RISK | REWARD | MONEY MANAGEMENT IN FOREX TRADING

     

     Anyone serious enough about trading would do well to incorporate money management techniques to their trading plan to protect their portfolio.

Nearly all successful traders use a money management strategy along with their regular trading plan, and if you have ever experienced a severe drawdown on your account, you probably do too.

Basically, having safeguards in place to protect your account to remain in business is far better than the alternative. What follows are some general guidelines for money management, which can be incorporated into a trading plan.

                        Tip #1: Only Trade With Risk Capital 

Trading currencies involves taking substantial risks, no matter how you look at it. Because of the free-floating currency market, currency trading has considerably more in common to gambling than investing.

As a result, putting funds at risk which you cannot afford to lose should never even be considered by a responsible forex trader. This includes money needed for key housing expenses such as your mortgage or rent payment, or the weekly food allowance necessary for your or your family's sustenance.

In general, traders do better by only trading forex with funds known as risk capital. Such money has been specifically designated for trading because it is expendable and therefore not needed for the basic essentials of living.

EURUSD WEEKLY OUTLOOK; OVER +1400PIPS IMMINENT

FUNDAMENTAL OUTLOOK

EUR/USD had an excellent week, breaking decisively to levels last seen in November 2011. Is 1.40 the next target? Or will the common currency take a break now? German retail sales, inflation and employment data, , consumer sentiment in France and Germany and GDP in Spain. Check out these events, on our weekly outlook. Here is an outlook for these events among others, and an updated technical analysis for EUR/USD.

Weak Non-Farm Payrolls in the US provided the trigger needed for the big breakout. If this is what the US can do without a crisis, things will likely look worse in the following months. However, in the old continent not all is well. PMIs couldn’t maintain their recovery and dropped. German business confidence is also weaker and so is inflation. Will the ECB step up its rhetoric and try to weaken the euro?

A summary of major events during the week.

GBPUSD WEEKLY OUTLOOK; OVER +1700PIPS PROFIT TARGET

FUNDAMENTAL BEAM

GBP/USD was almost unchanged last week, as the pair closed the week at 1.6161. This week’s highlight is Manufacturing PMI. Here is an outlook of the events and an updated technical analysis for GBP/USD.

US employment and manufacturing numbers disappointed last week, but the dollar held its ground against the pound.

A Summary of major events during week

USDJPY WEEKLY OUTLOOK; OVER +500PIPS PROFIT FORECAST

FUNDAMENTAL BEAM

USD/JPY had an uneventful week, as the pair posted modest losses. USD/JPY closed the week at 97.40. This week’s highlight is the Bank of Japan’s Monetary Policy Statement. Here is an outlook on the major market-movers and an updated technical analysis for USD/JPY.

The US dollar was broadly weaker last week , as initial optimism over the debt deal quickly faded . The agreement reached in Congress is only for a few months, as the underlying budgetary issues are yet to be resolved.

A summary of events during the week

EURUSD WEEKLY OUTLOOK

FUNDAMENTAL BEAM

EUR/USD rallied to a new 8 month high, enjoying the poor resolution to the US political crisis. Can the pair break higher? Or is it consolidation time? German Producer prices, German Ifo Business Climate and Manufacturing and services PMIs are the highlights of this week.  Here is an outlook for these events among others, and an updated technical analysis for EUR/USD, now just under the year-to-date peak.

The Euro strengthened against the US dollar in light of the lingering shutdown, badly affecting US economy. The aversion of the debt ceiling was achieved only at the last moment, and it set new dates for a potential shutdown and default, in early 2014. On this background, the Fed will likely postpone QE tapering and maintain the heavy weight on the dollar. In the meantime ZEW Economic Sentiment continued rising  However, the door to new easing is still open, as ECB officials remain worried about tighter credit conditions and falling inflation, as seen again just now. Let’s start:

A Summary of keys event during the week

NZDUSD WEEKLY OUTLOOK

FUNDAMENTAL BEAM

The New Zealand dollar was well prepared for the Fed decision: recent data was positive and so were flows of money into real estate in the small country. When the FOMC announced the NO taper surprise, the New Zealand dollar jumped higher and didn’t really look back.

