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Firstly, remember that Monday is a holiday in North America. Over the weejend, Trump received an update on trade talks with China which were “very productive.” Talks will continue in the coming week in Washington. Also, UK PM May is to hold Brexit talks with EC President Juncker this week.

Themes for the Week Ahead:

  • Risk Appetite: last week’s risk rally was based on US/China trade talks and the dovish shift in the FED and other central banks. These factors will remain at top of mind this week, since US/China trade talks continue and the Fed will release the Minutes from their recent meeting.  However, the mood will sour quickly if the Minutes and/or Trade Talks show anything different from expectations.
  • Earnings, Slowdown, Recession?  Analysts are still looking for a deeper correction in stocks and have taken their cue from Ed Yardeni’s Boom/Bust indicator which is pointing at lower stock prices in the short term. 
  • More on Growth:  U.S. and euro zone “flash” PMI data is released this week as the market focuses more and more on growth issues worldwide.
  • Turmoil in Spain: PM Sanchez has called snap elections for April 28 and opinion polls show no single party would win enough votes to govern. Coalition scenarios point to lengthy negotiations between various parties – potentially including the far-right Vox.

Data in the Week Ahead:

  • RBA Minutes
  • UK Employment
  • EU ZEW and IFO
  • FOMC Minutes
  • AU Employment
  • CAD Retail Sales

On the Radar:

I still have a long bias on equities, although we are approaching key levels on US indices. I also have a long bias on Crude Oil. In FX, the Euro remains rather week and the best option is EurNzd short for now. If the risk-on theme continues, NzdJpy will be a decent candidate.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

The post Weekly Game Plan 18 Feb 19 appeared first on FX Renew.

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In previous trade management articles we have discussed primarily systematic trade management vehicles, applied to daily charts. We also saw one example of short-term trade management from one of our own traders, Sachin Vaze. Today we’re going down the discretionary route again, with another of our traders: Sam Elhelou.

What follows are Sam’s best practices for managing trades within ranges – which is his bread & butter. It is quite different than trade management on trend-following trades because Sam has specialized in trading “tight turns” within ranges on multiple timeframes.

How to Exit Your Trades

In his own words:

When I started studying trade management for my style of trading, initially I tried to take full profits at 1R. However, my studies showed that I left profits on the table most of the time. Then I tried taking partial profits at 1R and leave the rest to run. That works sometimes, however it also requires more movement on the remaining lots to make up the initial risk.

At that point I tried going for 2R, and then trailing my stop to Break Even. However, that suited the bigger trends but they occur less frequently. Since I’m initializing my trades within a range, I had to come to grips with the fact that price can come back and chop around in the range.

Sometimes position is stopped at break even alot in choppy ranges, can re enter if setup still valid. Timing the market about to start is an art. Through my studying, I eventually found 4 different types of trades which are based on the principle of immediate gratification. Based on the type, I have a different expectation, always keeping in mind that playing the tight turns of support and resistance requires monitoring and managing the trade until 1R is achieved, and  then it’s a question of when and how to move the stop loss to break even.

Here are the 4 categories of trades I noticed:

  • After entry, price never goes in your favour and quickly moves against you. These ones should be avoided as they can cause damage to your account. When I see sudden moves against my position, right off the bat, I cut the trade (if possible) but these are the trades that usually just stop you out.

  • After entry, price never goes in your favour and remains lethargic for a certain amount of time. Usually these trades slowly move toward your stop. When trades are moving slowly after entry, I have learned to give it some time, but then cut them before they hit my stop.

  • After entry, price moves slowly in your favour. These are equally challenging trades because they lack the momentum that gives you confidence to hold the trade. If this kind of trade reaches 1R, I will protect my profits immediately.

  • Finally, there is the trade that never goes back to your entry point. If moves swiftly away. Once identified, this needs to be held and committed to. The best trades act like this. Do not be tempted to take profits when you see the initial burst of momentum. Have patience and let this trade move towards an aggressive target.

