FXCM/DailyFX Signals and Analysis

Commercial Content Analysts
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David Rodriguez has released another article in his series on the characteristics of successful traders. This one is titled: When is the Best Time of Day to Trade Forex

Summary:For most forex traders, the best time of day to trade is Asian hours. European currency pairs such as EUR/USD show the best results.

In looking at the trading records of tens of thousands of FXCM clients, as well as talking with even more traders daily via webinars, email, and Twitter, it quickly becomes apparent that most individual forex traders are what are called “range traders”. It also becomes apparent that many of them have trouble being successful in forex because they are trading during the wrong time of day.

Most forex traders should trade during the late US, Asian or early European trading sessions – essentially 2 PM to 6 AM Eastern Time (New York), which is 7 PM to 11 AM UK time.

They should avoid trading during the most active times of the trading day. Why? We’ve seen records for thousands of traders, and we’ve seen what works and what doesn’t. Here is a chart of the profitable trades in FXCM accounts in the 5 most popular pairs, displayed by the hour of day:

You can see that this generally correlates with the low-volatility trading hours. Traders tend to see the best results during the low volatility Asia Session hours:

This is because most individual forex traders use “range trading” strategies – buying oversold currencies near support and selling overbought currencies near resistance. These tend to work well during low volatility times, when support and resistance tends to hold. Range traders can incur significant losses when support or resistance is broken, which happens most often during the more volatile times of day.

Read the rest of the report here: http://www.dailyfx.com/forex/education/trading_tips/daily_trading_lesson/2011/12/12/When_is_the_Best_Time_of_Day_to_Trade_Forex.html

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Written by Jamie Saettele of DailyFX.com

The longer that the USDJPY fails to accelerate higher, the less confident I am in a bullish bias. Also, volatility is exceptionally low (3 month vol is lowest since November 2007), which is historically bearish. Price does remain below the 200 day average, which is now below the post intervention high of 7953. I am treating 7828 and 7714 as breakout levels (above 7728 is bullish and below 7714 is bearish).

Jamie’s daily technical update for all the major pairs can be found here http://www.dailyfx.com/technical_analysis/elliott_wave/

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Thank you for reading the DailyFX/FXCM analysis thread. This will be the last post of 2011, and we will be back posting on this thread the first week of January 2012. Happy Holidays from DailyFX and FXCM!

EURUSD: Adding to Short Trade on Bounce

Written by Ilya Spival of DailyFX.com

[B]Strategy: Short at 1.3526, Targeting 1.2872

Floating Profit / Loss: +522 pips[/B]

We initially sold EURUSD at 1.3526 and revised our stop-loss to the breakeven level after the pair met our first objective at 1.3144. Prices are now showing a bullish Three Inside Up candlestick pattern above support at a falling trend line connecting key swing lows since November, hinting an upswing is ahead. We maintain a bearish bias and will look at any corrective gains as an opportunity to add to the short position. Initial resistance lines up in the 1.3144-1.3231 region.

Source: http://www.dailyfx.com/forex/technical/candlesticks/title/2011/12/20/US_Dollar_Year-End_Pullback_to_Yield_Entry_Opportunities_for_2012.html

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Happy New Year Everyone! I will be the the DailyFX Analyst’s top trading opportunities for 2012 this week, and we wish you all the best with your trading for the new year.

[B]DailyFX Top Trade Opportunities of 2012[/B]

[B][U]John Kicklighter[/U][/B]

[ul]
[li]Long USDJPY: Safety, Manipulation and Yield
[/li][/ul]

My call for a drive higher from USDJPY has, admittedly, been a consistent belief of mine for much of this past year. And yet, the pair has forged little progress to make that a reality. As they say, patience is a virtue. My trading approach is to combine rudimentary technicals and capital flow-based fundamentals; and both of these legs of analysis lead me to the same bullish conclusion for the foreseeable future: an advance for USDJPY. The first consideration is the pair incredible proximity to its record low. Extending historical extremes is exceptionally difficult. So, we need a catalyst for reversal. Short-term, we have the threat of manipulation from the BoJ and Ministry of Finance to offer economic relief. Medium-term, we have the possibility of a deepening financial rut that makes us more selective of safe havens (the dollar is undisputed for relative liquidity, credit market stability). And, long-term, the return of higher global rates supports the Fed moving while the BoJ continues a two-decade, near-ZIRP policy regime. The question of timing the entry is my biggest hang up; but starting small and building up with confirmation is a good strategy for me.

