FX Island

• Euro setbacks accelerate after hourly double top triggers
• Dollar/Yen pressing back to highs but expected to be well offered above 95.00
• Cable still attempting to carve right shoulder of major H&S top
• Dollar/Swiss basing structure starting to take form of potential double bottom

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Many of the dollar-denominated majors have developed congestive patterns over the past six to eight weeks. This is no doubt a product largely derived from the US dollar itself; but it is further a situation that is mirrored in most currency pairs that have a tangible link to risk appetite.

7-17-09Range-01-EURUSD

Why Would EURUSD Hold a Range?

• Levels to Watch:

-Range Top:       1.4165 (Trend, Fib, Range High)

-Range Bottom: 1.3750 (Pivot, Fibs)

• Underlying fundamental and scheduled event risk is significant for EURUSD. Like nearly every other currency pair in the market, this most liquid cross will no doubt take its cue from shifts in risk appetite through earnings or any financial implosions should it catalyze fear or greed among speculators. However, aside from this unforeseeable risk, there is still plenty of data on tap; but little of it guarantees volatility. The euro will mark hold the bulk of the risk.

• Similar to patterns seen with a few of the other majors (USDCHF, AUDUSD, NZDUSD), EURUSD has produced a clear and consistent range formation since the beginning of June. This sideways price action follows a medium-term bullish bias, but resistance has a larger trendline as well as a major 50% Fib and a series of daily highs.

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You don’t have to be a daily trader to take advantage of the forex market – every time you travel overseas and exchange your money into a foreign currency, you are participating in the foreign exchange (forex) market. According to the 2007 Triennial Central Bank Survey of Foreign Exchange and Derivative Market Activity conducted by the Bank for International Settlements, the forex market generated $3.2 trillion dollars worth of transactions each day. This makes the forex market the quiet giant of finance, dwarfing over all other capital markets in its world.

Despite this market’s overwhelming size, when it comes to trading currencies, the concepts are simple. Let’s take a look at some of the basic concepts that all forex investors need to understand.

Eight Majors
Unlike the stock market, where investors have thousands of stocks to choose from, in the currency market, you only need to follow eight major economies and then determine which will provide the best undervalued or overvalued opportunities. These following eight countries make up the majority of trade in the currency market:

1. United States
2. Eurozone (the ones to watch are Germany, France, Italy and Spain)
3. Japan
4. United Kingdom
5. Switzerland
6. Canada
7. Australia
8. New Zealand

These economies have the largest and most sophisticated financial markets in the world. By strictly focusing on these eight countries, we can take advantage of earning interest income on the most credit worthy and liquid instruments in the financial markets. more…

Those trading in the foreign-exchange market (forex) rely on the same two basic forms of analysis that are used in the stock market: fundamental analysis and technical analysis. The uses of technical analysis in forex are much the same: price is assumed to reflect all news, and the charts are the objects of analysis. But unlike companies, countries have no balance sheets, so how can fundamental analysis be conducted on a currency? more…

As unemployment soared in January, four states’ jobless rates climbed higher than 10%, according to federal data released Wednesday. In January, 49 states and the District of Columbia recorded month-over-month unemployment rate increases, the Labor Department reported. All 50 states and the District of Columbia had higher rates than the previous year. more…

LONDON (AP) — The pound slid to a six-week low against the dollar Monday after the British government’s weekend announcement that it will take a majority stake in Lloyds Banking Group PLC in return for insuring up to 260 billion pounds of assets at the ailing bank. By midday London time, the pound was down 1.8 percent at $1.3832, having earlier fallen to $1.3776, the lowest level since late January’s $1.3501 — itself the lowest level in nearly 24 years. more…

by KBC Market Research Desk
On Tuesday, the euro extended its rise against the dollar. The trend was already in place since early last week and in the absence of key economic data the move was extended. The ECB (Noyer) still being rather optimist on the European economy going into 2008 might have been slightly euro supportive and this also was the case for the positive market sentiment that reigned on the stock markets, at least in the early hours of trading. However, later in US trading the euro (and stocks) clearly lost momentum and EUR/USD closed the day at 1.4725, still a decent gain compared to the 1.4657 close on Monday. more…