Casual Forex Trader

After I made my post yesterday, I saw another article at Bloomberg on the US dollar. The strategists that have come close to estimating the value of the dollar today are saying that the dollar is going to rise. The prediction is that the US dollar will rise about 17% in the second half of the year. That’s a large move and probably something that we could all turn profitable. Other big players like the CIBC World Markets Plc, Deutsche Bank AG, Bank of America Corp. are predicting that there will be a 4% rise in the second half the year.

It appears like all the big players are bullish on the US dollar for the second half of 2009. That’s good. I think 4% is pretty decent, but if you can pull away with a 17% return, than you’re set.

Source

June 29 (Bloomberg) — Strategists who came closest to predicting the dollar’s value against the euro so far this year see it strengthening as much as 17 percent in the second half as the U.S. recovers from the recession faster than Europe.

CIBC World Markets Plc, Deutsche Bank AG, Bank of America Corp. and Wells Fargo & Co. estimate the U.S. currency will rise more than 4 percent by Dec. 31 after May ended with its steepest three-month fall since 2002. At the start of the year, all had second-quarter forecasts within a penny or two of the $1.4056- per-euro close on June 26, Bloomberg’s currency survey shows.

“I’m reasonably bullish on the dollar,” said Henrik Gullberg, a currency strategist in London at Frankfurt-based Deutsche Bank, which Euromoney Institutional Investor Plc ranks as the world’s biggest foreign-exchange trader. “If you look at the data over the past few weeks, it has been consistent with the situation where the U.S. is a quarter or two ahead” of the 16-country euro region in rebounding, he said.

At the start of the year, after 2008 closed with the euro worth $1.3971, Deutsche Bank said it would weaken to $1.40 by June 30, just shy of where it was two trading days before the quarter’s end. Now the bank predicts a 17.1 percent gain to $1.20 per euro by year’s end, which would be the greenback’s best two-quarter performance against the euro or a basket of predecessor currencies since 1981.

Emerging from Turmoil

Little changed so far in 2009, the dollar is down 5.8 percent this quarter to trade at $1.4071 as of 12:34 p.m. in New York. Against the yen, which has declined against all 16 major currencies tracked by Bloomberg this year, the dollar has gained 5.9 percent since Dec. 31 to 96.00 yen.

Pro-dollar predictions reflect signs that the U.S. economy is emerging from the worst turmoil since World War II. Orders for American-made durable goods unexpectedly jumped in May, the Commerce Department said June 24. Median forecasts in Bloomberg’s economist survey predict the U.S. will grow 1.9 percent next year after shrinking 2.7 percent in 2009 as the euro economy contracts 4.3 percent before expanding 0.5 percent.

The Federal Reserve on June 24 said that “the pace of economic contraction is slowing.” The Organization for Economic Cooperation and Development last week urged the European Central Bank to cut interest rates further to speed the recovery there.

“In Europe, there’s a lot of headwinds, so the bullish- dollar story is based on what’s going on elsewhere,” said Adam Fazio, a CIBC currency strategist in New York. “We are bullish dollar in the near term.” Toronto-based CIBC predicts a 4.1 percent increase in the next two quarters.

Wide Range

Forecasts for the currency are the most scattered in two years, with fourth-quarter predictions ranging from $1.16 to $1.55 per euro, Bloomberg data show. The median of 48 forecasts sees the year ending at $1.40, near the current level.

Aletti Gestielle SGR SpA, an asset-management unit of Italy’s Banca Popolare di Verona, had the same second-quarter prediction at the start of the year as Deutsche Bank and now is among the most bearish, seeing $1.52 per euro by Dec. 31.

“There’s a lot of disillusion about growth in the U.S.,” said Fabrizio Fiorini, who helps manage $12 billion for Aletti Gestielle in Milan. “The U.S. will suffer from high debt and low consumption for quarters to come.”

Market uncertainty is driving up foreign-exchange swings. Fluctuations in Group of Seven currencies have risen to more than double what they were in the year before the credit crunch started in mid-2007; the G7 Volatility Index closed at 14.4 percent on June 26.

Winning Streaks

In the past six quarters, just two forecasters in Bloomberg’s survey — Danske Bank A/S in Copenhagen and Royal Bank of Canada’s London-based strategists — were among the five most accurate half-year-hence dollar-euro prognosticators twice in a row. Only London-based HSBC Holdings Plc did so three straight times. The rankings are based on forecasts in Bloomberg’s database on each quarter’s first day.

Robert Minikin, a Standard Chartered Plc currency strategist in London, said forecasting is difficult because governments are committing record sums to battle the recession.