Example of Excellent Performance: GBPJPY
Here is a trade I took in December 2018 on GBPJPY. 
Momentum was pointing down, and into December 5th I had strong convinction that sellers would still be waiting at the most recent swing high point from December 4th. I sold when price approached the key zone.
Initially this trade stumbled around, but the price action was, in my opinion, good enough to hold the trade. The typical herd behaviour was evident with the initial hourly Doji and the smaller ranges afterwards. The market has to make a choice: either shoot up or shoot down from here, after it slowed down.
The market decided to show momentum in my favour. This is the best kind of trade and I made up my mind to hold it for a return back to the consolidation low.
The sellers that pushed the market down on the 5th were being seen again into the day’s close. I held the trade overnight.
The next morning the market pushed all the way to my final target, offering me a multiple-R winner.
Over to You

Above and beyond Sam’s technique, I would like to draw your attention to the work Sam did to reach his comfort zone:

he tested, recorded the results, adjusted, recorded the results, adjusted again, recorded the results.

This is what is required, in order to be confident with your trading model: you need to work with it in a disciplined and structured manner. Even in the Free Advanced Course for Smart Traders, we suggest thinking in blocks of 30 trades. After 30 trades, taken with the same “recipe” and managed in the same way, you have objective data to work with.

But if you keep changing the way you identify, execute and manage your trades, the data will not make sense and any further changes are not based on solid ground.

The other key takeaway is Sam’s view on “immediate gratification”. It’s quite true that the best trades don’t usually stick around for long. They push in your favour immediately. They show promise from the onset.

Finally, if you want to hear more about Sam’s views on trading, you can find him in this webinar.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

The post One Way to Manage Range Trades appeared first on FX Renew.

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Here is the video version of our Forex trading opportunities for the week ahead.

Forex Trading Opportunities for the Week Ahead 18 February 19 - YouTube

Please go here for the written summary: Forex Trading Opportunities for the week ahead

About the Author

Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is the owner of  www.fxrenew.com a provider of Forex signals from ex-bank and hedge fund traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.

The post Video: Forex Trading Opportunities for the Week Ahead 18 February 19 appeared first on FX Renew.

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Note that this is my current view, but if market conditions change my view can change too. Generally I will trade in alignment with what I have noted here, though I will wait for a set-up before I enter. I base my view on technical and fundamental information. This is my beliefs and you are welcome to have opposite ones. Having a plan is more important than the actual direction for me. 

