video sessions where you can ask questions, and reports with fundamental and technical analysis.

[Market Expectations and Potential Outcomes

](http://bit.ly/PeeyWP)

Live Coverage:- Join Chief Strategist John Kicklighter as he covers the FOMC rate decision and its market impact Live in the DailyFX Live Trading Room or follow the Real Time News Feed to see all the analysts’ different take on the event.

Video of FOMC Outcomes:- What are the different outcomes for the Fed rate decision? What pairs are best to trade if there is no QE3 or the stimulus push proves larger than expected?

Fundamental View on Why the Fed Decision is Important:- Speculation has swelled heading into the Fed policy meeting, but why is this event risk so important to the US Dollar and risk trends in general?

Technical View on Why the Fed Decision is Important:- See how Senior Technical Strategist Jamie Saettele is positioning with what could be an extremely volatile market event.

Economic Calendar for Times and Future Event Risk:- What time is the Fed rate decision in your time zone? When will the group release their growth forecasts and Chairman Ben Bernanke Speak?

[B]Click here for more details at DailyFX.com[/B]

195

Hi Everyone,

The Euro smashed through the 1.3000 level and is now trading around 1.3135 against the US dollar (ticker: USDOLLAR). That’s over a thousand pips above it’s July lows and just 400 pips from it’s highs for the year. Is now the time to sell? That’s the question asked by DailyFX.com Quantitative Strategist David Rodriguez in his article today. Below is an excerpt of his analysis:

Cons against selling Euro against the US Dollar

[ul]
[li]Fundamental developments prop up Euro as Spain nears reform package
[/li][li]US Federal Reserve KO’s the Dollar as it announces open-ended Quantitative Easing
[/li][/ul]

Pros in favor of selling Euro against the US Dollar

[ul]
[li]The 1.3100 – 1.3145 range represents HUGE resistance on Euro/US Dollar
[/li][li]Despite announcing indefinite QE, Fed raises forecasts for US Growth
[/li][/ul]

[

Click here to read the full article at DailyFX.com](http://bit.ly/NsncTk)

196

Hi Everyone,

This week the focus starts on the Asia-Pacific region with the Reserve Bank of Australia releasing their September minutes at 01:30 GMT on Tuesday morning (or Monday night at 9:30pm New York time). According to DailyFX Currency Analyst, the Australian dollar may be poised to sell off going into the central bank announcement. Below is an excerpt from his article:

[I]The greenback strengthened against three of the four counterparts, led by a 0.51 percent decline in the Australian dollar, and the high-yielding currency may weaken further over the next 24-hours of trading should the Reserve Bank of Australia show a greater willingness to ease monetary policy further. Indeed, the RBA Minutes may highlight a weakening outlook for the $1T economy as China – Australia’s largest trading partner – faces a greater risk for a ‘hard landing,’ and the central bank may sound increasingly cautious this time around as Governor Glenn Stevens sees the resource boom coming to an end over the next 12 to 24 months. In turn, market participants are pricing a 45 percent chance for…[/I]

[B]Read the full article at DailyFX.com[/B]

197

Hi Everyone,

With all the news lately regarding QE3 and uncertainty in the Eurozone, most of the DailyFX research that I’ve shared with you has dealt with major currency pairs involving trades versus the US dollar. Today, I thought it would be interesting to shift the focus for a bit to the EUR/CHF, which has been popular with position traders. Below is an excerpt from today’s analysis from DailyFX.com:

[I]Recently we have observed the upward movement of all euro pairs. They have marked more or less continuously higher highs and higher lows thanks to massive support from the central banks ECB, Fed and SNB (forget Sunday 16th).

[B]EUR/USD between September 5 and September 17

EUR/CHF between September 4 and September 17
[/B]

The first euro pair to finish this upwards trend is traditionally the EUR/CHF. Friday’s weak industrial production and Monday’s bad NY manufacturing data, let investors doubt that the US recovery thanks to “QE ∞“ will really take place.

Apart from gold, the Swiss franc is the safe-haven that is closely associated with rising oil prices and inflation fears caused by quantitative easing. The CHF saw today a lower low, but also a higher high. This lower low breaks the rising EUR/CHF channel.

Traditionally a fall of EUR/CHF comes some time before EUR/USD or EUR/JPY go south…[/I]

[B]Read the full article at DailyFX.com[/B]

198

Hi Everyone,

It’s Thursday, which means our research team published the latest reading from the Speculative Sentiment Index (SSI) on DailyFX.com. This is a contrarian indicator which means it looks at what the majority and takes that as a signal to do the opposite. And right now retail forex speculators remain long the US Dollar across the board against other major currencies. Below is an excerpt from today’s report:

Retail forex speculators remain long the US Dollar (ticker: USDOLLAR) against the Euro and other currencies, but an important shift in sentiment serves as early warning of a potential Dollar turnaround. We’ve recently called for continued US Dollar losses across the board as retail crowds bought into Greenback weakness. Our FXCM Execution desk data shows that the majority of traders remain long, but many are actually now selling into the Dollar bounce.

