Holy Grail Forex System

Euro Highest

2007-11-06T22:38:00.000+07:00

EURUSD resumed its uptrend in early European trade today as it once again challenged all time highs set last Friday at 1.4528. Boosted by a rebound in European equity markets and better than expected economic results from the Euro-zone, the pair continues to hold the 1.4500 figure as market participants await the ECB meeting this Thursday.

As we noted in our weekly, “The ECB meeting on Thursday remains the key to further gains in the euro. Although no one expects the central bank to hike rates in November, the European monetary authorities generally like to prepare the market for any policy moves. To that end Mr. Trichet’s commentary will be crucial in signaling whether the bank will tighten in December. ECB officials have been uniformly hawkish in their recent statements but it remains to be seen if they will be willing to raise rates in the face of record high exchange rates for the EURUSD.”

On the economic front EZ news was generally positive today with PMI Services printing slightly better at 54.7 versus 54.5 expected. Looking at the details of the subcomponent surveys the German data revealed that while new business improved markedly jumping from 52.1 to 54.5, business expectations slipped below the 50 boom/bust line to 48.7 suggesting that the higher euro is starting to weigh even on the region’s services sector.

With US economic calendar empty, the pair will most likely trade on risk assumption/risk aversion flows, driven by the price action of US equities. The trend in the EURUSD remains up, and the pair may well challenge the 1.4550 level, as euro longs try to knock out option barriers set at that price. However, we continue to believe that any forward progress in the pair is likely to be incremental from this point onward, unless US data shows significant deterioration, inviting further cuts from the Fed or ECB determines that inflation risks outweigh the dangers of sabotaging growth and chooses to hike rates to 4.25% by year end.

U.S. Housing Starts Slide

2007-10-17T20:50:00.000+07:00

Housing starts in the U.S. plunged more than forecast to a 14-year low in September, keeping the real-estate market the Federal Reserve's top concern.

The 10.2 percent decrease to an annual rate of 1.191 million followed a 1.327 million rate the prior month, the Commerce Department said today in Washington. Building permits fell 7.3 percent to a 1.226 million pace.

Higher mortgage costs and stricter lending rules will further depress home sales and feed the decline in construction that threatens to stall economic growth. The Fed may cut interest rates again this year as the pall cast by housing persists into 2008, economists said.

``Housing continues to get worse and worse,'' said Carl Riccadonna, an economist at Deutsche Bank Securities Inc. in New York. ``The contraction will go on into at least the middle of next year. There are certainly going to be more rate cuts by the Fed.''

Prices paid by consumers rose 0.3 percent in September as food and energy costs climbed, the Labor Department also reported. The core measure, which excludes food and energy costs, rose 0.2 percent for a second month in line with forecasts.

Treasury securities rose following the reports and stock- market futures held earlier gains. The yield on the benchmark 10- year note fell to 4.63 percent at 8:56 a.m. in New York, compared with 4.65 percent late yesterday.

The number of housing starts was the lowest since March 1993. The decline was led by a plunge in construction of townhouses, apartments and condominiums.

Survey Forecasts

Starts were projected to fall to a 1.28 million unit pace, from an originally reported 1.331 million in August, according to the median forecast of 79 economists polled by Bloomberg News. Estimates ranged from 1.2 million to 1.35 million.

Permits, a sign of future construction, were forecast to drop to 1.285 million, according to the survey median, with projections ranging from 1.23 million to 1.32 million.

Construction of single-family homes fell 1.7 percent to a 963,000 rate, today's report showed. Work on multifamily homes slumped 34 percent to an annual rate of 228,000.

The decrease in starts was led by a 28 percent drop in the Midwest. Construction fell 12 percent in the South and 10 percent in the West. Starts jumped 45 percent in the Northeast.

The number of homes under construction fell 1.4 percent to a 1.114 million pace and the number of properties completed dropped 8.2 percent to an annual rate of 1.391 million.

Housing units authorized, but not yet started, decreased 4.2 percent to 187,400, today's data showed.

`Significant Drag'

Housing will be a ``significant drag'' on the economy into next year as ``conditions in mortgage markets remain difficult,'' Fed Chairman Ben S. Bernanke said Oct. 15.

Policy makers lowered the benchmark rate by a half point to 4.75 percent on Sept. 18. The decision followed the August turmoil in financial markets that triggered concern over rising defaults by subprime mortgage borrowers, or those with poor or limited credit history.

``Risk-management considerations also played a role in the decision, given the possibility that the housing correction and tighter credit could presage broader weakening in economic conditions that would be difficult to arrest,'' Bernanke said.

The majority of investors and economists project the Fed will trim rates again, probably in December, and some are betting on a cut at a meeting later this month.

The National Association of Home Builders/Wells Fargo index of builder confidence plunged to a record low 18 in October, the Washington-based association said yesterday. Levels lower than 50 mean most respondents view conditions as poor. The index averaged 42 last year.

More Cancellations

Builders are reeling from a surge in cancellations as buyers turn more cautious and banks pull back on lending.

D.R. Horton Inc., the second-largest U.S. homebuilder, said yesterday that orders in the quarter ended Sept. 30 plunged to the lowest in almost six years. Centex Corp. last week said it'll take a $1 billion charge on property and generate less cash from sales than forecast.

``We expect the housing environment to remain challenging,'' D.R. Horton's Chairman Donald Horton said. ``Buyers continued to approach the home-buying decision cautiously.''

Foreclosures doubled in September from a year earlier as subprime borrowers struggled to make payments on adjustable-rate mortgages, according to RealtyTrac Inc. Rising foreclosures will throw even more properties back on the market, economists said.

The National Association of Realtors last week cut its home- sales forecast for the 10th time this year. New-home sales will decline 24 percent this year to a 10-year low and existing-home sales will fall 11 percent, the group said Oct. 10.

The economy will probably grow at a 1.8 percent annual pace this quarter after expanding at a 2.7 percent rate from July through September, according to the median estimate of economists surveyed by Bloomberg earlier this month.

What to Look for in the FOMC Minutes

2007-10-09T21:43:00.000+07:00

dailyfx.com

US Dollar: What to Look for in the FOMC Minutes
A delayed reaction to Friday’s non-farm payrolls report as well as the market’s expectation for tomorrow’s FOMC minutes has taken the US dollar higher against every major currency today. Even the New Zealand dollar, which was firmer against the US dollar for most of the day turned lower towards the end of the US trading session. Tomorrow’s FOMC minutes are from the September 18th monetary policy meeting, which was when the central bank lowered both the Fed funds and discount rate by 50bp each. Although the credit markets have stabilized quite a bit since the rate cut and there have been no new blowups in the financial sector, the Fed’s reasons for taking the preemptive move could still trigger sharp market movements. If thee Fed decided to deliver the larger interest rate cut not because the US economy needed it, but because they wanted to avoid making successive cuts, then that would lower the likelihood for interest rates to be cut at the end of the month and consequently rally the US dollar. On the other hand if the move was taken because the Fed felt that the US economy had deteriorated so much that a 50bp Fed Funds and discount rate cut was necessitated, then that would be bearish for the US dollar. We expect the market to react more significantly to the former rather than the latter because recent economic data including non-farm payrolls could give the Fed the luxury of waiting until December before lowering interest rates again. Towards the end of the week, our focus will turn to trade, inflation and consumer spending. The weakness of the US dollar should help to narrow the trade deficit while boosting inflation. Consumer spending is the biggest potential market mover this week (it is not due out until Friday). The strength of payrolls in September and the upward revision to retail sales in August suggest that retail sales could be stronger than the market is currently expecting. Overall, it seems to be shaping up to be a dollar positive week.

Euro Slips Back Towards 1.40
The Euro is slipping back towards 1.40 on the back of a smaller than expected rise in German factory orders as well as mixed commentary from ECB and IMF officials. Despite the German Economics Minister’s comment that he is not losing sleep over the current level of the Euro this morning, recent economic data indicates that as much as some officials may try to deny it, the strength of the currency is indeed having an impact on the economy. Factory orders rebounded only 1.2 percent, following the biggest drop in at least 16 years. Although ECB officials seem to agree that price stability is subject to upside risks, ECB member Bini-Smaghi indicated today that if Europe wanted to act to weaken the strong Euro, they did not need to wait for the G7 meeting later this month. Is he trying to say that the ECB may physically intervene in the Euro? Probably not because the currency is already falling off its highs and Germany, the Eurozone’s largest member remains comfortable with the current level of the Euro. Also, the ECB would far sooner verbally intervene in the before physically intervening. Meanwhile IMF Rato’s comment that the dollar is undervalued is also pressuring the EUR/USD. Tomorrow we have more comments from ECB officials as well as the German trade balance and industrial production. Both numbers are expected to be softer given the weakness in factory orders and the recent strength of the Euro.

Are the Commodity Currencies Finally Reversing?
The Australian, New Zealand and Canadian dollars are all softer today due to the drop in commodity prices and broad dollar strength. After hitting a new 23 year high overnight of 0.9034, the Australian dollar gave back all of its gains to end the day below 90 cents. Although economic data was mixed with ANZ job advertisements falling and the AIG Construction PMI index rising, the strength of the Australian economy should be the envy of countries like the US who is still struggling. The same can be said for Canada, despite the currency’s fall today. Employment numbers were exceptionally strong on Friday, paving the way for another rate hike by the Bank of Canada. As for New Zealand, house prices fell for the first time since the beginning of the year last month, but even that has only put a minor dent in the kiwi’s rise. Whether this is a real reversal in the commodity currencies or another blip before further gains is contingent upon oil and gold prices. If they have peaked, so will the Australian, New Zealand and Canadian Dollars.

British Pound Hit by Weaker Economic Data
The British Pound is weaker against the US dollar following mixed economic data. Input prices in the month of September were hot, but output prices were weaker than expected. This indicates that even though oil prices are driving up the cost for raw materials, these higher costs have not been passed onto factories. Part of this may be due to the weakness that we are beginning to see on the factory level. Even though the monthly growth rate of industrial production was stronger than expected, the annualized pace of growth slowed materially. Overall, the latest data indicates the difficult situation that the Bank of England is facing at the moment. Inflationary pressures remain high but economic growth is slowing.

Mild Move in the Dow Leads to Mixed Performance in the Japanese Yen Crosses
The Japanese markets were closed for a public holiday in Japan last night, so there was no economic data released. Tonight we have the Eco Watchers index but that is not expected to be market moving. The big event this week is the Bank of Japan interest rate decision, yet even that may not cause any significant movements in the Japanese Yen since there is only a 3 percent change for a quarter point rate hike. Instead, Yen traders should continue to keep an eye on the Dow. Should the stock market resume its rise, we could see fresh gains in carry trades. The dollar could extend its gains against the Yen given the bullishness of last week’s non-farm payrolls release. Major resistance for the pair is not until 119.

Last Signals

2007-09-25T14:03:00.000+07:00

Sell
GBPUSD at 2.0215
GBPJPY at 232.48

Yen Gains Against Pound, Euro as Credit Market Losses Spread

2007-09-25T13:52:00.000+07:00

By Kosuke Goto and Stanley White
The yen gained versus the pound and the euro on speculation credit market losses will damp confidence among consumers and businesses across Europe.

The Japanese yen climbed against 15 of the 16 most-active currencies as investors reduced holdings of higher-yielding assets funded by loans from Japan, known as carry trades. The pound snapped a three-day advance against the dollar as the Independent newspaper reported the U.K.'s deposit protection plan needs more cash to cope with the bailout of mortgage lender Northern Rock Plc.

``The news caused renewed risk reduction, triggering yen- buying,'' said Akihiro Tanaka, a senior currency dealer in Tokyo at Resona Bank Ltd., a unit of Japan's fourth-largest lender by assets. ``We have no other choice but to respond to this kind of news each time.''

The yen rose to 230.79 versus the pound at 2:17 p.m. in Tokyo from 232.27 yesterday in New York. It climbed to 161.49 per euro from 161.79 and to 114.70 per dollar from 114.86. The yen may rise to 113 a dollar by year-end Tanaka said.

The Independent said the U.K. Financial Services Compensation Scheme holds 4.4 million pounds ($8.9 million), while a similar U.S. fund has $49 billion. Global economic instability stemming from credit-market turmoil in the U.S. is ``likely to be protracted,'' the International Monetary Fund said in a report released in Washington yesterday.

Consumer Confidence

The dollar traded at $1.4078 against the euro, within a cent of its record low, before U.S. reports forecast by economists to show falling home sales and consumer confidence. Signs of a weakening U.S. economy may stoke bets the Federal Reserve will cut interest rates again this year, reducing the appeal of holding U.S. debt.

Japan's currency advanced the most against New Zealand's dollar, a favorite of the carry trade, gaining 1 percent to 84.93 from 85.78 in New York yesterday. Against the Australian dollar, it climbed 0.4 percent to 99.30. Australia's key rate is 6.50 percent and New Zealand's is 8.25 percent.

In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency moves erase those profits.

The Bank of England agreed to bail out Northern Rock on Sept. 14. Chancellor of the Exchequer Alistair Darling pledged Sept. 17 to guarantee deposits as Northern Rock customers withdrew an estimated 2 billion pounds.

`Trigger a Run'

``The pound is being sold on this news,'' said Tetsuhisa Hayashi, chief currency trader in Tokyo at Bank of Tokyo- Mitsubishi UFJ Ltd., a unit of Japan's largest lender by assets. ``The amount for protection is too small. Investors are afraid this could trigger a run on the banks, just like we have seen people rush into Northern Rock on TV.''

The pound fell to $2.0138 against the dollar from $2.0223 yesterday. It may drop to $2 and 228 yen today, Hayashi said.

The euro also weakened against the yen on speculation data today will show German business confidence fell to the lowest in a year, casting doubt on growth in Europe's largest economy. Economists forecast the Ifo research institute's sentiment index, due at 10 a.m. in Munich, fell to 105 in September from 105.8 in August, according to a Bloomberg survey.

``We could see some euro selling,'' said Tetsu Aikawa, deputy general manager of the capital markets division at Shinsei Bank Ltd. in Tokyo. ``Weak economic data aren't good for sentiment. It calls into question whether the economic outlook will remain strong enough for interest rates to rise.''

The euro may fall to $1.40 and 161 yen today, he said.

Forced to Cut

The U.S. currency has fallen against all 16 most-active currencies in the past month on concern a U.S. housing slump will slow growth. It depreciated 2.9 percent against the euro and 1.5 percent versus the yen.

``I'm dollar-bearish,'' said Michiyoshi Kato, a senior vice president of currency sales in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan's second-largest lender by assets. ``The U.S. economy will no doubt slow. The Fed will be forced to cut rates at least once more this year, diminishing the yield advantage.''

