12-16-09
5:14a GMT – Bears continued their vicious attack on the EUR/USD markets yesterday dropping another 150+ pips on the day. For anyone keeping score thats more than a 600 pip drop in less than 2 weeks every since we saw that nice shooting star on the daily charts on Dec 3. For our part it has been hard to get a decent entry position in these thin markets as bears have been able to push down prices before we get close to our entry positions! But that is ok – I’m always happier to not take a trade than to take a trade I’m nervous about.
Daily Outlook: Obviously we have a bearish short-term outlook on the pair and we still have some room to work with before we hit daily support around 1.4485/1.4465. You can see on the 4h chart below that over the past few days we’ve seen a repeating pattern of a big bearish drop, about a 16 or so hours of consolidation and then another bearish drop – basically a repeating bearish flag-pattern on the charts.
Trading Idea: I’ll look to profit off of this repeating pattern by getting in on a short around the 1.4580-1.4600 resistance zone (50% and 61.8% fibs) or on a sustained break of the bottom rising trend support. Short targets from 1.4600 are 1.4570, 1.4540, 1.4505 and 1.4485.
(click to enlarge)
P.S. I’ve been bad about getting back to emails lately – sorry. With the email server going down all my spare time has been about getting that up and going again. As things clear up I’ll get back on top of the inbox :).
Quick Links:
December 16, 2009 at 15:38
News are worst than expected but nothing shocking I’d say..
December 16, 2009 at 15:55
Looks like a nice little doji is forming on the 1h chart
December 16, 2009 at 15:58
Just got in on that.
Short 1.4580.
December 16, 2009 at 15:57
Just took a short for 30 pip’s not to much going on in this volatile market this week risk management I think I’m done for the day. I will watch the markets from my iphone otha than that.
December 16, 2009 at 15:58
Persistent bulls aren’t they.
December 16, 2009 at 16:05
Oh yes Mark,
The last target you have, should it be 1.4485 instead of 1.4585?
Just to clarify.
December 16, 2009 at 16:09
Yes it should be, good catch.
December 16, 2009 at 16:09
Hey all, I took James’ post from the top of these comments and made it its own forum post here:
http://piphut.com/forum/viewtopic.php?f=2&t=84&p=188
I think the idea of patience and forex trading is important enough to have its own topic! Feel free to weigh in with your thoughts experiences by replying to the topic in the forum.
December 16, 2009 at 16:13
Looks like a shooting star might be forming soon on the 1h chart.
Anyone got in the top end of the tail?
December 16, 2009 at 16:16
I’m looking to short at 1.4600 based on last hours doji.
December 16, 2009 at 16:24
Here we go!
By the way Mark, great idea with the post of topic “Patience” in the forum.
I was a complete “loser” in the FOREX market when i first started out without any knowledge or what-so-ever with what i am doing. Luckily for me, i had a friend who dabbled with it and made some terrific returns. He gave me the idea of starting with a demo account (like you did with Lisa) first before putting in any real cash.
Now, i think a guide would probably go like this;
1. Start a demo account for a comfortable time range (say 3 months)
2. Decision time: If you feel you’re ready, start of with a small capital (this is where i am now!).
3. Trade in 1 or 2 Mini lots so that Margin Calls can be avoided.
4. As time passes and confidence grows, top up the account gradually (say in 1k)
5. Increase the the amount of Mini lots to see how one copes with the pressure or making huge losses (i assume everyone can cope with huge profits!)
6. You’re on a rather healthy growth.
Patience. I was trading with my eyes glued on the screen every night and i realised that this did not help at all. That is when SL and TP comes in handy. Get a strategy, put it in, let it run. If it works, well done. If it doesn’t then learn from it. No one gets it right all the time.
I personally treaded on the pointers and it did help. I hope it will help others too. Without paying too much “tuition fees”.
Cheers!
December 16, 2009 at 16:26
Brandon, good note. Would you mind posting in the forum topic so people will be able to see it when they view the topic?
December 16, 2009 at 16:33
Nice pointers Brandon. I’m currently going through a patch whereby I trade rashly, entering a trade even though it has passed its entry point hoping that it could go further. I’m also doing bad habits like dragging SL further n further in hope that it would bounce back at some point, and that is killing my account.
Money management is a must, as the saying goes “as long as you know how to lose correctly, you win”.
December 16, 2009 at 16:36
Danny, another great point. Would you also mind posting your reply under the forum topic so that others will be able to see it in the forum:?