Read the full SSI report at DailyFX.com

199

Yesterday afternoon, the DailyFX PLUS Tidal Shift Strategy registered a short signal for EUR/USD with an entry zone between 1.29318 and 1.28842. The pair has fallen back down into the entry zone as the day has progressed.

The majority of EUR/USD positions are still short the pair according to the SSI figure; however, I would keep an eye on this due to the situation in Spain. More articles have been coming up about a possible Spanish bailout, and news about protests in Madrid are putting some pressure on the Euro. A flip in SSI positioning from net short to net long could be a good sign for short positions.

200

Hey, jason just found you here. I will be keeping an eye on this thread. Thanks for the info you are putting up!

201

Thanks for following!

202

A nice drop in EUR/USD from yesterday following concerns over Spain and Italy. You’ll notice in the chart from yesterday that there is no limit order associated with the signal. That’s because this strategy uses a trailing stop in place of a limit. Looking at this morning’s latest SSI update, EUR/USD has moved slightly less negative, but still not flip in positioning.

In situations where the market is retracing off of a previous trend, I like to throw a fibonacci retracement onto the chart to see possible target levels. Take a look at the chart below where I drew a fibonacci from the end of July 2012 low to the September 2012 high. The 38.2% retracement is right around 1.2738.

If you want to learn more about fibonacci retracements, check out this video from DailyFX Analyst Michael Boutros from his Beginner Fibonacci workshop at the 2011 expo http://www.fxcmexpo.com/videos/beginner-fibonacci-fxcm-expo-2011/

203

EUR/USD rallied today after Spain approved its 2013 budget and reform package. Here are some key comments from the Spanish ministers as summarized by Tzu-Wen Chen in today’s article:

[ul]
[li]Budget aims to make 2013 last year of recession
[/li][li]Spain confident to meet deficit target in 2012
[/li][li]Revenue target for 2012 to be exceeded
[/li][li]Tax revenue for 2013 to rise 3.8% vs. 2012 budget
[/li][li]Reform plan goes beyond EU recommendations
[/li][li]Spain to make more efforts on cuts than tax hikes
[/li][li]Spain approves agreement on using pension reserve fund
[/li][li]Spain to tap pension reserve fund for EU3 bln for liabilities
[/li][li]Budget adjustment is about EU13 billion
[/li][li]Spain to create independent fiscal body
[/li][li]Spain to ‘develop’ labor reform
[/li][li]Spain to strengthen ‘single market’ and simplify regulation for single market
[/li][/ul]

204

Here’s an interesting EUR/USD chart by Chris Vecchio. As you can see, the Euro has broken the recent downtrend and is also trading above its 200-day moving average. This could mean the single currency is ready to resume the longer term uptrend. A lot will depend on the ECB Rate Decision this Thursday, October 4th at 11:45 GMT. Below is an excerpt of an article by David Song on what to expect from the upcoming meeting by European policy makers:


Click to enlarge

[B][I]Although the ECB is widely expected to maintain its current policy in October, it appears that a growing number of central bank officials are showing a greater willingness to lower borrowing costs further, and the rebound in the EURUSD may be short-lived as market participants raise bets for a rate cut. As the euro-dollar maintains the range carried over from the previous week, it looks as though the exchange rate will continue to track sideways going into the ECB rate decision, but we may see the pair struggle to hold above the 200-Day SMA at 1.2820 should central bank President Mario Draghi sound increasingly dovish this time around.[/I][/B]

[B]Click here to read the full analysis at DailyFX.com[/B]

205

On Thursday at 11:45 GMT (7:45 am New York Time), the European Central Bank will announce the results from their latest policy meeting. While everyone is expecting them to keep rates unchanged at 0.75%, the announcement has the potential to be a market mover. Here’s an excerpt of David Song’s preview on DailyFX.com:

[B]Potential Price Targets For The Rate Decision

[I]Trading the ECB rate decision may not be as clear cut as some of our previous trades as the central bank sticks to its current policy, but a less dovish statement following the rate decision may pave the way for a long Euro trade as market participants scale back bets for a rate cut. Therefore, if President Draghi endorses a wait-and-see approach for the near to medium-term, we will need to see a green, give-minute candle following the announcement to establish a buy entry on two-lots of EURUSD.

