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October 2010 Volume 7, No. 10
GOLD, INFLATION, and the dollar p. 12 CRUDE OIL and the majors p. 24 THE FX INDUSTRY’S new leverage landscape p. 30
IMPROVING CANDLESTICK patterns with volume p. 16 CATCHING MOVES EARLY: Trading trend transitions p. 20 WHAT’S NEXT FOR the struggling pound p. 6
Contributors ...................................................... 4 Global Markets Pound still faces strong headwinds .........6
The UK’s austerity measures might mean one thing for the British economy — and currency — in the long term, and quite another in the near term. By Currency Trader Staff
Forex News Forex world adjusts to leverage “compromise” ......................... 30 Key Concepts ............................................ 30 Currency Futures Snapshot ................ 31 International Markets ............................ 32
Numbers from the global forex, stock, and interest-rate markets.
On the Money Axes to grind ............................................ 12
Is gold fever causing unexpected symptoms in other markets, including the dollar? By Barbara Rockefeller
Global Economic Calendar ........................ 35
Important dates for currency traders.
Events .......................................................36 Trading Strategies Validating candlestick patterns with tick volume ....................................... 16
A “double-doji” breakout strategy gets a boost from a tick-volume filter. By Daniel Fernandez Conferences, seminars, and other events.
Trend transitions in forex ....................... 20
Transitional patterns offer earlier entry into developing price moves than typical trend-following techniques. By Dave Landry
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Advanced Strategies Crude oil and major currencies ................ 24
Is the perceived link between crude oil and “the dollar” a short-term artifact or a long-term fundamental relationship? By Howard L. Simons
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2 October 2010 • CURRENCY TRADER
A publication of Active Trader ® For all subscriber services: www. He has been publishing daily web-based commentary on technical trading since 1997. He is author of Dave Landry on Swing Trading (2000). 2000).blogspot.com Editor-in-chief: Mark Etzkorn metzkorn@currencytradermag. Trading and investing carry a high level of risk. 2001). and consultant at Citibank and other financial institutions. Fernandez is a graduate of the National University of Colombia.CONTRIBUTORS q Howard Simons is president of Rosewood Trading Inc. Dave Landry’s 10 Best Swing Trading Patterns & Strategies (2003). q Dave Landry has been actively trading the markets since the early 90s. He holds a bachelor’s in computer science and has an MBA. ad sales: Bob Dorman email@example.com). Issue 10. published in Japan in 1999. has written articles for several publications including Active Trader and Traders Journal-Singapore. In 1995 he founded Sentive Trading.com Volume 7. All rights reserved. and economics who has been focusing on the analysis of forex trading strategies. He was a registered Commodity Trading Advisor (CTA) from 1995 to 2009.co. He is a member of the American Association of Professional Technical Analysts.” which also includes reviews of commercial and free trading systems and general interest articles on forex trading (http://fxreviews. Chris Peters Editorial assistant and webmaster: Kesha Green kgreen@currencytradermag. Copyright © 2010 TechInfo.com). statistics. strategy or approach. He can be reached at dfernandezp@unal. For the past two years he has published his research and opinions on his blog “Reviewing Everything Forex.com Classified ad sales: Mark Seger seger@currencytradermag. Italian. Inc.. concentrating in computational chemistry. His books have been translated into many languages including Russian. Illinois 60047. Inc. q Daniel Fernandez is an active trader with a strong interest in calculus. It is not meant to recommend. 24/7 Trading Around the Clock. A book tentatively titled How to Trade FX is in the works. Around the World (John Wiley & Sons. trader. Lake Zurich.com) is an international economist with a focus on foreign exchange. He has spoken at trading conferences both nationally and internationally. She has worked as a forecaster.com Managing editor: Molly Goad firstname.lastname@example.org President: Phil Dorman pdorman@currencytradermag. and The Layman’s Guide to Trading Stocks (2010). and Chinese (pending 2010). 4 October 2010 • CURRENCY TRADER . promote or in any way imply the effectiveness of any trading system. LLC — a trading and consulting firm (www. Information in this publication may not be stored or reproduced in any form without written permission from the publisher. Past performance does not guarantee future results. Currency Trader is published monthly by TechInfo. where he majored in chemistry. Rockefeller is the author of Technical Analysis for Dummies (For Dummies. PO box 487.com Contributing editor: Howard Simons Contributing writers: Barbara Rockefeller. and currently publishes two daily reports on foreign exchange.rts-forex. Rockefeller is on the board of directors of a large European hedge fund. particularly algorithmic trading and the mathematical evaluation of long-term system profitability.davelandry. Traders are advised to do their own research and testing to determine the validity of a trading idea. He writes and speaks frequently on a wide range of economic and financial market issues.currencytradermag.com Publisher. The information in Currency Trader magazine is intended for educational purposes only. q Barbara Rockefeller (www. and How to Invest Internationally. The Global Trader (John Wiley & Sons. Marc Chandler. French. 2004). and a strategist for Bianco Research. He has made several television appearances.