  • Wait DXY.  – MT is bull normal. While we have entered a bull MT, but there is clear topping price action with a minor double top and formation of a bearish hammer. The drivers of the USD remain mixed and unclear. Trade talks with China is progressing with some optimism out there, but a positive conclusion is not yet certain. Price action on this news has been mixed for a long time and I am not sure how much a resolution or lack there of will impact the USD. While data in general remains ok, retail sales came in with a big miss on Thursday. This should encourage the Fed to stick with their message of patience about rate hikes. What may support DXY is weakness in the EUR, but otherwise the dollar looks like more of a sell than a buy to me.
  • Buy GBP/USD. – MT is sideways volatile. A bullish engulfing candle off the lower Bollinger Band (and prior support turned resistance) is indicative of GBP strength. There is not much progress at all with regards to Brexit talks, but the market is hopeful that there will be an extension to the rapidly approaching end of March exit deadline. Prime Minister May is engaging in Brinkmanship with her position that there will be no extension unless a deal is reached. I like to buy GBPUSD from here, but this trade certainly has it’s risks.
  • Wait USD/JPY. – MT is bull normal. We have broken out into a bull MT but Thursdays bearish candlestick, along with the topping pattern in DXY suggests caution should be had. Importantly bond yields remain flat. On the positive side, stocks are rising steadily. But price action is not correlating with the movements in stocks yet.
  • Buy AUD/USD. –  MT is sideways normal. Optimism that there could be the framework of an agreement between the US and China or that the deadline for additional tariffs has been benefiting the Aussie. Both Iron Ore and Gold have maintained the uptrend. Typically AUDUD has a high correlation with gold and the Aussie may well play catch up. Positive China data has helped the pair. Price action is suggestive of a long-term bottom in AUD. I would have preferred a re-test of 0.70, but given the rejection of the prior low at 0.71, Aussie looks like a good buying opportunity to me.
  • Wait EUR/USD. –  MT is sideways volatile. A long pin candle just ahead of support along with the accompanying price action suggests that the low may hold for now. A cautionary note is Bunds yields remain within a steady downtrend and have shifted well in favor of USD. There is more emerging political risk in Spain as a snap election has been called. Data out of the Euro-zone remains weak. Given price action has been responding negatively to negative news this should cap any gains in the pair.
  • Wait NZD/USD. –  MT is sideways normal. The RBNZ has acknowledged the improvements in the outlook for NZ with a less dovish monetary policy statement. Price was up significantly after the event and has subsequently maintained the gain. Technically, I don’t have entry given the price action, but shorter-term traders in the current week ahead may find this one of the better options to focus on.
  • Wait USD/CHF.  – MT sideways volatile. The topping action we saw on DXY is mirrored on USDCHF. This is despite stocks rising significantly on Friday. If you like it, this is an interesting opportunity to sell.
  • Sell USD/CAD. – MT is sideways normal. Oil has risen through the key $55 figure again. Data has been mixed in previous months but there was a huge jobs beat in January. BOC remains relatively upbeat. Given anticipated USD weakness and the price action, CAD looks like a sell.
  • Sell EUR/GBP.  – MT is bear normal. The bearish price action looks much stronger this week than it did last week. Look to sell targeting 0.8630.
Crosses
  • Wait EUR/CHF. – MT is sideways normal. Wait.
  • Wait AUD/JPY.  – MT is sideways normal. Wait.
  • Wait NZD/JPY. – MT is sideways normal. Wait.
  • Wait GBP/JPY. – MT is MT is sideways quiet. Wait.
  • Wait EUR/JPY. – MT is sideways quiet. Wait.
  • Wait CAD/JPY. – MT is MT is sideways normal. Wait.
  • Wait CHF/JPY.  – MT is sideways quiet. Look to buy a break above 110.50.
  • Sell GBP/NZD. – MT is bear normal. Look to sell.
  • Sell EUR/NZD. – MT is bear normal. Look to sell.
  • Sell AUD/NZD. – MT is bear normal. Look to sell.
  • Wait EUR/AUD.  – MT is sideways normal. Wait.
  • Wait GBP/AUD. – MT is sideways normal. Wait.
  • Sell AUD/CAD. – MT is bear normal. Continue to sell, low conviction.
  • Wait GBP/CAD. –  MT is sideways volatile. Wait or buy.
  • Sell EUR/CAD. – MT is bear normal. Look to sell.
  • Wait NZD/CAD. – MT is sideways normal. Wait.
  • Wait GBP/CHF. – MT is sideways normal. Wait
  • Buy CAD/CHF.  – MT is bull normal. Look to buy.
  • Wait NZD/CHF.  – MT is sideways normal. Wait
  • Wait AUD/CHF. – MT is sideways normal. Wait
Other Markets
  • Wait USDSGD. – MT is sideways normal. Wait
  • Wait USDCNH. – MT is sideways normal. Wait
  • Buy Gold. – MT is bull normal. Continue to buy.
  • Buy Oil. – MT is bull normal. Look to buy.
  • Buy S&P 500.  – MT is bull normal. Continue to buy.
  • Wait DAX. – MT is sideways normal. Wait
  • Buy Nikkei. – MT is bull normal. Look to buy.
  • Wait T-Notes. – MT is sideways normal. Wait.
View bank reports and fundamental analysis in the chatroom (members only)

View the chatroom 

Economic calendar for the week ahead:

View economic calendar

(MT = Market Type: Click for more information on market types.)

About the Author

Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is the owner of  www.fxrenew.com a provider of Forex signals from ex-bank and hedge fund traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.

The post Forex Trading Opportunities for the Week Ahead 18 Feb 19 appeared first on FX Renew.

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“People who want to get rich quick fall into temptation and a trap and into many foolish harmful desires that plunge men into ruin and destruction” – 1 Timothy 6:9

Let’s face it: most people that approach the financial markets are not really interested in the markets at all. They simply want to make money. To make matters worse, the majority want to make absurd amounts of money in very little time.