The U.S. currency may fall to $1.41 per euro and 114.60 yen today, Kato said.

Aggravating the Situation

The National Association of Realtors will probably report today that U.S. home resales fell 4.7 percent last month to an annual rate of 5.48 million, according to the median forecast of 72 economists surveyed by Bloomberg News.

``Falling housing prices will continue aggravating the whole situation, inflating bad assets,'' said Kazuo Mizuno, chief economist in Tokyo at Mitsubishi UFJ Securities Co. ``This will adversely affect U.S. consumption, pushing down the dollar,'' to 108 yen by year-end.

The New York-based Conference Board will say its index of consumer confidence decreased to 104.3 this month from 105 in August, according to the median forecast of 71 economists surveyed by Bloomberg.

The central bank on Sept. 18 cut its key rate by a half- percentage point to 4.75 percent. The European Central Bank's rate is 4 percent, and the Bank of Japan's is 0.5 percent, the lowest among industrialized nations.

Futures contracts show 72 percent odds of a quarter- percentage point cut to 4.5 percent at the Fed's meeting Oct. 31.

All Position Closed

2007-08-10T09:22:00.000+07:00

Closed Positions:

GBPJPY
1. Sell At 242.28 + 380 Pip

GBPUSD
1. Sell At 2.0282 + 70 Pip
=====================
Result: + 450 Pip

Using PRINCE TRADING SYSTEM

TOTAL TRADED: + 3,919 Pip

Because I Will have my Vacation All positions are closed.
See You on the next time.
Have A nice trading to All

Prince

Update GBPUSD 9th August

2007-08-09T20:40:00.000+07:00

Close Buy At 2.0296 -20 Pip

Open
1. Sell at 2.0282

Result All Trade +3,469

ECB Offers Unlimited Cash

2007-08-09T20:32:00.000+07:00

ECB Offers Unlimited Cash as Bank Lending Costs Soar

The European Central Bank, in an unprecedented response to a sudden demand for cash from banks roiled by the subprime mortgage collapse in the U.S., loaned 94.8 billion euros ($130.2 billion) to assuage a credit crunch.

The overnight rates banks charge each other to lend in dollars jumped to the highest in six years. The so-called dollar London interbank offered rate rose to 5.86 percent today from 5.35 percent and in euros gained to 4.31 percent from 4.11 percent.

The ECB's response to the fastest increase in the dollar bank rate since June 2004 signals that lenders are reducing the supply of money as losses triggered by the U.S. mortgage slump spread worldwide. BNP Paribas SA halted withdrawals from three investment funds today and Dutch investment bank NIBC Holding NV said it had lost at least 137 million euros on subprime investments, reversing evidence yesterday that credit markets were stabilizing.

``Liquidity in the market has completely dried up as investors aren't recycling their money back because of subprime concerns,'' said Saher Bin Jung, a trader on the commercial paper desk at Commerzbank AG. ``Levels have shot up dramatically since yesterday as issuers are trying to entice investors back.''

The ECB said today it provided the largest amount ever in a single so-called ``fine-tuning'' operation, exceeding the 69.3 billion euros provided on Sept. 12, 2001, the day after the terror attacks on New York.

Stocks, Treasuries

The announcement added to investor nervousness, pushing Europe's Dow Jones Stoxx 600 Index down 1.9 percent, while the Standard & Poor's 500 Index futures expiring in September lost 20.9 to 1,483.0. U.S. Treasury notes gained for the first time in four days as investors sought the safest assets, cutting yields on two-year notes by 16 basis points, or 0.16 percentage point, to 4.50 percent.

BNP Paribas, France's biggest bank, stopped investors withdrawing from funds with 2 billion euros of assets because it couldn't ``fairly'' value their holdings after concern over U.S. subprime mortgage losses roiled credit markets.

Three-month dollar Libor rose to 5.5 percent from 5.38 percent.

Federal Reserve spokesman David Skidmore declined to comment on the increases in overnight money-market rates.

GBPJPY 9th August

2007-08-09T16:35:00.000+07:00

Close Buy at 240.32 + 190 Pip

Open
1. Sell At 242.29

Total Trade : +3,489

GBPUSD 8th August evening

2007-08-08T20:10:00.000+07:00

GBPUSD Positions Up Date:

Close Positions:
1. Sell At 2.0340 +44
2. Sell At 2.0322 +22
3. Sell At 2.0231 -60
=================
Result: +6

Total Trade: +3,299 Pip

Yen Falls as Asian Stocks Gain

2007-08-08T12:28:00.000+07:00

Yen Falls as Asian Stocks Gain, Australia Raises Interest Rate

Aug. 8 (Bloomberg) -- The yen fell against the euro as Asian stocks rose and the Federal Reserve said the U.S. economy can withstand mortgage defaults, encouraging investors to buy higher-yielding assets with funds borrowed in Japan.

The currency fell the most against the Australian dollar, a favorite of so-called carry trades, after that nation's central bank raised its benchmark rate to 6.50 percent today. The &cls;Standard and Poor's 500 Index&cle; posted its best two-day gain since 2003 after the Fed said a six-year economic expansion won't be undone by a credit-market slump.

``With stock prices rising, the yen should be weaker,'' said Satoshi Okagawa, head of the foreign-exchange forward trading group at Sumitomo Mitsui Banking Corp. in Tokyo. ``All in the markets are caring about stocks, which represent risk appetite.''

The Japanese yen declined to 163.49 per euro at 1:38 p.m. in Tokyo from 163.25 late in New York yesterday. It also fell to 118.93 against the dollar from 118.83.

The yen dropped against 12 of the 16 most-active currencies as the Morgan Stanley Capital International Asia-Pacific Index of shares rose 0.6 percent. The S&P 500 climbed yesterday as investors took the Fed's statement as a sign turmoil in the credit markets won't limit global growth.

The Australian dollar has gained 0.8 percent versus the yen this month. It rose to 101.83 yen today from 101.57 in New York yesterday. The Reserve Bank of Australia increased its benchmark rate from 6.25 percent, widening the advantage in yield for two- year Australian debt over Japanese government bonds to 5.40 percentage points from 5.37 points on Aug. 6.

New Zealand's dollar, another favorite of the carry trade with a key rate of 8.25 percent, was at 90.46 yen.

`Surprisingly Weak'

Japan's currency also extended this month's losses to 0.8 percent against the euro after machinery orders, a key indicator of corporate spending plans, fell a seasonally adjusted 10.4 percent in June from the previous month. The median of 40 estimates in a Bloomberg News survey was for a 1.1 percent drop.

``The data were surprisingly weak,'' said Masaki Fukui, a senior economist and currency analyst at Mizuho Corporate Bank Ltd. in Tokyo. ``Today's data cannot support the Bank of Japan to raise rates this month. It's yen negative.''

The yen may move between 115 and 120 per dollar in one month, Fukui said.

The Bank of Japan will hold a two-day policy meeting starting on Aug. 22. The central bank last increased borrowing costs by 0.25 percentage point in February to 0.5 percent, the lowest among major economies. The benchmark rate is 4 percent in the euro region.

The yield premium investors earn on 10-year U.S. Treasury notes over similar-maturity Japanese bonds widened to 3.05 percentage points from 3.03 points yesterday and 2.90 points at the end of last week.

Subprime Mortgages

Fed policy makers repeated that inflation is still a risk after keeping rates at 5.25 percent. The ``economy seems likely to continue to expand at a moderate pace,'' the rate-setting Federal Open Market Committee said.

Gains in the dollar may be limited by speculation losses on U.S. subprime mortgages will prompt the Fed to lower interest rates this year.

The U.S. currency has fallen 3.6 percent against the yen in the past month on concern housing-market weakness will slow economic growth. Fed Funds futures also show traders increased bets on at least one rate cut by December to 49.5 percent odds from 6 percent a month ago.

``The U.S. subprime problems won't be solved any time soon, as housing prices are still falling,'' said Yuji Kameoka, a senior economist and currency analyst at Daiwa Institute of Research in Tokyo. ``This is a continuing correction of the housing market bubble and will keep adversely affecting U.S. consumption,'' pushing down the dollar to 115 yen by year-end.

German Exports

The euro may strengthen on speculation a German report today will show exports rebounded in June, adding to evidence Europe's largest economy is resilient to higher borrowing costs.

Europe's single currency may extend this year's 4 percent gain versus the yen on prospects the European Central Bank will raise interest rates at a faster pace than the Bank of Japan. The yield spread between two-year German and Japanese bonds was 3.29 percentage points today, above the average of 3.13 points in the past year.

``Growth in the euro area is robust,'' said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank in Tokyo. ``The ECB is likely to hike in September and perhaps once more this year. It's supportive of the euro,'' which may rise to $1.3770 and 163.75 yen today, he said.

Bernanke Looks

2007-08-08T12:25:00.000+07:00

Bernanke Looks Beyond Market Tumult to Focus on Inflation Risks

Aug. 8 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke isn't blinking in his battle against rising prices even as tumult in financial markets threatens to slow growth.

Fed officials said higher inflation is ``the predominant risk'' when they kept their benchmark interest rate at 5.25 percent yesterday. They rebuffed calls for a more balanced assessment that may have presaged a rate cut. In doing so, they also broke with former Chairman Alan Greenspan, who elevated the role of financial market stability in setting policy.

``They see the paramount task as keeping inflation low and keeping inflation expectations anchored,'' said Brian Sack, a former adviser to senior Fed officials on policy strategy who's now an economist at Macroeconomic Advisers LLC in Washington.

Bernanke's unwillingness to budge comes after price increases slowed for four straight months, to the lowest since he took office. The Fed chief emphasizes the institution's forecasts over coming quarters, while Greenspan tended to stress current conditions when markets weakened, enabling rapid shifts in policy.

U.S. stocks lost about $1.26 trillion in market capitalization since benchmark indexes reached records in July as banks restricted credit because of rising defaults on subprime mortgages. Volatility climbed to the highest since April 2003 this week, according to the VIX index, a gauge tied to the S&P 500 index compiled by the Chicago Board Options Exchange.

``The signal from the Fed was unmistakable: turbulent markets, in and of themselves, will not be sufficient to force their hand,'' said Peter Kretzmer, senior economist at Banc of America Securities LLC in New York.

`Baptism of Fire'

The 1987 stock-market crash was Greenspan's ``baptism of Fire,'' he said at a New York exposition June 1. While some advised him to wait to see the impact on the economy from a 23 percent slide in the Dow Jones Industrial Average, Greenspan said he concluded quickly that the U.S. was on the edge of ``fairly pronounced dangerous positions.'' He then said he would provide ``liquidity'' to the banking system.

In 1998, the Greenspan Fed lowered the benchmark rate three times as emerging market turmoil roiled Wall Street, and raised it on three occasions the next year. In January 2001, the Fed enacted an emergency rate cut just seven weeks after saying the risks were ``weighted mainly toward'' inflation pressures.

Bernanke, 53, and his colleagues have kept the federal funds rate unchanged for a year, the longest freeze in nine years.

Futures Trading

Traders yesterday reduced their expectations for a rate cut in the coming two months. Investors see a 58 percent chance the Fed will lower its benchmark rate by the end of October, down from 84 percent the previous day, based on futures on the Chicago Board of Trade. A reduction by year's end is still a certainty, futures indicate.

Unlike Greenspan, Bernanke isn't going to provide short- term financing to help ease a slump in asset prices, said Joe Carson, director of research at Alliance Bernstein LP in New York. It's too early to know if Bernanke's strategy will be successful, he said.

``Wall Street is looking for an easy solution to these problems,'' Carson said. Monetary ``policy is not going to help out.''

At least 70 mortgage firms have halted operations, gone bankrupt or sought buyers since the start of 2006. Large banks are also cutting back on their appetite for risky financings of corporate takeovers. At Bear Stearns Cos., two hedge funds failed in June and the firm's chief financial officer said Aug. 3 that the fixed-income market is in the worst shape in 22 years.

The Fed said yesterday that it still expects a ``moderate'' expansion. Policy makers added that ``solid growth in employment and incomes and a robust global economy'' will help.

Growth Rate

The government said on July 27 that the U.S. economy expanded at a 3.4 percent annual pace in the second quarter, the fastest in more than a year, after a revised gain of 0.6 percent in the three months ending March.

Economists and Fed officials anticipate a slacker expansion in the second half. For the year, Fed governors and presidents expect growth, on average, of about 2.25 percent to 2.5 percent, Bernanke told Congress last month. The projections are about a quarter-point below the previous round in February, mainly because of the weakness in homebuilding.

Price increases have slowed for four straight months under the Fed's preferred gauge, which excludes food and energy costs. The core personal consumption expenditures price index rose 1.9 percent in June after a revised 2 percent gain in May, the Commerce Department said July 31.

Financial volatility did change Fed officials' sense of the risk around the forecast. ``Downside risks have increased somewhat,'' the statement said.

``It is a step away from tightening, it is not a step toward easing,'' said Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago. ``Greenspan was more of a tinkerer. Bernanke is `stay the course until you tell me not to.' And the `you' is not the bond market, it is the economy.''

GBPJPY 8th August

2007-08-08T12:11:00.000+07:00

Close Positions:

GBPJPY
1. Sell at 240.58 + 15 Pip
2. Sell at 240.41 + 2 Pip
====================
Result: + 17 Pip

Open Position:
GBPJPY
1.Buy at 240.32

Position Update 8th August

2007-08-08T10:45:00.000+07:00

Positions Up date:

GBPJPY
1. Sell at 240.55
2. Sell at 240.41

GBPUSD
1. Sell at 2.0340
2. Sell at 2.0322
3. Sell at 2.0231

Total Trade Result : + 3,293 Pip

GBPJPY 7th August

2007-08-07T19:46:00.000+07:00

Result:
1. Buy at 240.98 -50

Open now
1. Sell at 240.55

Fed Lack of Transparency

2007-08-07T17:43:00.000+07:00

Fed Lack of Transparency Keeps Traders in Dark as Stocks Drop

Aug. 7 (Bloomberg) -- The Federal Reserve trails other central banks in openness, hamstringing it in times of market turmoil, and may not catch up even if Chairman Ben S. Bernanke's campaign to improve communications succeeds.

Fed policy makers, who meet in Washington today to set interest rates, are nearing the end of more than a year of talks on how to increase transparency. The Fed is behind five of eight major counterparts, including the European Central Bank and Bank of England, according to a paper by two European economists.

The differences were stark last week, when ECB President Jean-Claude Trichet hit the airwaves and held an unscheduled press conference while colleagues spoke to newspapers amid the biggest global stock sell-off since 2003. Bernanke was invisible, and because the Fed's top officials are so tightly scripted, any break from tradition may have panicked as many investors as it reassured. The statement today may at most contain brief comments on heightened economic risks, analysts said.