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S. and a 1-percent rate for 2011.77-percent loss vs. a 9. the U. Despite some recent bullish economic numbers. the Euro. The only major currency it has strengthened against has been the Euro (bottom). the British pound has lost ground vs. the Canadian dollar. Enam Ahmed.08 percent vs. director of London economic consul6 October 2010 • CURRENCY TRADER . perhaps thanks to the potenSource: TradeStation tially bleaker fundamentals plaguing the Eurozone. And with new fiscal austerity measures on the horizon in the UK. Figure 1 shows are much more sluggish. Indeed. and quite another in the near term. 31. signs are already emerging that UK economic growth is losing momentum and could stagnate even further amid the tax hikes and budget cuts slated for the new year. but nonetheless a recovery from the pound (EUR/GBP) pair.97-percent decline vs. to repeat later in the year. the largLike many economists.9-percent annualized rate.5 to 1. a 4. 2010. senior economist er fundamental picture is uncertain. dollar. the yen. a 7. dollar pair (GBP/USD) and the Euro/ only modest growth. and The British pound has suffered against most currencies. Forecasts for 2010 overall GDP Stephen Webster.” he warns. with the key exception of the Euro. in the area of 1.6 percent — the pound/U.72-percent loss vs. some market watchers are skeptical economic growth can continue to gain traction. the Swiss franc.5-percent GDP growth for at a 4. most major currencies in the first nine months of the year. UK’s 4. the pound did manage to gain 2.78-percent decline vs. the British pound lost ground against most major currencies: a 12. “The UK’s recovery bounce was driven by inventory building and is unlikely will face strong headwinds in coming quarters. 2009 and Sept. a 3. The with Moody’s Analytics is cautious about the UK’s ecoUK’s second-quarter gross domestic product (GDP) surged nomic prospects. to say the least.S. BY CURRENCY TRADER STAFF FIGURE 1: POUND VS.85-percent loss vs. (top). but economists say this 2010.GLOBAL MARKETS Pound still faces strong headwinds The UK’s austerity measures might mean one thing for the British economy — and currency — in the long term. Between Dec. including the dollar a 2.9-percent GDP contraction in 2009. forecasting 1. However. 30.88-percent decline against the Aussie dollar. DOLLAR AND EURO Weighed down by a variety of challenging fundamentals. the New Zealand dollar.
it is firmly in agreement with the continent that it is time to control spending. While the bulk of the fiscal consolidation will come from spending cuts. not to mention the British pound. There are some arguments for more stimuli to stimulate growth in the years ahead. rather than engage in the renewed stimulus efforts favored by the U. According to the details of the report.” Ahmed says. global economist at Wells Fargo Securities. first announced in June as part of the UK government’s austerity measures. Growth is key to long-run deficit reduction. you undermine growth and revenues drop. although 2011 could well get off to a weak start. Some market watchers are pessimistic about the impact the austerity measures will have on economic growth prospects.5 percent to 20 percent and the introduction of a levy on banks.” he says.. That. “The impending increase in VAT and [the rise in] wheat 7 . “In 2009 the fiscal deficit was over 11 percent of GDP — almost four times the EU 3 percent of GDP threshold that is considered to be consistent with sustainability of public finances. are expected to help trim the current UK budget deficit. The VAT (value added tax) is set to increase in January. general government gross debt is projected to peak at 86 percent of GDP in 2012-13 and fall to about 80 percent of GDP by 2015-16. chief currency strategist at Forex. The moves reflect the cross-Atlantic difference of opinion regarding the benefits of more economic stimulus vs.S. 20 Wells Fargo FX Express Currency Update research note: “The government’s budget outlined an aggressive deficit CURRENCY TRADER • October 2010 Austerity measures The VAT increase.” he says. where economists continue to voice concerns about potential deflation. are expected to help trim the current UK budget deficit. Nevertheless.” Impact on growth The January VAT increase. Although Britain is often at odds with the rest of Europe on policy. the UK is already battling a bout of inflation. Brian Dolan. will bump the tax from 17. albeit from a low base.” Wells Fargo Bank Currency Strategist Vassili Serebriakov wrote about the details of the austerity plan in the Aug. and stresses the singular nature of the Q2 economic numbers.” The inflation issue Unlike the U. Webster says there are mounting upside risks to CPI. along with cuts in government spending. Dolan notes that between a halfmillion and a million government jobs will likely be cut. public sector net borrowing will fall from 11 percent of GDP in the 2009-10 fiscal year to around 1 percent of GDP in 2015-16. “UK public finances deteriorated rapidly during the recession. the government has also scheduled a hike in the VAT tax from 17.” Elaborating further. though the risks are to the downside.tancy TopEcon.5 percent to 20 percent. and it was one of four countries in the EU25 where the shortfall hit double-digit numbers as a share of GDP.” he says.” reduction plan. I wouldn’t be surprised to see average growth for the year as a whole at around 2. Indeed. the BOE (Bank of England) referred to ‘choppy recovery’ prospects and the consensus is for weaker rates of growth in the second half of the year. “The economy is starting to show more indications of slowing and there are upcoming tax hikes and spending cuts.5 percent. “However. “The rebound in output was mostly the result of a turn