Today’s brief post is simply a reminder that trading is a job like many others, and there is no “get rich quick” scheme.

Lessons from a 92 Year Old

I was showing my Italian fiancèe a youtube video on Canada and at a certain point the vast landscapes were interrupted by a funny old man called John.

Check out John’s brief story in this video from min 17:56 to 19:41.

John is a 92 year old farmer that reminds me of my late 97 year old grandfather as they share a common perspective that I’d like to share with you today.

In his own words, John said “People quit! That’s the problem with some people nowadays. They reach 65 and they quit. Then, at 70, you put them in a box“. John was alluding to the fact that he sees people work until they reach retirement, collect their retirement and do nothing.

Then John reminds everyone that “Everything slows down when you stop“. This is exactly what I saw with my grandfather.  He didn’t like to stay still and he didn’t stop until he was literally forced to. He rode his bike with groceries on both handlebars until he was 96. He cooked his own meals, he cleaned his house each week and he maintained that bit of a social life that he could (despite the fact that he was outliving his friends one by one). The moment he lost the use of his legs and his routine stopped, his age caught up with him and within 1 year he went to be with the Lord. As for John, he was 92 when the video was made, and he said he was looking towards 100! He suspected there were another 4-5 years of work left in him.

Here’s the key: we all need to choose our jobs wisely because if we enjoy what we do, it won’t feel like work and we will never think about quitting. It won’t always be easy or fun. But if you enjoy it, those setbacks won’t stop you. Vice-versa: if we don’t like what we do, each day will be stressful and we will feel like we’re wasting time. We will start to look for shortcuts or a way out. Think about Ray Dalio, Paul Tudor Jones, Warren Buffett, Bill Lipschutz…they could all retire and play golf all day long. But they are still working. They didn’t become the best in their fields by chance. They actually find meaning in what they do and they like it.

Why Do Want To Trade?

 “By wisdom a house is built, and through understanding it is established; through knowledge it’s rooms are filled with rare and beautiful treasures”. – Proverbs 24:3

So what brings you to the financial markets? Are you simply looking into the markets as a means to an end? Or are you actually interested in learning how the markets work, following the flow of events around the world and creating a profession (becoming a trader)? Trading is a job like many others and in my experience it’s only the people that have a genuine interest for the job that actually succeed.

Sadly, most people that approach FXRenew didn’t get the memo.

Over 80% of people that come to FXRenew sign up directly for our Trading Signals or Active Trader Signals. They completely ignore our entire Training section and (usually) attempt to copy our signals without any attempt at understanding how, when or why they are issued. Naturally, 2 things happen:

  • subscriptions peak when we have a good run;
  • subscriptions fall when we get into temporary drawdowns or when we don’t issue signals for whatever reason.

This is no different from what academics have seen with mutual funds and other investment vehicles: clients enter at new equity peaks (buying the high) and exit during drawdowns (selling the low).

Dare to Differ

Executive coach Marshall Goldsmith often tells this story. People ask him why he still bothers to fly around the US, get up early, do seminars, etc. when he could simply go to the golf club every day. Mr. Goldsmith replies in effect: “I tried, but it didn’t work. The first time you go to the country club it looks great. You meet new people, you eat the sandwiches and you work your way around the course. The second time, the people are the same, the jokes are the same, but at least the sandwiches are still good and you still believe you can improve your game. The third time, even the sandwiches aren’t satisfying anymore and you realize that you’ll never be Tiger Woods.”

The bottom line is that trading is a job. You can’t learn to do a good job in the markets overnight, or by reading a couple of books. Furthermore, a bad day at work means you can lose a lot of money unless you know what you’re doing. It takes dedication, hard work and perseverance to make the transition from being a losing trader to being a solid, consistent trader.

The only people I’ve seen make the transition had a genuine passion for the markets. They aren’t looking for quick profits. They get up every morning and stare at screens because they like what they do.

So the resolving question is: what do you really enjoy doing?

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

The post Why do You Want to Trade? appeared first on FX Renew.

