GBPUSD maintained a downward trend in the past week confirming what seemed like a bearish take over from top at 1.7191 two weeks back. The pair recorded a four week low at 1.6961 with attempts to retrace back to 700 levels foiled by the bears. But the monthly support around 1.6972 appears strong enough to absorb the bearish pressure. Will the bears maintain the lead in the last week of the month?
The market is still bearish given results from the COT report which showed a negative open interest and a drop in long positions from the previous week. Investors appear to be about dumping the pound sterling due to the BOE’s indecision on whether or not to raise interest rates. The US jobs data keep getting better and the economy is gradually picking up.
Key Levels: Given the intersection of key Fibonacci Retracement levels, Floor Pivot, Camarilla and Woodie’s as well as Demark’s pivot levels we will be making entry decisions accordingly.
Sell Key Levels:1.7014, 1.7030-1.7045 and 1.7063. A probable sell break out will be expected around 1.6900 for conservative bearish traders. If the bulls succeed in taking back the baton, 1.7130-41 might be ideal to watch out for a bullish halt.
Buy Key Levels: 1.6925, 1.6907 and 1.6874. A bullish break out may occur around 1.7052.
Although the market will very likely be pushed up on what may seemingly appear like a bearish retracement buying should be done with caution this week as the monthly chart appears to be about forming a dark cloud cover for further GBPUSD fall in the month of August.
Trade to win!
EURUSD trend in the past week showed a bearish continuation having recorded a new low, closing lower than the weekly open and failed to exceed the high of the week before.
In the coming week of July 20 to 25, what should we expect of the pair? We will consider three tools to enable us have an insight into what the market will probably do. COT reports, 200 and 50 period Exponential Moving Averages and price action. So let’s work on the trend and our probable key entry and exit levels for the week.
From the COT Reports for Tuesday July 15 we can see an improvement in the Open Interest with overall positive change from the previous week’s reports indicating a possible demand for the European currency. Though considering the Non-Commercial side of the report, there are indications the speculators are still somewhat in favor of further bearish move. Based on this I will advise sellers to be careful as the present low level of support by the EURUSD may just be where the bulls might want to exercise some authority again.
Given the price action between the week that just ended and the one before a lower low and a lower high suggest we might see another bearish week. But from the action on the 4 hours time frame, price is likely to reach 1.3570 and 1.3611 levels.
The EMA is at 1.359 above the current price, suggesting the pair is still on a bearish mode.
200 EMA: At 1.3611 we are still bearish on the EURUSD.
Our Bias: Our indicators by majority are in favor of a bearish trend bias still.
Key Entry Levels
Using the Fibonacci Retracements tool with a fall from 1.3650 to 1.3490, 1.3570 is a strong key sell level for us at 50%. 1.3589 is yet another strong key level to watch for a probable sell.
Considering floor, Woodie’s and Camarilla Pivot Points the following key levels are worthy of note for sell setup; 1.35641 and 1.3611, while 1.3462 to 1.3492 appear strong for initial buying between Monday and Wednesday. We have to watch these carefully given that there are lots of intersections of key levels around the areas spotted.
Careful bears in the early days of the week. Trade to win!
Chair Janet L. Yellen
Semiannual Monetary Policy Report to the Congress
Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.
July 15, 2014
Chairman Johnson, Ranking Member Crapo, and members of the Committee, I am pleased to present the Federal Reserve’s semiannual Monetary Policy Report to the Congress. In my remarks today, I will discuss the current economic situation and outlook before turning to monetary policy. I will conclude with a few words about financial stability.
Current Economic Situation and Outlook
The economy is continuing to make progress toward the Federal Reserve’s objectives of maximum employment and price stability.
In the labor market, gains in total nonfarm payroll employment averaged about 230,000 per month over the first half of this year, a somewhat stronger pace than in 2013 and enough to bring the total increase in jobs during the economic recovery thus far to more than 9 million. The unemployment rate has fallen nearly 1-1/2 percentage points over the past year and stood at 6.1 percent in June, down about 4 percentage points from its peak. Broader measures of labor utilization have also registered notable improvements over the past year.
