The Ceiling is Falling in Euro -Dollar

For seven days euro buyers have been challenging the down trend in euro-dollar.  For me the 29 week moving average does a good job of describing overall sentiment.  The market has been unable to hold above here. 

Yesterday the market sharply reversed Tuesdays rally and emphasized what I see as the dominant theme – which is to sell euro strength.  The ceiling is now expected to fall to 1.3100 as any renewed bounce will attract more aggressive selling.   Below 1.3000 negative momentum will build, and I target 1.2750 the 1.02695 and 1.2260 overall.

Gold Has Fallen Through The Floor!!!

The base of the past twenty months at 1522 is now gone.  The twelve year trend as described by the 175 week moving average has been broken.  In addition the market has shot lower with a sustained momentum indicating this move is not a minor correction but a  new trend.  

My targets are 1312 and 1222.  Intra-day a  bounce towards 1480 should attract fresh selling.

Shot in the Foot by Gold Buyers

It’s funny, but in financial markets there are permanent doom mongers.  It doesn’t matter how good the trading conditions, how strong the performance in a market, there is a sizable portion of investors who constantly expect the world is going to end.

Within this group, one of the most vocal and aggressive sections are the gold buyers.

If North Korea is going to launch a missile, a coconut or a balloon, their forecast is always buy gold.  The end is always just around the corner.

Last week, I mentioned the downside risks in gold. I got a frantic response from investors who are pinning their retirement on an every lasting appreciation in the commodity.

I am not forecasting the end of the world.  I do not have a short position in gold.

However, I would not be buying it here.  The metal has fallen to within reach of last weeks lows. It is also near the base of the past twenty months at 1522.  But more importantly, its approaching the 175 week moving average, which has underpinned every dip since 2002.

A break beneath the 1493, 175 week average, would make me bearish on gold.  It may also be a sign of a larger positive shift in dollar sentiment.  I continue to believe euro-dollar is stretched above 1.3100.

Is It Time to Jump Into Euro-Dollar?

I don’t think so!  The water is freezing and it’s blowing a gale.

Up until Thursday last week the euro looked fairly appalling.  Seven out of nine down weeks is not a good tally for euro optimist.  I was happy, as I am not one. 

However, Thursday and Friday’s trading have taken the pressure back off the euro and put it on the dollar.

The euro ended in New York, close to the highs, and posted it strongest weekly performance since January. 

So is that it?  The euro is going to trundle along in a mindless pattern of consolidation around 1.3000.  A repeat of what we saw for much of 2012.

No! Not in my view! 

This year the market is trading on clear bearish sentiment.  A pause in the euro storm is not cause for celebration.   

Have you seen anything out of Europe that encourages you to invest in its currency?

I haven’t!  And I don’t expect much before the German elections later in the year. 

My strategy is to look for weakness between 1.3015 and 1.3170.  Strong selling in this area would be a good signal that euro strength is just temporary. 

I think the dollar is good value in this zone.

All That Glitters Is Not Gold

It has been a while since gold has lost over $50.00 in a week.  But it has this week.

The outlook is deteriorating, as the market heads to the base of its range for the past twenty months at 1522.  Not far below here, the major foundation for the bull run since 2002, comes in at 1491.  This level is pivotal, it marks the 175 week moving average.  A safety rope that has kept the market positive, even through the worst excesses of global financial meltdown in 2008.

If markets are going to unravel, a collapse in gold will help shape a new phase in the outlook for 2013.  It may be too soon.  It may never happen.  But if gold continues to collapse as the dollar strengthens, this will be a very interesting year.

Lesson 3 – How to succeed in Foreign Exchange

Why is trading so difficult?  Because you have to dismantle all the logic you have learnt to be successful.

Most people are brought up to be cautious.  We are programmed to look for signs of danger and avoid it wherever possible.

Since you were a toddler you have been told…

– Stay away from the fire,

– Be careful of the traffic,

– Be home before it gets dark.

Trading turns everything we have ever been thought on its head. 

Opportunity and danger go hand in hand!  The opposite is also true!

When the market is at its most volatile and dangerous – it’s time to jump in.

When the market is quiet and safe – it’s time to avoid trading and sit it out.

When everyone is buying its time to take a profit – or look for a selling opportunity.

When everyone is selling its time to take a profit – or look for a buying opportunity.

When you have a large profit and you are feeling confident, instead of doubling your position, it’s time to close it.

When you have a large loss and you feeling everything is hopeless.  It’s time to reassess all the information and struggle to keep you nerve, if your reasons for taking the position remain valid.