in the inventory cycle. in its August inflation report. also sees a 1. according to the Office for National Statistics. which Dolan says is above the Bank of England’s (BOE’s) 2-percent target rate. “It’s lousy timing. They are left with a deficit-neutral outcome and a lousy economy.” says Jay Bryson. but it also means their growth rate will be sluggish for the foreseeable future. the second quarter is likely to have been the peak. strong household spending.com is more to the point regarding the currency implications.1 percent in August. along with cuts in government spending (which will mean job losses). and a massive rebound in construction output.S. “I’m still pretty bearish on the British pound. which could bring consumer spending forward to the fourth quarter from the first quarter. “By going for austerity now. “In the long run it is good. Consequently. fiscal belt-tightening. UK consumer price index (CPI) data was steady at 3.5-percent 2010 GDP rate for the UK.
42 into late May. the U. they reduce the risk premium on UK assets and help the pound. any more upside CPI surprises in the UK will threaten the credibility of BOE forecasts for an inflation slowdown.60 by early August — gains that occurred amid better-than-expected economic reports out of the UK. Bryson highlights the PMI (manufacturing) number. the GBP/USD pair fell from about $1. 1. and are likely to record robust growth in the third quarter. which could present an opportunity in the EUR/GBP pair.” he says.” The pound/dollar slid back from $1. dollar. well into 2011. But others.50 percent. who cares?”. “In the short run.” he says.53 in early September as economic data began to soften. Thus.” he says. some say the UK could have an edge.GLOBAL MARKETS and cotton prices are threatening to ‘de-anchor’ inflation expectations.” Germany. while the market seems content to price in a more dovish view on growth and inflation.2 percent quarter-over-quarter in the second quarter. are doing much better. Germany’s economy grew 2. Uncertainty over the UK elections also weighed on the British currency. “The UK and the Eurozone as a bloc are faring similarly.” Ahmed says. Portugal.S. Ahmed emphasizes the role uncertainty is likely to play. but in August slid to 54. “While the problems lay with Greece.60 to about $1.3 percent [GDP] at the end of the day. but it is slowing. and — perhaps influenced by Fed speak — talk of the possibility of further BOE stimulus. Referencing recent BOE meeting minutes. Spain. Dolan says. he doesn’t believe the bank will do so because of the many challenges to economic growth.com’s Dolan notes the market has been speculating the BOE will be forced to tighten rates because of inflation. but they can make a significant impact.” Dolan says. which is yet to be resolved. “The European debt crisis dominated investor sentiment early in 2010.” Sterling action Relative performance Most economists say all of Europe faces a tough economic challenge. “The Euro is going to be the bigger loser.64 to $1.” he says.” Although Forex. “Both grew around 1 percent quarter over quarter in the second quarter. However.” Most analysts agree the BOE will not adjust interest rates this year.“This is likely to create more volatility in the financial markets. and Ireland.” Wells Fargo economists agreed in their Sept.” Wells Fargo’s Serebriakov says. “The high uncertainty over the [economic] outlook means investors are more sensitive to high-frequency economic data than they were in the past. “The dovish Monetary Policy Committee members seem to be trying to brush this under the carpet by conceding only that they’re ‘uncomfortable’ with high inflation. dollar since the beginning of 2010. “We do not expect the Bank of England to start raising its key policy rate until the end of 2011. “If it is 1. However. Eurozone investors were also worried about the UK’s large fiscal deficit and contagion.” Bryson says. any major slippage in the government’s plans to reduce the ballooning budget deficit will weaken the October 2010 • CURRENCY TRADER .3. However. However. “Those fiscal consolidation plans were the main factor behind improved sentiment for the pound. The outlook for the single-currency area is much bleaker given the Eurozone debt crisis. some Eurozone countries are doing much worse than the UK. It’s still in positive territory (above 50). “The uncertainty over the outlook means UK monetary policy is likely to be on hold for some time to come. 15 Global Chartbook research letter: “We believe the Bank of England will refrain from raising rates until economic recovery becomes more firmly established. The economy is fragile and this is probably going to hurt growth. In highlighting the key factors currently impacting the pound.” Moody’s Analytics Ahmed says.”It showed discussion was moving toward additional quantitative easing. The Euro zone and UK’s future paths are different. “There is a difference between the short-term and longterm implications of these fiscal austerity plans. where it has been maintained since March 2009.” he says. he also underscores the longerterm significance of these policies. The differences may seem small. driving up the demand for safe-haven assets such as the U. Ahmed explains the key drivers behind that move. In the long run. and will instead wait until late 2011. though. and also following the announcement of austerity measures. “Both the UK and the Eurozone are going to be sluggish. The obvious ones are the fiscally troubled countries of Greece.” May and June ushered in a shift in sentiment and the pair managed to rally toward $1. like 8 The pound has made relatively big swings vs.S.4 percent vs. we expect the Bank will keep its main policy rate at 0. you have to look at the impact on the real economy. “In May it hit 58. Also.