NZD/USD is over 600 pips above the lows seen early in month. Is it time for consolidation? Or can the year to date high of 0.8676 be challenged soon? Update.

USDCAD WEEKLY OUTLOOK

FUDAMENTAL BEAM

USD/CAD reversed directions this week, as the Canadian dollar gained close to one cent. The pair closed at 1.0284. This week’s highlights are Core Retail Sales and the Overnight Rate release. 

The Canadian dollar took advantage of a sluggish US dollar, as optimism faded over the fiscal agreement hammered out in Congress. Canadian releases were not impressive, as Manufacturing Sales declined and inflation indicators were subdued.

A summary of weekly events during week.

GBPUSD WEEKLY OUTLOOK

Last week Fibonacci  retracement result moved as predicted

FUNDAMENTAL BEAM

The pound’s slide continues, as GBP/USD lost about one cent this week. The pair closed at 1.5946, marking the first week the pair has closed below 1.60 since early September. This week’s key events are CPI, Claimant Count Change and Retail Sales. 

The pound took a mid-week hit, following a poor Manufacturing Production release. As well, the trade deficit was well above the estimate. The US posted a weak consumer confidence release on Friday, but the pound was unable to take advantage.

Updates:

• Taking it to the wire: Idea of the Day So we are still waiting for the US to sort itself out.
• GBP/USD: Trading the British Retail Sales: British Retail Sales is considered one of the most important consumer spending indicators and is often a market-mover. A reading that is higher...

USDJPY WEEKLY OUTLOOK

FUNDAMENTAL BEAM

USD/JPY reversed direction last week, as the Japanese yen posted modest gains. The pair closed the week at 97.69. This week’s schedule is very light, with just four releases. Here is an outlook on the major market-movers and an updated technical analysis for USD/JPY.

The US dollar was broadly weaker last week , as initial optimism over the debt deal quickly faded . The agreement reached in Congress is only for a few months, as the underlying budgetary issues are yet to be resolved.
A summary of major events surroundng this currency pair

1. Trade Balance: Sunday, 23:50. Japan continues to post monthly trade deficits. The August release showed improvement, narrowing to -0.79 trillion yen. This beat the estimate of -0.83 trillion. The markets are bracing for a weak release for September, with an estimate of -1.06 trillion.
2. All Industries Activities: Monday, 4:30. This indicator looks at the total amount of goods and services purchased by businesses. After posting a decline in August, the indicator rebounded last month with a gain of 0.5%. This beat the estimate of 0.3%. The forecast for the September release stands at 0.3%.

NZDUSD BULLISH MOMENTUM EXHAUSTED; BEAR LIKELY TO LEAD SOON.

TECHNICAL BEAM

        Following a third wave leg completion for a highly powered bullish momentum; there are indications showing the pair might just have bitten the much of the bull it can take. This is resulting from the Gann square of nine signal indication for this bull market that begun on the 8th of July, 2013.

USDJPY POSSIBLE FIBONACCI WAVE PATTERN IMMINENT

 FUNDAMENTAL BEAM

The Japanese yen lost ground last week, as USD/JPY jumped about 130 points. The pair closed the week at 98.57. This week’s schedule is very light, with just two releases. Here is an outlook on the major market-movers and an updated technical analysis for USD/JPY.
US consumer sentiment and unemployment claims were weak, but the yen couldn’t take advantage. The shutdown in the US continues, but the dollar was unaffected as the markets seem to be patiently waiting for the politicians in Washington to get their act together.
Updates:

• Taking it to the wire: Idea of the Day It felt like we were heading towards an agreement in the US last week, only for...
• Video: US closer to the cliff, EUR/USD above support, USD/JPY squeezed: The October 17th debt ceiling deadline is creeping closer. Is market complacency about to end with a storm? In an...
• USD/JPY Targets Further Upside – Technical Analysis: Watch out for more upside as USDJPY remains bullish and targeting further gains. As long as it holds above the...
• Aussie continues to climb against the USD: It felt like we were heading towards an agreement in the US last week, only for it to fall apart...

