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The Fair Value of The Euro

Filed under: EURO, General, JPY, USD - 24 Apr 2008
As a trader I think that Fair value for the Euro is 1.15/1.20!We been under value at 0.82 on October, 2001, and now over value at 1.60. the balance line is 1.17.
That’s make the euro over value by 25% against the dollar. While the dollar at fair value against most asia ccys.
Asian currencies have been falling vs EUR with market focused on fall in USD past 6-9 months. While USD has fallen vs both G10, emerging market currencies, EUR has absorbed a very large part of USD decline. Since start of turmoil in July 2007, EUR has risen about 14%. Asian currencies have fallen on average about 10% vs EUR; even “strong” Asian performers like SGD, MYR, TWD, CNY have fallen more than 5% vs EUR on average, though fundamental backdrop for these currencies is stronger than that for EUR. Notes a fair few Asian currencies are managed; while officials are willing to tolerate more gains to combat inflation they “are still not allowing for fast and volatile moves.” Also, EUR often considered safe and very liquid proxy to trade USD decline story. If anything, EUR gains vs Asian FX have led to “more pronounced fundamental imbalances between Asia and Europe”; Asian currencies very undervalued vs EUR: By about 25% according to its valuation framework. Asia also has more favourable external position than Euroland with less reliance on trade to U.S. last few years. Inflation is on rise in Asia, triggering need for tighter monetary policy. Has long TWD vs basket of 50% EUR and 50%.Goldman Sachs

Screen Forex

Is Europe

Forecast ActualMarch German Trade Balance EUR 17.0bn 16.7bnApril Swiss Unemployment Rate 2.5% 2.6%
No great surprises from the first European data releases. The more important German industrial production number later has more potential to impact on the Euro and probably more so than the two rate decisions due later in the morning.
Meanwhile the White House economist is looking for a H2 recovery in the economy stating “The data are pretty clear that we are not in recession. I would be very surprised if the NBER, looking back at this period, would date this as a recession.”
He expects Q2 to be pretty flat and that retail sales and manufacturing are the only areas of the economy showing the type of deterioration that NBER would consider recession range. He also observed that job declines are, so far, well below those of the 2001 recession.
Therefore the earlier-than-expected release of some government tax rebates could act as a stimulus to the economy, he offered. However, he did voice concern over the exorbitant rise in oil prices which is putting downward pressure on growth. He estimated that every additional $10 on oil reduced growth by 0.25% annually.
The following economic releases are due today:
MarchGerman Industrial Production (MoM) - 0.5%German Industrial Production (YoY) +5.0%U.S. Wholesale Inventories +0.5%
AprilU.S. Continuing Claims (26th)
MayU.S. Initial Jobless Claims (3rd) 375K
The Bank of England and European Central Bank are due to announce their rate decisions
The market appears to be getting the bit between their teeth in pushing the Dollar higher. The decline from the 1.6018 high is the largest since the November correction which saw the Euro dip by around 650 points. Already now the Euro has declined over 700 points and there seems to be more room for additional losses.
To highlight just how significant the decline in the Euro is, it has been the largest percentage drop ever since the 1.1640 low in November 2005. During that time the Dollar lost 37.6% of its value.
And it does seem to be on course for a move to 1.5154 at least, possibly just below 1.51 which would imply a drop of around 5.7%.
Given the market’s preoccupation for hating the Dollar this is a remarkable turn around but more than that it should be sustainable for at least 6 more months.
You may recall that around February last year the market took exception to a talk by Bernanke in which he accepted lower growth and higher inflation. The Dollar was sold off on the back of this.
The European economy appears to have about an 8-10 month lag to the U.S. economy and right now we are seeing Europe beginning to return lower growth and higher inflation while there are tentative signs of a stalling in the U.S. downturn.
The difference between 8-10 months ago and now is that oil has very nearly doubled in price and inflation is even higher. Consumer sentiment is also much, much weaker and credit comes with tighter rules.
At the moment the decline in Europe has not been excessive but with lower growth and consumer confidence the risk is for any weakness in the economy to be thoroughly tested. It may be through LBO’s unable to meet debt obligations as business dries up or it may be through weaker consumer spending as they allocate more of their budget to energy costs and rising food prices.
However, while a bounce in the Euro is expected after the current decline the next move lower could be stronger…