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The FX market is struggling to find a trend and with no news out over the weekend, we might have a quiet start to the week unless China returns from the holidays and creates a risk-off environment after Trump said he won’t be meeting Xi before the March 1st deadline.

Themes for the Week Ahead:

  • US/China trade debate: Trump & Xi won’t be meeting ahead of the March 1st deadline and that should be a negative for risk assets (commodities, EM, China & china proxies like Aud). However, high level trade talks between the two countries resume this week and the markets will be playing very close to any developments or lack thereof.
  • RBNZ: the bank is expected to leave the cash rate unchanged at 1.75% and echo the dovish tilt that Fed, RBA and ECB already touted. Also, the NZ jobs data came in weaker than expected.
  • Brexit: the markets’ conviction that a no-deal Brexit will be avoided may be starting to fade. Feb. 13 will see PM May in the British parliament again but what can really change? What amendments can be made that will satisfy Europe? I still believe no-deal is the default option.
  • US Government Shutdown: it didn’t perturb markets before, and it probably won’t perturb them again if the US government shuts down again.

Data in the Week Ahead:

  • US CPI and Retail Sales
  • EU Q4 Flash GDP
  • German GDP
  • UK  Q4 Prelim-GDP
  • China CPI and trade data

On the radar:

There are a few caveats to this watchlist, but broadly speaking I like Eur, Aud, Nzd weakness vs. USD and JPY. I also have a short stance on the Dax.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

The post Weekly Game Plan 11 Feb 19 appeared first on FX Renew.

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Here is the video version of our Forex trading opportunities for the week ahead.

Forex Trading Opportunities for the Week Ahead 11 February 19 - YouTube

Please go here for the written summary: Forex Trading Opportunities for the week ahead

About the Author

Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is the owner of  www.fxrenew.com a provider of Forex signals from ex-bank and hedge fund traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.

The post Video: Forex Trading Opportunities for the Week Ahead 11 February 19 appeared first on FX Renew.

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Note that this is my current view, but if market conditions change my view can change too. Generally I will trade in alignment with what I have noted here, though I will wait for a set-up before I enter. I base my view on technical and fundamental information. This is my beliefs and you are welcome to have opposite ones. Having a plan is more important than the actual direction for me. 