USD/JPY daily chart with support and resistance lines on it.

1. Revised Industrial Production: Tuesday, 4:30. This manufacturing indicator bounced back from a sharp decline in August, posting a solid gain of 3.4% in September. This beat the estimate of 3.4%. It was the best reading from the indicator since January 2012. The markets will be looking for another strong reading this week.
2. BOJ Governor Haruhiko Kuroda: Friday, 6:35. Kuroda will be speaking at an event in Tokyo. Analysts will be listening closely for any hints as to the BOJ”s future monetary policy, and a speech which is hawkish is bullish for the yen.

TECHNICAL BEAM

A bearish wave pattern is expected to begin formation on this pair. Wave leg C is expected to reach an extreme point at 95.79 after completing its intermediary waves at 97.65 and 98.30 for B and C respectively.
The chart below show a possible move for this pair as described by our calculations.

NOTE: Price predictions produced by FibonacciPrice&PatternTrader may be affected by unforseen events like hurricane, earth quake, flood and other natural disasters consequently changing price patterns already predicted. Hence we advice strict adherence to money management techniques.

HAPPY TRADING

EURUSD COMPLETES 31.8% RETRACEMENT; BULLISH TURN IMMINENT

FUNDAMENTAL BEAM

EUR/USD traded in range on the US uncertainty and eventually closed the week marginally lower. Will it pick a new direction now? German ZEW Economic Sentiment, industrial and inflation data are the main market movers. Here is an outlook for the market moving events, and an updated technical analysis for EUR/USD that holds above uptrend support so far.
EUR/USD was supported by the US government shutdown and the upcoming debt ceiling deadline, as well as the poor jobless claims reading. Germany posted an unexpectedly strong trade surplus of 15.6 billion in September but Factory Orders dropped by 0.3% while expected to gain 1.2%. Germany is the leading economy in the Eurozone, having a strong impact on market sentiment. Will German economy growth pick-up in the coming week? Let’s start:

EURJPY CLOSE TO ESTABLISHING A NEW HIGH SINCE LATE 2009

TECHNICAL BEAM

This pair may be close to forming new high since it last did in close of 2009 financial trading year. If we go by our calculations, we expect the pair to rally up to complete a wave leg (iii) at 133.87 and further advance to 134.94 where a key resistance is said to be established.

EURGBP ELLIOT WAVE BEARISH LOOK AHEAD

TECHNICAL BEAM

   Since Janauary 18th, 2008 when the pair broke high above the ranging price that persisted as far back as 2004; It has continued to advance north of the chart against the Great Britain pounce. After a wave 2 leg completion, we should expect prices to the technical support of 0.8424 and beyond.

An intermediate wave a leg with a price tag of 0.8424 bearish is imminent followed by a 50% fibonacci expansion retracement to 0.8457 before it pattern can be alot better predicted. we expect market prices to continue south-east of the chart to 0.8391.

NOTE: Price predictions produced by FibonacciPrice&PatternTrader may be affected by unforseen events like hurricane, earth quake, flood and other natural disasters consequently changing price patterns already predicted. Hence we advice strict adherence to money management techniques.

HAPPY TRADING

AUDCHF STILL BULLISH ON PREDICTED FIBONACCI EXPANSION

   Aussie continue to enjoy bullish ride to complete a wave leg C as predicted by fibonacci sequence. This however is not surprising to us following its bullish breakout since early 2009. New highs continue to form on this pair and much more is expected as the australian economy continue to gather momentum.

AUDUSD BULLISH STRENGTH REDUCING; FIBONACCI 62.8% BEARISH RETRACEMENT IMMINENT

FUNDAMENTAL BEAM

   The Australian Central Bank’s meeting minutes showed once again that another rate cut is not imminent. This boosted AUD/USD and sent it to the lowest levels since mid June.
However, this 4 month high didn’t hold for too long and the pair retreated back down. Is it the false break before the real one? Or is this failed attempt? Despite the bullishness, here are 3 reasons that point to the latter option as well as the predicted technicals based on fibonacci.

