Peter Bain Forex Trading Commentary for Friday March 10, 2006

Forexmentor.com Currency Trading Price Action

Today, I'm back to the euro. Why? Precisely for the same reason I've been talking about all week. I like to work with things that are going up - if only for a short period of time. In my analysis last night, I noticed a swing point at approx. the Tokyo open - which happens more often than not. I figured that was good for a short counter-trend trade. I didn't like what I saw on the hourly chart (read, MACD down), but my price projection saw 1920, or thereabouts. As it turns out, once we got through the bewitching hour of midnight ET, I realized that today was going to be an M1/M3 day, where the expected high was M3. That gave me an insight into where price was going. And, sure enough, that's where it hit the brakes. Who could have guessed? Meanwhile, from a longer-term perspective, the trend on the daily is still up, given the common sense demand (support) trendline is still being respected.

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Forexmentor.com Forex Trading News

It's a pretty safe bet that the Fed is done with rate increases in March or May. The Fed chairman will then more than likely take a wait-and-see attitude in July. As far as Japan is concerned, no matter how far the Bank of Japan goes with their rate moves, Japan will still have the lowest policy rate in the OECD. The guessing game calls for the Bank of Canada to raise its benchmark interest rate just one more time this year. That sentiment explains a lot in the recent weakness in the Canadian dollar. Manufacturers are loving it, as a lower loonie makes their exports more competitive.

GM and Ford are going to be cutting aggressively in the second quarter, and the rollover of the housing market should be in full swing by then. Watch out below!

OPEC is standing pat, leaving its output ceiling unchanged due to growing threats to world oil supplies and concerns that a run in prices could hurt the global economy, and cause a decline in petroleum consumption.

Peter Bain Forex Trading Commentary for Thursday March 9, 2006

Forexmentor.com Currency Trading Price Action

Back to the Swissy today, as it is temporarily in an uptrend having put in a double bottom on the 15 minute chart yesterday afternoon and evening ET. But, don't be fooled. The commercial traders (read, BIG DOGS) are extremely LONG the Swiss franc, which augers well for a tumble in the USD/CHF pair at some point, sooner than later.

All price is doing now is retesting a recent demand (support) trendline that was recently broken on the daily. Such a phenomenon occurs quite frequently. It's called a head fake. When you see commercial sentiment swing one way or the other (extremely so), you have to use prudent technical analysis to pick your entry point for a position trade (in this case, to go short). Back to today's price action. After yesterday's doublebottom, price did rise all the way up to R1 today, and then collapsed into the London open, at which time it reversed again, in the form of railway tracks (tweezers). Like I have said before, I like to work with a currecy pair that is headed north, even if only temporarily and, hence, my decision to focus on the Swissy today.

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Forexmentor.com Forex Trading News

Concerns abound about higher borrowing costs in the U.S. (and elsewhere), and those concerns have spilled over into copper prices, as there are worries that construction demand will stall. Of course, copper plays a big part in that industry. On the flip side, the yield on the 30-year U.S. Treasury bonds is at the highest in almost three months.

The Bank of Canada has all of a sudden turned dovish in its remarks. Together with its fifth consecutive quarter-percentage point hike of its overnight interest rate target, which now stands at 3.75%, it modified its language in its news release, using the word may to describe the possibility of a further modest increase in its policy interest rate.

The BoC is obviously concerned about the impact higher rates are having on the loonie, as the manufacturing section, which has come to rely on a low Canadian dollar, is really hurting. Exports, which are mainly to the U.S., become less competitive, and suffer greatly as that currency climbs. Counterbalancing that fact is the broader picture, wherein the resource sector has benefited from higher commodity prices.

Peter Bain Forex Trading Commentary for Wednesday March 8, 2006

Forexmentor.com Currency Trading Price Action

The pound came to life again yesterday, shortly after the 8:30 am ET news - as did the euro. Correspondingly, the Swiss franc turned turtle, as is to be expected, given the way it is paired with the USD. As I said yesterday, I find it much easier to work with a pair that is trending up, versus down. So, today, the GBP/USD is the flaveur du jour. I just like its chart action and yesterday's reversal better than the EUR/USD. Why make it tough, if it doesn't have to be? You will notice that we subsequently had a reversal, in the form of railway tracks, at the London open today - at M3 on an M1/M3 day - all the while Stochastics(slow) was overbought. STO, being an oscillator, is a good indicator to use when a market is trending.

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Forexmentor.com Forex Trading News

Housing bubble? What housing bubble? It's bursting. It looks like the Canadian housing market has peaked. Who could have guessed? Even the Canadian dollar is getting a case of the uglies from lower expectations in the housing sector, and weaker commodity prices aren't helping either. This despite the BoC's rate hike on Tuesday, which normally would bolster the loonie.
State-side, house prices appear headed south too. Take Sarasota, Florida, for example - down 48%. Ouch!

U.S. stocks are in the doldrums, as the yield on the U.S. Treasury's 10-year note reached its highest level since the Federal Reserve began raising interest rates in June, 2004.

Crude oil prices got some relief, as OPEC signaled its intention to keep production close to the highest level in two decades.

Peter Bain Forex Trading Commentary for Tuesday March 7, 2006

Forexmentor.com Currency Trading Price Action

The tide turned on the Swissy at 7 pm ET Sunday, March 5/06, wherein we witnessed a spinning top on the hourly chart and a hammer - both fairly pronounced. Since then, it's been up-up-and-away. When things get on a roll with a currency pair, it's then that you want to use an oscillator like Slow Stochastics to pick your entry points - i.e., buy the dips in an uptrend, when STO goes oversold. One of the reasons I picked the USD/CHF today over the EUR/USD and GBP/USD is that I personally find it easier to work with an uptrend (the latter two going down). I just find it easier to think that way. And, why not. The 'three muskateers' move in tandem - but differently, depending on how they're paired with the USD. This business doesn't have to be all that difficult. So, why not just go with the flow, and find situations that are easy to relate to.

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Forexmentor.com Forex Trading News

Get ready for more aggressive monetary tightening in the U.S. and elsewhere. Interest rates appear to be headed for higher ground in a number of countries.

The ECB raised rates, as expected, amid concerns from Jean-Claude Trichet, the ECB head, about inflationary risks. Meanwhile, core inflation is also picking up in Japan (fastest since 1998). It would seem as though Japan is about to leave seven years of deflation behind and, with that, say good bye to its five-year super-easy monetary policy, a.k.a. its quantitative easing policy. It is more than likely that the BoJ will adopt a more conventional interest rate policy at its March 8-9/06 meeting.

The Canadian dollar continues to draw strength from stellar economic data, leaving the BoC no other option but to consider hiking rates further. Lately, the loonie seems to have developed a mind of its own, bucking energy price movements.