Wednesday, 22 November 2017

Dollar treads water, capped by sagging long-term U.S. yields

TOKYO (Reuters) - The dollar treaded water against its peers on Wednesday, capped as U.S. Treasury yields failed to rise despite increasing investor risk appetite in broader financial markets.

The dollar index against a basket of six major currencies was little changed at 93.941.

The index fell back from a one-week high of 94.165 overnight after a rally triggered earlier this week by a sagging euro stalled as long-term U.S. Treasury yields continued inching lower.

The greenback was a shade lower at 112.280 yen, after slipping overnight from a high of 112.705.

“The dollar should be getting more of a lift against the yen in this ‘risk on’ environment. But what is taking precedence is the adjustment of positions before the Thanksgiving and year-end holidays by participants, resulting in the covering of yen shorts,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

Wall Street shares rose yet again to record highs on Tuesday, while Japan’s Nikkei climbed back towards 26-year peaks.

The ongoing flattening of the Treasury yield curve, which has capped long-term yields, is a further drag on the dollar, Daiwa’s Ishizuki said.

The U.S. yield curve flattened to its lowest in a decade on Tuesday, as investors price in the expectation that the Federal Reserve will continue to raise rates while the Treasury is seen increasing short-dated debt issuance. At the same time low inflation and global demand for yield has supported longer-dated debt.

Another factor seen supporting the Japanese yen on a broader level was its recent gains against the euro.

The common currency slumped against its peers at the start of the week as German Chancellor Angela Merkel’s failure to form a three-way “Jamaica coalition” government clouded the country’s political outlook.

“Cross yen pairs recently enjoyed a good run higher. Of these pairs, euro/yen holds a dominant position,” said Koji Fukaya, president at FPG Securities in Tokyo.

“Selling of the euro against the yen gathered momentum as traditional profit-taking before Thanksgiving was joined by market participants dissolving euro longs on the German political news.”

The euro was last 0.2 percent lower at 131.790 yen, having gone as low as 131.160 on Monday to its weakest since mid-September.

The currency market showed little response to comments by Fed Chair Janet Yellen, who said late on Tuesday the central bank is “reasonably close” to its goals and should keep gradually raising U.S. interest rates to avoid the dual pitfalls of letting inflation drift below target for too long and driving unemployment down too far.

Next in focus was the minutes of the Oct. 31-Nov. 1 Fed policy meeting minutes due later in the session, to be evaluated for any new indications that an interest rate hike is likely in December.

The euro was steady at $1.1737 after crawling away from a one-week low of $1.1712 brushed overnight on the political impasse in Germany.

The Australian dollar was 0.1 percent lower at $0.7568 after slipping to a five-month trough of $0.7532 overnight on dovish-sounding Reserve Bank of Australia policy meeting minutes.

The New Zealand dollar was steady at $0.6829 after digesting a surprise increase in October domestic milk production. New Zealand is a top dairy exporter and factors that are considered negative for milk prices tend to hurt the kiwi.

Reporting by Shinichi Saoshiro

Dollar near highs as German political impasse pressures euro

TOKYO (Reuters) - The dollar gave back some of its gains in Asian trading on Tuesday but stuck close to a one-week high against a basket of currencies as a German political deadlock continued to pressure the euro.

The dollar index, which tracks the greenback against a basket of six major rival currencies, dipped 0.1 percent to 94.029, but was still within sight of its overnight peak of 94.104, its highest since Nov. 14.

The euro edged up 0.1 percent to $1.1739, nursing losses after dropping to $1.1722 in the previous session after German coalition government talks collapsed.

German Chancellor Angela Merkel, whose conservative bloc lost seats in September’s election, said she would inform the German president that she could not form a coalition, after the pro-business Free Democrats withdrew from negotiations.

Merkel said she would prefer a new election to ruling with a minority, but Germany’s president told the parties they owed it to voters to try to form a government.

“It was primarily a euro weakness story, based on the failure to form a coalition government in Germany,” said Bill Northey, chief investment officer at the private client group of U.S. Bank in Helena, Montana.

“Stepping back from the daily activities, the big mountain that we’re still looking to traverse is still tax reform -- what form, and on what timeline,” Northey said.

U.S. Republicans are not expected to push major tax cuts through Congress this year, according to a majority of economists in a Reuters poll, who were also sceptical that tax reform would provide a significant boost to the economy.

Trading was expected to be relatively thin this week ahead of the U.S. Thanksgiving holiday on Thursday, which is also a national holiday in Japan.

The calendar is relatively sparse ahead of the holiday, with Federal Reserve Chair Janet Yellen scheduled to give a speech later on Tuesday. Minutes from the Fed’s November meeting will be released on Wednesday.

Against the yen, the dollar was slightly lower on the day at 112.59 , holding above its overnight low of 111.89 yen, which was its lowest since mid-October.

The euro was steady on the day against the yen at 132.15 yen, after skidding as low as 131.16 on Monday, its lowest since Sept. 15.

“Ahead of this week’s holidays, it would not have been unusual for the dollar to have fallen on position adjustments as investors pared their dollar-long positions, in case there was some dollar-negative news while they were away,” said Kumiko Ishikawa, FX analyst at Sony Financial Holdings in Tokyo.

“But due largely to the euro’s moves, the dollar is holding up,” she said.

The Australian dollar was down 0.2 percent at $0.7536, after falling as low as $0.7529 earlier, its deepest nadir since mid-June.

Minutes of the Reserve Bank of Australia’s (RBA) Nov. 7 policy meeting showed it harboured “considerable uncertainty” about how quickly wages growth and inflation might pick up.

After that meeting, the RBA trimmed its forecasts for core inflation to below its long-term 2-3 percent target band for another two years.

Bitcoin slipped nearly 4 percent on Tuesday after notching a fresh record high of $8,253.

Reporting by Lisa Twaronite

Tuesday, 21 November 2017

Asia stocks hit 10-year high on global growth optimism, dollar strong

TOKYO (Reuters) - Asian stocks rose to a 10-year high on Tuesday as investors took heart from further evidence of strength in the global economy, while the dollar hovered near a one-week high against its peers thanks to higher U.S. yields and a floundering euro.

European markets were expected to be somewhat more subdued in early trade, with financial spreadbetters expecting Britain's FTSE .FTSE to open 0.05 percent higher and Germany's DAX and France's CAC to open unchanged.

Gains on Wall Street overnight helped MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rise 0.8 percent to a fresh decade-high.

Japan's Nikkei .N225 advanced 0.7 percent, while South Korea's KOSPI  rose 0.1 percent and Australian stocks climbed 0.3 percent. Shanghai .SSEC added 0.5 percent and Hong Kong's Hang Seng was 1.3 percent higher.

Equity markets have enjoyed strong support this year thanks to rising corporate earnings on the back of an improving global economy.

That confidence was again on display overnight, with upbeat data in Germany helping the benchmark DAX brush off worries over the collapse of German coalition government talks.

German data showed strong industrial activity, while the Conference Board’s leading economic index for the United States rose 1.2 percent in October, double the rate economists polled by Reuters had expected.

Wall Street was led up by telecom and tech shares, with the Dow .DJI edging back towards record highs scaled two weeks ago. [.N]

In currencies, the dollar index against a basket of six major currencies stood near a one-week peak of 94.104 .DXY touched overnight.

The greenback was boosted by rising bond yields, with the two-year U.S. Treasury yield touching a nine-year high of 1.755 percent overnight.

The yield has risen as investors priced in more interest rate hikes by the Federal Reserve, while the Treasury is expected to increase debt issuance with a focus on short- and intermediate-dated maturities.

"The two-year yield appears to have risen too high now, as the Fed is only likely to hike rates twice at most next year considering current trends in U.S. wages and prices," said Makoto Noji, senior strategist at SMBC Nikko Securities.

The dollar was also lifted as the euro has been weakened by political risks arising from German Chancellor Angela Merkel’s failure to form a three-way coalition government, thrusting Europe’s biggest economy into a political crisis.

Merkel, whose conservatives were weakened after they won an election in September with a reduced number of seats, said she would inform the German president that she could not form a coalition, after the pro-business Free Democrats withdrew from negotiations.

“So another grey cloud has formed over euroland for investors to worry about. The euro may slide more in the days ahead unless a solution to Germany’s government can be found, fast,” wrote Carl Weinberg, chief economist at High Frequency Economics.

The euro inched up 0.1 percent to $1.1745 EUR= but remained near a six-day low of $1.1722 touched on Monday. A week ago, the common currency had rallied to a one-month high of $1.1862 on robust German growth data.