Real gross domestic product (GDP) is estimated to have declined sharply in the first quarter. The decline appears to have resulted mostly from transitory factors, and a number of recent indicators of production and spending suggest that growth rebounded in the second quarter, but this bears close watching. The housing sector, however, has shown little recent progress. While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year’s increase in mortgage rates, and readings this year have, overall, continued to be disappointing.
Although the economy continues to improve, the recovery is not yet complete. Even with the recent declines, the unemployment rate remains above Federal Open Market Committee (FOMC) participants’ estimates of its longer-run normal level. Labor force participation appears weaker than one would expect based on the aging of the population and the level of unemployment. These and other indications that significant slack remains in labor markets are corroborated by the continued slow pace of growth in most measures of hourly compensation.
Inflation has moved up in recent months but remains below the FOMC’s 2 percent objective for inflation over the longer run. The personal consumption expenditures (PCE) price index increased 1.8 percent over the 12 months through May. Pressures on food and energy prices account for some of the increase in PCE price inflation. Core inflation, which excludes food and energy prices, rose 1.5 percent. Most Committee participants project that both total and core inflation will be between 1-1/2 and 1-3/4 percent for this year as a whole.
Although the decline in GDP in the first quarter led to some downgrading of our growth projections for this year, I and other FOMC participants continue to anticipate that economic activity will expand at a moderate pace over the next several years, supported by accommodative monetary policy, a waning drag from fiscal policy, the lagged effects of higher home prices and equity values, and strengthening foreign growth. The Committee sees the projected pace of economic growth as sufficient to support ongoing improvement in the labor market with further job gains, and the unemployment rate is anticipated to continue to decline toward its longer-run sustainable level. Consistent with the anticipated further recovery in the labor market, and given that longer-term inflation expectations appear to be well anchored, we expect inflation to move back toward our 2 percent objective over coming years.
As always, considerable uncertainty surrounds our projections for economic growth, unemployment, and inflation. FOMC participants currently judge these risks to be nearly balanced but to warrant monitoring in the months ahead.
I will now turn to monetary policy. The FOMC is committed to policies that promote maximum employment and price stability, consistent with our dual mandate from the Congress.
What impact would this have on USD currency pairs “EURUSD and GBPUSD”? I think the USD should appreciate based on the fact that the Fed has made some good progress in bringing down unemployment rate, with increased efforts geared towards ending the Asset Purchase program.
We are selling GBPUSD from 1.718xx.
How COT Reports will Impact on GBPUSD This Week!
Many traders still do not know how to use the COT Reports to profit from trading. In this piece I am going to reveal some secrets on how best to use the reports to stack the odds in your favor.
Please, note first that though the COT Reports are released every week, it is not every week and in all trading situations that the reports are useful. The mistake many traders make is always wanting to make a decision with the reports, but not so with the more successful. I used to always want to make sure I make a decision with whatever the reports presents, until I realized that was hurting me and making me lose a lot.
So how do you use the COT reports to profit from trading, particularly this week of July 13 to 18, 2014?
Just like any other good indicator, there are time the COT reports will show Up Trend, Down Trend and No Trend (or what I call confusion or indecision).
As a trader you always need to always pay attention to what the reports are saying if you must maximize its usefulness.
Let me let you into the basics of the COT reports. I will do my best to explain them in a way that a lay man will understand.
The Non-Commercial: Always see the Non-Commercial section where the Speculators or big financial institutions belong as the section that helps you to decipher what the market is doing with the Trend. Speculators generally move with the trend until it bends. The challenge with this is that they find it difficult to spot the bending of the trend in time, which is why they are willing to cut losses as well as schedule milestones for profit taking.
The Commercial: The commercial traders, also known as hedgers are not exchanging or trading the instrument in question for any profits. No, they are concerned because they use the profit or loss to hedge their main business. Their major concern is not the Trend , but where the turning points will be. In other words, they focus mainly on where the market might reverse the trend. Both handles are important.