``It's one less degree of freedom,'' said Chuck Lieberman, a former New York Fed economist who's now chief investment officer of Advisors Capital Management LLC in Paramus, New Jersey. ``The very act of providing some assurance might scare the market'' because it would be unusual, he said.

The Federal Open Market Committee will keep its benchmark rate at 5.25 percent for the ninth straight meeting, according to all 96 economists surveyed by Bloomberg News. The statement is scheduled for 2:15 p.m. in Washington.

Still Trailing

While European, Japanese and U.K. central bankers hold press conferences and conduct on-the-record interviews, Bernanke's efforts are unlikely to produce that degree of transparency, Fed watchers said. America's central bank hasn't set a date for concluding the communications review.

Any changes will be ``pretty minor,'' said Adam Posen, a former Fed economist who has collaborated with Bernanke. The Fed may increase the frequency of and information contained in its economic forecasts, falling short of adopting an explicit inflation goal, economists including Posen predict.

Kansas City Fed President Thomas Hoenig said in May that ``advancing how we use the minutes'' of Fed meetings was one of the options under discussion. A conclusion is ``a ways off,'' he said May 15 in Denver.

Beginning in 1994, the Fed under former chairman Alan Greenspan started announcing rate decisions and issuing statements explaining them. That was copied by other central banks, including in Australia and New Zealand.

The Fed's counterparts have kept innovating and now the U.S. central bank is the only one among the Group of Seven nations that doesn't hold regular press conferences. It has given no indication the practice is under consideration.

`A Ways to Go'

``The Fed over the last five to seven years has been moving in the right direction but still has a ways to go,'' said Tom Schlesinger, who researches the Fed as executive director of the Financial Markets Center in Howardsville, Virginia.

Openness such as the ECB showed last week would be unthinkable at the Fed, where the chairman and vice chairman tend to restrict public availability to appearances that are scheduled weeks or months in advance.

The Fed's relative lack of clarity is a challenge because, unlike the ECB, it's charged with achieving full employment as well as stable prices, said Sylvester Eijffinger, a professor at Tilburg University in the Netherlands and co-author of the study ranking central banks. It ``leads to some confusion in terms of communication,'' he said.

No Cure-All

Transparency isn't a cure-all. Wim Duisenberg, Trichet's predecessor, was faulted for confusing markets with mixed messages on interest rates and contributing to a slump in the euro. And Bernanke himself tripped up with off-the-cuff remarks to a reporter in April last year.

Bernanke, 53, told CNBC reporter Maria Bartiromo at a Washington party markets had misinterpreted remarks to Congress that had suggested the Fed was finished raising rates. Bonds tumbled when CNBC reported the conversation May 1, 2006. Bernanke later said the incident was a ``lapse in judgment.''

Public comments by top Fed officials can help soothe investors. By chance, Bernanke was scheduled to testify before Congress on Feb. 28, a day after the biggest one-day slide in the Standard & Poor's 500 index in four years.

Soothed Market

Bernanke said then that financial markets were ``working well'' and growth was still likely to accelerate. The S&P 500 rallied 0.6 percent, taking back some of the 3.5 percent drop the previous day.

Last week, the index capped its worst three-week sell-off since February 2003 and the lack of scheduled events meant that this time, investors had no reassuring words from the Fed chief. Neither Bernanke nor Vice Chairman Donald Kohn has spoken in public since July 19, leaving commentary to lower-ranking officials such as Governor Randall Kroszner, who said the ``real economy does not yet seem to be affected.''

``Some sort of statement from the Fed that they stand willing to provide additional liquidity might help confidence,'' said James Nixon, a former forecaster for the ECB and BOE who is now an economist at Societe Generale SA in London. Trichet ``went some way to calm the market.''

Position Update

2007-08-07T10:42:00.000+07:00

Close Sell Positions.
Result:
1. Sell 241.90 +86
2. Sell 240.58 -45
===============
Nett: +41

Total Trade: +3,343 Pip

Open Positions:
GBPJPY
1. Buy at 240.98

GBPUSD
1. Sell at 2.0340
2. Sell at 2.0322

Bad of UK Data

2007-08-06T17:49:00.000+07:00

Well as News report that I have posted before, seem UK's Manufacturing Production release dropped to its slowest rate in two years.
confirmed close all Buy Position around 2.0344 and also Open Sell at 2.0340

Result:
1. Buy at 2.0298 +40
2. Buy at 2.0294 +44
3. Buy at 2.0252 -12
=================

Total: +72

Result Total +3,302 Pip

Open Positions:

GBPJPY
1. Sell at 241.90 + 260 Pip
2. Sell at 240.58 + 128 Pip

GBPUSD
1. Sell at 2.0340 +40 Pip

UK manufacturing employment growth

2007-08-06T14:59:00.000+07:00

UK manufacturing employment growth dropped to its slowest rate in two years, in the three months to July, a survey by the Confederation of British Industry, CBI, revealed, Monday. The survey showed that the growth in demand for goods had eased in the quarter to July. New orders grew for the third successive quarter, though slower than in the previous six months, while manufacturing output growth slowed in the quarter to July. The CBI is the UK''s leading business organization, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. The Regional Trends Survey, conducted by the CBI and Experian, were extracted from the 576 replies to the CBI''s Industrial Trends Survey in July. In the three months to July, fully half of UK manufacturers were working at full capacity, the survey revealed. As a result, job cuts in the manufacturing sector slowed to 5,000, much lower than the average of 30,000 job cuts every quarter since 2003. Four of eleven UK regions actually saw gains in employment. Job losses were heaviest in the West Midlands, London and the South East and the South West. Export growth had slowed down among most of the regions, the report said. Manufacturing costs increased in the quarter to July, reversing an earlier decline, pushed mainly by the high price of oil. However, firms were confident of increasing prices to offset rising costs, the survey found.The Northeast region witnessed robust growth in orders, output, employment and investment intentions while prices for both domestic and exports markets were strong. The metals and engineering industries in the West Midlands region was singled out by the survey for strong performance."The manufacturing sector''s revival is continuing, though the rate of growth has slowed somewhat. With more firms now working flat out than at any time since early 2006, there has been a very welcome effect on jobs," said Doug Godden, head of economic and fiscal policy at the CBI.

Dollar Falls to Four-Month Low Against Yen

2007-08-06T11:19:00.001+07:00

Dollar Falls to Four-Month Low Against Yen on Growth Concerns

Aug. 6 (Bloomberg) -- The dollar fell to a four-month low against the yen and traded near a record low against the euro on speculation hedge fund losses and a slowing economy will prompt the Federal Reserve to cut borrowing costs this year.

The currency also declined against the Swiss franc after a weaker-than-forecast U.S. jobs report caused traders to increase bets on lower interest rates as soon as October. The yen climbed versus the New Zealand dollar and the British pound as a slump in Asian stocks pushed investors to repay Japanese currency loans used to purchase higher-yielding assets.

``The dollar will fall further,'' said Koichi Yoshikawa, head of currency trading at BNP Paribas in Tokyo. ``People had funded their investments with yen and Swiss francs under good credit conditions. This money stream is turning around, which means a weaker dollar and a stronger yen.''

The dollar dropped to 117.63 yen at 12:45 p.m. in Tokyo from 118.05 on Aug. 3 and reached 117.19, the weakest since March 29. It weakened to 1.1840 Swiss francs, from 1.1907. The U.S. currency also fell to $1.3816 per euro from $1.3773, close to an all-time low of $1.3852 touched July 24. It may fall to 117 yen today, Yoshikawa said.

Federal Fund futures show traders see an 84 percent chance the Fed will cut its 5.25 percent benchmark rate by October, up from 14 percent a month earlier. The Labor Department said on Aug. 3 that job growth slowed to 92,000 in July, compared with 126,000 in June and the median forecast in a Bloomberg survey of 127,000.

The pace of leveraged buyouts has slowed more than 33 percent since June, data compiled by Bloomberg show. Investors are cutting back on riskier assets such as the loans and bonds that fund LBOs after being burned by losses from U.S. subprime mortgages.

``The subprime problem and concern about the economy damage U.S. credit markets,'' Yoshikawa said.

Carry Trades

Japan's currency got a boost as a 2.7 percent decline in the S&P 500 Index spilled over to Asian stock markets, encouraging investors to pare so-called carry trades. The Morgan Stanley Capital International Asia Pacific Index of shares dropped 1.2 percent.

The yen climbed against 15 of the 16 most-active currencies. Only the Swiss franc, another popular funding currency, gained more. The yen has risen 5.2 percent against the dollar since Bear Stearns Cos. said June 22 two of its hedge funds that made bets on subprime loans collapsed.

Easy to Buy

New Zealand's dollar, a favorite of carry trades because of its 8.25 percent benchmark rate, dropped 0.6 percent to 89.21 yen. Australia's currency, where the key rate is 6.25 percent compared with Japan's 0.5 percent, slid 0.4 percent to 100.54. The pound dropped to 240.20 from 240.95 on Aug. 3.

``It's easy to buy the yen today,'' said Akio Shimizu, chief manager of foreign exchange trading at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. ``The subprime problem means traders will want to avoid risk and buy back the yen.''

Japan's currency may rise to 117 against the dollar and 161.20 per euro today, he said.

Volatility implied by yen currency options expiring in one month with a strike price near the current level rose to 10.45 percent, the highest in 14 months. Traders quote implied volatility, a measure of expected price swings, as part of pricing options.

Higher volatility may discourage carry trades as it exposes these bets to more currency risk. The yen has gained 3.3 percent against the dollar since one-month volatility started rising from 5.725 percent on June 5, the lowest since Bloomberg began compiling the data in 1995.

``We're seeing increased options demand on expectations the dollar will fall more against the yen,'' said Ryousei Ishida, senior vice president of foreign exchange options at Mizuho Corporate Bank Ltd. in Tokyo. ``Volatilities have room to rise further. There's been a lot of negative news out of the U.S.''

Federal Reserve

The dollar fell for a third day against the euro on speculation Fed policy makers will voice concern about slowing economic growth at a meeting tomorrow, where it will probably leave rates unchanged.

``With the subprime woes intensifying, the Fed might make a reference to this in their statement,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``This would fuel Fed rate-cut expectations by year-end. It's negative for the dollar,'' which may decline to $1.3852, a record low, and to 117.20 yen today.

The currency also slid for a second day against the yen as the difference in yield between benchmark two-year U.S. and Japanese bonds narrowed today to 3.42 percentage points, the least in more than two years.

Latest Result Up Date

2007-08-04T23:16:00.000+07:00

Result Up Date From 24th July 2007:

GBPJPY:
+ 2,450
- 20
+ 20
+ 140
--------
+2,590 Pip

Still Open Position
1. sell at 241.90 = +80 Pip

From 25th July 2007
GBPUSD:
+665
- 15
- 10
-------
+640 Pip

Still Open Positions
1.Buy at 2.0298 = +116
2.Buy at 2.0294 = +120
3.Buy at 2.0352 = + 58
-------------------------
Total: = +294

All Trade made + 3,230 Pip

So Far so good. Have a nice trade to all of You.

Prince

GBPJPY 3 Ausgust

2007-08-03T21:12:00.000+07:00

Sell New at 241.90 and close all Buy Position.
Result:
1.Buy at 240.55 130 Pip
2.Buy at 240.94 80 Pip
3.Buy at 242.53 -75 Pip

Result Total: 140 Pip

GBP and GBPJPY 3 August

2007-08-03T12:05:00.000+07:00

GBP
Add New Buy at 2.0352.
Open Positions:
1.Buy at 2.0298
2.Buy at 2.0294
3.Buy at 2.0352

GBPJPY
Add new Buy at 242.53
Open Positions:
1.Buy at 240.55
2.Buy at 240.94
3.Buy at 242.53

Yen Strengthens as Sharper Currency Swings Deter Carry Trades

2007-08-02T15:03:00.001+07:00

The yen strengthened against the dollar and the euro as sharper swings in exchange rates prompted traders to cut investments in higher-yielding assets paid for by borrowing the Japanese currency.

The yen was the best performer among the 16 most-active currencies against the dollar today as subprime mortgage losses pushed fund managers to pare so-called carry trades. A measure of volatility in dollar-yen reached the highest in five months.

``The currency market remains choppy and driven by sentiment,'' said Gundy Cahyadi, an economist at IDEAglobal in Singapore. ``Chances the high-yielders will rebound in a big way today will be limited.''

The yen climbed to 162.30 versus the euro at 7:50 a.m. in London compared with 162.58 in late New York yesterday. It also advanced to 118.71 against the dollar from 118.96.

Volatility on one-day dollar-yen options reached 19.005 percent today, the highest since March 14, from 12.755 percent yesterday. Rising volatility may discourage carry trades as it implies bets will be exposed to greater exchange-rate fluctuations.

The yen also advanced 0.3 percent against the Australian and New Zealand dollars, popular carry trade currencies. Australia's dollar was at 101.50 yen from 101.80 yen, and New Zealand's dollar was at 90.85 from 91.15 yen.

The Bank of Japan's 0.5 percent benchmark rate compares with 5.25 percent in the U.S., 8.25 percent in New Zealand and 6.25 percent in Australia.

Repatriation Flows

Japanese investors sold 2.1 billion yen in overseas bonds and notes, while buying 47.4 billion yen in foreign short-term securities, the ministry said. Total holdings were cut for a third week, with net sales of 3.4 billion yen.

The currency also gained on speculation Japanese investors are converting income after Italy paid 14 billion euros ($19.1 billion) in coupon and principal on government debt yesterday, according to Societe Generale SA in Tokyo.

The yen has weakened 3.3 percent against the dollar in the past year as the lowest borrowing costs among major economies encouraged investors to borrow in Japan to buy higher-yielding assets.

American International Group Inc., the world's biggest insurer, may be sitting on losses of as much as $2.3 billion from securities backed by subprime mortgages, analysts said. Bear Stearns Cos., the manager of two hedge funds that collapsed last month, blocked investors from pulling money out of a third fund as losses in the credit markets expand.

``Confidence among investors hasn't clearly been restored, as there are still concerns over the subprime issue,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``They're probably looking to scale back carry trades, which may lift the yen'' to 118.40 against the dollar and 161.70 per euro today, he said.

Interest Rates

The euro may be supported by speculation European Central Bank President Jean-Claude Trichet will today signal an interest- rate increase as soon as next month after policy makers keep rates at 4 percent today.

The currency may extend this year's 3.5 percent advance against the dollar as the yield spread between two-year German and U.S. bonds narrowed this week to the least in 2 1/2 years. The British pound may gain for a fourth day as the Bank of England will raise borrowing costs to 6 percent by year-end after holding them at 5.75 percent at today's meeting, a Bloomberg News survey shows.