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he warns the risks are to the downside. “looking for a move to $1.” he says.48 to 1. y October 2010 • CURRENCY TRADER 10 . and a break of $1.62-1. First.61 range for the pound/dollar in the fourth quarter. That tends to correlate with broader economic weakness and the return of recession. Of the potential for the BOE to institute another round of quantitative Analyst forecasts target the pound/dollar rate to drop into the end of the year. which could be aggravated by the upcoming scale of fiscal austerity [measures]. However. But lower interest rates are always a currency negative.45 at end-2010. “There is more room for the Euro Some analysts see potential further pound weakness vs.58-1.51. “That typically has with the magnitude of the drop varying.61 area.” He advises selling the pound/dollar in the $1. How quickly or slowly will the BOE withdraw its extraordinary support to the economy? Investors are therefore likely to keep a close eye on UK inflation. The intent of quantitative easing is to drive FIGURE 3: POUND/CANADA market interest rates lower to support the economy. In this scenario.64 region.” Dolan forecasts a $1. Source: TradeStation a negative impact on a currency.” TopEcon’s Webster sees the potential for sterling to weaken in the near term. “The case for FIGURE 2: RISK TO THE DOWNSIDE sterling weakness. “I am looking for around 1. the Canadian dollar. can be made on a number of grounds.GLOBAL MARKETS pound. Dolan says. to fall from a long-term valuation perSource: TradeStation spective.” he says. renewed deflation in the UK housing market.38 (Figure 2). with the Euro/pound at 0. Serebriakov gives a 0. independent of the trend in the EUR/USD. additional BOE quantitative easing becomes a distinct possibility. Michael Woolfolk. easing. Longer-term.48 would open the door to additional losses toward $1.8100 target in the Euro/pound in 2011.” he says. because it has been stubbornly high relative to the BOE target. and also says the pound/Canadian dollar cross as a potential sell in the $1.53” (Figure 3). managing director at BNY Mellon cites his firm’s year-end forecast for pound/dollar at $1.8275. “marginally lower from current levels reflecting Euro weakness and sterling strength.
CURRENCY TRADER • October 2010 11 .