The dollar was steady at 112.545 yen JPY=, having bounced from a one-month low of 111.890 set overnight.

The Australian and New Zealand dollars were both slightly lower at $0.7543 AUD=D4 and $0.6804, respectively.

Oil prices were little changed as expectations of an extended OPEC-led production cut were cancelled out by rising U.S. output.

Brent crude futures were at $62.30 per barrel, 8 cents above their last close. U.S. crude were 3 cents higher at $56.45 per barrel.

Spot gold XAU= crawled up 0.25 percent to $1,279.76 per ounce after sliding more than 1 percent overnight on the dollar’s bounce.

Reporting by Shinichi Saoshiro

Euro rebounds from earlier lows as traders brush off Germany worries

LONDON (Reuters) - The euro recovered from a two-month low against the yen touched in Asian trade on Monday, with investors brushing off broader political risks arising from German Chancellor Angela Merkel’s failure to form a three-way coalition government.

Merkel, whose conservatives were weakened after they won an election in September with a reduced number of seats, said she would inform the German president that she could not form a coalition, after the pro-business Free Democrats withdrew from negotiations.

The development thrust Germany into a political crisis that raised worries among investors of a new election if Merkel cannot form a minority government.

But after selling off sharply in early deals in Asia, trading down as much as 0.8 percent to hit 131.16 yen, the euro’s weakest since Sept. 15, the single currency rebounded as much as 1 percent to trade flat on the day, at 132.18 yen.

“What usually happens after any news at the weekend is that Asian trading tends to be a bit less liquid, and that can exaggerate the scale of the moves; when Europe came in, markets took a more level-headed approach,” said MUFG currency strategist Lee Hardman, in London.

“There’s a bit of uncertainty – we don’t know what the next step is going to be, whether it’s going to be a minority government or fresh elections - but in terms of the bigger picture I don’t see any significant change in how you value the euro,” he added.

If there were another election in Germany, the far-right, anti-immigrant Alternative for Germany (AfD) party could add to the 13 percent of votes it secured in September. But the parliamentary process required to get through another election is considered to be quite difficult, involving more than one vote in the German parliament.

The dollar had also sold off against the yen - generally sought at times of uncertainty - in Asian trading, dipping to a one-month low JPY=. But it turned higher against the Japanese currency in European trading, up 0.1 percent at 112.14 yen.

The euro fell as much as 0.5 percent against the dollar in Asian trading to $1.1722 EUR=, pulling away from a one-month high of $1.1862 set on Wednesday last week. But it recovered to trade flat on the day at $1.1789 in London trade.

“There’s no panic in the market at all – it’s really a European story,” she added. “We’re not seeing a broad risk-off move here,” said Commerzbank currency strategist Esther Reichelt, in Frankfurt.

Bitcoin was trading at just above $8,000, after hitting a record high of $8,087 on the Luxembourg-based Bitstamp exchange on Sunday.

Many analysts expect this to be a relatively calm week of trading, with U.S. markets closed for the Thanksgiving holiday on Thursday and with few major data releases.

Reporting by Jemima Kelly

Monday, 20 November 2017

Asia stocks wilt as China weakness dims mood, euro skids

TOKYO (Reuters) - Asian shares pulled back on Monday, with investor sentiment hurt by a retreat on Wall Street and a slide in Chinese stocks, while the euro skidded after German coalition talks hit an impasse.

Spreadbetters predicted the gloom would spread to European openings, with Germany's DAX .GDAXI and France's CAC  each seen down 0.5 percent and Britain's FTSE expected to fall 0.1 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan, was off its session lows but still down 0.1 percent.

Japan's Nikkei stock average .N225 finished down 0.6 percent.

“It’s year-end season, so people have more incentive to take profits,” said Kyoya Okazawa, Hong Kong-based head of institutional clients, APAC at BNP Paribas Securities.

“This week and next week, more profit-taking is coming, especially whenever some negative news comes out,” he said.

“Long-only clients overseas are looking at the Japanese equity market, because they’ve been a little bit underweight, and there is still some room to add Japanese equities going forward.”

China stocks clawed their way off session lows but were still down, after Beijing set sweeping new guidelines to regulate asset management products. Analysts said that could dampen investor appetite for riskier assets.

The Shanghai Composite index .SSEC was down 0.5 percent, while China's blue-chip CSI300 Index .CSI300 fell 0.2 percent.

“The new guideline is not the last shoe to drop, or the last piece of bad news,” said Li Huiyong, an economist at Shenwan Hongyuan Securities. “The era of tough financial supervision has just begun.”

On Friday, the Dow Jones Industrial Average .DJI shed 0.4 percent, the S&P 500 lost 0.3 percent and the Nasdaq Composite  was down 0.2 percent.

The U.S. House of Representatives on Thursday passed their version of a tax overhaul bill that would cut corporate taxes, but the Senate continued to wrangle over its rival tax bill, with investors uncertain about whether Congress will be able to reach a compromise.

Against the yen, the dollar edged up 0.1 percent to 112.10 JPY=, after earlier falling as low as 111.89, its lowest since Oct. 16.

The dollar index, which tracks the greenback against a basket of six rival currencies, added 0.4 percent to 93.987 .DXY, as the euro fell 0.5 percent to $1.1734 EUR=.

Talks among four German parties seeking to form a coalition government following an election that weakened Chancellor Angela Merkel broke down on Sunday after the pro-business Free Democrats (FDP) pulled out, citing irreconcilable differences.

The decision by the FDP means that Merkel will either seek to form a minority government with the Greens or a new election will be held.

“It’s not a total surprise, and this kind of political change will not derail the German economy,” said Masafumi Yamamoto, chief currency strategist for Mizuho Securities in Tokyo.

“We are seeing this kind of reaction in the Asian session, but we need to see how Europe will react to this news later.”

He noted that emerging currencies, which are “usually the biggest victims of risk aversion, are not really falling.”

Position unwinding ahead of this week’s U.S. Thanksgiving holiday could keep the dollar’s gains in check, market participants said.

With the market nearly fully pricing in an interest rate increase by the Federal Reserve next month, speculators cut their bearish bets on the dollar for the seventh straight week.

The net negative value of positions against the greenback fell to a four-month low in the latest week, according to calculations by Reuters of data released by the Commodity Futures Trading Commission (CFTC) on Friday.

Lower benchmark U.S. Treasury yields also restrained the dollar, as the yield curve continued to flatten. The 10-year Treasury yield stood at 2.327 percent in Asian trade, down from its U.S. close of 2.354 percent on Friday.

Yields briefly rose on Friday, with those on 2-year notes hitting a fresh nine-year peak, after U.S. housing starts surged 13.7 percent to their highest since October 2016.

Spot gold XAU= was down 0.2 percent at $1,291.54 an ounce, after it jumped to a one-month high on Friday as the dollar softened amid tax reform uncertainty.

Crude oil futures were mixed. Brent crude oil dipped 10 cents, or 0.2 percent, to $62.62 a barrel, while U.S. crude CLc1 added 7 cents, or 0.1 percent, to $56.62 a barrel.

Oil rebounded more than 2 percent on Friday after falling for five straight session as a major U.S. crude pipeline was shut and traders anticipated an OPEC deal to extend curbs on production.

But crude prices still fell for the first week in six, pressured by rising U.S. output data and doubts that Russia would support an extension of the OPEC output cut deal.

Reference: Lisa Twaronite

Sunday, 19 November 2017

Fed's Williams joke shows how a novel policy could work, or fail

BERKELEY, Calif. (Reuters) - Economists presenting at a conference earlier this week blew through the organizers’ four-slides-per-speaker limit, and the host, San Francisco Fed President John Williams, vowed to take action.

“I am going to try, over the rest of my time at the Fed, to undo that damage by not showing any slides,” he said on Saturday at a separate conference at the University of California, Berkeley.

His joke elicited chuckles from the audience of scholars who had suffered through an immense number of equation-packed slides at the San Francisco Fed’s just-concluded conference.

By paying for that excess with a promise not to show any slides himself, Williams said, he hoped to ultimately bring the total number back in line with the original limit.

The approach neatly illustrates the logic behind a bold and nearly untried monetary policy idea that Williams has lately embraced.

The idea, known as price-level targeting, calls for a central bank to make up for bouts of low inflation by encouraging high inflation later on.

It differs from the Fed’s current approach of targeting inflation at 2 percent while taking a position of “let bygones be bygones” to past periods when it is above or below that level.

