So having said that – I have chosen to do something that few traders actually do: ignore it. Completely.

The news can change things when there are extreme shocks to the system, but the truth is that the forecasts have been dead on lately, and more importantly, the market isn’t worried about employment. We know unemployment is high, and have gotten fairly bored with that fact it seems. The markets are more worried about things going on in Europe than the US employment figures. With this in mind, Friday is just another day in my opinion.

Besides, it doesn’t change my working thesis at the moment:

• The Aussie Dollar is strong and going to get stronger
• The Euro is something I won’t own – except against the Franc
• In reference to the point above, YES the Swiss National Bank WILL INTERVENE if 1.20 is broken
• There are some really great trades lining up between shorting European currencies and buying ComDolls. Take a look at GBP/NZD, EUR/AUD, etc.

As you see, none of this has much to do with the Non-Farm Payroll. In fact, the way the market has been reacting to the announcements over the last year or two – does it even matter? Of course, if the number were to suddenly be a positive 400k, we would have to pay attention to that……but it won’t be.

Don’t let the headlines spook you, trading is easier when looked at from above…..

Chris

As usual, feel free to watch full screen – it’s in HD!

The Federal Reserve announced that the extremely low interest rates that have been in effect for the United States will continue until the end of 2014. Yes, 2014. This pretty much ensures that the dollar will be on the back foot for quite some time against most currencies. The most reported one will continue to be the Euro of course, but the reality is that Europe is a mess, and there hasn’t been a solution yet. Granted, the EU finally looks like it is taking the situation seriously, but the problems in Europe are structural, something that takes a bit more to fix permanently.

Australia

Unlike Europe, Australia has a strong economy. More importantly, this country has things that people want. When the governments around the world start easing, “things” often rise in value. (It makes sense if you think about it, as it takes more dollars or yen or whatever to buy stuff.) This shows up in commodity markets most clearly, as prices for gold, oil, and other markets rise. Because of this, Australia should do well for the rest of the year. The Australian dollar should also continue to rise as well.

As demand for gold and other hard assets continues, the Aussie will get a bid as that country holds so much raw material will when people are trying to keep their wealth intact. When you see currencies decline in value, many large firms will actually take delivery of physical goods from these markets as they can literally store wealth.

As for the AUD/USD pair, it shows a breakout from an ascending triangle. This pair actually triggered a buy signal several days ago. Now that the Fed is working to keep rates low, it makes sense that this pair will continue to rise. If you measure the breakout at 1.04 to the bottom of the triangle, you see that the targeted price will be 1.12 in this market. At first, I thought that was a bit rich, but if the Fed is going to keep rates this low for 2 years, it suddenly becomes much more believable.

Because the Fed is willing to weaken the dollar, I believe the search for yield is about to accelerate. The large positive swap between the AUD and USD currencies should continue as the Aussies aren’t looking to cut rates anytime soon. In other words, you get paid daily for being long this pair. To add fuel to the fire, the gold markets shot straight up through a resistance level today as well. With all of these things coming together, I believe the Aussie should be one of the best currencies to own for the foreseeable future. And to be honest – it should be strong against more than just the USD.

Chris

The bullshit that comes spewing out of the mouths of newscasters, European diplomats, morons at the IMF, and ratings agencies has made trading Forex a royal pain in the ass for months now. The drama in Europe seemingly won’t end, and that’s all we want – an ending. Decide already! Hell…..most of us don’t care which direction the markets go, just that they do. The most difficult part of all of this has been the fact that the Euro will fall hard, and then some random whisper has the stupid thing shooting straight up for a few days, and then it falls even lower. Granted, I only sell the currency, but the fact is that the volatility is making this a more difficult endeavor than it needs to be.

Anyway, while most of you have been riding this roller coaster, there are other markets that are moving in steady trends. By far, the biggest example has been the Natural Gas markets. The natural gas markets have been kind enough to follow the obvious fundamental and technical bits like a healthy trend will do.

The United States has over 14 Trillion Cubic Feet of natural gas underground. A lot of this has been found only recently, or simply been made available due to new drilling techniques. In fact, the storage bins placed around the Gulf of Mexico that were originally planned to accept incoming natural gas deliveries had to be retrofitted in the middle of construction in order to make them able to deliver gas to ships for export. My, what a difference just a couple of years can make. To give you an idea of how much natural gas the US really has: If you were to convert power plants and automobiles to burn Liquid Natural Gas, the US now has well over 300 years worth of energy. And this is without more discoveries or technological advances in drilling techniques. Amazing.