December 16, 2009 at 16:38
Sure thing Mark.
And btw, I’m in after that doji. 1.45766. Not sure if that’s a good decision as it hasn’t hit 1.4600 yet.
December 16, 2009 at 16:36
You’re quick :). Just saw your post in the forum.
December 16, 2009 at 16:44
Just doing my part Mark :)
It’s almost 1am here in Malaysia. I’m almost going to bed now. Put on a 40pips TP, 30pips SL and a brave face. Gonna try leave my trade alone for tonight.
Good night guys..Happy trading.
December 16, 2009 at 16:30
Sure i’ll do that!
Double doji! D-Square!
December 16, 2009 at 16:37
The core rate of inflation from the U.S. printed at 0.0%, down from last month’s 0.2%. The current account in the U.S. was lower by -108B. The Housing starts were close to expected. Manufacturing Sales in Canada printed at 2.0%, way above the expected. From that we can look to near-term Usd weakness
December 16, 2009 at 16:42
Hi Tom,
I’m not too sure if this is right (studying Monetary Economics now, really bad at it). But the Core Inflation Rate does signify that the overall economies prices have not moved up, which also means that manufacturers are still not expecting the economy to expand, hence the lower inflation rate. This in turn may cause a weakness in the USD.
From your experience, how much will this piece of information move the market?
December 16, 2009 at 16:51
Hi Brandon, its but a small piece of the entire puzzle that moves the forex market. What we have is expectations of a fast recovery in the USA and when the market finally sees that it is just not going to happen the dollar will tank again. The money spent from the ‘stimulis’ in the US did not create jobs or help the housing market and until these 2 shows signs of correcting there will be no sustained recovery only spurts from the billions of Gov money pumped into the economy with nothing long term to show for it.
The Dax,the SP500 the $index the Nikkei, all pay a pivotal role in the market moves and yes we must pay attention to the fundis.
I am not sure what to expect from the FOMC but I dont think we will see a significant drop from it. If anything we may see a rally before the next leg lower if that is yet to come.
December 16, 2009 at 16:38
Shucks! I exceeded the number of tries for registration. I clicked too many time the confirmation code refresh button! Gosh!
December 16, 2009 at 16:42
It’s ok we know the owner, LOL:)
December 16, 2009 at 16:43
doh! I had to crank up the security a bit on that image because I was starting to get a lot of spambots trying to post garbage in the forums. If you delete your browser cookies you should be able to try again.
December 16, 2009 at 16:43
Long Eur/Usd potential (subject to FOMC noise at 14:15 EST)
The major central banks embarked a the quantitative easing (QE) program during the credit crisis, launching a boat that was full of Usd liquidity and short-term local currency loans that were designed to instigate commercial bank lending. Signals are coming that the QE boat may have found dry land, and the dismemberment begins.
The question now is which region will be the first to leave the program completely, because that is the currency that will find buyers first.
The first to make the jump was the ECB (outside of Australia that seemed to doge the QE bullet) on Wednesday when they held the last of their 12-month refinancing operations. While the usual approach of central banks to expand their balance sheets is to buy bonds from the market, the ECB decided to follow an expansionary policy with a slightly different approach.
The ECB decided at the height of the credit crisis to increase the money supply and the inter-banking liquidity by offering 12-months loans, at a fixed rate, of 1% – which, by all standards are very low. The main advantage of this strategy over the standard one of buying government bonds is that the program exit is much cleaner and more straightforward.
At the last 12-month refinancing operation, the ECB drew bids of approximately €96.9bn, inline with the market’s forecasts.
Among the major central banks, the ECB is the first to officially exit from the quantitative easing policies. In February, the Bank of England’s asset-purchase program is also expected to end, while the Fed’s bond purchases are expected to last for a while, and at least through until February and March.
At the opposite end of the scale is the Bank of Japan, which is under pressure to create inflationary expectations, something that the bank has a long history of failing at this objective.
Central banks exiting QE strategies do not necessarily have any immediate traction in the currency market, but overall do point to higher interest rates, and therefore a more attractive currency to buy.
The end of QE policies can be taken as precursor for higher interest rates, even though it will take a while until the Fed, ECB or BoE will raise overnight lending costs. Heads up traders! The ECB may just have initiated a long-euro play.