Williams, Chicago Fed President Charles Evans and former Fed Chair Ben Bernanke have in recent months championed price-level targeting as a way to give central banks more scope to combat a severe downturn when merely cutting interest rates is not enough.

If people believe the central bank will stick to this policy, they will try to spend what they can during a downturn, before their money’s value is eroded by future inflation. That spending will itself pull the economy from recession faster, shortening any future period of high inflation induced by the central bank.

If such a policy were put in place now, the Fed would need to allow inflation to run at 3 percent, about twice as high as it is today, for about the next five years.

But the idea that the Fed would subject Americans to such a paycheck-draining policy strains belief, critics say.

“I find that quite implausible,” former Minneapolis Fed President Narayana Kocherlakota said earlier this week.

One economist at the Saturday conference said: “We’d probably bail on the policy halfway through.”

Williams completed his 15-minute talk there without showing a single slide. It remains to be seen whether he will stick to his policy in the 10 years before he reaches the Fed’s mandatory retirement age.

Reporting by Ann Saphir

Friday, 17 November 2017

What is The Elliott Wave

An Educational Article

Ralph Nelson Elliott developed the Elliott Wave Theory in the late 1920s by discovering that stock markets, thought to behave in a somewhat chaotic manner, in fact traded in repetitive cycles.
Elliott discovered that these market cycles resulted from investors' reactions to outside influences, or predominant psychology of the masses at the time. He found that the upward and downward swings of the mass psychology always showed up in the same repetitive patterns, which were then divided further into patterns he termed "waves".

Elliott's theory is somewhat based on the Dow theory in that stock prices move in waves. Because of the "fractal" nature of markets, however, Elliott was able to break down and analyse them in much greater detail. Fractals are mathematical structures, which on an ever-smaller scale infinitely repeat themselves. Elliott discovered stock-trading patterns were structured in the same way.
Market Predictions Based on Wave Patterns.

Elliott made detailed stock market predictions based on unique characteristics he discovered in the wave patterns. An impulsive wave, which goes with the main trend, always shows five waves in its pattern. On a smaller scale, within each of the impulsive waves, five waves can again be found. In this smaller pattern, the same pattern repeats itself ad infinitum. These ever-smaller patterns are labelled as different wave degrees in the Elliott Wave Principle. Only much later were fractals recognized by scientists.

In the financial markets we know that "every action creates an equal and opposite reaction" as a price movement up or down must be followed by a contrary movement. Price action is divided into trends and corrections or sideways movements. Trends show the main direction of prices while corrections move against the trend. Elliott labelled these "impulsive" and "corrective" waves.

Theory Interpretation
The Elliott Wave Theory is interpreted as follows:
Every action is followed by a reaction.
Five waves move in the direction of the main trend followed by three corrective waves (a 5-3 move).
A 5-3 move completes a cycle.
This 5-3 move then becomes two subdivisions of the next higher 5-3 wave.
The underlying 5-3 pattern remains constant, though the time span of each may vary.

Theory Gained Popularity in the 1970s
In the 1970s, this wave principle gained popularity through the work of Frost and Prechter. They published a legendary book on the Elliott Wave entitled "The Elliott Wave Principle – The Key to Stock Market Profits". In this book, the authors predicted the bull market of the 1970s, and Robert Prechter called the crash of 1987. (For related reading, see Digging Deeper Into Bull And Bear Markets and The Greatest Market Crashes.)

The corrective wave formation normally has three distinct price movements - two in the direction of the main correction (A and C) and one against it (B). Waves 2 and 4 in the above picture are corrections. These waves have the following structure:

Note that waves A and C move in the direction of the shorter-term trend, and therefore are impulsive and composed of five waves, which are shown in the picture above.
An impulse-wave formation, followed by a corrective wave, form an Elliott wave degree consisting of trends and countertrends. Although the patterns pictured above are bullish, the same applies for bear markets where the main trend is down.

Series of Wave Categories
The Elliott Wave Theory assigns a series of categories to the waves from largest to smallest. They are:
Grand Supercycle
To use the theory in everyday trading, the trader determines the main wave, or supercycle, goes long and then sells or shorts the position as the pattern runs out of steam and a reversal is imminent.

Reference: Investopedia

Dollar weakens on report Trump's election campaign subpoenaed

TOKYO (Reuters) - The dollar slipped on Friday, weakened by a Wall Street Journal report that investigators into possible Russian interference in the 2016 U.S. presidential election had subpoenaed President Donald Trump’s election campaign for documents.

Special Counsel Robert Mueller’s team issued the subpoena last month for documents containing specified Russian keywords from more than a dozen officials, according to the report.

The dollar index against a basket of six major currencies was down 0.35 percent at 93.593.

The index had edged up overnight to pull away from a four-week trough of 93.402 set on Wednesday. Wall Street shares rallied overnight after sagging through much of the week, causing a 4 basis points jump in the long-term Treasury yield to shore up the dollar.

“Dollar selling picked up after the market became aware of the Wall Street Journal’s report,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.

“Dollar demand from institutional investors appeared quite strong but selling by speculators seemed even stronger. We are likely to see choppy moves as participants try to adjust their positions before Thanksgiving Day (on Nov. 23).”

The greenback dropped about 0.6 percent to 112.405 yen JPY=, lowest since Oct. 19.

The dollar had bounced overnight from a one-month low of 112.470 yen midweek as an ebb in investor confidence halted a surge in global equities and lifted the Japanese currency.

“While the comeback in equities has stopped the recent decline in Treasury yields, focus remains on U.S. tax reforms,” said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo.

“Yields cannot rise much further when it is unclear whether tax reforms can go through this year. Dollar/yen can test the 114.00 handle but lacks momentum for a sustained surge under such conditions.”

The U.S. House of Representatives on Thursday approved a broad package of tax cuts sought by Trump. The debate now moves to the Senate, where Republican majority is smaller and no decisive action is expected until after next week’s Thanksgiving holiday.

The euro rose 0.35 percent to $1.1814, paring overnight losses.

The common currency was on track to gain 1.2 percent on the week. It had rallied to a one-month high of $1.1862 on Wednesday after data showed strong growth for Germany’s economy in the third quarter.

Against the sagging dollar, sterling extended gains after drawing support overnight when an initiative by European Central Bank President Donald Tusk on Brexit negotiations was taken as mildly positive.

The pound rose 0.35 percent to $1.3238 to put further distance between the week’s low of $1.3063 marked on Monday when perceived troubles for British Prime Minister Theresa May hurt the currency.

The Australian dollar crawled up 0.15 percent to $0.7598. It was still poised to end 1 percent lower on the week, during which it sank to a near five-month low of $0.7567 on lower commodity prices and weak domestic data.

Reporting by Shinichi Saoshiro

Sterling unmoved by retail sales data; Brexit eyed

LONDON (Reuters) - Sterling was only a touch higher on Thursday as investors largely ignored marginally better-than-expected retail sales data, focusing instead on uncertainty around Brexit negotiations.

The pound fell to a four-week low against the rallying euro on Wednesday, after numbers showed wages still lagging well behind inflation, keeping pressure off the Bank of England to raise interest rates again after the first hike in a decade earlier this month.

Sterling was up slightly on the day at $1.3186, having spent this month in a tight $1.30 to $1.32 band. Against the euro, it was 0.2 percent up at 89.23 pence, still close to Wednesday’s trough of 90.14 pence.

“The data is not going to be a game changer as it is all about Brexit negotiations at the moment and sterling is going to be trading in a tight range until we see further clarity on that,” said Viraj Patel, an FX strategist at ING in London.

British retail sales recorded their first year-on-year decline since 2013 last month, despite solid growth in volumes from September, as households battled with fast-rising prices.

Data on Tuesday had put UK consumer price inflation at 3.0 percent in October, lagging expectations.

Wednesday’s numbers also showed the number of people in work in Britain fell by the most in more than two years in the three months to September, in the latest sign of weakness in Britain’s Brexit-bound economy.

Progress at a Brussels summit between European and British negotiatiors next month is seen as an important milestone in the Brexit talks, as businesses seek clarity by the new year when many will take investment decisions dependent on conditions.

“The pound has been undermined by a combination of softer UK economic data releases, heightened domestic political uncertainty and building Brexit concerns ahead of next month’s EU Leaders Summit,” wrote MUFG currency strategist Lee Hardman, in a note to clients.

“The pound is likely to prove sensitive to negative economic data releases in the near-term, given that the BoE has signalled that it is not in a rush to follow up their first hike from earlier this month.”