Forex Trading

Cross traded- GBP/JPY.
Today has been a very exciting day. I started the day with two short entries, stopped out @ 228.82 and 228.87 respectively with 38.5 pips losses. With both 6 lots in total, that was a massive 231 pips loss. I've learnt to move on from such hits. Since those trades, I have made two good successful entries and both came up trumps.
... 228.29/31 it went back to take out my stop. Got back in @ 228.48 same result. Got off lightly though, trading 3 lots at a time. Down by 231 pips from stoplosses. In the medium-term the outlook of this cross still look south on the daily time frame.
As hinted in my earlier post, I was looking to taking upside move @228.65 but couldn't. Opportunity arose @229.04 and came of @229.84. As the morning report reactions wane the cross regained momentum. I went in again at 229.69 with fingers on the stoploss. The sloploss was eventually filled @231.45 seconds after adjustment.
I think I am okay for the day. My wish for you is that your forex trading today should become your best yet.
Have a great day.

Exclusive!! Forex

The geopolitical problems in the Middle East is playing heavily on the world economy again. The world financial markets are feeling the strains as the price of oil and gold hit new heights at the expence of the crumbling dollar walls. The question is where and when will this end? How will this affect the forex trading markets today and the weeks ahead?
Iraq is a nation whose agenda is never out of the news these days either by will or by default. Iran's nuclear reactor constructions has also not taken the it's foot of the peddle of chaos and uncertainty and now Turkey. The fighting between Turkish soldiers and Kurdish militia has done nothing but to upthe ante. The Australasian markets took the first south-bound trains today with heavy loses. What does the future hold in today's trading? According to Reuters:

Blog Moved to Siriusforex.com

Sorry guys, we have moved Forex Trading Strategy blog and its content to our domain blog - Siriusforex.com. Future updates and blogging can only be seen at http://www.siriusforex.com/If you were on our e-mailing list before now you will continue to receive your updates and articles. Now is a great opportunity for those who haven't subscribed to join in because you are missing out. Our foresight in the market is second to none. Get in on it now..I do hope this move would give us a bit of flexibilty in making the necessary adjustment on our coding and posting in the future. Happy blogging and have a great day.- Benny NardinoPS. The RSS Feed subscription button on the right could also give a subscription to the new blog FEED. I have just modified it too. Thanks.

Blog Moved to Siriusforex.com

Sorry guys, we have moved Forex Trading Strategy blog and its content to our domain blog - Siriusforex.com. Future updates and blogging can only be seen at http://www.siriusforex.com/If you were on our e-mailing list before now you will continue to receive your updates and articles. Now is a great opportunity for those who haven't subscribed to join in because you are missing out. Our foresight in the market is second to none. Get in on it now..I do hope this move would give us a bit of flexibilty in making the necessary adjustment on our coding and posting in the future. Happy blogging and have a great day.- Benny NardinoPS. The RSS Feed subscription button on the right could also give a subscription to the new blog FEED. I have just modified it too. Thanks.

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Commentary: The Dollar Conundrum