Open Interest: In financial terms, Open Interest is the number of contracts or commitments outstanding in futures and options trading on an official exchange at any one time. Now, take note that open interest is not the same as volume. Open Interest is positive when there have been buy activities on the particular option or futures. When Open Interest change drops to zero or becomes negative, the implication is that the confidence of the investors or traders that earlier purchased them has dropped, it might then be ideal to exit your long positions and then begin to look for opportunity to sell.
How Will All These Affect how I will trade the GBPUSD this week?
So for us to know the most probable trend for GBPUSD this week we do not look at the overall positions but only the Non-Commercial positions.
From the Non-Commercial or speculators stand point, the report for GBP shows that Long contracts held is still higher than Short contracts, with 86, 614 for Long Contracts, and 44, 975 for Short Contracts.
But that will not give you the information you need to make the right decision about the trend of the market. So this time we now monitor the Change in commitments from July 1, 2014. In there we have Change for Long Positions at -13, 315, which shows a massive exit of long/buy positions by the speculators. The change for Short Positions shows a positive number at 1, 458, open interest shows a negative change which clearly defines that the long positions held by them have been given up for a probable sell in the coming week. Also remember that the Fed have unanimously agreed to stop QE, which is also a good sign it is time for the US Dollar to shine against the pound sterling
Interpretation: This, when interpreted simply implies that the speculators are selling their pound sterling massively. Some1,458 short positions (volume) have been opened while about -13, 315 long positions (volume) have been closed or sold. For the trend seeker this is a pointer to the trend for the week July 13 to 18 being considered.
Comparing With Price Charts of GBPUSD
Just see the GBPUSD Daily Chart and Weekly Charts and confirm that GBPUSD is poised for a big fall.
So based on the position of the speculators it is clear to me that there is a high probability of a fall of GBP in the week of July 13 to 18. The next thing left for me to do will be to analyze my Key Levels and decide where I want to sell GBPUSD, all things being equal and the same.
Please leave a comment on what you think.
I am also available to attend to your questions and challenges. Also don’t forget to share.
Trade to win! Ifeanyi Uche
The Federal Reserve said growth is bouncing back and the job market is improving as it continued to reduce the monthly pace of asset purchases.
“Growth in economic activity has rebounded in recent months,” the Federal Open Market Committee said today in a statement in Washington. “Labor market indicators generally showed further improvement.” Business spending “resumed its advance.”
The FOMC trimmed bond-buying by $10 billion for a fifth straight meeting, to $35 billion, keeping it on pace to end the program late this year.
Chair Janet Yellen and her fellow policy makers are debating how long to keep interest rates near zero as the U.S. labor market improves and inflation moves closer to the Fed’s 2 percent goal…Read Full Details Here
The Federal Reserve will probably raise its benchmark interest rate faster than money-market investors expect, according to a majority of economists surveyed by Bloomberg News.
Eurodollar futures, the world’s most actively traded short-term interest-rate contract, are underestimating the pace of tightening over the next two years, according to 55 percent of economists in the June 12-16 survey, which drew 56 responses on the question. Fed officials begin a two-day meeting today in Washington.
Investors in the contracts are assuming a slower pace of rate increases than the Fed itself, said Conrad DeQuadros, senior economist at RDQ Economics in New York. They may also be overlooking recent reports showing the world’s largest economy is gaining strength after contracting in the first quarter, he said.
“I find it kind of odd that the market is not even priced for the median forecast the Fed has delivered,” DeQuadros said. “There is going to be an adjustment upward.”
Options on Eurodollar futures contracts show a 47 percent probability the Fed’s benchmark rate will be 0.75 percent or lower at the end of 2015. The odds that the rate will be 2 percent or lower by the end of 2016 are 54 percent. Eurodollars trade in price terms while the implied yield is derived by subtracting the contract price from 100.