“There’s profound uncertainty about the impact of the non- conventional measures,” on foreign-exchange markets, Minikin said. “It’ll be difficult” for policy makers “to unwind what they’ve done,” he said. There will be “heavy downward pressure” pushing the dollar to $1.55 per euro by year-end, he added.

HSBC has gone from positive to negative on the currency following three straight quarters in the ranks of the most accurate. After foreseeing $1.25 per euro by this quarter’s end, HSBC predicts $1.50 by Dec. 31.

‘Vulnerable Position’

“The dollar is in a vulnerable position because of the quantitative-easing policy,” said Paul Mackel, a HSBC currency strategist in London.

The greenback fell against the euro from early 2002 until the economic crisis exploded in mid-2008, when it strengthened to a two-year peak of $1.2330 per euro on Oct. 28 as investors fled to the perceived safety of Treasuries. It’s been a rollercoaster since — $1.4719 on Dec. 18, $1.2457 on March 4 and then an 11.4 percent decline as investors returned to riskier investments and pushed the Standard & Poor’s 500 Index up 29 percent.

The legal tender fell as much as 0.9 percent on June 26, after policy makers at the People’s Bank of China renewed calls for a new global currency “delinked from sovereign nations.” Despite such talk, investors aren’t deserting dollar assets. The Fed’s custodial holdings of Treasuries for foreigners rose to a record $1.96 trillion this month as central banks and others abroad bought $15.2 billion worth the week ended June 24.

‘Risk Rally’

The dollar rose today for the first time in three days against the euro after China said it will not alter its foreign- currency reserves suddenly. China’s “foreign exchange reserve policy is always quite stable,” central bank Governor Zhou Xiaochuan told reporters yesterday in Basel, Switzerland.

“The recovery is going to take time, and that puts pressure on the risk rally,” said Geoffrey Yu, a strategist in London at UBS AG, the second-biggest currency trader. Renewed demand for havens is “going to be dollar supportive,” he added, predicting it will strengthen to $1.30 per euro in three months. The currency will trade at $1.40 by the end of 2010, Ashley Davies, a UBS currency strategist in Singapore, wrote in a report today.

“You don’t have to bet on the recovery to be bullish on the dollar,” said Christoph Kind, who manages $20 billion as head of asset allocation in Frankfurt at Frankfurt-Trust Investment GmbH. “If the situation stays as bad as it is, the dollar is a safe haven. And if the economy turns the corner, the U.S. will be the first to get out of the recession. On that basis, the dollar looks like a good investment. We are buying the dollar against the yen and the euro.”

Normally I’d say that the US Dollar will continue to strengthen as reality turns to the market and the dollar looks like a better place to be, but it’s hard to say. It really is because there are a few pieces of news that we need to pay attention too.

Oil of course! Like I described in a previous post, the value of the US dollar is always changed when there is movements in oil. America isn’t a major oil producer, only a major buyer. The price of oil going up is generally perceived as a bad thing for the dollar and when oil goes down it is a good thing.

What was the big news on Friday? Cap and Trade. This is the government bill that will cap carbon dioxide emissions, which is all energies that we make in large numbers. This will essentially drive down the production of oil and increase the price of it. I know the bill only pass in the House and probably won’t get through the Senate, but it is still something that can weigh on the market.

Basically, it’s hard to call what will happen. On the one hand we could see a continuing trend of the US dollar strengthening or we could see oil jump and push the price of the dollar down.

This is the weekly summary on casual forex posts for this blog. This way you can get a summary of what you missed over the week and catch up on whatever you need.

Forex Divergence Trading – Divergence trading is something that comes from all sorts of trading. It’s one of those phenomenons of market behavior that you can take advantage of and predict the direction of trades. It’s a pretty diverse way to turn a profit in this market.

The Canadian Dollar Has Been Falling – The Canadian dollar has been on a run up for sometime. It has been on a massive run actually. It made it all the way up to 0.92 cents US. Now it is trending down again and it is around 0.86 cents US. I’m telling you, there is a lot of profit to be made with the Canadian dollar.

Poor Economic Data – It appears that there might be a little sanity returning to the equity markets. The stock market has been going up on news that could be best described as neutral. Some poor economic data has come out that paints a very sour picture.

Dollar Up Against the Franc – The Swiss have announced that they’re going to start interfering in the forex market by selling Francs. This creates a distortion of the price and devaluing. That’s exactly what happened, so you see an increase in the US dollar compared to it.