Once these conditions are fulfilled, we will set the initial stop at the nearby swing low or a reasonable distance from the entry, and this risk will generate our first objective. The second target will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in order to preserve our profits. On the other hand…[/I][/B]

Click here to read the full analysis on DailyFX.com

206

Going into Friday’s Non-Farm Payroll report, retail traders remain net-short EUR/USD. The crowd has been short the Euro, since it crossed above $1.24 on August 20. As a contrarian indicator, this has coincided with Euro strength, and the single currency is now trading above 1.3000 after Draghi’s post-ECB meeting press conference on Thursday.

What remains to be seen is whether the Euro can maintain this level and continue higher after the US employment report. Friday’s number takes on added importance, since it’s the second to last NFP before the US presidential elections in November. Below is an excerpt from David Song’s analysis on DailyFX.com detailing how to trade this event:

[B]As the developments coming out of the U.S. raises the outlook for employment, we may see the Non-Farm Payrolls report top market expectations, and a marked improvement in the labor market should sap speculation for additional monetary support as the economy gets on a more sustainable path. However, the slowdown in consumption paired with the downturn in private sector credit may weigh on hiring, and businesses may keep a cap on their labor force as the central bank maintains a cautious tone for the region.

Potential Price Targets For The Release

Indeed, the EURUSD appears to be making another run at the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120, and the pair may continue to retrace the decline from earlier this year as the upward trend from the end of July continues to take shape, However, should NFPs dampen bets for more QE, we may see the EURUSD threaten the bullish formation, and we will look for a close below the 200-Day SMA (1.2820) to reinforce a bearish outlook for the pair.

How To Trade This Event Risk

Expectations for a faster rate of job growth certainly instills a bullish outlook for the greenback, and a positive development may pave the way for a long U.S. dollar trade as it raises the outlook for the world’s largest economy. Therefore, if NFPs expand 115K or more in October, we will need a red, five-minute candle following the release to generate a…

Read the full report at DailyFX.com[/B]

207

GBP/USD long positions have surged since yesterday as the cable has tumbled. What are the implications heading into Tuesday’s UK GDP announcement? Below is an excerpt of David Rodriguez’s latest analysis from DailyFX PLUS.

[B]The ratio of long to short positions in the GBPUSD stands at -1.13 as approximately 47% of traders are long. Yesterday the ratio was -2.88; 26% of open positions were long. In detail, long positions are 64.1% higher than yesterday and 38.2% above levels seen last week. Short positions are 35.4% lower than yesterday and 28.2% below levels seen last week. Open interest is 9.8% lower than yesterday and 7.4% below its monthly average. We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives signal that the GBPUSD may continue higher. Current SSI is higher than yesterday and higher from last week. The combination of current sentiment and recent changes gives a further mixed trading bias.[/B]

[B]Read the full analysis at DailyFX PLUS[/B]

208

The US S&P 500 Volatility Index (VIX) is currently trading at levels that have coincided with Australian Dollar tops versus the US Dollar in the past. Can history repeat itself? David Rodriguez explores this question in the article below:

[B]Correlation between AUD/USD and S&P 500 Volatility Index

Australian Dollar/US Dollar Exchange Rate (lhs)
S&P 500 Volatility Index (VIX) (rhs)

The US S&P 500 Volatility Index (VIX) trades near multi-year lows, and current levels have coincided with important turnarounds in the S&P and the highly-correlated Australian Dollar. Indeed, current VIX levels of approximately 15% have most recently occurred at important AUDUSD tops. Why exactly?

The so-called “Fear Index” in the VIX represents how much investors are willing to pay for protection against sharp moves in the S&P 500. If the VIX is extremely low, it tells us that investors do not fear major stock market volatility. The connection to the Australian Dollar is similarly based on market sentiment.

Read the complete analysis at DailyFX.com[/B]

209

Retail traders remain heavily net-long the US Dollar (ticker: USDOLLAR) against the Euro and other major counterparts. If you’ve been following this thread, then by now you know that’s a contrarian indicator telling us that the US Dollar can continue to fall against the Euro. Below is an excerpt from today’s Speculative Sentiment Index (SSI) report by Quantitative Strategist David Rodriguez on DailyFX.com:

[B]Retail forex traders continue to sell aggressively into Euro strength, and indeed our proprietary Speculative Sentiment Index data supports calls for further EURUSD gains. It is worth noting that total short interest is down 7 percent from last week, but we likewise see that crowds sold aggressively into the overnight Euro bounce. Buying EURUSD against its lows lines up with our broader trading strategy bias, and indeed the Euro survived a key test as it held important price support in overnight trading. Crowds turned net-short Euro as it crossed above the $1.25 mark in mid-September, and we see little reason to stray from our contrarian call for further gains.