The Dollar is currently teetering on the edge of a precipice. Many analysts are predicting that, having recently retreated from a record low against the Euro, the Dollar's best days are still in front of it. On the other hand, the economic data and interest rate pictures remain nuanced, and still favor the Euro on paper. In this article, we aim to sort through this morass, and produce a clear summation of the factors which bear on the Dollar in the short term.
Let's begin with the bullish side of the equation, which is supported by the Dollar's recent upside swing. First of all, while interest rate differentials are currently hurting the Dollar, the Fed is probably near the end of its loosening cycle, while the ECB has yet to begin. The best-case scenario would be a tightening of US monetary policy simultaneous with a loosening of EU policy. Next, there is the economic picture. The most recent GDP data indicates an economy that is still growing, albeit slowly. In addition, the unemployment rate declined in the most recent month for which data is available. The US stock market has regained half the value it lost in the first three months of 2008, and the overall P/E ratio is close to its long-term average, which suggests the markets could appreciate further. Finally, the economic stimulus package that was approved by Congress in March will go into effect this month, as tax rebates worth $150 Billion are distributed to consumers and businesses.
On the bearish side, let's return to the interest rate story. While the future certainly bodes well for the US, the present still favors the EU. US interest rates are currently negative in real terms, and investors have already turned the Dollar into a funding currency for carry trades. Moreover, negative real interest rates implies high inflation. US CPI is hovering around 4.0%, and could continue to climb in proportion with surging food and energy prices. In fact, inflation is now viewed by economists as more problematic than the economy, itself. While US exporters have benefited from the resulting cheap Dollar, US consumers- which account for 75% of the US economy- have not. The economic downturn still has not officially been labeled a recession by the Bureau of Economic Research, but the situation remains tenuous, and the scales could easily be tipped by a few pieces of negative economic data.
The wild card in this mess is housing. In certain regional markets, real estate prices have tumbled by 30%. In other markets, they have hardly budged. While an estimated $350 Billion in subprime debt has already been written down, analysts disagree over the eventual total. Estimates vary from $1 Trillion to less than $350 Billion, which would imply "write-ups" on debt that was erroneously declared worthless. The difference represented here amounts to 6% of GDP, which could mean the difference between growth and contraction, a strong Dollar and a weak Dollar, respectively.

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EUR/USD at Monthly Low on Nonfarm Payrolls

EUR/USD broke down through 1.5400 mark today and reached the minimum level since the 24th of March as the employment fundamentals showed some improvement compared to the March results. Dollar managed to strengthen also against pound and yen even with objectively bad macroeconomic results.

Nonfarm payrolls — one of the main indicators of the U.S. economy’s health decreased 20k in April. That’s a lot better than the 80k drop in March and 75k drop that was forecasted for April. Still, the negative reading in payrolls is a clear sign of the recession danger. Unemployment rate was reported at 5% — below 5.1% in March and 5.2% expected for this month, but that indicator usually isn’t very accurate.

Carnival of Forex Trading

Welcome to the May 5, 2008 edition of Carnival of Forex Trading.
Amy S Quinn presents Top 25 Most Influential People in Forex posted at Currency Trading.net.

Heather Johnson presents 5 Unusual Things That Adversely Affect the U.S. Dollar posted at Forex Blog FX-BAR daily forex trading blog.
Jed Norwood presents Successful Forex Currency Trader posted at Forex Strategy, saying, “How do you measure your success as a successful forex trader? Not all of your successes are measure by money. This post helps you understand when you have been a successful forex trader.”
Lane Wright presents Compete with the Pros posted at Awesome Forex Alerts.
reekoinvest presents The fall of the US Dollar in a European world posted at Reeko.com - Bulls don’t fear bears..
Brice Hogan presents The Magical 50 Day Line posted at Financialzip.com, saying, “How to use the 50 day moving average to calculate buy in points.”
Dr. Barry Burns presents Using Fibonacci Levels to Find Support/Resistance posted at Top Dog Trading, saying, “New video on my blog shows how to use Fibonacci levels to find reliable support and resistance on charts for day trading, swing trading and investing in forex.”
That concludes this Carnival of Forex Trading edition. Some Forex and general trading articles this time and even one video article that explains the Fibonacci retracements trading on a very accessible level. I highly recommend reading the first article about 25 most influential people in Forex and seeing the video one; others are good, but not as good as those two.