[ul]
[li]Long CADJPY: The Return of the Carry Trade
[/li][/ul]

It’s inevitable that all we can think of heading into the New Year is the threat of the global financial crisis and another world-wide recession because uncertainty is immediate and there is still considerable long-risk exposure out there that needs to be unwound. However, if we look beyond the next shock, we will likely find that a lot of the leverage will have been worked down and idle capital will need to be reinvested. There will be a significant level of high-speculative investments; but the bulk of funds will be put behind lower risk investments – namely carry trade. Rates and rate differentials are already low; and they will be lower by the time underlying conditions turn around. A pair like AUDJPY will immediately have an advantage as its yield spread will likely be higher at the turn; but a lot of the capital appreciation that occurs in the exchange rate lies with the rate hikes (and expectations of those hikes). That puts CADJPY is a very good position as the Canadian dollar’s rate is already low. What’s more, there is an investment quality to the ‘loonie’ due to its commodity infrastructure and guaranteed export demand to China and the US.

[B][U]David Rodriguez, Quantitative Strategist[/U][/B]

[ul]
[li]Long USDJPY
[/li][/ul]

I would hate to think that the DailyFX analyst boat is getting pretty crowded with calls for a major reversal in the USDJPY. Yet I think there are many reasons why we might expect a significant USDJPY bounce, and the change in year is not the least of reasons the USDJPY might switch direction.
Instead of going long blindly into 2012, however, I’d like to see how we start off.

The above shows nearly 40 years of data in the USDJPY and the propensity for the pair to make its highs and lows for the year in the months of January and December. If we expected price to be completely random, there would be equal instances in which the highs/lows for the year were set for each month. Yet there were 9 instances in which the pair made its low for the year in USDJPY—nearly 25% of all years.

How might we look to trade this? With a long-term swing trade. If we see that the USDJPY respects 2011 lows in January, we could set orders to buy a break of January highs and set a stop below January lows. The limits would be set as conditions dictate. Yet we would have seasonality on our side, and having a central bank intent on keeping the USDJPY above record lows doesn’t hurt either.

Source: http://www.dailyfx.com/forex/market_alert/2011/12/24/DailyFX_Top_Trade_Opportunities_of_2012.html

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[B]DailyFX Top Trading Opportunities of 2012[/B]

[U][B]Ilya Spivak[/B][/U]

[ul]
[li]Short EURUSD: The Multi-Year Euro Downtrend Continues
[/li][/ul]

Broadly speaking, the Euro has been trending lower since July 2008 having peaked above 1.60 against the US Dollar. More of the same seems almost certainly ahead. The Eurozone debt crisis remains unresolved, presenting a two-pronged problem. On one hand, it amplifies already considerable headwinds facing economic growth. Soaring borrowing costs amid fears of a default within the currency bloc stymie activity as individuals and businesses find it more expensive to spend and invest. In turn, slower growth reduces regional governments’ tax intake, making it harder to reduce deficits, stoking already considerable sovereign solvency fears and producing a vicious cycle. Economists’ consensus forecasts suggest growth in the Euro Zone will stall in 2012 and recovery only modestly in the following year. Meanwhile, growth in the US is expected to accelerate over the same period. This beckons aggressive monetary stimulus from the ECB, suggesting interest rate differentials will narrow firmly in favor of the US Dollar even if the Federal Reserve opts to make good on its promise to keep benchmark borrowing costs on hold through mid-2013.

On the other hand, it threatens to unleash another market-wide selloff and global credit crunch, plunging worldwide finance into another existential crisis just three years after the 2008 debacle. In the event of a default in a large country like Italy or Spain countless banks, funds and other institutions would be forced to book sharp losses. For some, taking such a hit will prove unbearable and they will be forced to go out of business, sending ripple effects across the markets as their creditors now face losses, and so forth. Those that remain standing will rush to raise new capital, with banks and funds dumping assets at fire-sale prices to meet reserve and margin requirements. This translates into another broad-based rout across asset classes, erasing incalculable amounts of firms’ and individuals’ wealth. It goes without saying that such an outcome would outright crush private-sector economic activity on a global scale. Needless to say, such an outcome bodes very well for safe-haven currencies and in particular for the US Dollar, where official intervention does not undermine its store-of-value properties (as is the case with the Japanese Yen and Swiss Franc, typically the other go-to safety vehicles in the FX space).