September Hike

``Trichet is likely to reaffirm expectations of a September rate hike,'' said Masashi Kurabe, currency manager at Bank of Tokyo-Mitsubishi UFJ Ltd. in Tokyo. ``The euro may go higher'' to $1.3720 and 163.50 yen today, he said.

The euro traded at $1.3669 from $1.3667 yesterday, and the pound was at $2.0319 from $2.0325.

Interest-rate futures show investors are betting the ECB will lift rates at least once more this year. The implied yield on the December Euribor futures was at 4.49 percent, up from 4.48 percent yesterday. The contract settles to the three-month interbank offered rate for the euro, which has averaged about 16 basis points above the ECB key rate since 1999.

The dollar may extend losses on speculation a government report tomorrow will show U.S. companies added fewer jobs in July. The Labor Department will report U.S. employers added 127,000 nonfarm jobs, down from 132,000 a month earlier, according to a Bloomberg News survey of economists. The jobless rate is forecast to stay at 4.5 percent.

``Dollar-bearish sentiment is still prevailing amid concern over U.S. subprime issues,'' said Akihiro Tanaka, a senior dealer in Tokyo at Resona Bank Ltd. ``Jobs data won't help boost the dollar, even though data are better than expected. It rather has a further downside risk.''

The dollar may fall to 118.50 yen today, Tanaka said.

U.K. Pound Little Changed Before Bank of England Rate

2007-08-02T15:00:00.000+07:00

U.K. Pound Little Changed Before Bank of England Rate Deci

The pound was little changed before a Bank of England rate-setting meeting at which policy makers are expected to hold borrowing costs at a six-year high.

The U.K. currency held near a three-week low against the dollar as investors shun high-yielding currencies on concern losses on U.S. subprime mortgages will damage global economic growth. The BOE is forecast to leave key rates at 5.75 percent, while interest-rate futures indicate it will raise borrowing costs a quarter percentage point by the end of this year.

``We had a few sluggish U.K. numbers over the last couple of weeks but that in itself won't upset the Bank of England,'' said Paul Robson, a currency strategist at Royal Bank of Scotland Group Plc in London. ``The BOE is widely expected to leave rates on hold.''

Against the euro, the pound traded at 67.29 pence as of 7:24 a.m. in London, from 67.25 late yesterday in New York, and at $2.0311, from $2.0325.

The U.K.'s largest mortgage lender HBOS Plc will release house-price data for July at 8 a.m. in London. Economists surveyed by Bloomberg News forecast the average value of a home rose 0.3 percent, from 0.4 percent the month before.

The implied yield on the December interest-rate futures contract was at 6.17 percent yesterday. The contract settles to the three-month London inter-bank offered rate for the pound, which has averaged about 15 basis points more than the bank's key rate in the past decade.

U.K. bonds closed little changed yesterday. The yield on the 4 percent note maturing September 2016 was 5.20 percent.

Trichet, Poised to Raise Rates, Follows Bundesbank

2007-08-02T14:53:00.000+07:00

Trichet, Poised to Raise Rates, Follows Bundesbank

European Central Bank President Jean-Claude Trichet

July 31 (Bloomberg) -- The European Central Bank might be run by a Frenchman; its heart and soul belong to Germany's Bundesbank.

ECB President Jean-Claude Trichet faces political pressure to stop raising interest rates, and some of his own policy makers query the extent of the inflation threat in Europe. Still, investors are betting he'll push borrowing costs higher, upholding the legacy of Germany's central bank, which celebrates its 50th anniversary tomorrow.

``Some ECB council members are sounding more cautious about further rate increases, but I'd still bet on the Bundesbank cabal winning the argument,'' said Charanjeev Chana, an economist at Stone & McCarthy Research Associates in London. ``We still expect rates to rise twice more by the end of the year.''

The Bundesbank's inflation-fighting zeal remains at the heart of European monetary policy even after the bank ceded control of rates to the ECB in 1999. German memories of rampant inflation after World War I, and Adolf Hitler's subsequent rise to power, forged the Bundesbank's resolve to achieve stable prices and made it a role model for central banks across Europe.

``The Bundesbank tradition was completely adopted by the ECB,'' said Klaus Baader, chief European economist at Merrill Lynch & Co. in London. ``And Germany is the biggest economy in the euro zone, which tends to give the Bundesbank president more clout on the ECB council.''

`Hyperinflation'

``Hyperinflation'' gripped Germany in the 1920s after the government printed banknotes to finance World War I and fund reparation payments to the Allies after the country's defeat in 1918.

Prices spiraled out of control and confidence in the Weimar Republic, Germany's first full-fledged democratic system, was undermined. By the end of 1923, prices were doubling every 49 hours, and one U.S. dollar was worth more than a trillion German marks.

``Nothing rendered the German people so embittered, so full of hatred, so ready for Hitler, as inflation,'' former Bundesbank and ECB Chief Economist Otmar Issing said in 2004, quoting Austrian writer Stefan Zweig.

To ensure hyperinflation never returned, the government created the Bundesbank on Aug. 1, 1957. It was charged with ``safeguarding'' the stability of the deutsche mark, which had been established in 1948 and became a bedrock of Germany's economic recovery.

De-Facto Anchor

The mark also became the de-facto anchor to which other European currencies were tied after the collapse in 1971 of the Bretton Woods fixed exchange-rate system.

With the introduction of the euro in 1999, ``there had to be a reason for markets to attach credibility to the ECB,'' said James Nixon, an economist at Societe Generale in London. ``The Bundesbank provided one.''

The ECB adopted the principles that earned the Bundesbank respect. Both argue that price stability is the overriding aim of monetary policy, a stance that contrasts with the U.S. Federal Reserve's dual mandate to both fight inflation and foster job creation.

The ECB, like the Bundesbank, also says its decisions should be independent of government interference and take money-supply developments into account.

Doubts Raised

Those principles are now being questioned as the Frankfurt- based ECB prepares to raise rates for the ninth time since late 2005. The ECB's benchmark is already at 4 percent, a six-year high, and inflation has stayed below the bank's 2 percent ceiling for 11 straight months.

Bank of France Governor Christian Noyer has raised doubts about the accuracy of inflation signals sent by money-supply data, while Portugal's Vitor Constancio has said the appreciating euro may curb any inflation threat.

``This may be viewed as part of the ECB detaching itself from the old Bundesbank line, but the fact that Trichet defended the monetary strategy so strongly sent a very powerful message,'' said Thorsten Polleit, an economist at Barclays Capital in Frankfurt.

Trichet used a speech in June to laud the Bundesbank's ``acceptance of the ultimately monetary nature of inflation,'' and said ignoring money growth would entail ``excessive and unreasonable risks.''

French Attack

Trichet and the Bundesbank have also been united in defending the ECB after French President Nicolas Sarkozy called for governments to have a say in monetary policy.

The ECB's independence is enshrined in law and to question it is ``not acceptable,'' Trichet said. Bundesbank President Axel Weber dismissed Sarkozy's comments as ``noise.''

The Bundesbank has also supplied the ECB with a string of so- called hawks. Weber is the toughest inflation fighter on its 19- member governing council, according to a ``hawkometer'' compiled by Stone & McCarthy. He's topped the index in 10 of the past 14 months. ECB Executive Board member Juergen Stark, a former Bundesbank vice president, regularly rates among the top three.

With oil prices rising and the euro-region economy growing at close to the fastest pace since 2000, Weber and Stark are arguing for higher rates.

``Trichet seems to be listening,'' said Chana. ``The ECB acts pre-emptively to prevent inflation, and that's a Bundesbank trait.''

The ECB will raise its key rate to 4.25 percent in September, according to all 13 economists in a Bloomberg News survey. Some expect the bank to signal the move after its policy meeting on Aug. 2.

For now, the ECB remains driven by a doctrine best summed up by former Bundesbank President Karl Otto Poehl.

``Inflation is like toothpaste,'' he said in 1980. ``Once it's out, it's difficult to get back in again. So the best thing is not to squeeze too hard on the tube.''

Bear, Lehman, Merrill Trade as Junk

2007-08-02T14:29:00.000+07:00

Bear, Lehman, Merrill Trade as Junk, Derivatives Show (Update1)

By Caroline Salas

The exterior of the New York Stock Exchange

July 31 (Bloomberg) -- On Wall Street, Bear Stearns Cos., Lehman Brothers Holdings Inc., Merrill Lynch & Co. and Goldman Sachs Group Inc., are as good as junk.

Bonds of U.S. investment banks lost about $1.5 billion of their face value this month as the risk of owning the securities increased the most since at least October 2004, according to Merrill indexes. Prices of credit-default swaps based on the debt imply that their credit ratings are below investment grade, data compiled by Moody's Investors Service show.

The highest level of defaults in 10 years on subprime mortgages and a $33 billion pileup of unsold bonds and loans for funding acquisitions are driving investors away from debt of the New York-based securities firms. Concerns about credit quality may get worse because banks promised to provide $300 billion in debt for leveraged buyouts announced this year.

``The market is being driven by fear,'' said Mark Kiesel, who oversees $80 billion of corporate debt at Newport Beach, California-based Pacific Investment Management Co., manager of the world's biggest bond fund.

Credit-default swaps tied to $10 million of bonds sold by Bear Stearns, the second-largest underwriter of mortgage bonds, were quoted as high as $145,000 yesterday, from $30,000 at the start of June, indicating growing investor concerns. The swaps traded today at $85,000, according to broker Phoenix Partners Group in New York.

The contracts, financial instruments based on bonds and used to speculate on the chances of default, imply a rating of Ba1, one level below investment grade and six lower than Bear Stearns' A1 ranking, according to New York-based Moody's.

`Wall of Worry'

Prices of credit-default swaps for Goldman, the biggest investment bank by market value, Merrill, the third largest, and Lehman, the No. 1 mortgage bond underwriter, also equate to a Ba1 rating, data from Moody's credit strategy group show. Bonds of New York-based Goldman and Merrill are rated Aa3, seven levels higher than swaps suggest. Lehman is rated A1, the same as Bear Stearns.

About 1 percent of the thousands of companies followed by Moody's have a gap of more than five levels between their actual and implied rankings, analyst Tony Smith said in a July 19 report titled ``Broker Securities Climb a Wall of Worry.''

Spokesmen for the firms declined to comment or didn't return phone calls. High-yield, or junk, bonds are rated below Baa3 by Moody's and BBB- by Standard & Poor's.

Credit-default swaps are the fastest-growing part of the derivatives market. Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates.

Losing Value

Investment-grade bonds of brokerage firms lost 0.47 percent on average since June, while securities with similar ratings returned 0.19 percent, according to Merrill indexes. Finance companies are the biggest part of the corporate bond market, accounting for 40 percent of the $2 trillion of debt outstanding, according to New York-based Morgan Stanley, the second-biggest investment bank by market value.

Investors demand an extra 1.25 percentage points in yield to own the bonds of brokers instead of Treasuries, up from a low of 0.64 percentage point on Jan. 29. The wider spread represents an extra $6 million in annual interest for every $1 billion they borrow.

Lehman sold $1.5 billion of 6 percent notes due in 2012 earlier this month at a price to yield 1 percentage point more than Treasuries with a similar maturity. The company sold five- year debt with a 0.62-percentage-point spread on Jan. 9.

The difference adds up to $5.7 million a year in extra interest. The price of the new securities fell to 99.8 cents on the dollar to yield 1.38 percentage points more than Treasuries yesterday, according to Trace, the bond-price reporting system of the NASD.

Skittish Investors

Investors grew more skittish about the credit markets this month as mortgage defaults increased and at least 40 bond and loan sales faltered. U.S. foreclosures rose 58 percent in the first half of 2007 from a year earlier, as more homeowners fell behind on payments, according to a report yesterday by RealtyTrac Inc., an Irvine, California-based seller of foreclosure data.

Concerns escalated last week after banks including Goldman, Bear Stearns and New York-based JPMorgan Chase & Co., the No. 3 U.S. bank, were left holding $10 billion of loans they provided for the buyout of Chrysler, a unit of Stuttgart, Germany-based DaimlerChrysler AG, by Cerberus Capital Management LP in New York.

JPMorgan was among at least eight banks holding about $10 billion of loans for Nottingham-based Alliance Boots Plc, the U.K.'s biggest pharmacy chain being purchased by Kohlberg Kravis Roberts & Co.

Fewer Cylinders

Financing leveraged buyouts and bundling subprime mortgages and bonds into other securities called collateralized debt obligations generated about $21 billion in fees last year, data compiled by Freeman & Co., Thomson Financial and JPMorgan Chase show.

``The brokers were hitting on all cylinders,'' said Chuck Moon, who manages $30 billion as head of investment grade credit at Hartford, Connecticut-based Hartford Investment Management Co. ``Now there are a couple of cylinders in question.''

Bond and credit-default swap prices suggest Wall Street firms are no safer for debt investors than companies teetering on the edge of investment grade, including mining company Freeport- McMoRan Copper & Gold Inc. in Phoenix and Stamford, Connecticut- based copy machine maker Xerox Corp.

Pimco Buys

Credit-default swaps tied to $10 million of Freeport's bonds cost about $115,000 and those linked to Xerox's debt trade at $96,000, according to CMA Datavision. Xerox bonds are rated Baa3 by Moody's and BBB- by S&P. Freeport's are ranked Ba3 by Moody's and BB+ by S&P.

That may be a signal to buy, said Moon. Bonds of brokers are ``attractive'' because yields have widened so much compared with Treasuries, he said, declining to comment on whether he's adding them.

The growth in credit-default swaps allows finance companies to hedge more of their risks than a decade ago, Moon said. ``I don't think it's a disaster because, quite frankly, the institutions have become more sophisticated about their risk management practices.''

Pimco bought bonds of banks and brokers in the past two weeks, expecting them to sustain earnings growth and benefit from global mergers and acquisitions, Kiesel said. Profits at Bear Stearns will rise to $14.53 a share this year and $15.66 in 2008 from $14.27 in 2006, according to the average estimate in a Bloomberg survey of 16 analysts.

Reasons to Buy

Merrill's MOVE Index, a measure of expectations for Treasury volatility, reached 92.6 on July 26, up from a low this year of 51.2 on May 15. Merrill reported a 31 percent rise in second- quarter profit on July 17, while Lehman's earnings rose 27 percent to a record.

``We have been adding, I wouldn't say we've been power- lifting,'' Kiesel said. ``You want to leave some powder dry as you've got an unprecedented amount of high-yield supply that's hitting the market. That's a train coming down the tracks. So stepping in front of that takes some guts.''

Banks have agreed to provide bonds and loans for buyouts including the $25.6 billion takeover of Greenwood Village, Colorado-based credit-card processor First Data Corp. and the $45 billion acquisition of energy company TXU Corp. of Dallas. If they can't find investors for the debt, the banks may have to provide it themselves.