Reference: Saikat Chatterjee

Thursday, 16 November 2017

5 Tips for Trading During Volatile Markets

An Educational Article

Increased volatility leads many traders to seeing an increase in trading opportunities. The huge market swings trigger thoughts of monumental upside, but also for potential loss especially if traders do not take the necessary precautions. During times of volatility, traders need to adjust their strategy to compensate for erratic market. When trading during these market conditions, traders should follow the rules below.

1. Be More Selective Before Placing Trades
Wanting to take advantage of all the trading opportunities that present themselves in volatile markets, traders are tempted to place an increase number of trades. This temptation should be avoided. It is important to remember that in volatile times, losses are likely to be big. Before placing a trading, assess risk tolerance levels. Determine the level of risk that is acceptable for the trader both psychologically and financially before placing any trades.

2. Use Less Leverage
During high market volatility, losses can be traumatic. With the average trading range increased in volatile times traders should be considering how leverage will affect trades. At a one percent or even a half percent margin, investors should be mindful of how much leverage or even the size position being traded can affect their portfolio. In normal market conditions, placing a 2 lot position is fine when you are looking to make about 50-100 pips. During a more volatile time, when the potential loss is 100-200 pips, it stops being an effective risk to reward ratio. To compensate traders should look to taking on smaller trading positions, in this case only one lot as opposed to the average 2 lot position.

3. Trade with More Discipline
Traders should always follow their predetermined trading strategy regardless of market condition. During volatile markets, this is even more important to use that same level of restraint. Traders must adhere to any set stops, contingency plans or risk management benchmarks without hesitation. This will help to define how much risk is taken should price action be uncontrollable. Without this level of discipline and self control losses can be great.

4. Tighten Stops
Many traders are hesitant to use tighter stops in volatile markets because they see the large swings increasing the likelihood that the position will be taken out. Having tighter stops can also provide great risk managers in times of extreme volatility. For example, on a EURUSD trade, rather than setting an 80 pip stop to protect your position, consider placing a 50-60 pip stop. This will insure the protection of your currency position and if the stop is broken, there is a high likelihood that the trend will continue lower and the stop took you out before you could potentially lose more money.

The width of the stop being set does depend on the currency pair being trading as some pairs have wider ranges. In a Yen cross like the GBPJPY or AUDJPY, traders may be more likely to have wider stops as their average daily range is 50% more than that of the EUR/USD. With that said, stops during volatile market conditions should not as wide as before. Instead of a stop 100 pips below entry, traders may consider a 25 pip reduction and have a 75 pip stop. Below is a chart showing the EURUSD and the GBPJPY on the same very volatile day in the forex market. The EURUSD had an impressive range of nearly 600 pips! The GBPJPY far dominated though with nearly a 2000 pip trading range.

5. Be Prepared
It also helps a trader to know what is causing the current spate of volatility in the markets in order to be prepared for the unexpected. As such, an investor can accommodate their strategy to the market environment and not just the currency pair being traded. The first of these considerations is accounting for emotions in a market: is fear currently driving the market lower? Or is it buyer's mania that is keeping the bullish tone alive? Traders' overreaction and emotion tend to push markets to overextended targets. This fact alone creates volatility through simple supply and demand.

Volatility can also, and more than likely will, be sparked by economic events. In this instance, market participants may interpret fundamental data differently and not as cut and dry as the more novice trader. A perfect example of this is usually monthly manufacturing reports that are released in pretty much all industrial economies. The classic scenario has the market honed in on a particular number for the month. However, traders young and old will sometimes wonder why the market sold off if manufacturing showed positive growth. The answer is simple. The market had a different interpretation and positions were violently reshaped and shifted. These tend to create great opportunities for some and horrible memories for others. 

Panic and erratic momentum can additionally be found in certain market environments. Not to be confused with fear or greed, panic selling and buying can create very choppy and relatively untradeable markets. These conditions will lead some to flip flop their positions while leaving others gaping at the fact that the position was right, only to be stopped out prematurely. These two common examples will create further panic and volatility as traders abandon their own individual strategy for the possibility of instant profits or stoppage revenge. As a result, a vicious cycle of volatility ensues until a definitive market direction can be established.

The simple rules above, and a task of getting to know the current trading environment, can empower every trader through the ranks. Although some relate volatility with difficult and untouchable markets, opportunities continue to remain abound in these less than attractive conditions to those focused and fortunate.
By following these five simple steps, trading in volatile market conditions should be a little simpler. Don't forget to adjust leverage based on volatility, follow your trading plan, tighten your stops and know why you are getting into a trade before you place it.

Reference: Richard Lee

Asia shares gain despite Wall St. weakness, dollar edges higher

TOKYO/SYDNEY (Reuters) - Asian shares shrugged off Wall Street losses and a lackluster start to rally on Thursday, while the dollar edged up as investors priced in more U.S. rate hikes after upbeat economic data.

“European equity traders will likely inherit a positive market,” Ipek Ozkardeskaya, analyst at London Capital Group, said in a note.

Futures portended solid openings for European bourses, with European stock futures up 0.3 percent, Dax futures up 0.4 percent, and FTSE futures and CAC futures each up 0.3 percent.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.7 percent.

Australian stocks added 0.2 percent, with sentiment helped by data showing the country’s jobless rate dipped to 5.4 percent in October, its lowest since early 2013.

Japan's Nikkei reversed early losses and surged 1.5 percent as investors hunted for bargains after a six-day losing streak

EMini futures for the S&P 500 added 0.3 percent after major indexes dropped on Wall Street overnight, with the S&P 500 energy sector  suffering a four-day decline of 4 percent, its weakest such period in 14 months.

Investor concern over the progress of a massive U.S. tax reform plan showed no sign of abating as two Republican lawmakers on Wednesday criticized the Senate’s latest proposal.

“If we look at what the markets are focusing on, it’s still very much the tax cut debates in the U.S., and how much progress there’s going to be on this front,” said Mitul Kotecha, head of Asia macro strategy for Barclays in Singapore.

“Clearly, there’s some way to go before any deal is on the table, and I think markets perhaps may have reassessed some bullish expectations, and hence some of the dollar weakness yesterday, and probably the fact that the dollar has been unable to make up much lost ground today,” Kotecha said.

The dollar index, which tracks the greenback against a basket of six major rivals, was slightly higher on the day at 93.828. The euro was steady at $1.1791 EUR=, retreating from a one-month top of $1.1860 on Wednesday.

Against its Japanese counterpart, the dollar gained 0.2 percent to 113.04 yen JPY= after it sunk as deep as 112.47 overnight. But it remained well shy of its eight-month high of 114.735 hit last week as Japanese stocks pushed to multi-decade highs.

Doubts that the latest round of talks to overhaul the North American Free Trade Agreement would make much headway in the face of tough U.S. demands saw Mexico's peso MXN= sink to an eight-month low on Wednesday, though it steadied in Asian trade.

Mostly upbeat economic news added to expectations that the Federal Reserve would not only hike in December, which is now almost fully priced in, but multiple times next year as well.

Core U.S. inflation edged higher and retail sales beat forecasts in a positive sign for growth.

The rate outlook could push the two-year Treasury yields up further from its nine-year peaks, after the yield curve hit its flattest in a decade.

Investors also suspect this tightening will slow the U.S. economy and stop inflation ever getting to the Fed’s 2 percent target, pulling down longer-term treasury yields. As a result the gap between two- and 10-year yield has shrunk to its thinnest premium since late 2007.

“Whether it is the flattest yield curve in a decade, and what that has historically signaled for future growth, the recent troubles in high-yielding credit or lingering geopolitical tensions, it is not entirely clear what has markets spooked,” ANZ analysts wrote in a note.

In commodity markets, gold XAU= edged down 0.1 percent to $1,277.29 an ounce. It reached $1,289.09 overnight, its highest since Oct. 20.

Oil prices gained despite pressure after the U.S. government reported an unexpected increase in crude and gasoline stockpiles. They had lost ground to this week’s International Energy Agency (IEA) outlook for slower growth in global crude demand.

U.S. crude added 5 cents to $55.38 a barrel. Brent crude futures  were 15 cents higher at $62.02.

Reporting by Lisa Twaronite in Tokyo and Wayne Cole

Wednesday, 15 November 2017

Euro jumps to three-week highs as risk appetite returns

LONDON (Reuters) - The euro consolidated gains at a three-week high on Wednesday as investors grew optimistic about the single currency’s outlook with growing doubts about the prospects of the U.S. tax plan also underpinning gains.

With growth from the economic bloc exceeding the United States in the third quarter, led by economic powerhouse Germany, investors were becoming more comfortable in holding risky assets in Europe.