[B]Jamie Saettele[/B]

[ul]
[li]Short AUDUSD and Short NZDUSD: Strong Evidence of Long Term Reversals
[/li][/ul]

A scan of yearly and quarterly charts reveals reversal opportunities in the USDCHF (yearly and quarterly), AUDUSD (quarterly), NZDUSD (quarterly), and USDCAD (quarterly). I define a reversal with yearly data as a new 5 year high/low, a close above/below the prior year’s close, and a range for the year that is at least as large as the average range for the last 5 years. A reversal with quarterly data uses 12 periods (3 years) (for monthly 12, for weekly 13, and for daily 20). No method is immune to false signals, but key reversals indicate favorable reward/risk opportunities because a potentially significant pivot (high or low) is identified with minimal lag (when viewed in the context of the time frame being analyzed).

Many decade long turns have been indicated by yearly or even quarterly key reversals. The study also highlights the tendency for exchange rates to reverse during high volatility environments (hint – USDJPY volatility is NOT high which decreases the probability that an important low is in place).

AUDUSD QUARTERLY CANDLES (since 2000)

[I]Created by Jamie Saettele, CMT[/I]

A bullish reversal occurred in the 2nd quarter of 2001. Bearish reversals occurred in the 4th quarter of 2007 and the 3rd quarter of 2008. The 2007 reversal didn’t pan out. Price fell another 1900 pips (to the low) after the 2008 reversal (close to close was 897 pips). The most recent reversal occurred during the 3rd quarter of 2011.

NZDUSD QUARTERLY CANDLES (since 2000)

[I]Created by Jamie Saettele, CMT[/I]

A bullish reversal occurred in the 4th quarter of 2000. Bearish reversals occurred in the 3rd quarter of 2007 and the 3rd quarter of 2011. The 2007 reversal didn’t pan out immediately as the actual high was not until the 1st quarter of 2008.

The most recent large degree reversals paint a picture of USD strength in 2012. Unless your holding period is a year or more (Ilya), I do not suggest treating these reversals as signals. Rather, understand that conditions for the pairs examined are consistent with previous long term reversals. This knowledge should help in constructing favorable reward/risk opportunities in 2012.

Source: http://www.dailyfx.com/forex/market_alert/2011/12/24/DailyFX_Top_Trade_Opportunities_of_2012.html

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DailyFX Top Trading Opportunities of 2012

David Song

[ul]
[li]Short EURGBP: U.K. Remains Ahead Of the Curve
[/li][/ul]

As European policy makers struggle to address the sovereign debt crisis, we expect the single currency to face additional headwinds in 2012. Although the EUR/USD will be the center of attention for most FX traders, I will be keeping a close eye on the EUR/GBP.

1020×643

After actively trading the euro-pound throughout 2011, the British Pound has recent strengthened against its European counterpart, and the sterling should continue to outpace the single currency in the following year as the U.K. government remains ahead of the curve in balancing their public finances. As the euro-area faces an increased threat of a credit-rating downgrade, we expect the heightening risk for contagion to drag on the Euro, and the exchange rate should continue to push lower in the following year as the EU fails to restore investor confidence. However, as the fundamental outlook for the U.K. and Euro-Zone remains clouded with high uncertainty, monetary policy will be a key driver of price action for the EUR/GBP.

As the European Central Bank and the Bank of England carry their easing cycle into 2012, we expect to see additional monetary support in 2012, but the preemptive approach taken by the BoE should help to increase the appeal of the sterling. At the same time, with record-low rates in the U.K., we may see market participants move away from the Euro and into the British Pound should we see the flight to safety gather pace.

Michael Boutros

[ul]
[li]Foreign Investment in US Equities
[/li][/ul]

While on the surface, the recommendation appears to be non-currency specific, we view this as an extremely attractive opportunity for a portfolio hedge in 2012 and potential arbitrage strategy. Currencies have been broadly outperforming against the US Dollar in recent years and it finally appears as though this trend could be on the verge of some form of a reversal back in favor of the buck. However, long USD positions have also been quite risky and exposure to the Greenback might bring with it some unwelcome stress. As such, our recommendation for non-US residents is to instead, put their money into US equities. What does this mean?

Here is how we see this playing out. Should current correlations stand, if US equities are to head higher, then the investor will benefit from the US equity return, but at the same time, likely have his/her investment offset by the sell-off in the US Dollar and appreciation in his/her local currency on the resurgence in risk appetite and outflow from the safe-haven US Dollar. If on the other hand US equities head lower, then the risk off market environment will allow the investor to offset his/her loss in US stocks through the appreciation in the US Dollar on its safe-haven flows (remember – the investor in invested in US equities and thereby has USD exposure).