Pimco is still ``underweight'' in corporate debt, meaning it owns a smaller percentage than is contained in their benchmark index. The firm is a unit of Frankfurt-based insurer Allianz SE.

Marking Down

Bear Stearns analyst Ian Jaffe raised his recommendation on broker debt to ``overweight'' from ``underweight'' on July 13 because risk premiums increased and the economy is growing. Jaffe, who is based in New York, declined to comment.

CreditSights Inc., an independent bond-research firm in New York, also says investors should buy broker bonds.

``We've been probably the earliest and biggest critics of the brokers for the proprietary trading risks they're taking and the private-equity lending,'' said David Hendler, the head financial services analyst at CreditSights. ``We're saying the fear and spreads don't make sense.''

Banks face losses from acquisition-related debt because they typically sell the bonds and loans later at a discount. Treasury Secretary Henry Paulson, a former Goldman chairman and chief executive officer, described the credit markets decline as a ``wakeup call'' for banks in a July 26 interview.

`Got a Problem'

``They've got a problem,'' said Daniel Fuss, vice chairman of Loomis Sayles & Co. in Boston, which manages $22 billion in bonds. ``It's pretty bad. They're going to have to go back to the private-equity people'' to renegotiate their lending commitments, he said.

The perception of the risk on Bear Stearns bonds has risen more than its competitors on concerns that a decline in new securities backed by home loans will reduce earnings. Sales of mortgage bonds may tumble by a third to $556 billion in the second half of this year compared with the first six months, Lehman debt strategists said in a July 30 report.

Bear Stearns last month was forced to extend $1.6 billion in credit to one of two hedge funds that collapsed from bad bets on securities backed by mortgages to people with poor or limited credit.

`Fearful Behavior'

``You're getting paid for their concentrated exposure to mortgage risk,'' CreditSight's Hendler said. ``A lot of investors are trying to gauge subprime risk and how it affects their direct exposures. There is a lot of negative, fearful behavior.''

Credit-default swaps tied to $10 million in bonds of Goldman Sachs, the world's most profitable securities firm, rose to a high of $125,000 yesterday, according to Phoenix Partners. The default swaps traded at $69,000 today, Phoenix data show.

``Fundamental credit research does not mean anything at all in this environment,'' said Scott MacDonald, director of research at Aladdin Capital Management in Stamford, Connecticut. ``People are just trying to get out of the way.''

USD Volatility

2007-08-02T10:52:00.000+07:00

US Dollar: Volatility Continues to Rise as Equities See another Roller Coaster Ride
August is typically a month where most people expect quiet summer ranges. However this year, even those who have the luxury of enjoying the entire month off may not be sitting pretty. Volatility has rocked the markets and no asset has been spared including stocks, bonds and oil prices. The Dow went from being up close to 100 points to down over 70 before settling back up 150 points. Oil prices also hit fresh all time highs before reversing sharply. This rollercoaster price action pushed the Chicago Board Options Exchanges’ market volatility index or VIX to a 1 year high today. Although it later retraced, the last time we saw the VIX at that level was back in 2006, which was also when we saw the biggest case of carry trade liquidation in 20 years. The drawdown in carry trades at the time was 13 percent, double what we have seen so far. There is no real explanation for the late afternoon recovery in US equities. Instead, hedge funds have reported more losses. Bear Stearns announced today that they have blocked withdrawals from a third hedge fund and there were also reports that Caxton Associates was being forced to cut exposure due to margin calls from JPMorgan Chase and Goldman Sachs. As for economic data, ADP reported much weaker private sector employment, Challenger reported more layoffs while manufacturing growth slowed nationally in the month of July. Even though the ADP number was quite bad, they overshot private sector employment by 50k last month, which suggests that the drop in July could simply be a reversal. The one piece of good news was the rise in pending home sales. After falling by 3.7 percent in May, sales increased by 5 percent to a 3 year high. Unfortunately sales were still below year ago levels and was offset by the fact that mortgage approvals hit a 5 month low, indicating that the housing market has yet to stabilize. There were also rumors today that Beazer homes may have to report bankruptcy. Although denied, we would not be surprised if bankruptcies become the trend. In the meantime, any rebound in the Dow and carry trades will probably have a difficult time recovering even half of its recent losses.

British Pound Rallies into BoE Rate Decision
The Bank of England is expected to leave interest rates on hold tomorrow, but the rally in the British pound over the past few days suggests that some traders may be holding out for a surprise move. Compared to the rest of the world, the UK economy is certainly standing on stronger footing. Today, manufacturing PMI surged to a 3 year high, which comes in sharp contrast to the deterioration in the US ISM index. Output prices hit the highest level in 15 years, indicating that inflation is still a big concern while employment rose to a 3 year high. Even if they do not raise rates, this suggests that Bank of England Governor King will continue to hold onto his hawkish bias when he delivers their Quarterly Inflation report next week.

ECB: No Surprise Press Conference Expected
Despite the volatility in the rest of the foreign exchange market, the Euro traded in a tight range. Slower manufacturing sector growth in Germany and France did not stop the final Eurozone PMI numbers from coming out stronger than expected. This however should have little impact on the ECB’s interest rate decision tomorrow. They are expected to leave rates unchanged at 4.00 percent. There is a slim chance that the central bank could hold a surprise press conference but given the volatility in the global equity markets, we think that this is extremely unlikely. However if they do, this means that inflation is such a big concern that they cannot afford to relax. It would also signal that they fully plan on raising interest rates when they return from their holidays in September. Alternatively, if they do not hold a press conference, then that could mean another rate hike will not come until October.

Canadian, Australian, New Zealand Dollars Holds Onto Gains
The Canadian, Australian and New Zealand dollars all rebounded strongly today. The CAD rallied throughout the European and US trading session despite the reversal in oil prices. Most of this movement was related to flow since there was no economic data released and comments from Finance Minister Flaherty last night was bearish. He said Canada was seeing a little spill over from the US sub-prime mortgage crisis. The Australian and New Zealand dollars are also stronger thanks to the sharp increase in Australian retail sales last month and a nice rise in the manufacturing PMI index. Originally expected to increase by 1.0 percent, sales rose 1.4 percent. The Australian trade deficit however came under the weight of the stronger Aussie as exports decreased while imports increased. There are no further releases from Canada, Australia, and New Zealand until Friday.

Short Term Reversal in the Yen Crosses
The Yen crosses reversed sharply on the back of the rebound in the Dow. The biggest winners were CAD/JPY, NZD/JPY and AUD/JPY. The long wicks on each of the yen crosses suggest that we could see a further rebound over the next 24 hours especially since the Dow found support today at the same level that it did back in June, which makes this a potential triple bottom. Carry trades thrive in a low volatility environment. Although the VIX hit a 1 year high intraday, it closed up marginally. Bottom pickers need to be careful however since intraday surprises in the Dow have become the norm. All it takes is another major blowup by a hedge fund or mortgage lender and a technically sound scenario could become completely invalidated. Keep watching the Dow in the meantime since the Yen crosses are moving in lockstep with the equity index. For a clue on how the US market could behave, watch Asian stocks tonight.

READ DETAILED

British Poun Rallies

2007-08-02T10:37:00.000+07:00

British Pound Rallies into BoE Rate Decision

The Bank of England is expected to leave interest rates on hold tomorrow, but the rally in the British pound over the past few days suggests that some traders may be holding out for a surprise move. Compared to the rest of the world, the UK economy is certainly standing on stronger footing.

Today, manufacturing PMI surged to a 3 year high, which comes in sharp contrast to the deterioration in the US ISM index. Output prices hit the highest level in 15 years, indicating that inflation is still a big concern while employment rose to a 3 year high. Even if they do not raise rates, this suggests that Bank of England Governor King will continue to hold onto his hawkish bias when he delivers their Quarterly Inflation report next week.

US Dollar Mixed

2007-08-02T10:35:00.000+07:00

Forex - US dollar mixed early in Asian session as new leads awaited

SYDNEY (Thomson Financial) - The US dollar was softer against the yen but firmer against the euro early in Asian trading hours Thursday as financial markets around the world remained focussed on the sub-prime mortgage problems in the US, despite the mild rebound on Wall St Wednesday.

The mixed messages from economic data in the US and Europe are leaving traders with little alternative but to sit on the sidelines to wait for stronger new leads or further fallout from US stockmarkets.

At 10.15 am here (0015 GMT), the dollar was at 118.73 yen, down from 118.96 yen in late trading in New York Wednesday. The euro was at 1.3660 dollars, down from 1.3668 dollars in New York.

The greenback had been hurt in New York trading by the latest US ADP employment survey, which showed a gain of just 48,000 in July, possibly indicating a weaker non-farm payrolls report Friday. Commonwealth Bank senior economist Michael Workman said the ADP report was not a reliable indicator of payrolls in recent months and did not include government employment.

The US Institute for Supply Management's manufacturing index fell to 53.8 index points in July from 56.0 in June. Analysts said the survey did not alter the prospect of moderate expansion continuing in the US manufacturing sector.

US pending home sales jumped 5.0 percent in July, the market having expected a drop of 0.5 percent, following the fall of 3.7 percent in June.

'It was the first month in four to record positive growth and provided a welcome break from the continued run of excruciatingly weak US housing data of late, amid ongoing bad news on the sub-prime front,' Workman said.

'The July upside in pending sales signals the prospect of a rebound in existing home sales in July after three consecutive monthly falls.'

Comments by US Treasury Secretary Henry Paulson also supported the greenback. He said the US domestic economy was strong enough to weather the recent sell-offs in financial markets.

Look At This Pattern

2007-08-02T10:16:00.001+07:00

Look at this picture, what will happen??
Just wait and see......

have a nice trade....

Sterlling This Morning

2007-08-02T10:13:00.001+07:00

Open New Buy at 2.0294

This Morning GbpJpy

2007-08-02T10:04:00.000+07:00

Add New Position Buy at 240.94.
Open Position:
1. Buy at 240.55
2. Buy at 240.94

2007-08-01T22:57:00.001+07:00

Close Sell position at 2.0296 and open Buy at 2.0298
Result:
1. Sell 2.0296 -10

2007-08-01T22:46:00.000+07:00

Well, after falling down, Sterling rebound because of Good PMI and Bad ADP.
Close Sell at 240.89 and now open Buy at 240.55.
Result:
1. Sell 240.89 +20 Pip

Sterling Rebound

2007-08-01T21:44:00.000+07:00

Pound reverses gains after strong PMI; Focus on waning risk appetite

LONDON (Thomson Financial) - The pound quickly reversed short-lived gains after an unexpectedly strong UK manufacturing PMI report this morning as the market turned its attention back to credit concerns and the recent sudden drop in risk appetite.

The purchasing managers' index on UK manufacturing activity from the Chartered Institute of Purchasing and Supply jumped to a three-year high of 55.7 in July from 54.7 in June, revised up from the previous estimate of 54.3.

The reading was way above the consensus forecast of analysts polled by Thomson Financial News, who had predicted a fall to 53.8.

The pound initially rose to a high of 2.0238 against the dollar just after the data from 2.0221 but soon fell back, and at 10.10 am was trading at 2.0218 usd. The euro meanwhile was trading at 0.6749 stg, still down from 0.6751 just before the PMI data were released but off an earlier low of 0.6743.

'Cable (sterling/dollar) has failed to elicited any benefit from July's much better-than-expected UK manufacturing sector PMI, due to the fall in risk appetite' shown by the fall in equity markets, said Robert Howard at Thomson IFR Markets.

Nevertheless, the strong survey will put a rise in Bank of England interest rates to 6.00 pct in the autumn firmly back on the cards.

'Not that the bond or the forex markets are used to paying much attention to the data in the current environment, but if anything, today's report could rekindle rate hike speculation,' said Jodie Tiller at CIBC Markets.

How Bad Of ADP??

2007-08-01T21:34:00.000+07:00

Dollar wobbles as ADP report suggests weak US non-farm payrolls

LONDON (Thomson Financial) - The dollar had a wobble after indications that the crucial US jobs report due Friday will come in weak.

In data out this afternoon, the ADP national employment report showed US companies added 48,000 jobs in July, far lower than the 100,000 expected by analysts.

The report excludes government jobs, which rose by 22,000 -- suggesting that non farm payrolls due Friday will still fall short of the 135,000 predicted.

The data led some analysts to revise down their forecasts for Friday's headline figure.

'Considering the ADP's 66 pct track in predicting the direction in private payrolls reported by the US Department of Labor, today's disappointing figure causes us to downgrade our forecast for non-farm payrolls to 80,000 from June's 132,000,' said Ashraf Laidi at CMC Markets.

The ADP report dented the dollar which had otherwise been enjoying a decent performance amid safe haven type bids against a backdrop of rising risk aversion across the board.

Sentiment in wider markets dived after reports of more hedge funds in trouble amid the continuing fall-out in US sub-prime mortgages. To make matters worse, American Home Mortgage Investments said that it could not meet debt service obligations. Shares of the company, which makes mortgages and bundles them into securities, plummeted by over 90 pct. The benchmark DJIA index slumped over 100 points overnight.

'The dollar continues to trade well at times of equity market stress,' said Daniel Katzive at UBS.

The yen meanwhile was well off day highs after the rout on stock markets.

The Japanese unit has been benefiting from increased aversion to risk, which in turn led to an unwinding in carry trades, where players take advantage of low interest rates in the second biggest economy to invest where yields are higher, such as New Zealand and Australia.

'When currency traders are closely watching equities, the intra-day correlation between the rising yen and falling equities is playing an increasingly vital role in repricing risk in forex markets,' said Laidi at CMC Markets.

The Australian and Kiwi dollars were among the biggest losers, while the euro and pound also came under pressure. The Swiss franc, another funding currency for carry trades, also enjoyed good gains while the dollar found fresh safe haven type flows.

'High yield/emerging market currencies have, as would be expected, suffered most heavily, with the dollar catching a bid almost by default,' said Steve Pearson at HBOS.

Elsewhere, the pound got a short-lived boost from unexpectedly strong UK manufacturing PMI report.

The purchasing managers' index on UK manufacturing activity from the Chartered Institute of Purchasing and Supply jumped to a three-year high of 55.7 in July from 54.7 in June, revised up from the previous estimate of 54.3.

The reading was way above the consensus forecast of analysts polled by Thomson Financial News, who had predicted a fall to 53.8.

The strong survey will put a rise in Bank of England interest rates to 6.00 pct in the autumn firmly back on the cards.

'Not that the bond or the forex markets are used to paying much attention to the data in the current environment, but if anything, today's report could rekindle rate hike speculation,' said Jodie Tiller at CIBC Markets.