From the LFB
December 16, 2009 at 16:52
If the ECB starts to withdraw the stimulus program earlier than The Fed i think it may trigger a Long-Eur play, but it will not be tonight. QE is basically stating that while the “additional” monies that are in the systems right now should be withdrawn, coupled with raising interest rates, will strengthen the currency. The question is which side will do it first? Will we have a “FCFS winner” or the “Last Nation Standing Winner” case?
Tom, may i have your opinion on tonights FOMC Rates? Whether will it affect the market?
December 16, 2009 at 16:59
I think the USA will be among the last to raise rates, our economy is still in extremely bad shape and anyone that lives in or knows anyone that lives in middle America knows this to be a fact regardless of what the Gov numbers want to show the rest of the world. You cannot sit in a seat of power looking out from you high rise and expect to see what the majority of the nation is going through.
the current administration is really clueless how to fix or correct the problem, they continue to patch it to keep it running but sooner or later this will catch up to them, my guess is sometime next summer before midterm elections
December 16, 2009 at 17:03
Thanks Tom for the insight.
Cause i’m living here at the other part of the world, and is really clueless how bad the situation is in the states. But from the pictures it paints which i get from CNBC, Squawk Box etc, it seems like it is moving relatively well. I will not say it is already moving out, but at least it is not sliding down at the moment.
Could this also be due to the fact that we’re approaching festive season and that it is wise to just post “nice numbers” to keep the mood going? Just thinking out of the box.
December 16, 2009 at 18:19
grassroots america hurts, unemployment is high and the USA you see from main stream media/CNN CMBC etc. is not the america you see if living here. The numbers do not reflect the real situation but an artificially created situation by printing and spending trillions of dollars that have NOT created jobs nor will it create jobs.
I too watch the news and wonder who they are trying to fool.
no economy recovers without jobs and housing and America has done nothing to correct either.
There is a loan modification program here that allows those with ARM’s to lock into a low rate loan in the hopes of saving their houses from foreclosure. It is estimated that as many as 6.5 million of those that received these modifications are now AGAIN behind in payments and facing foreclosure. When you have no jobs and no prospect of jobs things will only get worse.
There is much more to it but that gives you an small idea of the truth.
December 16, 2009 at 16:51
another 8 minute to see a doji at m30.. :)
December 16, 2009 at 17:00
Double Doji completed.
December 16, 2009 at 17:00
The Euro is a no trade until the FOMC now
December 16, 2009 at 17:06
Actual: release at 19:15 GMTCons.: 0.25%Previous: 0.25%
The Board of Governors of the Federal Reserve announces an interest rate. This interest rate affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the exchange rate. If the Fed is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the USD.
source:fxstreet
December 16, 2009 at 17:27
For United States
about-Fed Interest Rate Decision
December 16, 2009 at 17:11
I closed my trade early again in anticipation of the uncertainty during the FOMC rate decision. Looks like a wrong choice.
December 16, 2009 at 18:29
never look at it that way, there is never a wrong choice, its made and done, on to the next trade
December 16, 2009 at 18:56
Thanks Tom.
I really needed that encouragement cause this is the second time i did that.
LOL!
December 16, 2009 at 19:24
Look at ti this way
with TRILLIONS changing hands everyday you never leave pips on the table because there is always the next trade. Thats part of the mental part traders need to master.
you also never miss a trade
December 16, 2009 at 18:17
Half my position closed for 40 pips, other half is at breakeven, just bring the news :)
December 16, 2009 at 18:20
does anyone know weather we should buy or sell for the fomc breaking news. I’m trying to put a strategy together. So after the news break I can be a PIPSTAR!!!
December 16, 2009 at 18:27
If anyone knew for sure then we could all retire after the news breaks.
its wait and see like all news like this is.
personally I just closed out a long from the drop for 15 pips and am done until tonight
December 16, 2009 at 18:27
Hi Don, I do not trade news events :).
December 16, 2009 at 18:44
Hey Mark, you think it best to wait to trade till after the rate news.
December 16, 2009 at 18:56
At this point yes. And if you shorted on the double doji in the 1.4580 range I would personally take profit before the event.
December 16, 2009 at 19:00
Cool thank you I will close out.
December 16, 2009 at 18:23
Read this
While we wait for the pronouncements from the Fed on their most recent meetings, there is other news. In Copenhagen, the riot police have been called upon to dispense pepper spray and tear gas as the protesters demand “climate justice.” Probably the best news for the global economy is that, despite the presence of Prince Charles, Gordon Brown, and Arnold Schwarzenegger, it is reported there is a total lack of progress, in solving the fixing the changes in the Earth’s climate.