“The growth story in Europe is reasserting themselves and we are starting to see some doubts creep in on the prospects of the U.S. tax plan,” said Timothy Graf, head of macro strategy EMEA at State Street Global Markets in London.

The single currency EUR punched through a key technical level of $1.1734 on Tuesday and extended gains on Wednesday to rise 0.4 percent at $1.1853 against the dollar.

On a two-day rolling basis, the euro was set to stage its biggest rise in nearly six months.

Over the last few sessions, unhedged purchases of European stocks have picked up noticeably after declining in October.

The euro’s gains was also partially a dollar weakness story as the single currency’s gains was largely muted against the crosses, especially the Japanese yen EURJPY=

The euro’s gains were also bolstered by concerns that an ambitious U.S. tax plan may face headwinds even as financial markets have priced in more interest rate hikes next year.

U.S. Senate Republicans on Tuesday linked repealing a key component of Obamacare to their ambitious tax-cut plan, raising new political risks and uncertainties for the tax measure that financial markets have been monitoring closely for months.

The dollar index fell 0.3 percent to 93.553 on Wednesday as investors awaited U.S. consumer inflation data for October,later on Wednesday.

“The dollar is getting hit against the euro and the yen and the strong data out of Europe is definitely a factor with some investors bailing out of the long dollar trade,” said Alvin Tan, an FX strategist at Societe Generale in London.

Reference: Saikat Chatterjee

Global Forex code bans 'last look' trading tactic

LONDON (Reuters) - A controversial trading tactic used on the $5 trillion (£3.78 trillion) a day foreign exchange markets has been banned by a global committee of central bankers and industry officials.

The Global Foreign Exchange Committee said on Wednesday it had concluded that traders should not undertake trading activity that uses information from a customer’s trading request during the “last look” window.

“Last look” refers to the ability of dealers to reject a trade at the last minute. Critics say traders could potentially abuse this by using the market intelligence gained to influence other trades.

The committee said the decision would be reflected in a revised version of its code that was launched in May in response to banks being fined billions of dollars for rigging currency benchmarks.

The committee said it had also agreed to clarify conditions under which certain trading arrangements could be distinguished from “last look”.

“The GFXC has made a number of decisions that will help to strengthen and embed the Code across the global market,” the committee’s chair, Chris Salmon, said in a statement.

Salmon, who is executive director for markets at the Bank of England, said in September the code may need tweaking.

Reporting by Huw Jones

Forex, The Four Letter R-word

An Educational Article

A lot is written about Forex Risk; whether the markets are tolerant, averse, or neutral. It is a headline that is bandied about on a regular basis. Quantifying the value of risk, and its forex impact, may be so much harder to do in the trading arena, than reporting each day on whether the herd was charging towards, or away from risk.
In its natural state the financial market has three major attitudes towards risk that models its behaviour and actions throughout each of the global trading session. The three are; risk aversion, risk tolerance and risk-neutral. Headlines overplay the four letter Risk word, it should be used sparingly as daily risk levels do not reflect the big picture of fair value on global risk, and its forex implications.

Aversion Phase:
Risk-aversion is characterized by investors selling assets in times of global contraction that are considered risky, and swapping them for the safety of the bond market, mainly U.S. Treasuries. Risk-aversion can be seen relatively easily; commodities decline (global commodities are priced in USD values, and as such create a short commodity/Long dollar move), as investors consider that consumption will slow, while S&P futures also head lower at a sustainable pace.
In the currency market, risk-aversion strengthens the dollar, as investor sell foreign denominated assets to buy U.S. Treasuries. In this period, higher yielding currencies (those with a higher overnight, or ten year note rate) are the ones being sold the most as the USD is bought.

Tolerant Phase:
The risk-tolerance phase is seen when Treasuries and bonds are sold as investors look for higher yields in a long-term play that reflects a confidence that the global economy is expanding. In periods of relative calm and positive macroeconomic reports, traders dilute holdings in the safety of the bond market and invest their capital in stocks, commodities and higher yielding foreign currencies. Usually, bull markets are characterized by risk-tolerant phases and in this period S&P futures and global commodities head higher. Therefore, in this period the dollar is sold.

Neutral Phase:
In most cases, risk-neutrality happens when the financial market moves side-ways, unable to push to test support or resistance, and when global fair value on risk is accepted. At this stage the global economy will be hitting its peak, or hitting its trough, in the business cycle phase. This will be characterized by a re-distribution period, as investors shift their assets between the various financial instruments in preparation for the next leg of fair value on risk.
The main difference in the Neutral phase being that the shifts are not only session-by-session, they literally happen hour-by-hour as big players try to make their automated moves without detection. Sentiment is seen to change from one to the other, empowered by the relentless flow of global market trades that trigger as a contingency play, as each individual market accepts risk neutrality, or not.
The sideways moving market tends to be the more volatile as the channels are traded, and fair value sought at each regional market open and close. 

Transition Phase:
Looking towards the next three months of trade, tenured forex traders understand that fair value on the USD, and on risk, will be all about the phase that global business cycle are entering. The stages are; Trough> Expansion> Growth> Peak> Contraction. The five cycles take 10-15 years on average to work through and complete. The U.S. economy however has been completing the cycle in half that time, and that is making USD long-term valuations harder to reliably plan.
Therefore, when in Trough-to-Expansion, or Peak-to-Contraction phases, the market runs on risk neutrality and stocks dominate reads on fair value. This leads to a very high correlation (averaging 90%) between equity trade and USD movement; stocks go up and USD goes down.
When we get into the Expansion or Contraction, phase, and either one is in full flow (lasting a 5-8-year period globally, or 2-3 years in the US) risk tolerance takes over, interest rate differentials dominate the valuation of currencies, and stock market correlations reduce (averaging 60%). Fair value on risk and on the USD becomes all about growth and interest rates.

Fed Fund Phase:
In times of Growth the USD will increase against those currencies not showing inflation, and/or, higher interest rate outlooks. As and when the Federal Reserve raise overnight interest rates, it will be because of an inflation fear coming from economic expansion, and it will very likely be in a drip-fed manner of slow and steady increments as the attempt to keep the speculative interest on the long side of the USD at bay.
However, the USD will then be challenged by regional growth that does not carry the weight of massive debt and current account/trade imbalances. The USD may never get back to 90.00 on the dollar index if global regions expand at the same pace as America. As in 1972 under President Nixon, it looks as though the U.S. in 2009 has set up USD devaluation with an over-commitment to Treasury debt that now looks challenging, to say the least.

Weak Dollar Phase:
Forex traders will be looking again at whether the global economy is prepared to welcome a slimmed down version of the greenback, something that seems a ‘must-have’ for the Federal Reserve. That however can only happen in the current environment with an increasing global equity market, and a boisterous oil market arena that maintains a high level of long speculative interest.
We have to go back to the rule book set in 1972-73 when the last major forex rule was torn up and re-set, to a time that the dollar index was born if we are to gauge the potential in an ever-decreasing USD value Traders and investors may have to accept that going forward the USD/Risk link may become eroded as the debt mountain surpasses equity direction as the thing that helps or impedes daily USD valuations.

Percentage Risk Phase:
Following the laws of probability and the (Shwartz Stock Market Handbook has it as historically being the worst performing equity time of the year), forex trader eyes will be all about whether the USD gets bought in the same number as previously seen in the recent Risk Averse periods of trade. If stocks pull back and the USD does not get bought at a 90% correlated rate, we will have a signal of two things;
Firstly, that the market is valuing risk on forward Growth and interest rate differentials. Secondly, that the equity pull-back may be a technical signal that it will find support before making the next leg higher, rather than being the start of an equity collapse.
Risk Tolerance and Interest Rates will be affected by the global business cycle. Whatever the headlines roar about this session being tolerant on risk, or not, we now fully understand that at this pivotal a time, risk will be seen in the percentage correlation between equities and the USD changing.

Forex Trader Phase:
Forex traders will be looking to see that USD/CHF is moving hard when they place their trades, if not they will be questioning the moves because Swissy has become correlated to dollar index moves holding, or not. They will also be looking for oil and S&P futures markets to stay aligned, because in any play in forex, whatever the pair being traded, the USD does affect the momentum flow.
The USD affects every major traded cross pair, for example; EUR/USD x USD/JPY = EUR/JPY. Also, EUR/USD ÷ GBP/USD = EUR/GBP. The synthetic pairs (no USD on one side or the other) can only move as a percentage of the change in the major pair moves against the USD; knowing what the drivers of the USD are doing allows for targets to be realistically set, and lot size accordingly adjusted.
Getting secondary confirmation from inter-related markets is a must-do for any level forex trader, especially when fair value on risk is so hard to find as global markets transition from Trough to Growth. 