So if this is the case, then where is the benefit in this trade, and why even do it? Well, what if we see a break down in familiar correlations where the US equity market rallies and the US Dollar also rallies at the same time? What if we see a situation where US equities and the US Dollar become positively correlated? In this scenario, the investor stands to benefit a great deal and will not only make money from his investment in US equities, but will also enhance his/her returns on the appreciation in the US Dollar.

The global recession appears to be moving in phases, and with the markets now dealing with phase two of the crisis in Europe, we can start to anticipate the transition to phase three, where we believe that China, the commodity bloc economies and emerging markets will all be exposed. At the same time, we see a first in and first out type of situation, with the US economy the first to emerge from the global recession which should translate into a more upbeat outlook on low valuation US equities and the US Dollar as well, on a narrowing of yield differentials back in favor of the Greenback as the Fed begins to signal a reversal of ultra accommodative monetary policy.

Source: http://www.dailyfx.com/forex/market_alert/2011/12/24/DailyFX_Top_Trade_Opportunities_of_2012.html

53

Written by Jamie Saettele

Downside levels of interest are the August 2010 low at 12590 and the 100% extension of the decline from the 2011 high at 12455. Watch for support from the line that connects the May 2011 and October 2011 lows as well. 5 waves down from 13076 may be complete which increases the risk of a bounce. Expect resistance at 12845 with an extended bounce running into offers at 12880-12900. Strength into these levels would present a short opportunity against 13076. Read more technical research for trading ideas. Bottom Line – sell rallies into 12845-12900, stop 13080, target 12450

[B]EUR/USD Daily Bars[/B]

[I]Source: http://www.dailyfx.com/forex/technical/elliott_wave/eur-usd/2012/01/09/eliottWaves_eur-usd.html[/I]

55

Written by David Song and Trang Nguyen of DailyFX

[B]THE TAKEAWAY: Boston Fed Pushes For Discount Rate Cut > Kansas City Vote To Raise > Growing Rift Amongst Fed Officials[/B]

According to the Fed minutes, the statement revealed that the board of directors at the Boston Fed called for a quarter-percentage point discount-rate cut to 0.5 percent in light of the “recently reduced charges on Federal Reserve’s dollar liquidity swap arrangements with major foreign central banks.” In contrast, Kansas City Fed once again pushed for a quarter-point increase, while the remaining ten regional Fed banks sought to keep the discount rate unchanged. The recent development coming out of the Fed suggest central bank officials are struggling to meet on common ground amid the slowdown in the world economy, and we may see the FOMC maintain a neutral policy stance throughout the first-half of 2012 as the global landscape remains clouded with high uncertainty.

[I]Source: Forex @ DailyFX - Fed Struggles To Meet On Common Ground, FOMC To Preserve Policy[/I]

56

DailyFX Analyst John Kicklighter posted a great GBP/USD observation earlier today to his twitter account saying…

[I]We are now in a serious zone of support for $GBPUSD. The 1.5300/5350 region has stood as a floor (to a H&S?) since July of 2010…

…could this be perfect timing for a surprise BoE decision tomorrow? Low probability; but the consequences are great enough to ponder.[/I]

If you look at the daily GBP/USD chart below, the currency pair is sitting at an important support level with little in terms of tecnical support to stop it from sliding further if it gets past 1.5300. While the Bank of England is not expected to change interest rates at tomorrow’s meeting, it does add an additional risk event to watch out for.

The second thing I want to point out is an article that DailyFX Analyst David Song released earlier today regarding the Dow Jones FXCM US Dollar Index. The index has been making progressively higher lows and seems poised for a breakout to the upside. Here’s a look at David’s chart:

Dow Jones FXCM US Dollar Index

The Dow Jones FXCM US Dollar Index measures the value of the USD against 4 major currencies: Euro, British Pound, Australian Dollar, and Japanese Yen. So the weakness primarily in the EUR and GBP have been pushing the index higher. David’s full article can be found here: http://www.dailyfx.com/forex/fundamental/us_dollar_index/daily_dollar/2012/01/11/USD_Index_Poised_For_Bullish_Breakout_Euro_Outlook_Weighed_By_ECB.html

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Here’s an article from Ilya Spivak on the Turkish Lira for those of you that venture into the more exotic pairs. The symbol for hthe lira is the TRY .

