Wednesday, July 18, 2007

Dollar posts modest rise after stronger-than expected CPI, housing data

Dollar posts modest rise after stronger-than expected CPI, housing data

LONDON - The dollar posted a modest rise after US inflation and housing figures came in stronger than expected.

The CPI measure of inflation rose 0.2 pct in June from May, the smallest monthly increase since January but above analyst expectations of a 0.1 pct rise.

Meanwhile in the US housing sector, which is generally seen as the economy's weakpoint, figures showed the number of new homes built in June posted a 2.3 pct rise from a year ago to a 1.467 mln unit annual rate. The consensus forecast had been for a more moderate rise to 1.450 mln units.

The figures caused the dollar to make a moderate gain against the euro, although its moves are likely to be limited while markets await Federal Reserve chairman Ben Bernanke's testimony to congress.

At 1.44 pm, the euro was at 1.3755 usd having been at 1.3780 shortly before the data was released. The pound also slid further off its morning high against the greenback, dropping to 2.0464 usd from 2.0505.

The pound, which had earlier set a 26-year high of 2.0547 usd, retreated steadily to below the 2.04 usd level on the news that the 9-strong BoE rate-setting committee was split by a 6-to-3 margin to hike borrowing costs to 5.75 pct this month.

The news was seen as a little less hawkish than expected and led to a slight scaling back in rate hike expectations.

Markets still predict another quarter point hike, to 6.00 pct, over the coming months but appear to be a little less certain whether an increase to 6.25 pct will materialise.

However, Bear Stearns analysts said the data will do little to change the outlook for interest rates in the UK.

"The tone of the MPC hawks remains uncompromising and it sounds like the UK is on a collision course with 6.0 pct rates before year end," they said. "There is obviously a split in thinking in the MPC in terms of how far rates need to go, so timing for the next move will be down to the data and (BoE governor) Mervyn King's hearts and minds campaign in the next few months," they added.

Monday, July 16, 2007

Strong NY State Index Provides No Support to Dollar

The New York State Manufacturing Index defied critics once again in Jul and rose to 26.46, reaching a one year high, and being much better than expectation of a fall to 28.0. The index indicates manufacturing conditions continue to improve in the New York State, with details supporting the headline view. However, this piece of good news provides little support to the green back and it continues to remain pressured. Dollar continue to hover near record low against Euro, falls to fresh 26 year low against sterling. In addition, the greenback is still staying near to the new 22 years low and 18 years low against Kiwi and Aussie made earlier today. Canadian dollar is also hovering new 30 year high against the greenback.

Nevertheless, downside momentum in the greenback is limited so far as traders are holding their bets on some key events in the week. Producer and consumer inflation will be featured in the coming two days with another round of housing data. More important, Bernanke will have his semi-annual testimony on Wed and Thu, together with the release of FOMC minutes.

GBP/USD
Daily Pivots: (S1) 2.0279; (P) 2.0323; (R1) 2.0385
Cable's recent rally resumes today by surging to new 26 years high at 2.0403. At this point, further rally should be seen as long as cable stays above 2.0307 minor support. Sustained trading above trend line resistance (now at 2.0380) will encourage further rally towards next upside target of 100% projection of 1.9183 to 2.0132 from 1.9621 at 2.0570. However, note that upside momentum is seen diminishing with mild bearish divergence condition in 4 hours RSI. A break below 2.0307 minor support will indicate that the rally from 1.9621 could have made a top and deeper correction should then be seen towards 2.0056 support.

In the bigger picture, the sustained break of 2.0207 projection target confirms underlying upside momentum is still strong. Also, it added much credence to the case that whole up trend from 1.7047 is resumption of multi-year up trend from 1.3680. In such case, further rally should then be seen to 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677 first.

Having said that, even in case of a short term correction, downside should be contained above 1.9783 resistance turned support and bring medium term rally resumption. Also, break of 1.9862 low is needed to indicate a medium term top is formed and turn outlook neutral. Otherwise, medium term outlook will remain bullish.

Sunday, July 15, 2007

What ARE the 17 Steps? by Van Tharp

Lets take a look at the 17 steps one by one, with the first of the eight steps involving the development of a sound business plan.

First — assess your beliefs about trading and about yourself.

Although it’s difficult to grasp, did you know that nobody actually trades the market? Instead, you always trade your beliefs about the market

Second — determine your objectives for trading. System experts know that understanding your objectives thoroughly is half the battle in developing a system but most people have never taken the time to even consider what their objectives might be.

Third — understand the big picture. What’s the market doing overall and how can you measure it for yourself? It's important that you know how to determine the big picture for yourself and how to measure it.