Reference: The LFB Team

Australian dollar skids, yen firms as sentiment sours

TOKYO (Reuters) - A reduction in risk appetites lifted the yen on Wednesday and pressured the Australian dollar, as investors awaited U.S. consumer inflation data later in the global session.

The Aussie was the big mover of the Asian session, skidding 0.6 percent against its U.S. counterpart to $0.7587, brushing its lowest levels since July.

Against the yen, it tumbled 0.8 percent to 85.81 yen after falling as far as 85.67, its lowest since mid-August.

Data showed Australian wages rose only 0.5 percent in the third quarter and 2.0 percent for the year, falling short of 0.7 percent and 2.2 percent respectively and challenging the Reserve Bank of Australia’s view that wages would pick up.

Slumping equities also added to pressure. Asian stocks slipped on Wednesday after weaker crude oil prices took a toll on Wall Street.

“Risk sentiment has soured somewhat in the last week or so, as the U.S. equity rally has run out of steam,” said Ray Attrill, Sydney-based global co-head of forex strategy at National Australia Bank.

“So you’ve had a bit of a perfect storm, with specific factors that have been supporting the yen, that have also been driving down the Aussie, which is still a very risk-sensitive currency,” he said.

The euro remained close to 2-1/2 week highs, getting a boost from Tuesday’s upbeat German economic data. The common currency edged down slightly to $1.1797 after jumping more than 1 percent in the previous session. It moved well away from a 3-1/2-month low of $1.1553 plumbed last week.

The euro’s ascent pushed down the dollar index, which tracks the U.S. currency against a basket of six major rivals. It was steady on the day at 93.812, wallowing at its lowest levels since late October and well below its overnight high of 94.542.

Germany’s seasonally adjusted gross domestic product rose by 0.8 percent on the quarter, beating a Reuters poll forecast of 0.6 percent.

Investors awaited U.S. consumer inflation data for October, due later on Wednesday, that is expected to show a marginal increase in consumer prices.

“If it is weaker, then that may push down the probability of a Fed rate hike in December,” said Jeff Kravetz, regional investment strategist at U.S. Bank Wealth Management.

“Right now, Fed fund futures are pricing in around 80 percent, but it could go down to like 50-50,” he said. “And if we do get a weak number, then I would think the euro would continue to strengthen, versus the dollar.”

Data on Tuesday showed U.S. producer prices rose a more-than-expected 0.4 percent last month, boosting the PPI 2.8 percent in the 12 months through October for the biggest annual increase in wholesale inflation in more than 5-1/2 years.

But economists said the strong producer price readings probably did not translate into higher consumer prices in October as the correlation between the PPI and consumer price index has weakened.

Against the yen, the greenback slipped 0.3 percent to 113.15, hitting its lowest levels since late October and moving away from its eight-month high of 114.735 hit last week.

Data released earlier on Wednesday showed Japan’s economy posted its longest period of uninterrupted growth in more than a decade, expanding at a 1.4 percent annualised rate in the July-September quarter. That was slightly above the median estimate for annualised growth of 1.3 percent.

Reporting by Lisa Twaronite

Tuesday, 14 November 2017

Wall Street heads lower, tax plan doubts weigh

(Reuters) - Wall Street was set to open marginally lower on Tuesday as worries about Republican tax plans and the economy’s ability to deal with more rises in interest rates weighed on the mood among investors.

Shares in Home Depot held steady while those in off-price retailer TJX dipped after quarterly reports that bore the impact of a violent U.S. hurricane season.

Buffalo Wild Wings surged 26 percent after a report that the restaurant chain had received a takeover bid at about $2.3 billion from private equity Roark Capital Group.

With the quarterly earnings season winding down, the market has halted after its rally to record highs last week.

Investors were waiting for any signs of compromise on U.S. tax policy after Senate Republicans unveiled a plan last week that would cut corporate taxes a year later than a rival House of Representatives’ bill.

“You’re at the end of the earnings season, economic data is all distorted because of the hurricanes, I don’t think there is going to be any clear picture until we get a firm yes or no for the tax bill,” Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“We’ll see a bit of back-and-forth, the market’s got to breathe.”

At 8:32 a.m. ET, Dow e-minis were down 38 points, or 0.16 percent, with 27,263 contracts changing hands.

S&P 500 e-minis were down 5 points, or 0.19 percent, with 176,095 contracts traded.

Nasdaq 100 e-minis were down 5.25 points, or 0.08 percent, on volume of 29,520 contracts.

A Labor Department report showed producer prices increased 0.4 percent in October, after similar gains in September. Economists polled by Reuters had a expected a 0.1 percent rise.

In the 12 months through October, the producer price index jumped 2.8 percent, the largest rise since February 2012.

St. Louis Fed President James Bullard said on Tuesday the Fed should keep its benchmark interest rate at current levels until there is an upswing in inflation.

Investors are concerned that a tightening gap between short and long-term U.S. government bond yields suggests the Federal Reserve may be in danger of hiking rates too much and killing longer term inflation and growth.

Reporting by Sruthi Shankar

The Essentials to Picking a Forex Robot

An Educational Article

If you follow Forex, you know the Forex robots have become wildly popular. With the overabundance of Forex robot sales pitches, it is hard to find a robot that is actually successful. In this article, we will show you how to find the best Forex robot for your trading style, as well as what you need to know about your EA and what your realistic goals should be.

If you are looking to purchase a Forex robot, you are most likely looking to make a profit. This means different things to different people. You may be content making $50/week, or you may be seeking much bigger money. The greater your risk tolerance, the greater the chance you will strike it big. At the same time, taking on more risk also means the chance to take bigger losses.

Your risk tolerance is going to be a key factor in dictating which robot is best for you and your trading goals. After determining this, you should look for robots that suit your trading style and analyse various statistical factors including maximum drawdown, profit factor, expectancy and efficiency. A majority of this information can be found in the Best Forex Robot report at

One thing you should realize upfront is that finding the robot that is best for you is going to cost you both time and money. There are numerous elements to look for when choosing your robot. Much of the key statistical information needed to make a sound decision can be found in the best Forex robot toolkit. 
It is crucial to understand that most Forex robots only work efficiently in certain types of markets. What does this mean? Some robots perform better in range bound markets while others are more effective in trending markets. The problem lies in that it is often very hard for a trader to determine if the market is in a range or trending. One key thing you must remember is in order to achieve success with your Forex robot you should never give up the gains that it makes during a favourable market when the market is unfavourable.

So what does this mean? Assuming that your robot is most efficient in a trending market, as soon as the market starts to range you will run into complications and might begin losing money. In order to be successful with this robot you cannot lose money during the ranging market that you made during the trending market.

Furthermore, you must determine if your robot is sustainable which entails backward and forward testing it through a range of market conditions. If your robot's profitability is sustained, then it can be considered robust. Keeping this in mind, you must always remember that past results are never an indication of future performance.

You need to assure that a robot has been both back and forward tested by the vendor before even considering making a purchase. Once you have decided to go forward with the purchase you need to perform your own testing. A good Forex broker can show you how to do this. At this point, if you are unhappy with the robot’s performance, you should return it if possible. On the other hand, if you are happy with the robot’s performance, you should run it on a live micro account at first so you are only risking minimal capital in the beginning.
Our hope is that after reading this article, you should now have the proper tools and confidence to embark on your robot trading journey. 

Let's take a quick moment to do a final review of what you need to be a successful robot trader:
1.) Determine if your robot is robust and in line with your expectations of return.
2.) Perform extensive testing of your robot before taking it live.
3.) Start trading live on a micro account to minimize losses.
Following the guidelines above will help you get one step closer to Forex success.

Reference: ActionForex

Sterling steadies before Brexit debate, U.S. yields prop up dollar

TOKYO (Reuters) - Sterling was flat on the day at $1.3115, nursing losses after it skidded in the previous session against a backdrop of political turmoil as British lawmakers this week debate the U.K. government’s plans for leaving the European Union.

The Brexit bill will be debated on Tuesday and Wednesday, with as many as 40 of Prime Minister Theresa May’s Conservative lawmakers prepared to support a no-confidence motion against her, according to the Sunday Times newspaper.

Also in focus, European Central Bank chief Mario Draghi, Federal Reserve Chair Janet Yellen, Bank of Japan Governor Haruhiko Kuroda and Bank of England head Mark Carney will form a panel on central bank communication at the ECB-hosted conference in Frankfurt later on Tuesday.