London 1308 GMT London 0810 GMT

USD Dollar: More problem Equal More losses

2007-08-01T16:03:00.000+07:00

US Dollar: More Problems Equals More Losses
The markets are selling off once again as the troubles in the sub-prime sector continue to grow. Yesterday, everyone ignored news that American Home Mortgage (which commands 2.5 percent of the mortgage market) had to delay its dividend but today, the double blow of major losses at Sowood Capital and C-BASS was too much for them to handle. The Dow went from being up 135 points in the early US trading session to down 146 points at the market close. This was a swing of 281 points on an intraday basis. Unsurprisingly, bond yields and carry trades have also sold off while the VIX index resumed its rise, indicating the return of risk aversion. Economic data is also beginning to deteriorate. Aside from consumer confidence, every piece of US economic data released today was weaker than expected. On a growth front, personal income was unchanged in the month of June while spending slowed. In terms of inflation, the market was looking for the monthly core PCE deflator to increase, but instead, it remained unchanged. House prices and construction spending deteriorated as well but the big surprise today was the sharp decline in the Chicago PMI index and the jump in consumer confidence. Despite continued weakness in the US dollar, regionally, growth in the manufacturing sector is beginning to slow. With both the Philly Fed and Chicago PMI index dropping significantly, tomorrow’s national manufacturing index (ISM) will likely follow suit. Do not be too discouraged however as things may actually get better at the end of the week. According to the “Jobs Plentiful less Hard to Get” category in the consumer confidence report and the employment component of the Chicago PMI, non-farm payrolls due out Friday could actually be firm since both increased sharply. Whether or not this will overshadow any further losses in the subprime sector remains to be seen. Contrary to what some people may think, the Fed IS watching the stock market. President Poole hinted today that the central bank is watching the markets closely and will act “in due time if and when evidence accumulates that action is appropriate.” That would involve deterioration in both inflation and employment, which makes keeping an eye on NFPs even more important.

Carry Trades Liquidation: How Bad Can it Get?
Carry trades have sold off significantly over the past few weeks with GBP/JPY being the biggest loser. Having fallen from a high of 251.15 down to its current level of 241, it only took six trading days for the currency pair to erase the 1000 pip rally that was 3 months in the making. NZD/JPY, AUD/JPY and CAD/JPY all suffered the same fate, having each registered over 700 points in losses. As one of the most popular and successful trading strategies over the past few years, the strength of recent losses has caught everyone by surprise. To the dismay of Mrs. Watanabe and anyone still long carry this is not the worse case of carry trade liquidation that we have seen. Between December 2005 and June 2006, our Dynamic Carry Trade basket had a drawdown of as much as 13 percent. From its peak last Monday, the portfolio is down 7 percent. There is still more room to fall before we get to 13 percent, which is the biggest drawdown that the portfolio has seen over the 20 past years. The idea of long carry is breaking down and if the Asian markets finally follow suit, which they haven’t in the past week that could be the trigger for further losses. Last night’s Japanese data was mixed. Labor cash earnings, overall household spending, and the PMI index all weakened, but the jobless rate and housing starts improved. With no more significant Japanese data on the calendar this week, the fate of the Yen will continued to be determined by the movements in the Dow.

British Pound – The Only Currency to Rally against the Dollar
The British pound was the only currency to rally against the US dollar today thanks to the fact that the FTSE saw the biggest gain in 14 months. The rally was triggered by strong earnings and rumors that the UK’s seventh-largest bank could receive a buyout offer from the National Bank of Australia. Merger and acquisition flow has often come to the support of the currency therefore it is not a surprise to see it do so again. Economic data released this morning was mixed. Consumer confidence deteriorated but even though the expectations portion of the CBI Industrial Trades survey dropped for August, the realized component of the report improved modestly. In an environment where the economic outlook for the US is deteriorating quickly, the relative stability of the UK economy and the continual M&A flow will help the British pound outperform the US dollar.

More detail

GBPJPY

2007-08-01T10:08:00.001+07:00

Close Buy GBPJPY yesterday and now open new sell at 240.89.
Result:
1. Buy 241.02 -20 pip

GBP

2007-08-01T09:59:00.000+07:00

Just follow the rule. Close Buy at 2.0306 and now open new sell position at 2.0296.
Result:
1. Buy 2.0306 -15 pip

DEATH BROKER

2007-07-31T21:48:00.001+07:00

Here I repost from other forum.
If You want to open an account or already open an account, always check your broker status.

The news about the NFA shaking up the forex industry by dramatically raising capital requirements has kicked off a lot of speculation. So I gathered everything I have learned about this new NFA proposal and am posting here for your review. As someone who has been burned by a bankrupted forex broker I can tell you it is not a pleasant feeling to watch your funds get sucked into some black hole. So my advice is to stay away from any firm that is not currently meeting the coming $5 million capital requirement. And if you already have money at such a firm, get it out, now. If you don't, you could end up like the poor souls at United Global Markets (UGMFX) who can't get their money out due to an NFA account freeze: http://www.forexfactory.com/showthread.php?t=35197

Who has the Money & Who Doesn't
To find out how much money your broker has goto this link:
http://www.cftc.gov/files/tm/fcm/tmfcmdata0704.pdf

Healthy Forex Firms
Oanda ($44,000,000)
FX Solutions ($20,000,000)
Gain Capital ($20,000,000)
FXCM ($51,000,000)
GFT ($48,000,000)
CMS ($10,000,000)

Dead Firms Walking
One World Capital ($1,105,000)
Velocity4X ($1,587,000)
Direct Forex LLC ($1,523,000)
FiniFX ($1,464,000)
Forex Club ($3,304,000)
GFS Futures & Forex ($3,074,000)
Nations Investments ($1,699,000)
Royal Forex Trading ($1,102,000)
SNC Investments ($1,565,000)
FXDD ($781,000)
I Trade FX (-$3,039,000!!!!! Close to Bankruptcy!!!!)
MB Futures ($3,080,000)
Money Garden ($3,399,844)
United Global Markets (Bankrupt)

Here is the actual NFA proposal to raise capital requirements (below that is the sad email from the CEO of UGMFX stating the firm is going under.) The CFTC is expected to sign off on it this summer. I'll comment further on the proposal in a future posting as it will actually require most firms to have upwards of $10 million in capital when you take into consideration such things as open customer positions and margin levels. In any case, this should be sober reading to anyone who is currently trading at one of the "Dead Firms Walking."

NFA Proposal
The proposals pertain to the minimum adjusted net capital requirement and the concentration charge and set certain requirements for FDMs' internal financial controls.

Minimum Adjusted Net Capital and Concentration Charges

In the past twenty years, there have been nine FCM insolvencies. Since 1990, there have been only two insolvencies by traditional FCMs trading on U.S. exchanges, and no funds in segregated customer accounts were lost in either of those two instances. This is from a population that averages around 250 (over the last 20 years). Even in the Refco matter, the FCM filed for bankruptcy not because customer funds were at risk but, rather, to facilitate the sale of its assets and the transfer of its accounts in connection with the parent company’s insolvency.

The FCM insolvency rate becomes more troubling when FDMs are added to the mix. Of the three bankruptcy or receivership proceedings for insolvency occurring in the last four years, two have involved FDMs (Refco was the third), and they are drawn from the smaller FDM population (averaging around 40). Specifically, in late 2003, an FDM misappropriated almost $2 million of customer funds, which depleted the amount of assets necessary to meet the amounts owed to customers. The Commodity Futures Trading Commission ("CFTC") is still working to try to get back some of the customers’ funds. More recently, NFA took a Member Responsibility Action ("MRA") against an FDM whose liabilities exceeded its assets by over $1 million. The CFTC also brought an emergency action in U.S. District Court, and the Court immediately appointed a receiver who was subsequently able to sell the FDM’s customer accounts. Due to this sale, it appears that the customers were made whole.

This discrepancy between FDMs and FCMs involved in on-exchange transactions is even greater when looking at the number of financial MRAs NFA has issued in the last ten years. During that period, NFA issued twelve MRAs to FCMs for failing to demonstrate compliance with NFA’s financial requirements. Three of these firms were traditional FCMs with an on-exchange business, one was a forex dealer registered as an FCM prior to the advent of the FDM category, and the remaining eight were FDMs.

NFA's concern that one day an FDM might be unable to meet its financial obligations to its customers has heightened as the amount of retail customer funds held by FDMs has increased to over $1 billion. The above described FDM insolvencies have done nothing to abate this concern, particularly with the most recent occurring just months after the $1 million capital requirement became effective. If the receiver had not sold the FDM's accounts, then twice within less than four years customers of FDMs would have lost funds due to an FCM insolvency. Additionally, since March, eight different FDMs have fallen under the early warning requirement of $1.5 million.

One of the reasons for the 2006 increase to the FDM capital requirements was that an FDM’s dealer activities create greater financial risks than the agency transactions involved in traditional exchange-traded futures and options. A second reason is that the need for adequate capital is particularly acute for FDMs since customers trading off-exchange forex have not received a priority under the Bankruptcy Code in the event of a firm’s insolvency. Both of these reasons still exist.

NFA is not alone in recognizing the increased financial risk of acting as a dealer. Congress recognized that acting as a dealer increases financial risk and requires substantially higher capital on the part of the dealer. Pursuant to Section 4c(d)(2)(A) of the Commodity Exchange Act (the "Act") the grantor of a dealer option must maintain at all times a net worth of $5 million. The Commission has likewise recognized the increased financial risk resulting from being a dealer, imposing an adjusted net capital requirement of $2.5 million on leverage transaction merchants ("LTMs").[1]

When the Commission adopted the financial requirements for LTMs in 1984, it noted that the leverage market is "essentially a principals' market" and that the "purchaser of a leverage contract is solely dependent on the LTM for performance on the contract."[2] This is the exact same situation that customers are in when they purchase or sell currencies with an FDM. Further, as with an LTM, an FDM "takes the other side of every [contract] entered into by a [customer]" and the FDM "is the sole guarantor of performance on the [contract]." When trading with an FDM "there is no clearing organization to take the other side of every trade, no FCM guaranty of variation margin to the clearing organization and no clearing organization guaranty fund and assessment power."[3] Due to these factors, the financial requirements for FDMs, like LTMs, must be substantially higher than those for FCMs engaging in agency transactions.

As noted above, the Commission imposed the $2.5 million capital requirement for LTMs in 1984. Based upon the Consumer Price Index, $2.5 million in 1984 dollars would be worth approximately $5 million today. Accordingly, NFA is proposing to raise the minimum adjusted net capital for FDMs to $5 million. An increased capital requirement would result in an FDM having a larger buffer to meet its obligations to its customers. Additionally, an increase in capital requirements for FDMs would ensure that FDMs have a larger financial stake in their forex business.

Mr. Stephen Leahy
Chief Financial Officer
United Global Markets, LLC
20 Park Plaza, Suite 1000
Boston, MA 02116
Tel # (617) 357-5122
sleahy@ugmfx.com

Dear Valued Client:

United Global Markets (UGMFX) has been notified that we are in violation of CFTC Regulation 1.17(a)(4) by our regulatory body, the National Futures Association. We have been notified that we fall below the minimum Adjusted Net Capital requirements of $1,000,000 and therefore may not allow clients to open new positions until we increase our own capital.

To be clear, United Global Markets has more than enough cash assets as compared to our liabilities to our clients. But we do not have $1,000,000 of our own liquid assets which is the NFA’s required minimum.

We are speaking to an institutional partner that has both more than the capital requirements AND shares our philosophy of treating clients fairly. However as with most large financial institutions, they have not been able to due their due diligence on United Global Markets in the short time period since the NFA’s proposed changes to Financial Requirements.

Therefore, in compliance with the NFA-issued notice of violation of CFTC Regulation 1-17(a)(4), our clients may only close open positions and not initiate new positions until further notice. Additionally we may not accept new client accounts or further funds from existing clients.

For those who wish to withdraw funds, please fax or e-mail a Withdrawal Request Form and we will process quickly.

http://www.ugmfx.com/downloads/Withdrawal_funds.pdf

MORE INFORMATION

TRADING PLAN

2007-07-31T16:26:00.000+07:00

WHAT IS TRADING PLAN??

As onces You choose the Forex Market, You should have a trading plan.

What is Trading Plan??
A trading plan is a complete set of rules that covers every aspect of your trading life. Many experts refer to the need to have an ‘edge’ which will tip the balance of probabilities of success in your favour. In itself, a plan is not an edge but, over time, the trader with a plan will fair a lot better than the trader without one. Many amateur traders do not have any sort of plan to trade by, and enter the markets with scant regard to their risk and profit objectives. Suffice to say, comprehensive risk and money management strategies lie at the heart of all good trading plans.

Traders with a plan have the ability to monitor their performance. They can evaluate their progress continually, day-by-day, in a way that is objective and comprehensive. This enables them to trade without emotion and with minimal stress. The trader without a plan is not able to do this and their trading tends to rely upon gut feeling, hunches and tips etc. Trading for them is a nail biting, emotional roller coaster ride of stress that, inevitably, results in financial loss.

Why we must have a trading plan??
Who needs a trading plan? Well, unless you have been a consistently profitable trader over a sufficient length of time to encompass a number of different market conditions,then YOU need a trading plan! If you have achieved this, then this document may not tell you anything you do not already know. However it may still prove useful as a “refresher” course or indeed open your eyes to new aspects of trading that can improve your profitability.

What will a trading plan do??
A trading plan will make the act of trading simpler than it would be if you traded without one. It will limit your opportunity to make bad trades and it will prevent many psychological issues from taking root. It will help you to achieve these things because wherever you are on your trading journey, it will not only act as a roadmap, but also locate your position as well. Most importantly, if your trading is going badly, you will know it is down to one of only two possibilities: either something in the plan is not working or you are not adhering to the plan. If the plan is a good one and it is back tested and paper traded, (or forward tested with a very small amount of money) then the fault is likely to be found in the latter of the two options. But, what if you are losing money whilst trading without a plan? It is virtually impossible to distinguish what you are doing right from what you are doing wrong. You have no way to evaluate your results, therefore the likelihood of being able to diagnose the fault and correct it is small and could take forever. A trading plan is your personal GPS device to locate your position and, if you have made a wrong turn, it provides the means to identify where you went wrong and how to get back on track. You are able to evaluate continually your results and, more importantly - your discipline - in a manner that is objective and comprehensive. This is extremely difficult to do if you do not have a plan.

for more detail read this: TRADING PLAN

Close SELL GBP

2007-07-31T10:50:00.001+07:00

Open Buy at 2.0306 and close all sell position.
Result:
1. Sell 2.0607 300 pip
2. Sell 2.0538 230 pip
3. Sell 2.0490 180 pip
4. Sell 2.0267 -45 pip

Total: 665 pip

So far so good.. let see the next result.