There seems to be a lot of news about how the dollar is up against the Swiss Franc and people appear to be paying attention to the Federal Reserve meeting. Personally I don’t exactly expect any changes in Fed policy. From a monetary stimulus point of view, they’re stuck in a hard place. I don’t expect any interest changes. Not really sure what the expectation from the market is, but I’m sure it is probably the same. Here’s the news article from Forbes:

By Wanfeng Zhou

NEW YORK (Reuters) – The U.S. dollar rose against the Swiss franc Wednesday as traders reported the Swiss National Bank was intervening in the market by selling the Swiss currency for dollars and euros.

The dollar was the biggest beneficiary of the intervention reports; the SNB declined to comment.

Investors were beginning to turn their attention to the policy statement from the Federal Reserve due out at the close of the two-day meeting of its Federal Open Market Committee, at about 2:15 p.m. (1815 GMT).

“It has been a roller-coaster ride in the U.S. dollar this morning,” said Kathy Lien, director of currency research at GFT Forex in New York. “Everyone is going to be focused on the FOMC rate decision and how much the central bank talks about exit strategies.”

The Fed is widely expected to leave the benchmark federal funds rate at almost zero percent. Investors will focus on what the U.S. central bank says about the economic outlook and its debt-buying program.

The reported FX intervention by the Swiss National Bank drove both the Swiss franc and the euro lower earlier in the session, said Vassili Serebriakov, currency strategist at Wells Fargo ( WFC – news – people ) in New York.

“We do think that the Swiss National Bank will remain alert to those deflation risks in the near-term and are likely to maintain the current stance of preventing significant strength in the Swiss franc,” he said.

The dollar hit a session high of 1.0910 francs from around 1.0660 francs, before the intervention reports emerged on electronic trading platform EBS. In midday trading, the dollar was up 1.6 percent at 1.0841 francs.

Traders cited the SNB buying dollars around 1.0880 francs. Earlier, market players cited the Bank for International Settlements buying euros on behalf of the SNB around 1.5125 francs, after it had been seen in the market at around 1.5010/15 francs. The BIS declined to comment.

The euro rose as high as 1.5288 francs , its highest level in more than two months, from around 1.5010 francs before the intervention talk. It was last at 1.5210, up 1.3 percent.

U.S. data released on Wednesday painted a mixed picture of the economy. New orders for long-lasting manufactured goods jumped unexpectedly by 1.8 percent in May, providing further evidence that the battered U.S. economy was finding its feet.

A separate report, however, showed sales of new U.S. single-family homes slipped slightly in May, underscoring that conditions in the hard-hit housing market remain fragile.

The euro last traded down 0.4 percent at $1.4026, while the dollar was up 0.2 percent at 95.42 yen

The ICE Futures U.S. dollar index, which tracks the greenback versus a basket of major currencies, rose 0.2 percent to 79.995 .

The euro had earlier come under pressure after the ECB allotted a higher-than-expected 442 billion euros ($613 billion) in funds at a flat rate of 1 percent

“Today’s 12-month ECB auction further blurs the boundary between the ECB’s monetary expansion strategy and quantitative easing,” said Lena Komileva, head of G7 market economics at Tullett Prebon.

Despite modest gains in the dollar, Wells Fargo’s Serebriakov said sentiment on the greenback remains jittery ahead of the FOMC rate outcome.

“The risks are skewed towards the Fed making a stronger commitment to keep rates low for an extended period of time,” he said. “That makes the dollar vulnerable and we could see a weaker dollar should that scenario play out.” (Additional reporting by Jessica Mortimer in London and Gertrude Chavez-Dreyfuss and Nick Olivari in New York; editing by Leslie Adler)

I never thought the economic performance of the stock market over the last few months was any sort of reality. I’m not exactly sure what it was, but I think people just really wanted it to go up. There just didn’t seem to be any fundamentals that could back it up.

Despite all the money the government has thrown at this problem, they have yet to address the problem of toxic acids. They’re still sitting on bank balance sheets. There are still huge amounts of foreclosures and prices have been dropping for homes. This is just the facts of everything happening during the rise in the stock market. I’m not an investor in markets I don’t understand.

Some information came out yesterday that showed things weren’t that great and might be far worse than everyone will expect.

The World Bank put out a worse than anticipated number on the contraction of the economy at 2.9%

Here is the other data that came out:

7:45 a.m. ICSC Chain Store Sales Index For June 20: Previous: -0.6%.
8:55 a.m. Redbook Retail Sales Index For June 20: Previous: -4.5%.
10:00 a.m. May Existing Home Sales: Expected: +2.6%. Previous: +2.9%.
10:00 a.m. June Richmond Fed Manufacturing Index: Previous: 4.
4:30 p.m. June 1 API Oil Industry Report
5:00 p.m. ABC/Wash Post Consumer Conf For June 20: Previous: -49.