“Major currencies have consolidated in ranges today, but something could emerge at the ECB conference later in the day,” said Keiko Ninomiya, senior FX market analyst at SMBC Trust Bank in Tokyo.

The dollar index, which tracks the U.S. currency against a basket of six major rivals, was steady on the day at 94.486.

Against its Japanese counterpart, the dollar inched slightly higher to 113.66 yen, but remained below its eight-month high of 114.735 hit last week.

“The dollar is getting support from U.S. yields, but I am actually surprised that it did not go higher, so perhaps the correlation between yields and the dollar is breaking down,” said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.

“But with the Fed expected to hike rates in December, the dollar could go higher” in the coming weeks, he said.

The yield on two-year U.S. Treasury notes scaled a nine-year peak on Monday, as the yield curve resumed its flattening and investors priced in a 25-basis-point interest rate hike by the Federal Reserve next month. [US/]

The 10-year Treasury yield rose to 2.407 percent from its U.S. close on Monday of 2.400 percent. It was at 2.304 percent as early as Nov. 8.

The euro inched up 0.1 percent to $1.1672, holding well above last week’s a 3-1/2-month low of $1.1553.

The New Zealand dollar was the biggest mover in the Asian session, skidding 0.6 percent to $0.6863 and on track for its fourth session of losses. It moved back toward its Oct. 27 low of $0.6818, which matched a low logged in May.

The kiwi had risen as high as $0.6980 last week, as the Reserve Bank of New Zealand raised its inflation forecasts in response to the fall in the currency and to the Labour government’s plans for more spending.

The latest median projection of 48 analysts called for the kiwi to stand at $0.7000 in one month, down from $0.7200 in the previous poll.

The Australian dollar rose 0.1 percent to $0.7632, managing to mostly shrug off downbeat Chinese economic data after the latest survey of businesses from NAB showed the best conditions in two decades, with sales and profits surging in October.

The Aussie is sensitive to Chinese data as it is often used as a proxy for that country because of Australia’s major trade exposure. China’s retail sales rose 10 percent on the year in October, while industrial output grew 6.2 percent, both missing expectations as the government extended a crackdown on debt risks and factory pollution.

Reporting by Lisa Twaronite

Monday, 13 November 2017

Fed's Harker stands by call for rate hike next month

TOKYO (Reuters) - A Federal Reserve official said on Monday he expects to back an interest rate hike next month despite caution over low-inflation, as U.S. central bank policy needs to be positioned to deal with future economic shocks.

Philadelphia Fed President Patrick Harker said he has “lightly penciled in” a December rate hike. However, he flagged he had slightly less conviction about the policy decision than he had last month as he “continues to elicit caution” about weak inflation and also about the way in which it is measured.

Harker said he expects the Fed to raise rates three times next year as long as inflation remains on track, and the projected tightening could take policy to what he would describe as a neutral stance.

Harker, a centrist voter on the Fed’s monetary policy committee this year under an internal rotation, said the Fed must continue normalizing policy as the economy is “more or less at full strength” and there remains “very little slack” in the labor market.

“Removing accommodation is the right next step for a few reasons,” he said in prepared remarks to a Global Interdependence Center conference in Tokyo.

“In the event of another shock to the system, I want our tools to be at their most effective, and in my view, that means reducing our balance sheet.”

Price measures have drifted lower below the Fed’s 2-percenttarget this year even while unemployment has fallen. The central bank has raised rates a notch twice in 2017 and is widely expected to do so again next month from its current target range of 1.00 percent to 1.25 percent.

The Fed will also continue to trim its nearly $4.5-trillion bond portfolio, which Harker said should be clearly communicated in advance and happen in a predictable manner.

Harker said the conditions in the U.S. economy are ripe for further gains in consumer prices, but he wants to make sure he can confirm this in the economic data.

“We will see unemployment drop below 4 percent probably late 2018 or early 2019, before it starts to come back up,” Harker said.

“That should put pressure on wages and we should see inflation moving back to target. But again, I emphasize the word ‘should’ because we’ve been predicting this for a while and it hasn’t happened.”

U.S. President Donald Trump earlier this month chose Federal Reserver Governor Jerome Powell to become the next head of the U.S. central bank when current Fed Chair Janet Yellen’s term expires in February 2018.

Harker said he did not anticipate big changes to monetary policy because of Powell’s appointment. He also said it is still undecided whether Yellen will stay on as a Fed governor after her term as chairwoman ends.

Powell has gone further than his colleagues in his calls to relax some of the stricter banking regulations imposed after the 2008 financial crisis.

When asked, Harker said the Fed has more room to lower the regulatory burden on small banks but urged caution on regulations for large banks.

Harker said the United States faces a demographic challenge as baby boomers retire and are replaced by younger workers who get paid less. He saw parallels with Japan’s rapidly ageing population and said raising productivity is the key to solving this problem.

“We create the conditions for growth, or lack thereof, but fundamental growth comes from the increase in labor force and the increase productivity,” he said.

“By definition, those two define fundamental economic growth.”

Reporting by Stanley White

Bitcoin slides by over $1,000 in less than 48 hours

LONDON (Reuters) - Bitcoin dropped below $7,000 (5,303 pounds) on Friday to trade more than $1,000 down from an all-time high hit on Wednesday, as some traders dumped it for a clone called Bitcoin Cash, sending its value up around a third.

Bitcoin has been on a tear in recent months, with a vertiginous sevenfold increase in value since the start of the year that has led to many warnings the bitcoin market - now worth well over $100 billion - has become a bubble that is about to burst.

It reached a record high of $7,888 around 1800 GMT on Wednesday after a software upgrade planned for next week that could have split the cryptocurrency in a so-called “fork” was suspended.

But it has quickly retreated from that peak, falling to as low as $6,718 around 1330 GMT on Friday. It later recovered a touch to trade around $6,880 by 1645 GMT, but that was still down almost 4 percent on the day.

“Bitcoin is all ups and downs,” said Thomas Bertani, chief executive of Eidoo, a cryptocurrency wallet provider that recently became the first startup in the space to take out a full-page advert in the Wall Street Journal newspaper.

“The market realised that the price rise was an over-reaching, so people started selling... (and) there are many long and short positions that amplify price movements.”

As bitcoin tumbled, Bitcoin Cash, which was generated from another software split on Aug.1, surged, trading up as much as 35 percent on the day to around $850, according to industry website Coinmarketcap.

Bitcoin Cash’s transactions are processed in so-called “blocks” that are larger in capacity than bitcoin‘s, so can therefore in theory allow for more transactions to be processed at any given time, making transaction fees much cheaper.

The fork that had been planned for next week, known as “SegWit2x”, had also intended to increase the capacity of the blocks, and could thus have reduced fees for bitcoin transactions.

Any investors, therefore, that see bitcoin more as a currency than a store of value might be choosing to buy into Bitcoin Cash now that Segwit2x had been scrapped, Bertani said.

“People who had been supporting Segwit2x could as an alternative move to Bitcoin Cash,” he said.

“There are good reasons to believe that Bitcoin Cash could be an alternative for people who believe that low fees on bitcoin transactions are needed today.”

Reporting by Jemima Kelly

Bitcoin Gains Validity as Digital Gold

An Educational Article

Bitcoin investors were less vulnerable by the Brexit news: They enjoyed an almost 9 percent jump in the value of their holdings.
It's the type of event that bitcoin enthusiasts, many in the technology industry, have anticipated because of growing political and economic instability in many regions of the globe. Meanwhile, legions of sceptics have criticized the cryptocurrency as a high-risk bet on an unprotected and unregulated alternative to money.

"Bitcoin is effectively becoming digital gold," said Ashvin Bachireddy, co-founder and general partner at Geodesic Capital, a Silicon Valley venture capital firm that backed bitcoin start-up 21 Inc. "You can continue to see further validation of bitcoin as something detached from a centralized government that allows people who work to preserve wealth in a secure way."
Not that Bachireddy — or any credible bitcoin investor — is recommending selling all your pounds, euros or dollars in favour of the cryptocurrency. There is tremendous volatility involved, and the currency still has limitations in how and where it can be used.

The price of a bitcoin surged as much as 8.7 percent on Friday to $680.19, according to CoinDesk, that followed the Brexit vote, which sent the pound spiralling downward against the U.S. dollar to $1.32, the lowest since 1985.
However, earlier that week, Hong Kong-based bitcoin exchange Bitfinex was closed for a few hours because of "networking issues". The issues were fixed on the same day. But during that time there was a very high volatility.