Close All Position

2007-07-31T10:20:00.000+07:00

Today GBP recover from JPY after fall almost 1200 pip last week.
Based on Prince System, Open Buy at 241.02 and close all sell position at this moment.
Result:
Sell:
1. 249.31 830 pip
2. 247.87 680 pip
3. 247.52 650 pip
4. 244.01 298 pip
5. 241.08 -5 pip

Total: 2450 pip

So Far So Good and what next??? Let see....

British Pound Punished

2007-07-31T01:05:00.000+07:00

British Pound Punished on Risk Aversion, Potential for Bounce?

The British Pound saw an extraordinarily volatile week of trade, setting fresh 26-year highs before matching its worst single-week decline since September of 2006. A remarkable carry trade unwind forced traders to liquidate overextended GBP longs across the board, sparking especially noteworthy moves against the oversold Japanese Yen. Economic data was relatively sparse on the week, but fears of global credit tightening led a flight to safety in virtually all global asset classes. Such a dynamic has undoubtedly hurt outlook for the British currency, but it remains to be seen that this unwind will continue through the short term. According to our Technical Currency Analyst Jamie Saettele, the Sterling is due for further decline against the Swiss Franc through coming trade. Outlook for Cable’s performance against the US dollar is similarly pessimistic; the GBPUSD may not see significant support until a test of a year-long trendline near the psychologically significant 2.0000 mark. From a more fundamental standpoint, the British currency will see little boost from economic data through the coming week. A pending Bank of England interest rate decision is highly unlikely to show a rate increase, and the central bank does not release commentary on unchanged policy.

The early going will see little foreseeable event risk on the second-tier GfK and Nationwide Consumer Confidence surveys, but continued volatility across financial markets may nonetheless make for choppy trading. This will almost entirely depend on the performance of risky assets across the world, with Sunday night’s Asian market open to prove especially important for the outlook on the week ahead. Given that the carry trade is inextricably linked to Japan and other regional markets, speculators will likely show their true colors and outlook for high-yielding currencies as soon as they hit their desks at the open. Late tumbles in North American equity markets suggest that the Japanese Nikkei index may open trade substantively lower, but this does not rule out a later rebound on improved appetite for risk. Pending such a turnaround, we could see the British Pound catch some relief against the Japanese Yen and other lower-yielding currencies.

Yen Rises

2007-07-31T01:02:00.001+07:00

Yen Rises as Risk Appetite Falls

On Friday we wrote, “Yen has been the key beneficiary of the this move to risk aversion gaining more than 200 points since yesterday. However, the unit lost some momentum in late Asia trade as USDJPY once again traded above 119.00 figure. Despite the power of the carry trade unwind, the yen is unable to gather even a modicum of support from the fundamentals. Overnight Japanese data was horrid with Retail Trade slipping to -0.4% and CPI continuing to contract. Japanese retail traders have been one of the staunchest sellers of their own currency and they stepped in to buy the dips in USDJPY tonight helping to stabilize the fall.”

Next week the tug of war should persist as the forces of risk aversion will continue to cover their yen shorts and the still potent demand of carry traders who see nothing on the economic horizon to expedite the BOJ glacial pace of monetary tightening will try to buy every dip in the yen crosses . Indeed after last weeks lackluster data chances of an August rate hike have decreased. The market will now focus on the Overall Household spending figures which will be critical to determining the health of the consumer. Expectations are for 0.7% rise. If the number prints in line, the yen may get a boost ob speculation that an August rate may yet take place, but a miss would almost certainly take that scenario off the table. None of this however will assure further yen weakness if the turmoil in global equity markets continues. In a battle between carry trades and risk aversion, the latter has the upper hand. – BS

Dollar Rebound

2007-07-31T00:58:00.000+07:00

Dollar Rebounds As Risk Liquidated Across the Board

It didn’t matter that Existing Homes Sales in US plunged another –3.8% or Durable Good came up short of expectations at 1.4% or that New Homes fared even worse than the existing stock of housing. The theme last week for speculators the world over was liquefy, liquefy, liquefy. As equity markets plunged and commodities corrected, capital came flocking back into the greenback. As we explained on Friday, “The greenback rally appears to be driven by technical factors as many speculative trades from equities to commodities to the carry trade are unwound and those assets are parked in dollars for the time being.”

The fears over the sub-prime problem have finally been realized after last week commentary by County Wide Finance chief executive Angelo Mozilo. He noted that he doesn't expect the U.S. housing market to rebound this year or next. With massive resets of Adjustable Rate mortgages still facing the market and a very pronounced tightening of credit conditions over the past several months, the housing recession is likely to persist and weigh on the overall economy. Therefore while the dollar may continue to benefit from the technical unwind its rally may be short lived if the economy falters further. Fed fund rates have already plunged handicapping a rate cut by December to 5% from the current 5.25%. Should US rates be lower, the dollar could resume its decline as capital will resume its search for higher returns.

The question of whether the Fed will cut or not will depends largely on the state of the growth in the economy. That’s why next weeks data is likely to be scrutinized even more closely than usual as traders look for any clues of a significant slowdown. After two consecutive months of negative spreads between consumer income and spending the market is looking for an improvement. However, should the number print negative again it could put further pressure on the buck, indicating further deterioration of consumer balance sheets. Nevertheless, the true test of the strength of the US economy will come later in the week as all eyes will focus on ISM and NFP data. If that news prints in line showing slow but steady expansion it may pacify the markets for the time being-BS

2007-07-31T00:31:00.000+07:00

Weak Housing Numbers Weight on British Pound
Like the Euro, the British pound has sold off significantly today on the back of liquidation of high yielding assets as well as a broad dollar recovery. House price growth continues to be soft which could be concerning going into next week’s heavy economic calendar. We are expecting more housing market reports as well as money supply, consumer confidence, distributive trades, manufacturing and service sector PMI. Overall the UK economy still remains healthy and the Bank of England could raise rates to 6 percent by the end of the year. The global markets just need to stabilize before these factors come into play once again.

2007-07-30T23:12:00.001+07:00

Carry Trade Unwinding Continues, More Losses in Store
High yielding carry trades continued to perform horribly today with AUD/JPY and NZD/JPY falling another 300 points. The Chicago Board of Trade’s Volatility Index continued to rise and is less than a point shy of its 52 week high. Carry trades only perform well in low volatility environments. The fact that volatility shot up so much so rapidly makes carry trades or basically the desire for yield far less attractive for the risk. Even though USD/JPY and CAD/JPY are stronger, they have hardly put a dent into Thursday’s losses. Japanese data released overnight was mixed with consumer prices falling, but retail spending increasing on an annualized basis. The Nikkei was also down 418 points or 2.3 percent overnight. This seems to matter little for yen traders because they are solely focused on the market’s aversion for risk. If stocks continue to collapse, carry trades will continue to fall. Meanwhile in the week ahead, there is a lot of data on the Japanese calendar including industrial production, the trade balance, household spending, labor cash earnings, and the jobless rate. The market has gone from pricing in a 64 percent chance of an August rate hike to a 45 percent chance.

2007-07-30T16:43:00.000+07:00

Open New Position For GBPUSD at 2.0267
It Couldbe up or down.......
just wait for the result.

Have A nice trade

2007-07-30T16:10:00.000+07:00

After going down in this morning,GBPJPY up to cover the gap. It's look like at 240.60 good area to open short again but I got at 241.08..

Have nice trade

AMAZING PIP

2007-07-30T09:11:00.000+07:00

LOOK AT THE PIC ABOVE!!!!!
WHAT AMAZING SETUP

There are four setup.
1. Sell at 249.31
2. Sell at 247.87
3. Sell at 247.52
4. Sell at 244.01

now runing price at 239.70, so there is 2900 pip made

What AMAZING PIP!!!!!!!

Feel Free To Contact me for more detail.

Have a good trade.

Prince

2007-07-30T00:18:00.000+07:00

This is the last week, there are 3 setup.
1. Sell at 2.0607
2. Sell at 2.0538
3. Sell at 2.0490

and still hold about 860 pip....

if You want to ask about my system, feel free to PM Me....
Good Luck with Your trade

regard Princefx

2007-07-30T00:07:00.000+07:00

Look at the pic above, there are three buy setup.
1. Buy at 2.0515
2. Buy at 2.0540
3. Buy at 2.0576

because there any crosses all of the moving, so all buy are closed at price 2.0607 an reverse open 1 short at 2.0607.
from three buy, there are about 180 pip can be collect.

Prince Trading System

2007-07-29T23:19:00.000+07:00

Prince Trading System

My Trading strategy is based on Exponential Moving Average.
I used 5,6,8,10,21 Exponential Moving Average. Exp.

RULE:

Buy
1. Buy if all that moving crosses up ( 5,6,8,10 croses 21)
2. Buy again in next day when price near the 21 Exponential Moving Average

Sell
1. Sell if all that moving crosses down ( 5,6,8,10 croses 21)
2. Sell again in next day when price near the long moving

Closed buy or sell when the other signal occur.
in some cases, there will be any position because of the price move still go up or down.
Look at the images above, there are 3 entry setup. All position are short still hold and no close yet.

Exp. Moving Average (EMA)

2007-07-29T23:10:00.000+07:00

Now I want to share one of my favorite trading system.
But before that, the basic of this technique is using exponential Moving Average. Here the explain of EMA.

Exp. Moving Average (EMA)

An exponential moving average is another type of moving average. In a simple moving average, the price data has an equal weight in the computation of the average. Also, the oldest price data is removed from the moving average as a new price is added to the computation. The exponential moving average assigns a weight to the futures price data as the average is calculated. Thus, the oldest price data in the exponential moving average is never removed, but it has only a minimal impact on the moving average. This study displays the exponential moving averages as a crossover system. You may select up to three different averages. Generally, the lengths are short, intermediate, and long term. A commonly used system is 4, 9, and 18 intervals. An interval may be in ticks, minutes, days, weeks or months; it is a function of the commodity chart type.

A buy signal occurs when the short and intermediate term averages cross from below to above the longer term average. Conversely, a sell signal is issued when the short and intermediate term averages cross from above to below the longer term average. You can use the same signals with two moving averages, but most market technicians suggest using longer term averages when trading only two exponential moving averages in a crossover system.

Another trading approach is to use the current price concept. If the current commodity price is above the exponential moving averages, you buy. Liquidate that position when the current commodity price crosses below either moving average. For a short position, sell when the current commodity price is below the exponential moving average. Liquidate that position when current commodity price rises above the exponential moving averages.

As you use exponential moving averages, do not confuse them with simple moving averages. An exponential moving average behaves quite differently than a simple moving average. It is a function of the weighting factor or length of the average.

Parameters:

Period1 (4) - the number of bars, or period, used to calculate the first moving average.
Period2 (9) - the number of bars, or period, used to calculate the second moving average.
Period3 (18) - the number of bars, or period, used to calculate the third moving average.

Computation

The formula to calculate an exponential moving average is as follows:

EMAt = EMAt-1 + (k * (Pt - EMAt-1))

EMAt is the exponential moving average for the current period.
EMAt-1 is the exponential moving average for the previous period.
Pt is the price for the current period.
k is the exponential smoothing constant.

FutureSource does not ask you to specify the smoothing constants. It asks you to specify the length of the moving average. You can then determine the smoothing constant from the formula listed below.

If you specify an exponential moving average length of 10, the smoothing constant is 0.18. The formula to determine the smoothing constant is:

k = 2 / (n + 1)

k is the smoothing constant
n is the length of the moving average.

Now, substitute the above values in the formula.

k = 2 / (10 + 1) = 2 / 11 =.1818

Conversely, if you know the smoothing constant, you must derive the length of the moving average. In this example, use a smoothing constant of .125 You can solve the above equation for the value of n, which produces the following formula:

n = (2 / k) - 1

Now, substitute the above values for the equation.

n = (2 /.125) - 1 = 16 - 1 = 15

Please remember that FutureSource always asks for the length of the moving average, not the smoothing constant. If you know the smoothing constant, you use the above formula to determine the length of the moving average. If you set the length of the moving average and want to know the smoothing constant, use the formula to solve for the smoothing constant or k.

Note: There are several variations to the above formula.

Why Forex??

2007-07-29T23:04:00.000+07:00

why is FOREX so popular?

FOREX involves trading currencies of one country for another. FOREX is the largest and most significant business and financial market in the world!

FOREX trading is attractive because it offers unparalleled freedoms. A FOREX trader can live almost anywhere as long as he/she is within reach of the internet.

A FOREX trader can work from home or office, and in some cases, even trade while traveling!

A FOREX trader can usually choose his/her own hours to work since the global foreign exchange market is open 24 hours a day.

A FOREX trader avoids many common headaches associated with running a business because there is NO inventory, NO shipping, NO billing, NO collections, NO employees, NO commuting and NO dress code.

And finally, since FOREX traders can potentially earn a very high income, they enjoy the possibility of never working for someone else again!

Retain 100% of your trading profits
Benefit from superior liquidity
Profit in both rising and falling markets
Trade on your schedule, respond to market changes immediately

FOREX vs. Equities

If you are interested in trading currencies online, you will find that the FOREX market offers several advantages over equities trading.

Lower Transaction Costs

It is much more cost-efficient to trade FOREX in terms of both commissions and transaction fees. FOREX.com charges NO commissions* or fees whatsoever, while still offering traders access to all relevant market information and trading tools. In contrast, commissions for stock trades range from $7.95-$29.95 per trade with online discount brokers up to $100 or more per trade with full service brokers.

Another important point to consider is the width of the bid/ask spread. Regardless of deal size, FOREX dealing spreads are normally 3-4 pips (a pip is .0001 US cents) in the major currencies. In general, the width of the spread in a FOREX transaction is less than 1/10 that of a stock transaction, which could include a .125 (1/8) wide spread.

Trade on Your Schedule

FOREX is a true 24-hour market, which offers a major advantage over equities trading. Whether it's 6pm or 6am, somewhere in the world there are always buyers and sellers actively trading foreign currencies. Traders can always respond to breaking news immediately, and P&L is not affected by after hours earning reports or analyst conference calls.

After hours trading for U.S. equities brings with it several limitations. ECN's (Electronic Communication Networks), also called matching systems, exist to bring together buyers and sellers - when possible. However, there is no guarantee that every trade will be executed, nor at a fair market price. Quite frequently, traders must wait until the market opens the following day in order to receive a tighter spread.

Superior Liquidity

With a daily trading volume that is 50x larger than the New York Stock Exchange, there are always broker/dealers willing to buy or sell currencies in the FX markets. The liquidity of this market, especially that of the major currencies, helps ensure price stability. Traders can almost always open or close a position at a fair market price.