[B]Turkish Lira Intervention Unsustainable, Reckoning Ahead[/B]

Written by Ilya Spivak

Turkey’s monetary policy appears to be turning increasingly convoluted, an apparent reflection of the country’s mix of accelerating inflation and slowing economic performance. Indeed, the yearly GDP growth rate ticked lower in the second and third quarters while December’s CPI report put the headline inflation rate at a whopping 10.45 percent, the highest in over 3 years. The central bank has claimed that the upswing in inflation owes to the weaker Lira and has gone about fighting it by intervening in the currency directly rather than raise interest rates, which the government strongly opposes claiming such a move would erode consumption.

On balance, this sclerotic state of affairs seems to be a classic example of just how problematic political interference in monetary policy can be. The Lira began trending lower in October 2010 as the central bank began a rate-cutting campaign that would bring benchmark borrowing costs down by 125bps over the subsequent 8 months. In what is likely no coincidence, the aggressive easing cycle came just ahead of the 2011 general election where the ruling AK party, smug after a successful September 2010 constitutional referendum, hoped to win a commanding mandate to implement its menu of reforms. Unfortunately for Prime Minister Erdogan and company, GDP growth peaked in the first quarter of 2010 and began to trend lower over the following two quarters, threatening to unravel popular support for the administration on economic grounds.

Pushing through its ambitious constitutional changes meant the government had to deliver growth in an environment where global expansion as a whole had peaked and started to slow. The Central Bank of Turkey (CBT) has “instrument independence”, meaning it can choose the tools of monetary policy, but is expected to use them to support the government’s economic agenda. This murky relationship leaves ample room for the administration to influence monetary policy, so it doesn’t seem to be a stretch to say that the CBT’s overzealous loosening of lending conditions may have had something to do with the election.

Looking ahead, the current state of affairs is unsustainable. Turkey’s FX reserves war-chest is understandably dwindling and it will not be able to keep the Lira afloat indefinitely. It’s only hope for a relatively soft landing is buying enough time to allow the global slowdown expected in 2012 to weigh on price growth and deflate the economy without the central bank’s aid. Otherwise, stagflation beckons, putting the economy through a far more painful correction than need be. Those who would infringe on central bankers’ independence – a seemingly growing constituency after policymakers’ bold actions to counteract the 2008 downturn – had better look at Turkey as a cautionary tale of what happens when politicians get involved in monetary matters.

On the technical front, prices are testing rising trend line support set from mid-April 2011, a boundary reinforced by a horizontal barrier at 1.8278. A break below this barrier amid continued CBT intervention exposes 1.7898 and 1.7435. If intervention is moderately successful over the coming months, the 1.6203 level is a reasonable medium-term reference level to keep in mind as a possible area for the markets to take a stand, amounting to a potential buying opportunity.

[B]USD/TRY Spot Weekly Chart[/B]

Source: Forex @ DailyFX - Turkish Lira Intervention Unsustainable, Reckoning Ahead

58

Very interesting research. I would think it is the other way around. Major currencies would be traded mostly during NY and London sessions. I would think this is the time to trade. Well… he knows his clients.

59

If you look at COT report, commercials are all time high in cable longs, holding approx 80% of the open interest. For me, this support should hold once again and prices should correct.

60

The commercials do have a lot of longs everywhere my only thought is that open interest is still high on most pairs will be checking it all over this weekend

61

Open Interest ( again) all time high on EURO,GBP futures. It is interesting to see how it unfolds once there is nobody left to trade. Price must adjust. Right?

62

Written by David Song

[B]Euro: IMF To Boost Lending Capacity, Europe To Contract 0.3%[/B]
The Euro advanced to 1.2844 as the International Monetary Fund announced plans to increase its lending capacity by $500B, but we maintain a bearish outlook for the EUR/USD as the EU struggles to stem the heightening risk for contagion. Indeed, Fitch Ratings warned Spain, Italy, Ireland, Cyprus, Belgium and Slovenia may face another ratings cut as the region fails to draw up a ‘comprehensive solution’ to address the debt crisis, while the World Bank lowered its growth forecast for the world economy as the group sees the euro-area contracting 0.3% in 2012.