  • Wait DXY.  – MT is sideways normal. Despite gaining everyday last week, the USD remains range bound. We are at the top of the internal range, but have room to go to key support at 97.70. A large bullish engulfing week has formed. Pundits put USD strength down to safe haven flows, but this justification seems a bit weak. Perhaps what we are seeing is a little of this but more a lack of strength in it’s counterparts. Things are not all rosy though. President Trump has said he will not meet with Chinese leader Xi as trade talks are not yet far enough ahead. There is still optimism a deal will get done, but we may see some brinkmanship ahead of the end of March deadline or perhaps see talks roll over into Q2. The US government may shutdown again next week, though watch out for Brinkmanship there too. There is a tendency for last minute deals in politics. Of course, Trump may declare a national emergency to get funding for a wall, and the government may stay open anyway. How will these things impact the USD? Perhaps the uncertainty will benefit the pair in coming weeks. I am low conviction on direction right now.
  • Wait GBP/USD. – MT is sideways volatile. In last weeks BOE meeting, rates were left on hold and downside risks were acknowledged. The Brexit drama continues along with no real progress. Market participants are still hopeful that there will be an extension to the Brexit deadline coming up at the end of March.
  • Wait USD/JPY. – MT is sideways normal. JPY remained robust despite the rising USD. This suggests some nervousness in the market. We are entering into a sideways quiet MT. Price action suggests a break above 110.00 is tradeable, but it would be lower conviction for me, considering the weakness in US bonds.
  • Wait AUD/USD. –  MT is sideways normal. Big picture price action suggest upside potential in the pair. But this is not mirrored by the fundamentals. The RBA was decidedly dovish (after clarification) and the pair is now trading near the bottom of the range. Iron Ore prices have been rising. I would be looking for a move back towards 0.70 before considering buying.
  • Wait EUR/USD. –  MT is sideways normal. EUR continues to struggle with weak data. This is keeping sentiment towards the pair depressed. We remain within the long-term range. Watch our for support at 1.13.
  • Wait NZD/USD. –  MT is sideways normal. The price action is not supporting it just yet, but the Kiwi has some of the better fundamentals. Dairy prices were up over 6%, after being up over 4% in the prior auction. Employment data came in on the weak side, but this is not a trend. The economy should be supported by government spending in 2019. If we get down to 0.66 then that could be a buying opportunity.
  • Wait USD/CHF.  – MT sideways volatile. The price is sitting right on the key 1.0 figure. I don’t have much conviction in direction just now. Wait.
  • Wait USD/CAD. – MT is sideways normal. It was a rough week for CAD after oil rejected the breakout through the key $55 level and formed a weekly bearish engulfing candlestick pattern. This is indicative of more weakness in oil. Employment data was the bright spot with a large gain. This did not translate into any sustained momentum for the pair. Wait for now.
  • Sell EUR/GBP.  – MT is bear normal. Price action is bearish but I would not hang my hat on this. Low conviction sell.
Crosses
  • Wait EUR/CHF. – MT is bull volatile. Wait.
  • Wait AUD/JPY.  – MT is sideways normal. Wait.
  • Wait NZD/JPY. – MT is sideways normal. Wait.
  • Wait GBP/JPY. – MT is MT is sideways normal. Wait.
  • Wait EUR/JPY. – MT is sideways quiet. Wait.
  • Wait CAD/JPY. – MT is MT is sideways normal. Wait.
  • Wait CHF/JPY.  – MT is sideways quiet. Wait.
  • Wait GBP/NZD. – MT is sideways normal. Wait.
  • Wait EUR/NZD. – MT is sideways normal. Wait
  • Wait AUD/NZD. – MT is sideways normal. Wait.
  • Wait EUR/AUD.  – MT is sideways normal. Wait.
  • Wait GBP/AUD. – MT is sideways normal. Wait.
  • Sell AUD/CAD. – MT is bear normal. Continue to sell.
  • Wait GBP/CAD. –  MT is sideways volatile. Wait.
  • Wait EUR/CAD. – MT is sideways normal. Wait
  • Wait NZD/CAD. – MT is sideways quiet. Wait.
  • Wait GBP/CHF. – MT is sideways normal. Wait
  • Wait CAD/CHF.  – MT is sideways normal. Wait
  • Wait NZD/CHF.  – MT is sideways normal. Wait
  • Wait AUD/CHF. – MT is sideways normal. Wait
Other Markets
  • Wait USDSGD. – MT is sideways normal. Wait
  • Wait USDCNH. – MT is sideways normal. Wait
  • Buy Gold. – MT is bull normal. Continue to buy.
  • Wait Oil. – MT is sideways quiet. Wait
  • Buy S&P 500.  – MT is bull normal. Continue to buy.
  • Wait DAX. – MT is sideways normal. Wait
  • Sell Nikkei. – MT is bear normal. Look to sell.
  • Wait T-Notes. – MT is sideways normal. Wait.
View bank reports and fundamental analysis in the chatroom (members only)

View the chatroom 

Economic calendar for the week ahead:

View economic calendar

(MT = Market Type: Click for more information on market types.)

About the Author

Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is the owner of  www.fxrenew.com a provider of Forex signals from ex-bank and hedge fund traders (get a free trial). If you like Sam’s writing you can subscribe to his newsletter.

The post Forex Trading Opportunities for the Week Ahead 11 February 19 appeared first on FX Renew.

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 My greatest discovery was that a man must study underlying conditions, to size them so as to be able to anticipate probabilities. – Jesse Livermore

In this recurring monthly analysis, we will look at three global risk factors in order to assess the current market state and attempt to foresee risks on the horizon.  The factors that we will be using, in order of weight, are:

  • Global Monetary Policy
  • Global Volatility
  • Global PMI readings

Together, they can assist us in shaping up underlying macro conditions, so we don’t get caught off guard by some change in market dynamics that was foreseeable.

Global Monetary Policy Stance

Source: cfr.org

We use Global Monetary Policy to evaluate inflation risks, deflation risks, and interest rate risk.