Elsewhere it is reported that there is dissatisfaction with the USD’s use a the trading currency for oil in the Arab states. The UK Telegraph this morning reported:
“Gulf petro-powers to launch currency in latest threat to dollar hegemony
The Arab states of the Gulf region have agreed to launch a single currency modeled on the euro, hoping to blaze a trail towards a pan-Arab monetary union swelling to the ancient borders of the Ummayad Caliphate.
The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (£739bn), some 40pc of the world’s proven oil reserves, and financial clout equal to that of China.”
The creation of a Middle East central bank has some of the Middle East sheiks irked because the bank will be located in Riyadh Saudi Arabia. Some of the Emirates favor locating the bank in Abu Dhabi, and will not join the initial group in the bank. There does appear to be unanimity in their desire to delink from the dollar.
December 16, 2009 at 18:24
The news has been negative for the Euro this week, but this will not last forever. At the moment there is nothing to indicate a rally in the market is imminent but after a 640 point sell off, we do not wish to pile on here. On the other hand, trying to pick a bottom is usually not a good idea, so just stand aside.
December 16, 2009 at 18:40
Thank you Mark and Tom I read your comments they’ve helped me make a decision with my money management. In conclusion my decision is to watch and stand aside therefore on the next news event that is similiar I will know a bit more what to expect. Thank You for piphut we are all PIPSTARS!!!! YEAH!!!
December 16, 2009 at 19:07
You know this website is so additive so much so that i’m still awake here at 3a.m. in the morning knowing i have to get up at 7a.m. God help me, Long and Shorts! LOL!
Anyway, we’re really getting mixed signals from all the news all over. Better to stand aside and watch.
December 16, 2009 at 23:28
Hey Brandon, I agree. There’s a lot to learn from piphut here, and I stay up every night till 1 – 2am even though I have to go to work at 8 in the morning. :)
December 16, 2009 at 19:10
Maybe you should work on making this your full time. Do what you love be a PIPSTAR!!!!!
December 16, 2009 at 19:18
Thank you Mark for your suggestion of getting out:)
December 16, 2009 at 19:20
2009/12/16 14:16:15 US FED: FOMC Maintains Range of 0.0%-0.25% For Fed Funds Rate
December 16, 2009 at 19:24
Alright, read the news at Bloomberg, and the markets are reacting gradually but not in an hostile way. Should barely touch 1.4500 since there were no shocks in the results.
Time for me not to move from my bed now.
Goodnight PipStars! (i’m counting the stars now!)
Ciao
December 16, 2009 at 19:24
It’s amazing to see how the market reacts to… basically no news since the fed’s rate is unchanged
December 16, 2009 at 20:23
im done for today, thanks all, see you tomorrow, good night ;)
December 16, 2009 at 21:45
Mark maybe is better to write the countries after nicknames like Brandon Wong (Singapore) -you will see how many countries have in this site :)
December 16, 2009 at 22:56
That could be interesting. im in.
December 16, 2009 at 23:00
I agree, good idea.
December 16, 2009 at 23:08
Well I’ll join in the fun as well:)
December 16, 2009 at 23:21
I’m in too. :) Nice meeting you guys..
By the way, I stayed in trade throughout the news as I went to bed before it, and my TP was hit for a 50-pip profit.
Thanks guys!
December 16, 2009 at 23:35
Mark, i remember reading you sometime place sell orders below major suport areas and buy orders above major resistance in case it will break them. As exmaple 1.4480 something is major suport… right? how do you decide where to put the sell order, sl and tp?
Personaly i think it seams a bit risky but im sure you know what your doing.
December 17, 2009 at 03:49
WoW!! Bears are pushing hard tonight, anyone else see this move. I would have thought it would have happened in the morning.
December 17, 2009 at 04:50
Yes I’m watching.
I wish I had put my entry at 1.4580 instead of 1.4600 before I went to bed last night, and just woken up.
December 17, 2009 at 05:04
This is a big move, I thought it would happen during the New york session. I came home from dinner and saw this. Doesn’t seem to be many bulls out tonight.( obviously ) Fun to watch but I to chicken to enter now. I’ll catch the rebound hopefully. Well off to bed for me, hope you catch some good pips Les.