TradeView Forex — Another Broker from RCG

Today I’ve added a new Forex broker to the list on the site — TradeView Forex — another broker that is operated by the financial company Rosenthal Collins Group, LLC (first broker from this company, which hit my list, was RCG fxtrader). TradeView Forex offers MetaTrader 4 platform without CFD trading, limited demo accounts (30-day limit) and rather tight spreads (from 2 pips). For me, it doesn’t look like a great broker, because it requires a lot of paper work to open an account, doesn’t support convenient ways of account funding and offers quite a limited amount of trading instruments. But for some traders it might seem to be an interesting Forex broker, because it’s registered with NFA and offers good scalping opportunities.

EUR/USD

EUR/USD fell today significantly, recovering from its two-day fall that was observed this week. It went down by more than 0.8% today — from 1.5532 to 1.5380. Good fundamental indicators from U.S. helped dollar to strengthen on Forex.
Productivity in business sector grew up in first quarter of 2008 according to a preliminary report that was released today. Annual rate of the seasonally adjusted productivity growth was 1.9% in Q1 — above 1.5% forecasted by market analysts.
Crude oil inventories last week increased by 5.7 million barrels (quite a lot compared to recent increases) and are now in the middle of the average range for this time of the year.

My Forex

I was in gloom and doom mode around this time last year (2007). Without getting too personal, I had just concluded a divorce so that definitely had a lot to do with it. My advice would be to stay away from doing anything that involves risk, especially trading forex when you're going through a life changing event. Here was a post from last year:
Is my forex trading dedication waning, are my priorities shifting, or have I come to a realistic conclusion? I'm talking about the time I actually spend sitting at my computer trading. There was a time when I was getting up way before the crack of dawn trying to trade the European session at 4 a.m. EST. I also used to watch the charts closely during the Japanese session. Those times are over though. The time I actually sitting in front of charts has lessened by the month at this point and I'm not sure that's such a good thing for someone at my stage of learning.
I get a lot of emails like, "why don't you do this or why don't you do that" but the reality is that I just can't do most of those things. Some of these "things" are trading the news and trading shorter-term charts. I certainly appreciate the feedback but can someone with a limited amount of time actually be a trader? I'm not sure but maybe I'm taking the wrong approach to all of this. Maybe someone short on time shouldn't be trading short-term charts or trade news releases. Maybe I shouldn't even think about day trading.
I've been trading a daytrading system for a while now mainly because it was a set and forget system. I could set my orders, stop losses, and profit targets and wake up most of the time to find the trade already complete but this certainly doesn't give you any flexibility. Particularly, I'd find it very difficult to implement a breakeven requirement to my trading plan unless I automate this via a Metatrader broker. So do I have to give up trading 30-minute and 60-minute charts and move toward 4-hour, daily, or weekly? Perhaps I will have to do that.
Some things remain the same as last year and some are different. I'm still trying to be a forex trader but with a lot more success. I still don't spend a lot of time sitting in front of my computer trading but this is by choice. I have strategies and plans that fit my trading personality now so I can scan charts quickly and know whether there's a possible trade brewing. I no longer sit and search for a trade. This is the worst thing that you could possibly do and a common mistake inexperienced traders make. I've modeled my trading style around my schedule and this allows me to day trade. It is possible to day trade without sitting and staring at a screen in the middle of the night and all morning. I find that my best trades are those that occur when a chart is nowhere in sight.
I made my best trade of the year this month. I traded jobs and left Bear Stearns two weeks before the blow up. This will probably be the best trade of my life.
Success? Time will tell. Persistence...
Read more posts like this at http://www.forexproject.com/.

One Financial — New CFD/Forex Broker

One Financial is quite a new Forex broker, that is actually specializing on CFD and other futures trading, but offers Forex trading services too. They offer Muslim-friendly accounts (with no interest or swap) and Arabic support — so, it’s quite clear that they are aimed on the traders from Middle East. Their trading conditions are quite common — 3 pips spreads on EUR/USD, $1000 minimum positions, wire and credit card deposits and a custom platform that can be ran in browser. One Financial claim that they are registered and regulated by FSA (United Kingdom), but I’ve failed to find any mention about One Financial on FSA site. I can also note that their support isn’t very professional — it took me a lot of time to find out that they offer mini-Forex services.