So what do you think this news with a warmer than usual winter will do to prices? Yep, you got it – the market actually behaves like it “should”. There are no politicians and High-Frequency Traders playing games. For your consideration, I am attaching a chart of long-term trading in the natural gas contracts. Just remember this image when you think of whether or not you should be trading other markets. I know the ability to be able to has made my life much easier….

Even with all of the bad things going on in the European Union, I still see many of you out there talking about how the EUR/USD is about to bounce. I keep reading things in forums from retail traders about how the central banks will never allow this pair to keep falling. I read things like how the pair cannot fall below 1.25 as the US economy is in such bad shape. Others will say things like “its a big game that the banks are playing so they can send the market the other way as soon as everyone is short.” What?

Very few things have brought to the forefront how bad retail traders really are than this EU crisis. Let us think of some things that have gone on recently, and keep in mind – this is a simple list that I am coming up off the top of my head:

• The Swiss National Bank had to impose a floor in the EUR/CHF pair because the Euro is in a free fall. You know things are bad when your neighbors have to come to your rescue – even when you don’t ask for it.
• There have been multiple meeting in the EU between leaders. Every time they do this, the “bounce” is shorter and shorter. The market isn’t buying their bullshit as much these days as they are tired of being jerked around by the politicians.
• The Greeks are simply insolvent. However, there are other countries that aren’t far behind. Yes, I am looking at you Portugal and Spain.
• The Italian 10 year bond is now offering over 7%, despite the ECB doing everything it can to intervene. The Italian debt market is the third largest in the world by the way. If it collapses, things get ugly fast.
• The ECB has recently lent out money for almost nothing in the hopes that the banks would invest it in bonds around the EU, such as the ones mentioned above. Guess what? They didn’t. Nobody is buying these sovereign debt gimmicks. Germany can still sell bonds of course, but that’s about it.
• There are a lot of elections coming up in 2012 in the EU. It is hard to believe that at least one of these politicians won’t make some kind of a “stand” in order to get themselves elected.
• MOST IMPORTANTLY: The Euro has either made new all0time lows, of multi-decade lows against several difference currencies lately. NZD, AUD, and CAD are good examples. This shows very broad-based weakness in the Euro. Just because it has been stubborn in its fall against the Dollar doesn’t make it healthy. This is the one bit that a lot of these noobs on the forums are missing: The Euro is falling the hell apart against almost everything.

So what is the next move in the Euro? Down. It might bounce, and quite frankly I hope it does. This way I get to sell it at a higher level. I am currently short EUR/AUD, EUR/GBP, EUR/NZD, and EUR/CAD. All of these positions are doing quite well, thank you. After all, the EUR/AUD (as an example) just broke through a 20 year consolidation range to the downside. These moves don’t happen everyday.

So while the new trader is focusing on the EUR/USD pair and how it refuses to collapse, the rest of the world is trading the EUR/XXX crosses. Remember, keep your eyes open out there. There are plenty of pairs to at least let you know what is going on if you are willing to look at the big picture!

Chris

However, having said that – I think there could be a possible play tomorrow. The fact is I am not willing to go out of my way to be awake, but if I am – I think that the initial reaction to the number could offer a chance to make a “reversion to the mean” trade like the HFT assholes mentioned above. The fact is that the NFP number is supposed to bring us an addition of 152,000 jobs for the month of December in America, and if we get a good number – there could be a “risk on” scenario unfolding. However, I think that reality will come back very quickly at this point. Typically, the Dollar gets sold off when times are good, and if we get a surprise to the upside on this number there will be plenty of idiots to pile into the high-risk trades out there. One major problem: The fall of risk assets isn’t necessarily due to the US job situation. It’s all about European Union issues presently, and now adding to that pressure is the very real and very large mess in Hungary. (More on that in a later post maybe.)

My Ideas….

On the event of a better than expected number, I suspect that the EUR/USD, AUD/USD, NZD/USD, USD/JPY, GBP/USD, and GBP/JPY will all rise. (Other will too, but how many pairs are you actually going to watch???) With these pairs, the idea is that the Dollar will weaken as US investment firms go around the world to search for yield, and money will flow out of US Treasuries.

The knee-jerk reaction will suck in all of the amateurs, and the low liquidity will exaggerate the move as usual. I am especially interested in the EUR/USD and USD/JPY pairs if they rise. The traders out there will more than likely by the Euro out of habit if there is good news. (I have this theory that few people actually think, they simply do what they are conditioned to do.) The EUR/USD will undoubtedly rise at that point, and I will be waiting to sell it off at crucial points. The 1.3050 area is especially interesting to me at this point as I think that area should hold as resistance. I am willing to sell a failure at that area on the smaller time frames – something I rarely say. The fact is that a better job market in the US is going to do very little for the European debt crisis.