As the fundamental outlook for the region turns increasingly bleak, the single currency remains poised to face additional headwinds over the near-term, and the lack of momentum to push back above the 20-Day SMA (1.2872) could pave the way for a reversal as the EUR/USD maintains the downward trend carried over from the previous year. Nevertheless, the EU announced that talks on Greece’s second bailout package should resume today as the group looks to settle on a 50% haircut, but the developments may fail to prop up investor confidence should European policy makers struggle to meet on common ground. As long as the EUR/USD holds below the 20-Day SMA, the short-term rebound in the exchange rate should taper off over the remainder of the week, and the 23.6% Fibonacci retracement from the 2009 high to the 2010 low (1.2630-50) looks poised to give way as the heightening risk for contagion continues to drag on market sentiment.

[B]British Pound: Sideways Price Action Ahead, 50.0% Fib To Give Way[/B]
The British Pound maintained the narrow range from earlier this week as the GBP/USD pared the overnight advance to1.5397, and the exchange rate may continue to track sideways over the remainder of the week as the pair struggles to push back above the 10-Day SMA (1.5384). As the economic developments coming out of the U.K. highlights an increased risk of a double-dip recession, the Bank of England minutes on tap for the following week could heighten speculation for additional quantitative easing, and the central bank expand its balance sheet throughout 2012 as U.K. policy makers see a growing risk of undershooting the 2% target for inflation. In turn, we may see the GBP/USD clear the 50.0% Fib from the 2009 low to high around 1.5270-1.5300, and the exchange rate may come up against the 61.8% Fib around 1.4850 as market participants see the BoE taking additional steps to shore up the ailing economy.

[B]U.S. Dollar: Weakness To Be Short-Lived, Index Carves Higher Low[/B]
The greenback struggled to hold its ground on Wednesday, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) slipping to an overnight low of 9,935, but we should see the reserve currency regain its footing during the North American trade as the rise in risk appetite tapers off. As the U.S. equity market opens lower, the shift in market sentiment should gather pace over the next 24-hours of trading, and we expect to see the USDOLLAR track higher over the remainder of the week as it maintains the upward trend carried over from the previous year. As the dollar index appears to be carving out a higher low in January, we anticipate to see another run at the 78.6% Fib (10,117), but we may see a bullish breakout in the USD as price action approaches the apex of a ascending triangle.

Source: Forex @ DailyFX - Euro Euphoria Weighed By Growth Concerns, Sterling To Maintain Range

63

Written by David Rodriguez

[B]EURUSD[/B] – Trading crowds have turned aggressively net-short the Euro against the US Dollar, giving strong signal that the recent rally may be the major turning point we have been expecting for some time. Last week we prematurely called for a Euro bottom as there were early signs of a reversal. Yet short interest is now at its highest since October 25, at which point the EURUSD was trading at 1.3900 and was on its way above the 1.4000 mark.

Our SSI ratio stands at -2.00 as there are 2 traders long for every 1 short. Although past performance is no guarantee of future results, such one-sided extremes can often come at major turning points. Given where we stand in terms of overall market positioning, this could very well be the start of a bigger upside EURUSD correction.

The obvious caveat in this forecast is that the Euro is already 300 pips off of its lows, and the “easy part” of this pullback trade may already be over. In other words, the Euro rally could slow down and we could see sideways trade until further notice, limiting the appeal of fresh Euro/US Dollar long positions.

Source: Forex @ DailyFX - Euro May Have Bottomed versus US Dollar

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I assume that this index ( if real) is based on FXCM database.
If so, how much of the FX futures market FXCM holds?
It is probably a very small chunk.
Sentiment based on that would be a poor reflection of the whole futures market.

65

Hi
Just read your analysis short term still looks bearish.
Might be turning point but comparing tech with fundamental analysis still looks down to sideways for next few weeks

66

Hi
Just read your analysis short term still looks bearish.
Might be turning point but comparing tech with fundamental analysis still looks down to sideways for next few weeks

67

Hi gainforexsignal,

It’s real data :slight_smile: and shows the net positioning of FXCM’s retail clients. If you look at FXCM’s monthly operating metrics, FXCM clients tend to do about 13-16 billion in notional volume per day to give you an idea of the numbers.

What DailyFX has found over years of research is that retail forex traders like to pick tops and bottoms in the market, or fade the market. Put another way, retail forex traders tend to be range traders. This works whenever volatility and low and the markets are ranging, but doesn’t work during breakouts and trending markets. Whenever the market breaks through the range, retail traders tend to add to their losing position rather than cutting the loss, causing SSI to go to more extreme levels as the trend continues. Therefore SSI is used as a contrarian indicator, doing the opposite of what the crowd is doing.

That’s a quick overview of SSI, and I’ve also attached a PDF document from DailyFX that goes into more detail about SSI.

SSI_Primer.pdf (516 KB)