Forex Announcements

Forex On Top was updated this afternoon and there are a lot of big moves. Why visit? The most informative sites tend to bubble up to the top. With so many forex websites out there, it's tough to disseminate the good from the bad. Granted, there are a lot of broker sites in the top 50 but there are also a lot of non-broker sites mixed in that get just as much traffic. This is impressive considering they're competing without expensive advertising campaigns. Check out sites ranked 1-50, 51-100, 101-150, and more. You can also check out the forex websites that have increased their rank the most from last week at Forex Movers.

What Is More

I haven't been able to make any progress monetarily in about a month. I'm up about 4% this month but breaking my account balance all-time high has been a struggle. I'm pretty much stuck where I was around this time last month. I'm not all that concerned and shouldn't be considering I was preaching patience a couple of days ago. It's just that everytime I open my trading platform, the account balance is just staring me in the face.
It's more important that I progress as a risk-aversed trader. For newer traders, it's very important for you to understand that learning methods to control your risk should be a priority. Making gains monetarily is obviously important but making gains and strides elsewhere are more important. When I first started trading mostly with demo accounts, I had some unbelievably profitable trades but my strategies were random and my risk and leverage too high. A lot of this is just pure luck and not going to take you to the next level. Your account balance shouldn't be used as a guage for success. Some questions to ask yourself to guage your success may be:
Have you managed to minimize your risk and maximize your reward?
Have you maintained consistency?
Have you been able to control your emotions?
Have you developed a complete trading system that you've been able to follow without deviation?
If you haven't been profitable, have you at least been able to turn those gushing drawdowns into slow bleeders?
If you're new to trading forex or have been trading for a couple of years, the #1 goal is to stay in the game as long as you can. I've talked to many traders over the years and many of them have been in and outers. They'll jump in head first, blow up multiple accounts, and jump out never to be heard from again. There are other traders I've known who couldn't consistently turn a profit and instead turned into mentors or forex marketers. Heed caution... There are also others who couldn't stand the non-regulation of forex and went back to trading futures or stocks. There are a couple traders still around since I started but I can count them on one hand. It takes years to become a trader and I can't even say that for certain. I'm still not there but I'm still around and giving myself at least 5 years. If it doesn't work out for me or you after 5 years, just think of the countless people who have gone to college and have never entered into the field of their degree.

Forex

Has the GBP/USD found a base now?
I went long today in GBP/USD and found a really good trade. When the market has finally found a potential bottom (note the corrections above 1.9330) risk is offset to trade long when there is a pattern such as the monthly and weekly double bottom that has formed.
This could be the turnaround many traders have been waiting for now the January blues have worn off.

Where Have I Been?

It's been a while; a little over two weeks in fact since my last blog post.
My last trade was 18 days ago and today was the first time I opened up a chart since then.
Am I quitting? Has the forex market taken its' toll on me?
No and no.
I started a new job about two months ago and it has been so draining mentally and physically that I just haven't had anything left for forex. Trading forex has since fallen to the bottom of my priority list next to watering my cactus. The unfortunate thing is that I took this new job because I thought it would give me more time to concentrate on forex.
I feel like my added responsibilities are started to loosen a bit though as I become more acclimated to my new full-time job. The fact that I'm finally posting something on my blog for the first time in two weeks may be evidence.
The question will be whether I jump head first back into trading forex or ease my way back in. Either way, I'll probably wait until May 1st for psychological reasons. I'm up 2% for the month and I'd rather not threaten this by trading hastily before month end.
Stay tuned. I'll be back soon. Hope everyone else is still chugging along making progress and money.

EUR/JPY cross

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The EUR/JPY cross pair just took a fall after a surprising rally above stops at 155.80. See the pics below of a 1 minute chart representation of the sell-off of the single currency vs. the yen.