GBPUSD CURRENTLY AIMING 50% FIBONACCI EXTENSION BULLISH TURN

Following my analysis of this pair some six days ago where i predicted its possible slide from a previous retracement. Pattern now indicate the pair is in for its bullish turn as a key support has just be established at 1.5923. This would therefore serve as a temporary key support for the short term after the bullish turn is over and the bear comes in for its share.

EURJPY BEAR MARKET PREDESTINATION

TECHNICAL BEAM

An expected wave C leg is destine to complete its cycle at 130.97.
Also following this scenario is a like support level that would likely come into play if the market finnishes below 130.97. this bearish market is strongly put at 129.84 As seen in the chart below.

EURGBP EXPECTED TO MAKE FURTHER DOWNSID MOVE

TECHNICAL BEAM

Further downside move expected for EURGBP following irregular ranging moves seen last week.
The wave leg (y) has just been completion and this is sure to follow with a slide south-east of the chart.

AUDUSD BEARISH RETRACEMENT FOLLOWS WITH A BULLISH WAVE C LEG COMPLETION WITH TARGET

FUNDAMENTAL BEAM

AUD/USD had a solid week, gaining over one cent. The pair closed the week at 0.9435. This week’s highlight is Employment Change. Here is an outlook of the events and an updated technical analysis for AUD/USD.
The Australian dollar has benefited from the US shutdown, which has hurt the US dollar. As well, the Aussie got a boost from the RBA, which maintained its benchmark interest rate and hinted that it will not be reducing rates in the near future.
AUD/USD graph with support and resistance lines on it.

1. AIG Construction Index: Sunday, 22:30. The Construction Index continues to post readings well below the 50-level, indicating ongoing contraction in the construction industry. The August release came in at 43.7 points and no significant change is expected in the upcoming release.
2. ANZ Job Advertisements: Tuesday, 00:30. This indicator is an important gauge of activity in the employment sector. The indicator continues to post declines, with the August release coming in at -2.0%. Another decline is expected in the September release.
3. NAB Business Confidence: Tuesday, 00:30. Business Confidence jumped to 6 points in the previous release, its best showing in over two years. Will the indicator follow suit with another sharp release for September?

USDJPY IN FOR BETTER BULLISH TURN THIS WEEK

FUNDAMENTAL BEAM

USD/JPY finished the week strongly, as the pair gained slightly over one cent on the week. USD/JPY closed the week at 98.20. This week’s highlights are the Tankan indexes and the BOJ Monetary Policy Statement. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.
Japanese inflation indicators met their estimates last week. In the US, Unemployment Claims were down slightly, but key manufacturing and housing data posted declines.
Updates:

• USD/JPY falls on US government shutdown fears: The yen is certainly enjoying its safe haven status. As negotiations in the US concerning a government shutdown got stuck...
• The Sword of Damocles may fall on the US unless a deal on a budget is reached today: Idea of the Day This could be a tricky end of the month. On top of the usual month end...
• Investor confidence shaken by political tensions on both sides of the Atlantic and a default threat in the US: A number of political developments over the weekend have shaken investor confidence worldwide, sending global equities sliding as we head...

USDCHF STARTING BULLISH UPSIDE MOVE

TECHNICAL BEAM

Following our bearish prediction of USDCHF and a close wave leg 3 completion for our open trade as seen in the chart.

GOLD RELUCTANT TO MOVE NORTHWARD; BEARISH TURN NOW VISIBLE

TECNICAL BEAM

We expect further downside movement for GOLD after reluctantly deciding to break above the resistance by establishing south spike. Market price closing downward for the week.