Bank of England policy makers said a rate increase this year may be more likely than investors anticipate as the debate on the timing of the first policy tightening in seven years heats up.
In the minutes of its June 4-5 meeting, the central bank’s Monetary Policy Committee said the economy could maintain its pace of growth and slack “would be absorbed more quickly than had previously been expected.”
“In that context, the relatively low probability attached to a bank rate increase this year implied by some financial market prices was somewhat surprising,” the BOE said.
The stock market’s roller coaster ride and uncertain economic outlook have sent investors searching for alternative investments with many choosing to place their money in commodities such as precious metals. Gold and silver are the most popular metals today with platinum not too far behind. But plunging into the commodities market is not as simple as one might expect and it is worth the time it takes to obtain some knowledge about these metals and the markets they trade in before jumping in.
How do you buy silver?
Investing in silver can be done in a number of different ways. Basically, silver investors can choose between two options to begin with—investing in the physical metal or purchasing a financial security that moves with the price of silver.
Buying coins, bars and privately minted coins (rounds) is the easier choice. You see what you are purchasing, you know up front what the price is going to be and there are no surprises involved. Bars of silver can be purchased from major banks as well as bullion dealers. They are made of mostly pure silver and they traditionally trade at a small premium above the prevailing market value for silver.
Investing in silver coins is another matter. Collectible coins fluctuate tremendously, rising and falling in value in response to issues which affect the demand for that specific coin. The demand is usually governed by the amount of coins available in the marketplace. Thus, it is not the silver content in the coin that drives the price; it is the demand for the actual collectible that is instrumental in setting the price.
Silver can also be obtained as bullion coins which work much like silver bars, deriving their value solely from the amount of silver they contain.
According to one major coin collector, “If an investor is looking to specifically invest in silver, he may want to invest in the bullion coins because (in addition to the value of the silver metal) the collector coins also have numismatic value.”
Bullion coins can be purchased through the U.S. Mint as well as through authorized dealers; collector coins can only be acquired through collectors and private sellers.
Like any other investment instrument, buying silver in the commodities market should be done only after learning all the minutiae of silver trading. While the price of silver is determined by trading on the commodities market, investors who buy physical silver still need to do their homework. There is a software tool made available by the U.S. Mint’s website that offers suggestions for bona fide and regulated silver dealers. It is worth researching some of these dealers before making your choice.
In order to come out with a good profit, it is important to know when buy and at the right price. But even dealers can steer you wrong sometimes and there are no shortage of scams in the industry.
Many investors choose to trade in a stock offered by a silver mining company or in an ETF, an exchange-traded fund. ETFs are popular investment vehicles that track indexes or commodities while offering a high level of liquidity. Traders should take note that when purchasing an ETF, they are not really buying silver. They are simply betting that the price of the silver will go up.
An investor interested in buying silver through an ETF will normally look at iShares Silver Trust (trading symbol SLV), which tracks the price for silver. Most discount brokerage houses make SLV and other ETF’s available to their account holders.
Are you aware?
Many are afraid of numbers and calculations. From school days, there are those who cannot just stand mathematical figures or numbers for fear of failure. Have you not carried that over into your adult real life?
As traders, whether or not we like it, dealing with numbers is one thing we must all come to terms with, if we must truly give this business of ours all that it requires for us to succeed.
Dealing with numbers as traders is something you see on a daily basis each time you open your chart to trade. For instance, when you decide on the lot size to use you are dealing with numbers, when you think of where to place your stop loss or take profit order, you are dealing with numbers, when you think of your trading ROI, you are dealing with numbers. Think of Leverage, margin, equity, margin levels, etc, all these expose you to dealing with numbers. How can you run away from the numbers when they are the crux of what we do as traders? Whenever money is involved numbers must come in and you have to deal with them.
Then my advice is to cease to fear the numbers since we must meet them on day to day basis. Rather than fear, learn instead to deal with them.
I know it might surprise some of you that I am talking about the mathematics of Trading Plan Development. But it is a crucial aspect of trade planning we have to understand and deal with to really succeed in trading.