To unlearn a lifetimes programming is extremely difficult.   

If the last 15 years have thought us anything – it must be to be skeptical of amazing booms and be confident when everything is hopeless.

 

Blown Away! – The Euro is Collapsing

There is a big bear sitting on the euro.   Is it Russia! 

No it’s everyone who is fed up of being told fairy stories about stability, unity, co-operation and solutions by European politicians, the ECB and the IMF. 

Resolution by policy ineptitude can only bore the market into a slumber temporarily

It may seem like a long time, but reality is beginning to dawn that the EURO is not working.

Emergency steroids have begun to wear off, as the euro has once again committed a fatal crime against its original ideals – freezing the free flow of capital. 

What is a euro really worth against the dollar? 

I believe we will get a much clear idea over the next few weeks. 

The break of 1.3000 was not clean cut.  However, with all eyes on 1.2659 the stakes are rising for anyone who believes that the euro can be held frozen in the boring wastelands of the high 1.2000’s and low 1.3000’s forever.

 My next target beneath 1.2659 is 1.2041.

Your Money or Your Life… Here Comes Dick Turpin!

I may be accused of flogging a dead horse.  These days, in fact, that could mean trading in burgers supplied to almost any large high street chain.  I am as ever negative on the key sterling cross.

The euro continues to weaken and sterling is making healthy gains s a result.  The sustained break through 0.8500 yesterday is a promising development. 

Now we need to see a similar drive beneath 0.8445 to open the path to 0.8250 and 0.8150 in the next few days. 

It is rare for the cross to maintain this sort of selling momentum for long.  A poor performance over the next two to three days is the extent of the near term weakness I see in the cross. 

The Cypriots have been robbed.

Unauthorized attacks on individual saving accounts, is a development in public theft, not seen since the days when Dick Turpin terrified the highways on his horse. 

Poor Loser – Don ‘t Play

There are games for people who hate to loose.  Those who have to show publicly that they are winners…

The list is long especially if you want to play by yourself –

SOLITAIRE,

PATIENCE,

Any XBOX single player game

Any PLAYSTION single player game

In fact with anything you play yourself it is easy to imagine you are a champion.

All you need to do is play beginner mode, stack the odds in you favour, hide your defeats and promote your victories.

One of the biggest fallacies is playing forex in practice accounts, where you get an imaginary FREE $50,000 to $1,000,000 account to play with.

No consequences = No education.

The moment you play with real money against real traders, the bitter taste of defeat quickly becomes a sickening flavor you have to adjust to.

Forex, despite initiate perceptions, is not a game for the lone player.  You take on all comers and quickly know if you win or lose. 

There are no ways of avoiding losses, so you may as well be prepared to take them before you begin. 

The Gambler On The Train…. FX Trading Lesson 3

A few years back I was on a long train journey.  I was sitting at a table surrounded by four seats.  Two of which were empty.   A man sat opposite me in the window seat.

I didn’t give it a lot of thought.  But after about 30 minutes this guy got into an animated conversation on his mobile phone. 

I am not sure how you feel, but it is very hard for me to switch off from a conversation I am not part of, when I am are hearing only one side of the story. 

So for an hour, I couldn’t distract myself from his chat.   He was a young guy, well dressed, but he had a worn, lived in feel in his face, that was not helped by three days of stubble.

He shouted into the phone about a greyhound race he had been at in a small seaside town the night before. 

He said ‘I started small, laying a grand on Red Donkey in the first’.   ‘He finished last’.  He then went on, that, he was glad he started that way, because he got his bad luck out of his system in the first.

He then proceeded to lay three grand on ‘First Flyer’ in the second.  He came in fourth.  Not a good result but at least he was getting a little higher up the field. 

In the third, he said, ‘well at least I was betting’.  He exclaimed ‘I HAVE TO BE IN IT TO WIN IT!’.  He lost three grand in that race. 

I have made up of the names of the two previous greyhounds he backed because I didn’t remember, so I won’t insult your intelligence by making up another name for the dog in the third race. 

He skipped the fourth and fifth race and placed five grand on FX Yarn in the last.  It fell on the first bend and never really recovered, to eventually finish well behind the field. 

He was now on his way to a horse racing course where he felt HIS LUCK was about to change after the previous evening’s nightmare at the dogs. 

The ability to take risk, the availability of risk and the prospect of successfully taking risk are different concepts.  To make money you have to take prudent risk at time of great opportunity.  Not huge risk at any opportunity.

Buying every scratch card you can afford will not make you a millionaire, regardless of how big the jackpot.