Into 2019, monetary policy has been tightened once again and continues to enhance the probability of a collision of risk factors with tighter policy, slower global growth (see PMIs) and heightened volatility. Despite the recovery in risk assets, we’re by no means out of the woods and the FOMC came out and said it explicitly last week.

Global Volatility Meter

 Source: TradingView

We use the Global Volatility Monitor to capture economic growth risks and liquidity risks.Since we are tracking the implied volatility on the S&P 500, the Eurostoxx and Crude Oil, we can see the composite indicator as “the cost of hedging a price decline” in each market.

Volatility has dropped from recent highs but we are still in high vol territory. This is confirmed by SPY/TLT just barely negotiating the 52Wk average.

Global PMI Monitor

Source: IHS Markit

We use the Markit/JPM Global PMI analysis as a gauge for economic growth risks, inflation risks and deflation risks. PMIs are known to be a leading indicator for GDP growth rates.

PMIs are where the action is, and the reason why markets are now concentrated on growth. We have been highlighting the slowdown for quite some time now, and finally (as PMIs are approaching the 50 mark/contraction territory) even the central banks are paying attention. This is the main concern in the markets for the time being.

From the report: The slowdown in China manufacturing was the main drag, as the China PMI fell to a near three-year low. The euro area and Japan PMIs fell to 50- and 29-month lows respectively

To Sum Up

Our Macro Risk Monitor (MRM) is currently showing a collision of risk factors on the horizon with PMIs slipping below the 50 mark while monetary policy is being tightened and volatility is high. The focus is now on global growth and it will remain this way until we see PMIs starting to rise again – which might not happen for some time. Expect further volatility going forward. Defensive assets and market neutral strategies look like the best bet for now.

About The Macro Risk Monitor

What we are doing is neither new nor original. Anyone with a basic comprehension of macroeconomic theory, and a bit of real world experience, can do the same thing. We’re just doing it for you.  What follows is a brief explanation of why we are monitoring precisely Monetary Policy, Volatility and Purchasing Managers’ Index.

  • During periods of real (non-inflationary) growth, the main cyclical classes (Developed and Emerging Market Equities, Real Estate, High Yield Bonds) tend to have low volatility.
  • Vice versa, during periods of economic uncertainty or outright contraction, cyclical assets have high volatility.
  • However, we can also have inflationary growth, which is the best environment for Commodities (Energy, Industrial Metals).

When volatility is high, or global growth expectations (measured via the PMI) are low and monetary policy is tight/tightening, there is a collision of risk factors that produces a high uncertainty/high risk environment that is usually only favourable to fixed income and counter-cyclical assets.

When volatility is low, or global growth expecatations (measured via the PMI) are high and monetary policy is loose/loosening, there is a combination of easing factors that produces a low uncertainty/low risk environment that is favourable to cyclical asset classes.

By using just these three measures, we can create discrete market environments that can assist in selecting the right asset class to target given the current situation.

If any of this is a bit foreign or complex, our Forex Fundamentals Mastery course can bring you up to speed.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.

The post Monthly Macro Risk Monitor – 6 Feb 19 appeared first on FX Renew.

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Last week saw investor demand for EURCHF continue the rise from last year’s low point. But the key element was that buying interest accelerated – creating a 4th up week in a row  and, more importantly, breaking above the 21 week moving average.

That positive break confirms the ‘golden’ cross already provided in the EURCHF RSI signals that was given the previous week.

EURCHF sentiment turned bearish last May with the market unable to break above the pair of averages, together, during that time. Twice since that May signal, EURCHF traded more than 5 1/2 big figures lower.

But sentiment is now assessed as bullish and although an early move above October’s 1.1505 high (our first EURCHF target) is needed to confirm an end to a sequence of lower weekly highs.

Once above that point, sentiment is exposed to 1.1559 and 1.1607.

About FX Renew

This blog post was published on www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial). If you like this post, subscribe to the blog for free or get free access to the acclaimed Advanced Forex Course for Smart Traders.

The post EURCHF – Sentiment Turns Bullish appeared first on FX Renew.

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