GBPUSD ENTERS BEAR MARKET; ASIAN SESSION BULLISH RETRACEMENT EXPECTED

FUNDAMENTAL BEAM

GBP/USD continues to move higher and broke through the 1.61 line this week. The pair closed the week at 1.6136. This week’s key events are Manufacturing, Services and Construction PMIs. Here is an outlook of the events and an updated technical analysis for GBP/USD.
The pound continues to shine, although this week’s UK numbers were uneventful. In the US, Unemployment Claims looked sharp, but key manufacturing and housing data disappointed the markets and weighed on the greenback.

1. Net Lending to Individuals: Monday, 8:30. An increase in lending reflects stronger consumer confidence and spending. The July reading dropped to 1.5 billion pounds, falling short of the estimate of 1.7 billion. The estimate for August stands at 1.6 billion.
2. Manufacturing PMI: Tuesday, 8:30. This PMI has been steadily rising and the index has been above the 50-point level, indicating expansion, for the past four releases. Little change is expected in the upcoming release, with an estimate of 57.5 points.

EURUSD LOOKING BEARISH ON LONG TERM; SHORT TERM BULLISH MOVE STILL IN SIGHT

FUNDAMENTAL BEAM

EURUSD reached a new 8 month high on the back of the US government shutdown, but soppted at resistance. Draghi’s speeches, Industrial data and the IMF meeting are the highlights of this week. Check out these events among others, and an updated technical analysis for EUR/USD, now in a higher range.
  The ECB left all rate unchanged postponing new policy moves until the fragile euro zone recovery strengthens. The ECB became concerned with rising market interest rates over the summer, and pledged to keep the benchmark rates at a minimum low for an extended period. And while the central bank remains ready to act with new LTROs, falling inflation is currently not a worry. Draghi’s content message add fuel to the EUR/USD fire, that was lit by the US government shotdown – an unresolved theme dominating the news.
Updates: EUR/USD daily chart with support and resistance lines on it.

1. Sentix Investor Confidence: Monday, 8:30. Euro zone sentiment improved for the first time in more than two years in September a vote of confidence in the Eurozone economy, reaching 6.5 points after minus 4.9 in August signaling the end of recession. The reading beat market forecast for minus 4. A boost in exports and increased spending pulled the euro zone out of recession in the second quarter of 2013. A further boost to 10.9 is expected now.
2. German Trade Balance: Tuesday, 6:00. Germany’s trade surplus narrowed in July to 14.5 billion following 15.8 billion in the previous month as exports weakened. In unadjusted terms, trade surplus decreased slightly to 16.1 billion euros from 16.9 billion euros, amid a rise in imports. Exports to the European Union as a whole edged up by 0.8 percent and exports to the rest of the world were up by 3.6 percent, the statisticians said. A rise to 15.1 billion is expected.
3. German Factory Orders: Tuesday, 10:00. German factory orders declined in July, down 2.7% following a 5.0% boost in demand by the Paris Air Show a month earlier. Economists expected a small drop of 0.7%. On a yearly base, orders advanced 2%, when adjusted for the number of working days. German economy expanded 0.7% pulling the 17-nation euro area out of its longest-ever recession. Manufacturing expanded and business confidence increased to a 16-month high in August, indicating a solid pick-up in German economy. A pick-up of 1.2% is expected now.
4. German Industrial Production: Wednesday, 10:00. German manufacturing output fell 1.7% in July, following a 2.0% gain in the previous month. However a two-month average suggested that industry in Europe’s largest economy is on the path to recovery. The current drop in production could be related to the previous month, where output boosted 2.0% driven by a high number of public holidays. The general trend indicates growth in manufacturing and significantly stronger in construction. A rise of 1.1% is expected.
5. French Industrial Production: Thursday, 6:45. French industrial output fell unexpectedly by 0.6% in July after a 7.4% plunge in the previous month, due to lower car production and mineral refining, casting shadow over French recovery in the beginning of the third quarter. The data suggests the economy is still weak after pulling out of recession in the second quarter. A rise of 0.7% is forecasted.
6. ECB Monthly Bulletin: Thursday, 8:00. The ECB monthly bulleting released in September revealed that the Euro area has recovered during the Q2 of 2013 and is expected to continue its recovery in the remaining year however, the Euro Zone should continue the reforms, in order to strengthen recovery. The Euro area real GDP, edged up 0.3% in the second quarter of 2013. ECB projected an annual GDP decline of 0.4% in 2013 and an expansion of 1.0% in 2014. ECB interest rates will remain at present or lower levels for an extended period of time.
7. Mario Draghi speaks: Thursday, 13:00. ECB President Mario Draghi is scheduled to speak in New York where he is likely to discuss the Eurozone recovery and his plans for further easing measures to ensure a speedy recovery. Market volatility is expected. He managed to deflect sensitive political questions in the last statement. What will he say now?

