Forex Crunch Forex trading season! |
| Posted: 24 Mar 2010 02:26 PM PDT
John Forman is a Forex author and expert. He is the Senior Foreign Exchange Analyst for the IFR Markets group of Thomson Reuters and frequent blog poster on Currensee.com. Do you know the seasonal patterns which tend to play out in the forex markets? If so, then you were well positioned to take advantage of what we saw out of the likes of the dollar and the euro over the last couple of months. Both moved in accord with their historical tendencies during January and February. Take a look at as this chart of how EUR/USD tends to perform throughout the course of the calendar year.
What the chart is telling you is that if you sell EUR/USD during the first 8 weeks or so of the calendar year, and hold that position for a month, you will generally make month. The chart includes data for 1997 to 2008 (pre-1999 data is from the old ECU to which the EUR was pegged at its launch). It doesn't include 2009 and 2010, which would make things even more negative as the chart below shows.
And here all the market commentators were talking about what was happening with Greece as the main driver of the decline in EUR/GBP the last couple months. While that certainly was contributory, there's no denying that January and February have a seasonal tendency to move lower anyway. The current news and psychology in the market has been riding along the seasonal pattern. So where to from here? Well, the dollar tends to stay on the positive side through about the first quarter of the year, though the latter part of that span is not quite to strong as what is seen in the first two months. As we progress toward the middle part of the year the dollar takes on a comparably negative bias as the positive one seen at the outset of the year. Look at what's forthcoming in USD/JPY.
Week 23, which falls in June, is about the start of 2-3 month stretch over which USD/JPY tends to perform badly. That wouldn't be a time one generally is going to want to be long. A little more immediate is the strong tendency for GBP/CHF to rally in the month of April. Between 1982 and 2008 the cross was up 70% of the time at an average rate of 1.73%. Overall, the cross has averaged a gain of 0.78% during the month. And those figures don't include a 3.3% gain GBP/CHF experienced in 2009. There are loads more seasonal patterns in the majors and major crosses, from monthly down to daily. Don't ask me to tell you why they persist. I can only hazard a guess about what the drivers may be, but really I'm just reporting what the numbers say. And you definitely should be aware of these patterns. You're not going to base your trading decisions on them alone, but they may help you improve your trading odds by biasing you in the right direction. The data above comes from the research report Opportunities in Forex Calendar Trading Patterns, which I put together after I started noticing these patterns while I was doing my own trading. I have definitely used them profitably since. ===== Be sure to read the full risk disclosure before trading Forex. Please note that Forex trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved before trading. Performance, strategies and charts shown are not necessarily predictive of any particular result. And, as always, past performance is no indication of future results. |
| Forex Daily Outlook – March 25th 2010 Posted: 24 Mar 2010 02:00 PM PDT
Ben Bernanke will dominate the scene today with a testimony in Washington. There are lots of other important events from all over the world. Let’s see what’s up for today. At the time of writing, EUR/CHF is still at an all time low, under 1.43. A massive intervention by the Swiss National Bank can happen anytime now. OK, let’s start the review: Federal Reserve Governor Donald Kohn will start the day with a speech about monetary policy. Later, Federal Reserve Bank of Cleveland President Sandra Pianalto will also speak in a conference. Will they hint about the rates? These will be a warm up for the main speaker of the day: Ben Bernanke. In his testimony in front of House Financial Services Committee, Bernanke will speak about the exit strategies of the bank. This testimony, starting at 14:00 GMT, will include tough questions and will case volatility for many hours. Later, also US Treasury Secretary Timothy Geithner will speak before a committee in Washington and might move the markets as well. American Unemployment Claims are predicted to drop for the fourth month in a row – from 457K to 453K, giving hope for a positive NFP. In Australia, the RBA Financial Stability Review will probably show satisfying stability, and will support the Aussie. Later, RBA governor Glenn Stevens will speak in a conference and could shake AUD/USD. The CB Leading Index can also have an impact on the Aussie – it’s expected to rise. For more on the Australian dollar, read the AUD/USD forecast. The struggling Euro will receive three indicators today: GfK Consumer Climate from Germany is predicted edge down from 3.2 to 3.1 points. In Europe’s second largest economy, France, Consumer Spending dropped by 2.7% last month, and is now predicted to rise by 0.3%. The last indicator is the M3 Money Supply. The amount of money in circulation stopped rising, indicating ongoing deflation. It’s predicted to squeeze by 0.1% this time. For more on the Euro, read the EUR/USD forecast and Casey Stubbs’ latest analysis. In Britain, Retail Sales are predicted to rise by 0.6% after dropping by 1.8% last month. This should help stabilize the volatile Pound. Read more on the British Pound in the GBP/USD forecast. In New Zealand, Trade Balance is expected to show a smaller surplus – 242 million. NZD/USD is around 0.70. Japanese Tokyo Core CPI has the strongest impact of all inflation figures. A small improvement, from a drop of 1.8% to a drop of 1.7% is predicted this time. That’s it for today. Happy forex trading! Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
| Posted: 24 Mar 2010 06:25 AM PDT
Every major appearance by Alistair Darling is a blow for the Pound. This time isn’t different. At the annual budget release, Darling released a few disappointing statements sending GBP/USD towards an important support level. Less than two months before the general elections, Britain’s budget was presented in parliament. Alistair Darling, Britain’s Chancellor of the Exchequer, defended the government’s role in dealing with global crisis, but his prospects for the future weren’t good enough. Darling has a history of hurting the Pound. Here are his actions this time: Darling warned that confidence had not fully returned, especially in Europe. The growth forecast for 2010 stands at 1 to 1.5%, while the forecast for 2011 now stands on 3 to 3.5%. The government’s prospects were lowered, now more in line with many economists. Even though nobody expected the British government to make painful cuts in the budget weeks before the elections, the national debt is still a great weight on the Pound. Darling didn’t address it. One of the dangers of a big debt is a credit downgrade. David Blanchflower of the Bank of England, begins to accept it:
GBP/USD Reaction The British Pound fell before Darling’s presentation, and accelerated its falls afterwards. It reached 1.4896 before climbing back above 1.49. GBP/USD approached the 1.4870 level which was the bottom two weeks ago. A stronger point of support appears at 1.4770 – this is the line where the Pound bounced back when it made a big collapse at the beginning of March. This is also a historic line. If GBP/USD recovers, 1.50 is the immediate resistance line, followed by 1.51. Note that the Pound also suffers from risk a stronger dollar across the board. EUR/USD collapsed earlier today and broke a very important support line. Later in the week, British retail sales will move the Pound, as well as American figures, such as Ben Bernanke’s speech. Currently, the blow to the Pound is limited. A break under 1.4770 is necessary in order to trigger a new massive drop. Want to see what other traders are doing in real accounts? Check out Currensee. It’s free. |
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