Fourth — include three strategies that are compatible with the big picture in your business plan. Although there are thousands of systems out there, there are not many types of strategies. Know the essence of ten key strategies that you could use, the general picture of how they work and how you can adapt them for yourself.

Fifth — understand what your personal edges might be and how they set you off from the crowd. Having an edge in the markets isn’t just a slight advantage; it could be the pivotal difference in your success. So it’s very important to list your edges in your business plan and be able to capitalize on them. You need to know the key edges that almost any investor has over market makers or institutional investors. Or if you are a CTA, hedge fund, or portfolio manager, you need to know what your key edges might be.

Sixth — understand the key systems that almost every business must understand and start to think about developing structures for those systems. From marketing to cash flow, to back office and clients, trading is a business and should be regarded as such. More importantly, developing the right structures and systems is crucial for business success. For example, if you are a private trader, you must deal with clients – even if those clients are you and your family.

Seventh — develop a worst-case contingency plan. Most people don’t even consider this crucial component until it’s too late, but the key to a successful business plan is to be able to overcome disaster.

Eighth — select your trading market based upon two key factors. Learn what you need to know so that you can determine the following: Are you going to trade stocks? Are you going to trade futures? Are you going to trade mini-forex or real forex through the big banks? Are you going to do options on any of these? What market will you trade? Whatever you select must take into account the big picture and what is likely to happen in the next five to ten years.

Ninth — know about strategy preparation. There are several key sub steps that you should take before you think about trading. You need to know what you should do to get ready and how to follow up.

Tenth — know the key steps in strategy development and how to test for each. You’ll need to understand how to test exit signals, determine what your initial risk will be, and select and test your profit taking exits.

Eleventh — properly evaluate your system. Know what information you’ll need to gather to really test and compare your system with any other system. It's good to have a formula that will allow you to compare your system with any other system in the world and rank that system. Thus, you’ll know whether your system is weak, average, good, excellent, or superb.

Twelfth — master a simple way to get to know your system well without a lot of cost. You need a method to understand if your back testing is accurate. And, to understand what the worst-case scenarios will be for your system. Through this testing, you’ll be able to develop a simple position sizing model to fit your objectives.

Thirteenth — work on your objectives to actually develop position sizing models. This step is one of the keys to developing a system that fits you.

Fourteenth — know how to do a complete self-assessment. A successful trader needs to know the answer to these questions: How does my personality type impact trading? What is the most important attitude that I must have as a trader and how can I assess if I have it? What are my beliefs and values and how can I assess them? How do I begin to assess my key issues so that I know what could happen that might really interfere with my trading?

Fifteenth — commitment to do what it takes. There are many things you can do on a regular basis to really improve yourself. And if you have the commitment to really doing them, you’ll be unstoppable.

Sixteenth — how to develop a top down approach to discipline. Few traders have the kind of discipline needed for successful trading, but if you combine top-down discipline with regular self-work, you’ll be amazed at the difference in your trading.

Seventeenth — put what you know into action. Learning and studying are very important factors in any endeavor, however the only true way to be successful as a trader is to take action. Getting in there and learning from your experiences.

Saturday, July 14, 2007

Dollar Hovers Near Lows ahead of Retail Sales

Dollar is generally in consolidation mode near to recent lows ahead of today's retail sales data from US. Apparently, market hesitates to push the greenback through some key near term support levels against Sterling and Swissy this week. Even though EUR/USD edged to new record high, the medium term resistance of 1.3822 is playing some effect in capping the pair's rally. Growth in headline sales is expected fall back to 0.1% Jun after a strong rise of 1.4% in May. Growth in ex-auto sales is also expected to slow from 1.3% to 0.2%. However, with a lot of details in the report, there are a lot of uncertainty on how markets will react, in particular if the actual data comes in not far off expectation. Also, considering Friday's profit taking effect, we could still see the some dollar rebound even if retail sales disappoints today.

Other data from US include import prices which is expected to slow from 0.9% to 0.7% in Jun, business inventories which is expected to slow from 0.4% to 0.3% in May and University of Michigan consumer sentiment which is expected to rise slightly from 85.3 to 86.0 in Jun.

The Japanese yen remains generally weak today as global stocks soars. Meanwhile, Kiwi rebounded sharply overnight after much stronger than expected retail sales growth of 1.2% which enforces speculations that RBNZ is not done with the current tightening cycle. But after all, the rally in Kiwi is still limited by last week's high of 0.7879.

Sunday, July 01, 2007

FX Mastery Trading Seminar 2007

I just came back from Petaling Jaya for 2 Days FX Mastery Trading Seminar by Dar Wong at PJ Hilton.