TECHNICAL BEAM

EURUSD continued a bullish trend last week as predicted, climbing as high as 1.3639 after which it drops down to 1.3540. This leaves everyone with the question of whether the Greenback has returned to winniing ways just overnight.
We envisage a long term bearish move for EURUSD as seen in the chart below

However, we expect that EURUSD would climb come open of Asian session on monday before afterward starting strongly the bearish southward move as seen in the chart below.

NOTE: Price predictions produced by FibonacciPrice&PatternTrader may be affected by unforseen events like hurricane, earth quake, flood and other natural disasters consequently changing price patterns already predicted. Hence we advice strict adherence to money management techniques.

HAPPY TRADING

EURUSD STILL ADVANCING NORTH OF THE TECHNICAL RESISTANCE

FUNDAMENTAL BEAM

EURUSD continues to chip away at the retreating US dollar in Thursday trading. The pair has crossed over the 1.36 level for the first time since February, as the euro got a boost from a strong Eurozone Retail Sales release on Thursday. In other developments, ECB head Mario Draghi sounded positive about the Eurozone recovery, and the Italian government survived a vote of no confidence. In the US, today’s highlights are ISM Non-Manufacturing PMI and Unemployment Claims. The markets are expecting weaker numbers from both indicators. Meanwhile, the government shutdown continues, as Congress has been unable to reach an agreement that would end the budget impasse.

AUSSIE KIWI PAIR AUDNZD ON A STRONG BULLISH REVERSAL MOVE

FUNDAMENTAL BEAM

   Short AUD/NZD is not yet a crowded trade. In fact, the latest IMM data suggests quite the opposite. Speculative AUD longs have been built up faster than NZD longs, such that the (implied) AUD/NZD speculative position is actually a sizeable net long. The implication is that speculative positioning does not present an impediment to additional AUD/NZD downside.

- Despite the speed of the rally, the AUD/NZD is not yet 'cheap' according to fundamentals. Indicative of such, NZ-AU 3-year swap differentials, NZ-AU commodity prices, and relative business confidence currently suggests a 'fair-value' range of 1.2200-1.2500 for AUD/NZD. In short, the fundamental backdrop is likely to see AUD/NZD heavy over the coming 3-6 months.

TECHNICAL BEAM

The Aussie is gathering bullish momentum against the kiwi after trading lower lows for periods determined by the fundamentals. Fibonacci and Elliot wave analysis with a help of Gann time series shows the AUDNZD has begun a corrective wave leg III following a trend reversal late september.

The wave III or [W]  leg is expected to come to completion at the resistance level of 1.1516 and consequently retrace 21% fibonacci level  [X] = 1.1427. Then continue from wave leg [X] to a third wave leg C  or [Y].

WIKIPEDIA'S UNDERSTANDING OF SWING TRADING

Swing trading is a speculative activity in financial markets where a tradable asset is held for between one to several days in an effort to profit from price changes or 'swings'. A swing trading position is typically held longer than a day trading position, but shorter than buy and hold investment strategies that can be held for months or years. Profits can be sought by either buying an asset or short selling

Using a set of mathematically based objective rules for buying and selling is a common method for swing traders to eliminate the subjectivity, emotional aspects, and labor-intensive analysis of swing trading. The trading rules can be used to create a trading algorithm or "trading system" using technical  analysis and fundamental analysis to give buy and sell signals.