It is amazing how right I have become on the Canadian dollar, so I hope you have been investing on the help I’ve been trying to provide. The Canadian dollar was up to about 92 cents American. It’s back down to 86 cents. These are huge moves only over the course of a few weeks. That’s a lot of profit if you’re invested on the right side of the move.

I was calling it here: Has the Canadian Dollar Hit The Ceiling

It’s a trend we will probably experience too since reality is starting to hit the market again. It seemed like the last run we’ve had in the market has been out of touch with reality. People just wanted the market to work, but it really wasn’t. More grim predictions are coming in and oil is starting to sag back down.

When it comes to the Canadian dollar, without any power in oil, there is going to make it go up. Let me say that again, without oil power, it won’t go up.

Oil is going down again. I doubt it will fall as low as we were seeing before, but it’s going down. Until that trends turn, you can bet the Canadian dollar will be weak. Exploit it for your profits.

Yes, I’m going to talk to you about forex divergence trading, which should be a little bit different than what you’re used to when it comes to trading. I know there are a lot of you in this market that are just scared of risk and wish that you could more easily identify the selling points.

Well, there are ways to know when to sell near the top and buy near the bottom. If you were in a long trade, it would be sweet to know exactly when to sell because its tough watching the ups and downs. There is a way to do all this that is known as forex divergence trading.

The key to finding the proper prices is through a concept known as a oscillator indicator. There are a lot of different oscillators that you can use, but it really doesn’t matter which one. After you start focusing on this, you’re going to pick up on this much easier and probably will be able to pick this up by just looking at a graph.

This post was brought to you by Forex Killer.

This is another installment of the weekly summary for the week of June 19. This is a way to catch up on all the posts over the week, on your spare time on the weekend. I hope you enjoy me doing it like this.

Why You Need Forex Software – I don’t think people really understand how important and helpful software can be for you when trading. I’m not talking about it as something that is made to get you rich, but something that is a powerful tool for identifying trends.

Why You Need a Forex Trading Plan – Without a plan for your money and the trades you plan to make with it, you’re just a dead fish in the water. You have to have a plan or you’re just risking so much. This is a business and you should treat it as such.

Forex Trader or Gambler – There are some people that like to call forex trading gambling, but is that really the way to look at it? There is risk in this business just like any business, but what separates forex from gambling?

What is a Currency Carry Trade – A lot of people haven’t really heard of this kind of trading strategy because it isn’t exactly a traditional way of trading currencies. The approach is very interesting though and an easy way to make some money.

I thought I’d do a simple post on why you need forex software. I think a lot of people get intimidated by the fact that people are selling software and saying you can make money with it. It does sound too good to be true. If the software can make your money, than you really don’t have to do much. Too good to be true right? Or is it?

If you’ve been following my blog for sometime than you should of learned a thing or two about trading forex. The first point that you would of learned is that this is a logical business. There’s no emotions or gut feelings. You make moves based on probabilities and conditions that show a potential for profit. Hmmm, that sounds just like a computer.

All the indicators in the forex market are logical and can be easily identified by software. Are you starting to see what I’m saying? Sure you can sit in front of a computer all day looking at graphs, trying to identify the indicators (lots of them), but you could have software doing this that has all the indicators programmed in to work.

Since forex trading is a completely logical, unbiased, and technical business, having forex software makes you more profitable. Even if you set the software to manual, you can see it identify trades and you just have to make the choice of buying or selling. That’s the real power that comes from this kind of software.

Click here for the best software I’ve found

I thought I could help you out here and tell you why you need a forex trading plan. It amazes me how many people don’t have a plan to begin with. They just try things out when they trade and I suppose that would be fine if your goal is to just learn how trades work, but I’ve found that most people have the goal of making money. Or at least that is my goal. Money is the name of the game in this market and without a profit, you’re just wasting your time. Let me show you why you need a forex trading plan.

Keeps you in the right direction

It is very easy to get off track and get very inconsistent. It’s just the way we are. We tend to be impulsive creatures that will seeing that looks like a good opportunity and go for it, but if we see something else, we’ll go for that too. Making sure you’re going consistently in a certain direction is important. Without that direction, you can’t tell whether you’re going forward, back or in a circle.

All Businesses have plans

Whether you’ve accepted the fact that this is a business or not, you’re in a business. You’re assuming all the risk and you’re putting money on the line. A plan has to exist or you’re just being stupid. Do any other businesses out there function without a plan? Does McDonald’s try to make big profits this year without actually knowing what they’ll do to achieve that? Of course not. This is the real world and you need a plan to help you get to where you want to go.