Bitcoin is not for the faint hearted. It started the year around $430, sank below $360 in mid-January, jumped to $768 in mid-June and then plunged to $603 a week later.
Speculators can drive the price up and down in ways that would be terribly unsettling for people with significant bitcoin investments.

"I'm not a big proponent of bitcoin as a currency replacement," said Steve Waterhouse, a partner at San Francisco-based Pantera Capital, a bitcoin investment firm that started in 2013.
Waterhouse, a native of England, said bitcoin is most effectively used for business-related transactions and money transfers that would take several days to clear in the traditional financial world but can be done digitally with bitcoin on the same day.

" Waterhouse said. "It doesn't follow the ups and downs of regular markets."
The S&P 500 dropped 3.6 percent on Friday, and the pan-European STOXX 600 index closed down around 7 percent lower on the day.

Jesse Powell, CEO of digital asset exchange Kraken, said that the volume of bitcoin trading on his company's site doubled in the 24 hours following the Brexit vote. Since June 10, there's been a five-fold increase in bitcoin to euro trading as of late Friday.
"There's an advantage to having a currency that isn't political, isn't tied to a government and not subject to these kinds of things happening," said Powell, whose San Francisco-based start-up enables the exchange of national currencies into cryptocurrencies. "It's purely governed by math."

But bitcoin has its own variables. The size of the market expands through a process called mining, whereby coders use software to solve complex math problems and are rewarded with bitcoins. Every four years, the number of bitcoins rewarded is cut in half.

"I wouldn't tell anybody to put their life saving into bitcoin because that could just as easily be wiped out," said Powell. "Think about it in terms of diversifying your portfolio. If you have investments in gold or an index, maybe think about bitcoin or cryptocurrency as an asset class you want to have some money in."
Bitcoin bulls expect that the currency will eventually have greater utility in the marketplace and move from being a savings and investment tool into transactions. Businesses that already take bitcoin include Expedia, Dell, Microsoft and dating site OkCupid, but they typically require the use of a bitcoin wallet like Coinbase.

Unlike gold, which only works as an alternative asset for investment purposes, the idea with bitcoin is that it's also easily spendable on everything from groceries to money transfers.

"Most people are buying it for investment or stored value," said Chris Larsen, founder and CEO of Ripple, which is developing a global financial network for digital settlement. "They're not paying their rent. It's the beginning."

Reference: Ari Levy

Pound retreats as trouble mounts for May, dollar crawls higher

TOKYO (Reuters) - The pound slipped early on Monday as troubles mounted for British Prime Minister May, with a report that 40 Conservative MPs are readying a leadership challenge, while Brexit talks face a crucial deadline.

The dollar received a lift against its major peers as U.S. yields spiked and as the pound stumbled, although the main investor focus was still on a planned U.S. tax overhaul.

Sterling was last down 0.55 percent at $1.3120, pulling away from an eight-day peak of $1.3229 scaled on Friday on better-than-expected data on British industry.

“There were some headlines released over the weekend that were negative for prime minister May, and the market began the week by digesting the reports and then sending the pound lower,” said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.

The Sunday Times reported over the weekend that 40 members of parliament from British May’s Conservative Party have agreed to sign a letter of no-confidence in her.

That is eight short of the number needed to trigger a party leadership contest, the mechanism through which May could be forced from office and replaced by another Conservative.

Also, Brexit minister David Davis said on Sunday that Britain will not offer a figure or a formula for how much it believes it owes the European Union, highlighting the lack of progress plaguing the divorce negotiations.

Against the yen, the pound was last down 0.45 percent at 149.12 yen.

The dollar index against a basket of six major currencies was 0.15 percent higher at 94.533, following a 6 basis points rise by long-term U.S. Treasury yields on Friday.

The index had ended the previous week on a loss of 0.6 percent amid investor disappointment that a proposed U.S. corporate tax cut could be delayed until 2019 instead of being implemented in 2018.

“The sharp rise by Treasury yields certainly is not hurting the dollar. But the yield rise appears mostly technical in nature - the recent flattening trend is being unwound - so the positive impact on the dollar is limited,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

Bond traders had favoured longer-dated Treasuries over shorter-dated issues the past two weeks on concerns about the tax overhaul and a diminished likelihood of an introduction of a Treasury bond that matures beyond 30 years.

As a result, the spread between the two-year and 10-year Treasury yields reached its lowest since 2007 last week, before rising slightly.

“In my view, the U.S. tax reform talks are proceeding roughly according to schedule. It cannot get much worse, and this is a supportive factor for the dollar,” Yamamoto at Mizuho Securities said.

The greenback was up 0.1 percent at 113.660 yen. The euro slipped 0.1 percent to $1.1653.

Elsewhere, the Australian dollar lost 0.05 percent to $0.7655 to edge back towards a 3-1/2-month low of $0.7625 marked at the end of October. The currency has come under pressure with its yield buffer over the greenback shrinking to its narrowest since 2001.

The market has pushed out the prospect of a rate hike in Australia, while almost fully pricing in a U.S. rise for December and at least one more next year.

The New Zealand dollar shed 0.15 percent to $0.6923.

Reference: Shinichi Saoshiro

Gold investors hold their nerve as stock markets fly

LONDON (Reuters) - Gold’s resilience in the face of soaring equities and a dramatic fall in demand this year points to underlying confidence in the metal among investors unconvinced by this autumn’s scorching stock market rally.

Bullion’s price has barely budged XAU= as stocks soared to record high after record high since mid-October and, with a month and a half to go, is on track to post its narrowest trading range of any year since 2005. Physical gold demand, meanwhile, hit an eight-year low in the third quarter.

But that masks solid underlying support from investors. While gold’s price performance during this autumn’s stock market boom has been underwhelming, they have not been bailing out of the metal.

“In theory, and in the past, when you have exceptional markets and low volatility, gold was much, much lower - but nobody’s selling gold,” Davis Hall, head of FX and precious metals at Indosuez Wealth Management, said.

“At some point, this stock market run is going to run into some profit-taking, for one reason or another,” he said. “As a hedge, gold’s definitely still the best viable alternative for high exposure to global equity positions.”

Last time there was a strong retracement in equities, during the financial crisis of 2008, it precipitated a years-long rally in gold that took it to record highs near $2,000 an ounce, even after stocks started to recover.

Hedge funds and money managers have cut their net long positions in Comex gold futures in the past seven weeks, but after strong inflows in the third quarter, positioning remains elevated compared to the start of the year.

And while inflows into bullion-backed exchange-traded funds have been sparse this year -- helping to drive that eight-year low in gold demand in the last quarter -- there have been no significant outflows.

The past quarter’s drop in physical demand sounds dramatic, particularly as gold is tipped to repeat that performance in the full year. However, for gold, this is less disastrous than it sounds.

Unlike most other commodities, physical demand is typically dictated by price, rather than the other way round. This is particularly true in huge Asian markets such as China and India, where investors buy for the long term and have an eye for a bargain.

Much more important for setting gold prices is investment appetite. There have been plenty of headwinds for that, not just in terms of rising stocks and a stronger dollar - which makes gold more expensive for holders of other currencies - but also the prospect of another rise in interest rates this year.

Federal Reserve interest rate policy has been the single biggest driver of gold investment over the last decade, with ultra-low rates in the wake of the financial crisis keeping the opportunity cost of holding non-yielding bullion at a minimum. Its subsequent decline through to early last year was largely a reflection of expectations that rates would start to normalise.

The Fed has indeed pressed ahead with rate hikes, but these have been relatively benign so far. With moderate Jerome Powell now tipped to take over from Janet Yellen as head of the U.S. central bank early next year, confidence in a continuation of that policy is growing.

“With Jerome Powell, Fed policy will remain relatively unchanged in the next quarter, and that will represent good news for gold,” Arnaud du Plessis, portfolio manager at CPR Asset Management, said. “If (more hawkish candidate) John Taylor had been selected, the situation would definitely have been different.”

Meanwhile there is plenty in the wider markets to support gold.

The flattening of the U.S. yield curve suggests that investors may be rotating out of nominally safer short-dated U.S. Treasuries and into riskier assets such as equities, Mitsubishi analyst Jonathan Butler said. This, he said, has traditionally been seen as an indicator of trouble ahead.

“It does seem like we have another canary in the coal mine here,” he said. “Equities are making new all-time highs, the dollar’s doing okay, but yields are signalling that something is not quite right in the fixed income market.”

“There is still an element of support for gold to hedge some of the riskier equity trades.”

Reporting by Jan Harvey