So, what is the mathematics of Trading Plan Development all about? It is the use of numbers, calculations, mathematics generally to plan how we trade each time we trade, simple.
This is particularly on the aspect of trading plan development that deals with goal setting and trading routines.
In this piece, I will be dealing with the goal component of the trading plan as it touches the maths.
Your Trading Goal
The first component of your trading plan in my opinion ought to be your trading goal, which clearly spells out all that you will be expecting from trading and what your commitment and contributions will be to the achievement of those goals.
I usually begin the trading goal setting exercise with the Be-Do-Have method. But this time I will pick the figures to work with.
I ask myself, how much do I have for trading?
You too have to ask and answer this question. Many rush into trading without settling this, and then when they lose they’re broken. Have you heard it before that your trading capital should be money you do not need? Yes, it’s still true as it was when it was first said whenever it was said. That money you do not need is the money you can give to a friend without losing sleep over it. It means that you have considered all your bills and family needs, then you have saved off this amount that you want to trade with to see if you can grow it into something big.
Let us now say I have got only $250 to spare for trading; if you lose it you will not query yourself and nobody will. Good!
Now the goal will be to grow this amount by 120% in 12 months of the year. Please note that I recommend that if your funds are bigger then let your goal be adjusted to suit your trading ability. For example, if you have $10000 I will recommend a 50% to 70% per annum.
But let us work with $250 in this example. $250 x 120% = $300 increase, bringing your account to a total of about $550.
The next goal is your risk goal. If you target 120% for profit what do you want your risk to reward ratio to be, may be 1:2, 1:3 or 1:5? Let us help ourselves here and be more realistic with between 1:2 and 1:3 risk-reward ratios. What this simply means is that for every one dollar we risk, we will be targeting two or three dollars. Therefore, if we expect 300% growth, then we might be risking about 150%, is that not more than we’ve got? Well, may be. But let us break that down to monthly, weekly and daily goals. So we divide 150% by 12 months. 150/12 = 12.5% risk per month. Further down to weekly and daily will give us, 12.5%/4 weeks = 3.125% per week. Now if we choose to take only 3 trades per week in 3 days of the week, that will give us something close to 1.04% per day or per trade. Is that now too much? Certainly not!
Next thing after this will be to determine our lot size per trade based on this first calculation. This aspect will depend on the broker or dealer you use their service. I will deal with this on market standard first. You are aware already that one standard lot is an equivalent of 100000 units, right?
Ok, just in case you do not know, that is what it is. Then, one mini lot size is an equivalent of 10,000 units, while one micro lot size is 1000. A cent lot size is an equivalent of 100 units. So if your broker offers standard lot at 10,000 units like InstaForex does, you now know what to apply as we move on.
Please note also that I by my own standard do not encourage taking any trade in which the stop loss is more than 50 pips. I go for between 20 to 50 pips depending on what the market presents per trade.
Now let me work with 40pips risk and 80 to 100 pips Take Profit. Moving forward, the question to now ask is, how do I use this to determine my lot size per trade? Simple! Divide the target risk by the SL value (in this case, 40 pips) 1.04% of $250 = $2.6. Then, divide 2.6 by 40, and you have 2.6/40 = 0.065. Approximating the figures we will have 0.07 lot size per trade.
Putting it all together now; if I take 3 trades with strict discipline per week, and in a month 12 trades, winning 50%, and losing 50% my numbers will look as follows:
• Losses: $0.07 x 40 pips = $2.8 x 6 = $16.8
• Wins: $0.07 x 80 pips = $5.6 x 6 = $33.6
• Profit per month: $33.6-$16.8 = $16.8
• Therefore, $16.8 x 12 = $201 per annum which is about 100% account growth.
• Remember that when goals are set, the essence of measurement is to determine whether or not the goals were achieved, and what can be done to improve on the achievement.
This is the mathematics of Trading plan Development. It guides how you trade, when you trade and what you risk and target per trade.
This is to your success!
The Coaching Authority