Let's Trade Together - Forex, Crypto and Stocks

By Kathy Lien While investors are eagerly awaiting Janet Yellen’s testimony today before the Senate Banking Committee, the sell-off in currencies, equities and Treasury yields indicate that risk aversion is the overriding theme in the financial markets this morning.  A smaller decline in durable goods orders helped to ease the selling but with jobless claims rising, the relief rally in USD/JPY and other major currencies was limited.  Durable goods orders fell only 1% in the month of January compared to a forecast of -1.7% but what made the report positive for the greenback was that excluding transportation orders, durable goods rose 1.1%. After the sharp decline in December, investors were really hoping for a rebound in January and even though there was a large pullback in transportation orders, demand for other goods improved significantly – a sign that confidence could be improving in the economy. Meanwhile the 14k increase in jobless claims is discouraging but not overl...

Leverage is the ability to use something small to control something big. Specific to forex trading, it means you can have a small amount of capital in your account controlling a larger amount in the market. Stock traders  will call this trading on margin. In forex trading there is no interest charged on the margin used and it doesn't matter what kind of trader you are or what kind of credit you have. If you have an account and the broker offers margin, you can trade on it. The obvious advantage of using leverage is that you can make a considerable amount of money with only a limited amount of capital. The problem is, that you can also lose a considerable amount of money trading with leverage. It all depends on how wisely you use it and how conservative your risk management is. Leverage Amounts Leverage is usually given in a fixed amount that can vary with different brokers. Each broker gives out leverage based on their own rules and regulations. The amounts are typically 50:1, 100...

The Japanese yen was the big winner of a volatile week that saw new levels for a few currency pairs, and ended with risk off sentiment. The Fed decision is naturally the most important event, and is accompanied by the first releases of GDP in the US and the UK, as well as other events. Here is an outlook on the main highlights on the coming days. US existing home sales disappointed with 4.87 million. Even though the next taper is on the way, it served as an opportunity to sell the USD against the recovering pound (lower UK unemployment rate) and euro (strong German PMIs). It was a different story against the Aussie and the CAD, as both were hit by their central banks. A talk about AUD/USD at 0.80 in Australia and relatively dovish comments in Canada sent these currencies to multi-year lows. And towards the end of the exciting week, the crisis in Argentina together with fears about China boosted the safe haven yen. Let’s start, Updates: German Ifo Business Climate: Monday, 9:00. German...

Event risk peaks today with the release of the US NFP report for December.  OK or better data will be USD-supportive though whether this is able to generate much impact on EURUSD remains to be seen.  Mixed EZ data and “strengthened forward guidance” from the ECB this week has failed to have much downward impact on the EUR and the market remains well supported in the mid/upper 1.35s at the moment.  We still rather favour looking to sell EURUSD rallies to the mid 1.36s for a push back to 1.33/1.35. USD/CAD: Taking the Under on Canadian Jobs Open 1.0863     Range 1.0836/1.0866     Previous Close 1.0843 The CAD got battered by the contrasting Canada/US trade data earlier in the week (USDCAD rose 1.2% on the day) so the prospect of a combination of better-than-expected US data and worse-than-expected Canadian data, at least according to TD’s forecasts, suggests significant upside risks for funds today.  We don’t think this move up is ...

When I have a string of losses I pause and reflect and ponder if it is me trading badly or just the market environment not being conducive to my trading method. Here are 10 questions we will do well to ask ourselves at times when we seem to be out of synch with the market. Are we taking good entries? We have to enter at a high probability moments to put the odds of winning on our side. Buying support bounces, shorting resistance levels, or entering on confirmed break outs. Are we trading too big? Big position sizes can cause us to stress to much and exit too quickly, we must trade a comfortable level that allows us to overcome our emotions and stick to our trading plan. Are we risking too much per trade? We need to cap our risks at no more than 1% to 2% capital at risk per trade. It is very difficult to make back big losses on a percentage basis it is much easier to steadily grow an account by avoiding those big losses with correct position sizing. Are we trying to fight ...

The US trade data usually isn’t market affecting, and indeed yesterday’s US trade data for November didn’t have an immediate impact on the FX market, but it gradually lifted the dollar as economists started to consider its implications for growth. The deficit narrowed sharply to USD 34.3bn from USD 40.6bn, far better than market expectations of USD 40.0bn, as exports reached a record high (+5.2% yoy) and imports declined (-1.1% yoy). Most of the improvement in the goods trade balance was due to petroleum; exports are rising and imports are falling due to increasing US domestic oil production. The US Energy Information Administration said that US oil production in 2015 should be at a 43-year high – so much for “peak oil” in the US – and the top Republican on the Senate Energy Committee urged an end ban on exporting crude oil. That means the prospect is for oil to cause further improvement in the trade balance in the future as well. The important point for the FX market yesterday was t...

The Big Picture A surprisingly weak US service-sector PMI caused further mean reversion in US asset markets and weakened the dollar somewhat, but it still managed to gain against several of its G10 counterparts, indicating continued underlying strength (see technical section on EUR/USD). The December non-manufacturing ISM index fell to 53.0, a six-month low, from 53.9. The decline was largely due to deterioration in new orders, but since that series includes many weather-sensitive sectors, such as construction and agriculture, it may be due more to the weather than to the economy. Nonetheless US bond yields fell – the 10-year Treasury was down about 4 bps – and implied interest rates on the longer-dated Fed Funds futures declined 4-5 bps, while the stock market fell for the third consecutive day, continuing the mean reversion that has characterized US asset markets in 2014. The dollar lost some support as US rates eased, yet it still managed to open this morning stronger compared...