Simpler rule-based trading approaches include Alexander Elder's strategy, which measures the behavior of an instrument's price trend using three different moving average of closing prices. The instrument is only traded Long when the three averages are aligned in an upward direction, and only traded Short when the three averages are moving downward. Trading algorithms/systems may lose their profit potential when they obtain enough of a mass following to curtail their effectiveness: "Now it's an arms race. Everyone is building more sophisticated algorithms, and the more competition exists, the smaller the profits," observes Andrew Lo, the Director of the Laboratory For Financial Engineering, for the Massachusetts Institute of Technology.

Identifying when to enter and when to exit a trade is the primary challenge for all swing trading strategies. However, swing traders do not need perfect timing—to buy at the very bottom and sell at the very top of price oscillations—to make a profit. Small consistent earnings that involve strict money management rules can compound returns over time. It is generally understood that mathematical models and algorithms do not work for every instrument or market situation.

Risks in swing trading are commensurate with market speculation in general. Risk of loss in swing trading typically increases in a trading range, or sideways price movement, as compared to a bull market or bear market that is clearly moving in a specific direction.

USDJPY IN A STRONG BEARISH MOVE TO HIT A KEY SUPPORT AS U.S GOVERNMENT SHOTS DOWN FOR THE FIRST TIME IN 17 YEARS

FUNDAMENTAL BEAM


The overnight session was once again filled with action, as politicians in Washington refused to budge from party lines and careened the government into shot-down for the first time in 17 years.  The late-night vote for the continuing resolution with a stopgap plan that delays ACA (Affordable Care Act) was passed by the House with a count of 228 for and 201 against, which prompted an immediate response from Senate Majority leader Reid reiterating that the Senate would not be passing any House plan that was not a ﾓcleanﾔ funding bill.

While the US continues to remain in political deadlock and the government shutters itﾒs non-essential doors until a spending plan can be reached, the ﾓbright sideﾔ of last nightﾒs vote was that 12 Republicans voted ﾑNayﾒ and 9 Democrats voted ﾑAyeﾒ; therefore, there may be some wiggle room in the House to get closer to passing something the Senate would consider tabling before the President. As of right now it doesnﾒt seem like there are many bargaining chips left on the table, so it was be interesting to see how fast outside pressure mounts.  As mentioned yesterday, the real market catalyst is not the government shut-down itself, but the risk the negotiations continue to tread water and the market become more pessimistic as the debt ceiling approaches.

S&P futures were little bothered overnight, and are actually positive as we head into the North American open.  The USD is weaker against a basket of currencies, with the DXY slipping below the 80 level before finding some buying support.  The Loonie has managed to claw back its overnight losses, and is currently pivoting close the 1.0300 level before the opening bell.  Implied volatility in the options market for USDCAD has ticked up recently, but still remains well below the highs back in 2011 when the debt ceiling debate first gained prominence.  Calls on the USD in the options market are still more expensive than puts, but the marketﾒs lack of anxiety has risk reversals at depressed levels when compared to Q3 2011.  With the market seemingly little bothered by a government shut-down, protection from the ﾑfat-tailﾒ risk of a less-than-smooth navigation of the debt ceiling appears cheap at these levels.

In Asia, strong sentiment readings from Japanﾒs largest manufactures boosted confidence that Prime Minister Shinzo Abe is on the right track with monetary and fiscal policy reforms.  The quarterly Tankan readings for large manufacturers came in at the strongest levels since 2007, showing that Abeﾒs sweeping policy changes are helping the economy gain traction.  The manufacturing industry seems little phased by the fact that Abe is set to introduce an increase in the national sales tax from 5% to 8%, a move that is set to raise a ﾥ8tn per year and eat into the ballooning government deficit.  In order to cushion some of the blow of the sales tax increase, Abe is also planning to announce a stimulus package valued at ﾥ5trn, aimed at infrastructure investment leading up to the 2020 Olympics, and expanded tax rebates for corporates.  With the positive developments in sentiment of manufactures in the region, any JPY strength from the flight to safety trade due to government shut-down concerns in Washington could be a good opportunity for clientﾒs long JPY to think about taking some exposure off the table, as the perceived success of ﾑAbenomicsﾒ could propel USDJPY back towards the 100 level.  The yen grinded higher against the big dollar overnight, dropping the USDJPY pair below the 98 level during the Asian session.