The USD/JPY pair offers a massive resistance area at the 80 handle, and I would love to see this pair rise near it. I don’t expect that tomorrow, but a run towards the recent 78.25-ish resistance area is a good place to start looking for shorts. The USD/JPY almost always rises in reaction as the Yen is bought in times of fear….but anyone that thinks this trend to the downside is over has to be out of their mind.

As for a less than expected number, I think the Dollar rises anyway as traders buy US Treasuries. The EUR/USD could pop as a response, but I would think that would be very short-lived, and I would sell that as well. To be honest, a less than expected number probably just has the markets continuing the move lower on the risk scale as we have been doing this anyway.

Either way – be careful!

Chris

Remember, my videos are recorded in 720p, meaning you can watch them full screen.

]]> http://thetraderguy.com/front-page/forex-analysis-canadian-dollar-and-oil-december-29th/feed 0 http://thetraderguy.com/front-page/gbpusd-forex-analysis-december-28th-and-going-forward http://thetraderguy.com/front-page/gbpusd-forex-analysis-december-28th-and-going-forward#comments Wed, 28 Dec 2011 03:13:59 +0000 chris http://thetraderguy.com/?p=1196 Looking at the Forex markets, there is one pair that nobody seems to be talking about…..cable. The Euro is front and center for most people, and while I can understand that – it often leads to missing out on what are often the best trades in the market. I personally think that the cable pair could be the trade of 2012 if the thing triggers a level I am watching. There is a massive formation that is just waiting to be triggered, and if it does happen – you can bet your ass I am involved!

Video is in HD, so feel free to watch it full screen.

]]> http://thetraderguy.com/front-page/gbpusd-forex-analysis-december-28th-and-going-forward/feed 0 http://thetraderguy.com/front-page/demo-forex-trading http://thetraderguy.com/front-page/demo-forex-trading#comments Tue, 27 Dec 2011 07:05:33 +0000 chris http://thetraderguy.com/?p=1185 When you first start out trading forex, or even any other market, demo trading is one of the first concepts that you are exposed to. The basic idea is that you can practice your theories, systems, and ideas without risking any real money. However, very few traders take advantage of this to the full extent that they could.

The average trader will either skip demo trading altogether, or only do it for a very short amount of time. The main reason is that they aren’t worried about success, they simply want money! I know it is counterintuitive, but a successful win to loss ratio isn’t what new traders are thinking about…they are thinking about all of those easy riches that the nice salesman on the website or brokerage phone told them. The forex markets are open 24 hours, and it is money just waiting to be plucked out of thin air it would seem if you listened to some of the people involved out there.

The demo account phase of trading is by far the most important in your development. I know this seems cliché to say, but you need to understand that if you cannot make a profit with a virtual demo account, you certainly won’t when there is real money involved. However, I have seen many traders more than willing to do just that – trade with real money before proving that they can make money over time in a pressure-free and safe environment. It is normally just after that great choice that they get their first lesson in trading psychology: Trading live money can be nerve racking at times. (At least if you do not know what you are doing.)

The temptation to start trading live early is great, I know. I have been there and in your shoes. I know it is difficult to watch virtual profits add up when you know the exact same trade in the real market would have made you money. However, you need to prove that over the long run you can do it, not just a few random trades. I mean that anyone can get a couple of winners in a row as the markets can only go up or down. However, if you can make it a couple months of being profitable – then you have something to hang your hat on.

We never really stop learning as traders. This is something that I cannot seem to shake, learning. Because of this, it is foolish to think that you can just jump into the markets and start making money right away. I tried it originally and I placed my first trade – sell USD/ZAR. That’s right; the South African Rand was my first trade. Not exactly an easy one to start with and I remember the erratic movement being particularly paranoia-inducing. Trust me, I learned about trading psychology really fast in that environment.

However, it was many months later that I finally decided to trade with a demo account. I learned to be profitable for three months straight, and then went live. I can honestly say it was during the demo months that I truly learned to love trading. The money is how I keep score now, but it isn’t the sole focus as I have learned to love the entirety of the process. I know that sounds odd, but if you trade long enough, I think you will understand what I mean.

Trading is something that you will hopefully be doing for a very long time. Years and years to be exact. If that is the case, why not take a few months to learn how to do it correctly?

Chris

There aren’t any great new nuggets of technical analysis in it, rather a greater appreciation of how far I have come as a trader and person over the last several years. The document is free to all, and by all means fell free to post it wherever you want, I claim no real rights to it but would appreciate it if you kept the logo and name intact.

Chris

download .pdf file here