Because of the lower trade volume, investors in the stock market are more vulnerable to liquidity risk, which results in a wider dealing spread or larger price movements in response to any relatively large transaction.

100:1 Leverage

100:1 leverage is commonly available from online FX dealers, which substantially exceeds the common 2:1 margin offered by equity brokers. At 100:1, traders post $1000 margin for a $100,000 position, or 1%.

While certainly not for everyone, the substantial leverage available from online currency trading firms is a powerful, moneymaking tool. Rather than merely loading up on risk as many people incorrectly assume, leverage is essential in the FOREX market. This is because the average daily percentage move of a major currency is less than 1%, whereas a stock can easily have a 10% price move on any given day.

The most effective way to manage the risk associated with margined trading is to diligently follow a disciplined trading style that consistently utilizes stop and limit orders. Devise and adhere to a system where your controls kick in when emotion might otherwise take over.

Profit Potential In Both Rising And Falling Markets

In every open FX position, an investor is long in one currency and short the other. A short position is one in which the trader sells a currency in anticipation that it will depreciate. This means that potential exists in a rising as well as a falling market.

The ability to sell currencies without any limitations is another distinct advantage over equity trading. In the US equity markets, it is much more difficult to establish a short position due to the Zero Uptick rule, which prevents investors from shorting a stock unless the immediately preceding trade was equal to or lower than the price of the short sale.

FOREX vs. Futures

The global foreign exchange market is the largest, most active market in the world. Trading in the FOREX markets takes place nearly round the clock with $1.9 trillion changing hands every day. It is the main event.

The benefits of FOREX over currency futures trading are considerable. The dissimilarities between the two instruments range from philosophical realities such as the history of each, their target audience, and their relevance in the modern FOREX markets, to more tangible issues such as transactions fees, margin requirements, access to liquidity, ease of use and the technical and educational support offered by providers of each service. These differences are outlined below:

More Volume = Better Liquidity. Daily currency futures volume on the CME is just over 2% of the volume seen every day in the FOREX markets. Incomparable liquidity is one of many advantages that FOREX markets hold over currency futures. Truth be told, this is old news. Any currency professional can tell you that cash has been king since the dawn of the modern currency markets in the early 1970's. The real news is that individual traders from every risk profile now have full access to the opportunities available in the FOREX markets.
FOREX markets offer tighter bid to offer spreads than currency futures markets. By inverting the futures price to compare it to cash, you can readily see that in the USD/CHF example above, inverting the futures dealing price of .5894 - .5897 results in a cash price of 1.6958 - 1.6966, 8 pips vs. the 5-pip spread available in the cash markets.
FOREX markets offer higher leverage and lower margin rates than those found in currency futures trading. When trading currency futures, traders have one margin rate for "day" trades and another for "overnight" positions. These margin rates can vary depending on transaction size. When trading cash markets, you have access to the same margin rates day and night. Of course, trading on margin magnifies both your profits AND your losses.
FOREX markets utilize easily understood and universally used terms and price quotes. Currency futures quotes are inversions of the cash price. For example, if the cash price for USD/CHF is 1.7100/1.7105, the futures equivalent is .5894/ .5897; a methodology followed only in the confines of futures trading.

Currency futures prices have the added complication of including a forward FOREX component that takes into account a time factor, interest rates and the interest differentials between various currencies. The FOREX markets require no such adjustments, mathematical manipulation or consideration for the interest rate component of futures contracts.
FOREX trades executed through FOREX.com are commission free*. Currency futures have the added baggage of trading commissions, exchange fees and clearing fees. These fees can add up quickly and seriously eat into a trader's profits.

In contrast, currency futures are a small part of a much larger market; one that has undergone historical changes over the last decade.

Currency futures contracts (called IMM contracts or international monetary market futures) were created at the Chicago Mercantile Exchange in 1972.
These contracts were created for the market professionals, who at that time, accounted for 99% of the volume generated in the currency markets.
While some intrepid individuals did speculate in currency futures, highly trained specialists dominated the pits.
Rather than becoming a hub for global currency transactions, currency futures became more of a sideshow (relative to the cash markets) for hedgers and arbitragers on the prowl for small, momentary anomalies between cash and futures currency prices.
In what appears to be a permanent rather than cyclical change, fewer and fewer of these arbitrage windows are opening these days. And, when they do, they are immediately slammed shut by a swarm of professional dealers.

These changes have significantly reduced the number of currency futures professionals, closed the window further on FOREX vs. futures arbitrage opportunities and so far, have paved the way to more orderly markets. And while a more level playing field is poison to the P&L of a currency futures trader, it's been the pathway out of the maze for individuals trading in the FOREX markets.

The Benefits of FOREX Trading

No Short Selling Restrictions
FOREX trading always involves buying one currency and selling another, so traders can easily trade in a rising or falling market. There is no Zero Uptick rule or any other restriction against shorting a currency.

At $1.9 Trillion Per Day, FOREX is the Largest, Most Liquid Market in the World
The sheer volume of FOREX facilitates price stability, with less slippage. What's more, almost 90% of all currency transactions involve the 7 major currency pairs. As a result, these currencies exhibit smooth trends and enjoy the tightest dealing spreads and highest level of liquidity.

Trade on Your Schedule; Respond to Changes in the Market Immediately
FOREX is a true 24-hour market, open continuously from 5:00pm ET on Sunday to 4:30 pm on Friday. With three distinct trading sessions in the US, Europe and Asia, you can trade on your own schedule and respond to breaking news immediately.

Keep 100% of Your Trading Profits
FOREX.com charges NO commissions or fees*, while still offering free access to real-time quotes, news, charts, research, and more. Also, dealing spreads as low as 3 pips (.0003) are available in currency trading. Even at a penny ($.01), the bid/ask on a stock trade is 30x wider, in addition to the brokerage commission.

Control Up to 200:1 Leverage
With more buying power, you can increase your total return on investment with less cash outlay. For example, with $1,000 cash in a margin account that allows 200:1 leverage (.5%), you can control up to $200,000 in notional value. Of course, trading on margin magnifies both your profits and your losses.

Introduction to the FOREX Market

The Foreign Exchange market, also referred to as the "FOREX" or "FX" market is the largest financial market in the world, with a daily average turnover of US$1.9 trillion — 30 times larger than the combined volume of all U.S. equity markets.

"Foreign Exchange" is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY).

There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies and governments that buy or sell products and services in a foreign country or must convert profits made in foreign currencies into their domestic currency. The other 95% is trading for profit, or speculation.

For speculators, the best trading opportunities are with the most commonly traded (and therefore most liquid) currencies, called "the Majors." Today, more than 85% of all daily transactions involve trading of the Majors, which include the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.

A true 24-hour market, FOREX trading begins each day in Sydney, and moves around the globe as the business day begins in each financial center, first to Tokyo, London, and New York. Unlike any other financial market, investors can respond to currency fluctuations caused by economic, social and political events at the time they occur - day or night.

The FX market is considered an Over The Counter (OTC) or 'interbank' market, due to the fact that transactions are conducted between two counterparts over the telephone or via an electronic network. Trading is not centralized on an exchange, as with the stock and futures markets.

What is Forex

2007-07-29T22:42:00.000+07:00

FOREX HISTORY

Forex dates back to ancient times, when traders first began exchanging coins from different countries and groups. However, the foreign exchange industry itself is the newest of the financial markets.

In the last hundred years, the foreign exchange market has undergone some dramatic transformations. In 1944, the postwar foreign exchange system was established as a result of a multinational conference held at Bretton Woods, New Hampshire. That system remained intact until the early 1970’s.

At this conference, representatives from 45 nations met together to discuss the future exchange system. The conference resulted in the formation of the International Monetary Fund (IMF). It also produced an agreement that fixed currencies in an exchange-rate system would tolerate one percent currency fluctuations to gold values, or to the U.S. Dollar, which was established previously as the “gold standard.” The system of connecting the currency’s value to gold or the U.S. Dollar was called pegging.

In 1967, a Chicago bank refused a college professor by the name of Milton Friedman a loan in pound sterling because he had intended to use the funds to short the British currency. Friedman, who had perceived sterling to be priced too high against the dollar, wanted to sell the currency, then later buy it back to repay the bank after the currency declined, thus pocketing a quick profit. The bank's refusal to grant the loan was due to the Bretton Woods Agreement, established twenty years earlier, which fixed national currencies against the dollar, and set the dollar at a rate of $35 per ounce of gold.

The history of the FOREX Market as it exists today begins before 1971 when the FOREX market departed from The Bretton Woods Accord to reflect a radical change in Universal fixed exchange rates. After World War Two, the Bretton Woods Accord was introduced to the FOREX market to stabilize the devastated world economy.

The Agreement was finally abandoned in 1971 and the US dollar would no longer be convertible into gold.

After the Bretton Woods Accord came the Smithsonian agreement in December of 1971. This agreement was similar to the Bretton Woods Accord but allowed for greater fluctuation band for the currencies. In 1972, the European community tried to move away from their dependency on the dollar. The European Joint Float was established by West Germany, France, Italy, the Netherlands, Belgium and Luxemburg. This agreement was similar to the Bretton Woods Accord, but allowed a greater range of fluctuation in the currency values.

Both agreements made mistakes similar to the Bretton Woods Accord and, by 1973, collapsed. The collapse of the Smithsonian agreement and the European Joint Float in 1973 signified the official switch to the free-floating system. This occurred by default as there were no new agreements to take their place. Governments were now free to peg their currencies, semi-peg or allow them to freely float. In 1978, the free-floating system was officially mandated.

Europe tried, in a final effort to gain independence from the dollar, by creating the European Monetary System in July of 1978. This, like all of the earlier agreements, failed in 1993.

Important milestones in the history of Forex

The Gold Standard

Money was invented when barter was no longer an adequate means of trade, seeing that actual goods could quickly lose value, were subject to value discrepancies, and could many times not easily be divided (Morris, 4). Money, on the other hand, could function as a medium of exchange, a unit of accounting, and a store of value (Ethier, 402). The original form of money was typically something that had value in itself, such a precious metal. The metal itself, usually gold or silver (Eichengreen, 9), was valuable, both because of its scarcity and its inherent usefulness.

By the nineteenth century, both coins and paper money were in popular use. Under the famous "Gold Standard," currencies were not directly valued in terms of each other. Instead, each currency had a certain, the rate at which the currency could be exchanged for gold. This in turn produced an effective exchange rate between any two currencies.

In 1900, for example, the mint parity for the U.S. dollar was $20.67, while that of the British pound was 3 pounds, 17 shillings, 10½ pence. To exchange U.S. dollars for British pounds, one would divide $20.67 by 3.17.10½, which produces $4.86 per pound after adjusting for the fact that U.S. gold coins had a somewhat greater gold content than did British coins (Aliber, 34).

Paper money could then be used in place of the precious metal. A citizen could carry paper money while the central bank would, in which more money left the country than came in, there would be less U.S. dollars in circulation.

Because central banks have large control over the interest rates, the rates at which banks borrow and lend money, they soon found that they did not have to passively wait for gold flows to be restored. In a trade deficit scenario, with gold supplies leaving the country, a central bank could raise interest rates which would make domestic savings more attractive.

Floating Exchanges Systems

Under a floating exchange system, on the other hand, currencies are not valued in terms of gold - they are valued in terms of other currencies.

In the early 20th century, two world wars brought about social upheavals, rapid inflation, and the destruction of the setting which made the gold standard operable. Between the wars, many countries elected to temporarily abandon the gold standard and opt for floating exchange systems until their economies returned to the point at which in light of the fact that, if a currency drifted too far outside its band and could not be contained by central bank intervention, the country was allowed to adjust its peg by setting a new exchange price.

There were three aspects of the system that were in conflict: constant exchange rates, autonomous domestic economic policies, and increasing international capital mobility. The existence of Bretton Woods did not stop states from using domestic economic policy (manipulating interest rates, for example, as under the gold standard) for domestic reasons, whatever their long-term effects on the exchange rate. Capital mobility simply makes the effects of domestic economic policies on the exchange rate happen sooner than they otherwise would.

With the instability brought about by the Vietnam War, central banks finally began to convert their dollars to gold. To halt the loss of gold, in 1971 Nixon "closed the gold window" by refusing to provide gold to foreign dollar holders (Eichengreen, 133). In 1974 the Bretton Woods System of adjustable pegs was officially abandoned and the Jamaica Agreement basically allowed the presence of any exchange system a country chooses (Aliber, 52).

Exchange Systems Today

There are several exchange systems a country can currently choose from. A free floating exchange system, as mentioned earlier, would simply allow the market to determine the price of a currency. Trade surpluses and deficits, domestic investments versus foreign investments, and domestic taxation policies, to name a few factors affecting the exchange rate, would all be allowed to occur whatever their effects on the currency.

A pegged exchange rate, on the other hand, would function exactly as the gold standard did a century beforehand, except that a country would its currency to the price of another currency, usually the U.S. dollar. If there is a balance of payments deficit, for example the central bank will buy the appropriate amount of the domestic currency in exchange for its foreign currency reserves, thereby returning the price of the currency to its peg but at the same time depleting the size of its reserves.

Some countries practice by, while remaining officially free-floating, sometimes intervening in their currency rates in order to suite domestic interests - increasing (revaluing) their exchange rate before an oil shipment, for example (Luca, 17). Other countries, for example Brazil before its turn to a free floating system, peg their currencies to the U.S. dollar or some other currency but allow the rate to float within a certain band similar to the Bretton Woods adjustable peg system.

The FOREX Market, often considered to be the playground of governmental institutions operating under the agency of central banks, expanded its horizons in recent years to include corporations, hedge funds, and speculators and most recently with the dot com boom and the expansion of the world wide web, now the private investors have been afforded the lucrative opportunity to be a part of the action.

The appeal of The FOREX Market is one of non-stop, twenty four hour a day trading for the five business days of the week. The first tentative steps towards a global economy have created a fast moving liquid market facilitating a wide variety of transaction options. Combine this with the ability to make money in both winning and losing markets and you will see why The FOREX Market is considered by some to be the fastest developing most lucrative business opportunity open to the savvy investor who has the skill, intelligence, acumen and backing to create substantial profits.

The FOREX Market provides a number of ways for investors to get in on the global high stakes action. From the spot market to spread betting, options, contracts for difference and futures, these are just some of the ways FOREX can turn a modest portfolio with moderate potential, into a heavy hitting enterprise totaling far in excess of what it once was. The BIS or Bank of International Settlements estimated in a recent survey that over $1,200,000,000.00 is exchanged everyday on The FOREX Market. Currently industry analysts think the market is not living up to its 1978 potential of $1,490,000,000.00 and still view this as an attainable goal for the FOREX Market of the future.