The Reserve Bank of Australia held their monthly policy announcement overnight, and while the central bank kept interest rates unchanged at 2.5% as expected, the accompanying rate statement was closely eyed to see if the communication from Governor Stevens confirmed that the RBAﾒs easing cycle was complete.  The RBA once again struck a ﾑneutralﾒ tone in regards to the future for monetary policy, reiterating the effects of their recent monetary policy easing were still being disseminated throughout the economy, and refrained from telegraphing what the next move on interest rates would be.  Just ahead of the rate decision retail sales for the region came in slightly warmer than forecast with a monthly increase of 0.4%.  The bright spot for August bucks the trend of consistent underperformance for retail sales in Australia, and is a far cry from the central bank claiming success in stoking consumer demand, however the combination of a neutral RBA and better than expected retail sales has the Aussie flying high, up over a full figure against the USD north of the 0.9400 handle.

European markets are mixed as we move into the North American cross, with the FTSE lower by 0.33%, while the Stoxx and Dax add 0.55% and 0.52% respectively.  German 10 year Bunds are lower this morning, as investors rotate into equities despite a worse than expected unemployment report which saw the German economy shed 25k jobs in the month of September, a sign the recovery for the backstop of the EZ remains uneven.  The EUR has given back some of its overnight gains, and is currently trading in the mid-1.35s against the USD as traders remain wary of the possibility for a new LTRO at the ECB rate decision tomorrow.  While it is certainly evident that credit expansion in the region is abysmal, the last few LTROs have done little more than bolster the balance sheets of banks under siege, so it will be interesting to see if Draghi deems another LTRO would be beneficial.  With the EUR at some of its loftiest levels on the year, corporations that are long EURﾒs might want to explore their options heading into the ECB rate decision tomorrow.

While it is likely the ebb and flow of markets will be driven by developments out of Washington as the day progresses, at 10:00am EST investors will get some tier-one economic data from the US that could draw some attention.  The survey conducted by the ISM on purchasing managers in the manufacturing industry is due out in a few hours, and is expected to show a slight decline from the August reading to come in at 55.00 in September.  Should the survey continue to hold its recent trend of forecast beats, the upside deviation would help spur some modest USD buying, putting pressure on a Loonie thatﾒs been confined to directionless trading so far this week.


 TECHNICAL BEAM

Following shot-down of government house, the USDJPY has reversed from a likely bullish 0% Fibonacci scenario of a wave 5 leg to continue its bearish wave C or III.

Price target in sight for the wave C leg is put at a key support level at 96.277 PRZ( Potential Reversal Zone) back to 98.677 for another 50% fibonacci retracement.


STILL BEARISH OF USDJPY

NOTE: Price predictions produced by FibonacciPrice&PatternTrader may be affected by unforseen events like hurricane, earth quake, flood and other natural disasters consequently changing price patterns already predicted. Hence we advice strict adherence to money management techniques.

HAPPY TRADING

EURCAD BULLISH RETRACEMENT

TECHNICAL BEAM

EURCAD rested on a key support 1.36607 6th of September 2013 thereby establishing a complete corrective wave B leg. The wave B leg, resulting from the shocking septaper surprise- The Federal Reserve Monetary Policy news which must have affected the Canadian dollar interest rate.
Therefore, on this key note we expect the EURCAD pair to keep soaring high following a bullish channel up to a price target of 1.4144 and consequently kissing the key resistance at 1.4240.

Completion of this wave leg could send the EURCAD pair 61.8% of the fibonacci price down to wave leg 2 with a price tag of 1.3808.

NOTE: Price predictions produced by FibonacciPrice&PatternTrader may be affected by unforseen events like hurricane, earth quake, flood and other natural disasters consequently changing price patterns already predicted. Hence we advice strict adherence to money management techniques.

HAPPY TRADING