Read the full analysis at DailyFX.com[/B]

210

Today we have Michigan Confidence on tap. A poor number may increase expectations in the market for more quantitative easing which would like to gains in “risk on” trades such as buying the Euro and global stocks. Below is an excerpt of David Song’s preview of this announcement on DailyFX.com:

[B]Time of release: 10/12/2012 13:55 GMT, 9:55 EDT
Primary Pair Impact: EURUSD
Expected: 78.0
Previous: 78.3
DailyFX Forecast: 76.0 to 80.0

The ongoing improvement in the labor market paired with the rebound in wage growth may prop up household confidence, and a positive development may spark a bullish reaction in the U.S. dollar as it limits the Fed’s scope to expand its balance sheet further. However, the slowdown in private sector consumption along with sticky price growth may impede on consumer confidence, and a marked decline in the U. of Michigan survey may instill a bearish outlook for the dollar as Fed Chairman Bernanke maintains a fairly dovish tone for monetary policy.

Potential Price Targets For The Release

As the EURUSD fails to maintain the upward trend from earlier this year, the pair may continue to consolidate over the remainder of the week, and we may see the euro-dollar may another run at the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120 as the 200-Day SMA (1.2820) continues to hold up as interim support. However, as the EURUSD carves out a lower top around the 38.2% Fib, the pullback from 1.3170 may turn into a larger correction, and we may see the pair work its way back towards the 23.6% Fib (1.2640-50) should the report curb speculation for more QE.

How To Trade This Event Risk

Forecasts for a drop in consumer confidence casts a bearish outlook for the greenback, but a positive development may pave the way for a long U.S. dollar trade as it dampens the scope for additional monetary support. Therefore, if the U. of Michigan survey…

Read the full report on DailyFX.com[/B]

211

There is something big on the horizon: a Euro-zone Summit this week on Thursday and Friday. And it is very possible that this Euro-zone Summit is different from anyone preceding it: the potential is very much there to make a strong statement about European unity and give the Euro another major shot of confidence in the arm at the end of the week. Below is an excerpt from Chris Vecchio’s analysis on DailyFX.com:

[B]Fundamental Forecast for the Euro: Bullish

The path to the major effort this week began in early-October. On October 2, Reuters reported that Germany signaled to Spain to wait to announce the bailout. “‘The Spanish were a bit hesitant but now they are ready to request aid,’ a senior European source said. Three other senior Eurozone sources confirmed the shift in the Spanish position, all speaking on condition of anonymity because they were not authorized to discuss the matter,” the article stated. A few days later, on October 5, French President Francois Hollande said that while it is Spain’s decision to take a bailout or not, that the issue must be “clarified” by or at the Euro-zone Summit. What does this mean and why is it bullish for the Euro?

Read the full article at DailyFX.com
[/B]

212

In his “Trend of the Day” article for Tuesday, DailyFX trading instructor Walker England shows traders how they can use can use a descending trendline to place new market entries on AUD/USD which has already declined 476 pips in the past trading month. Below is an excerpt:

[B]The AUD/USD is a currency pair generally known for its long trending moves. Over the past month, the pair has declined as much as 476 pips from its September 14th high of 1.0624 to the October 8th low at 1.0148. As price moves lower, traders are left looking for opportunities to enter into this directional move. One way we can take advantage of a trending market is to look for opportunities to sell in a downtrend using a trendline. Today we will focus on identifying and trading the descending trendline of the AUD/USD.

Looking closer at the AUDUSD 4HR graph below, we can begin to notice the development of our trendline. It is important to remember that in order for a trendline to be valid, traders need to find at least two points of contact. The trendline below has been formed by connecting a straight line between the September 14th and September 27th 2012 highs. Once these points are connected the trendline may be extrapolated to find…

[U]Read the complete article on DailyFX.com[/U]
[/B]

213

With interest rates at historic lows in most of the major currencies, there has been little talk about the carry trade strategy in a long time. That’s because the carry trade is a buy-and-hold strategy designed to take advantage of the interest rate differential between a high yielding currency and a low yielding currency. Below is an excerpt of Trading Instructor Tyler Yell’s recent article on DailyFX.com about how exotic currency pairs can still be used in the current market conditions to employ the carry trade strategy.

[B]Major currencies have slashed their overnight bank rates and rollover payout to take them out of Carry Trade consideration, so they can spur economic growth through low interest borrowing. Here are some interest rates of exotic currencies that you can take advantage of by utilizing the carry trade.

Hungarian Forint (HUF): 6.50%
South African Rand: 5.00%
Mexican Peso (MXN): 4.50%
Turkish Lyra (TRY): 5.75%
Russian Ruble (RUB): 8.25

We can look to the FXCM Trading Station 2.0 Dealing Rates to find out the payout of these currencies against lower yielding currencies.

Once you’ve found an attractive rollover, here are two things you need to look at to see if you should take advantage of this as a carry trader…

Read the full article at DailyFX.com[/B]