52 1. Instead.0% 38.35 1. inflation in the ground against the dollar since June.25 1.21 1.44 1.32 The press made much of gold rising 1.22 equivalent to a dollar-devaluation policy.0% 12 October 2010 • CURRENCY TRADER .19 1.48 1.47 easing (QE2) — i. was steady. to levels consistent with its mandate.. And not just the FX market — equity traders can’t tell if they are coming or going.6% 0. temporarily — but chances are it’s going to be led by interest rates — eventually.0% 61. over time. including the dollar? BY BARBARA ROCKEFELLER The FX market can be maddeningly perverse and irrational. As of August. But was triggered by the Fed’s Sept.23 1. anyone who want1. The Euro had been gaining inflation.32860. not engage in another round of quantitative easing. We already knew from the Currency Trader Mag Oct 2010 Fig 1.36 announcement date itself.37 1.16 tary easing leads to inflation.40 1.32350. data — Reuters and eSignal Even core inflation (excluding food and 100. and only if.24 ing that to engage in additional easing is 1.S. 21 policy statement that it was ready to the Fed is worried about deflation. In late September.8% 50. we got 1. the Euro in less than 24 hours was triggered by the Fed’s policy statement in late September that it would “provide additional accommodation if needed to support the economic recovery and to return inflation. And not just 2009 November December 2010 February March April May June July August September O any degree of inflation. buying Treasuries and 1. but inflation that The dollar’s nosedive vs. too.33 1. 1. 1.43 In a normal market. Wyo.01730) 1.30600.45 thus pumping liquidity into the economy.30550.27 1. +0. The Euro’s Remarkable Recovery minutes of the August Federal Open FIGURE 1: THE EURO’S REMARKABLE RECOVERY Market Committee (FOMC) meeting and Euro (1.26 commentators made another leap.38 had plenty of time to do it ahead of the 1.On THE MONEY ON the Money Axes to grind Is gold fever causing unexpected symptoms in other markets.41 ed to sell dollars on this news already 1. The FX market is being led by gold. and hard commodities like oil and gold are in an intellectual tangle.17 1.51 ments in Jackson Hole. 1.39 1. 1.29 1.34 sudden panic selling (Figure 1). Whoever said “The market is always right” was referring only to the inability of a single trader to move the market. the Fed was 1. not to any truth that must inherently reside in the consensus analysis.31 1.2% 23. at a rate below 1 percent.28 ary effect of quantitative easing. U. 1. 1. it’s clear to anyone with a grain of common sense that thinking in the FX market has run off the rails.18 devaluation occurs if. Source for all figures: Chart — Metastock.20 This reveals a fossilized mind-set.49 considering another round of quantitative 1. assert1. The dollar’s nearly 300-point giant nosedive vs.46 1..e.50 1.42 1.” This should have inspired Barbara Rockefeller a big yawn. mone1. Dollar 1.30 immediately on the “automatic” inflation1. Some 1.53 from Fed Chairman Ben Bernanke’s com1. the Euro in less than 24 hours (final candle on chart) is higher than in other G7 countries.
The yield drop is the one cause of the dollar’s drop that fits into conventional CURRENCY TRADER • October 2010 1. reasoning that QE Fed.3 did fear of inflation come? 1. and a weakan increase in energy supplies. is poised for another 100 basis and price stability.3 100 1. Right after the Fed announcement. in a weak recovery. run “with its mandate to promote maximum employment Australia. though. which means less fear of inflation. The Euro (green line) was rising at approximately the same pace. gold dipped a little to goose the economy and disagrees with Bernanke on but the Euro kept heading south.S. The rising gold trend started back in October deflation and that is done with easing before deflation gets 2008 with a low of $681. because we are.5 1.4 110 probability of the U. It would be naive to imagine the tional round of quantitative easing as promoting demand Fed didn’t foresee some dollar weakness and its attendant and growth.50 at the high the next day.lack) and the Euro (Green) more useful message to potential borrowFIGURE 2: GOLD AND THE EURO ers: get going or miss out on lovely low 1. Besides. It first peaked in December 2009 at $1. they were the sensible traders.S. QE is 120 1.S.4 125 the possibility of the U. benefits. the bond vigilantes.00. St.2 1. a weaker dollar means imports are more expenFor their part.3 percent.1 1. growth and thus demand for energy. the dollar is secondary in Fed considerations.2 1.’” Bullard discusses 1. while indefinitely low rates raise the 1.4 tion. same pace and with roughly the same low and high dates. In with that information.2 1.4 1. though. real bond traders with real money to invest didn’t buy the inflation fable. Raising rates would send a Currency Trader Mag Oct 2010 Fig 2 Gold (B. The Fed came right out and economic analysis: money flows out of low-return counsaid this low inflation rate is not consistent over the longer tries and into those with the highest real rate of return. The Fed has no mandate that mentions the dollar.4 1. keeping rates low indefinitely. adopting a deliberate policy of dollar devaluThe Australian dollar is firm. from what planet 1.4 of Japan and its two lost decades.40. 13 . addition. the yield on U. stock market participants are still sitting sive and this boosts both the producer price index and the on the fence. In fact. In May and June 2010. The Fed’s true purpose is to prevent Japanese-style (Figure 2). Long-end rates come down when inflation fear recedes.3 deflation is legitimate. which he feels is counteras rescue operations for Greece were under way.278 at the QE2 announcement is like saying you rake leaves for the open on Fed day to $1. good things for equity prices. after all. The To say the Fed was seeking to get a weaker dollar from front-month gold futures contract jumped from $1. they “should” see an addiconsumer price index. Alan Greenspan often said Oil prices rose on the announcement.1 95 90 85 80 75 70 x10 May Jun Jul Aug Sep Oct NovDec 2009Feb Mar Apr MayJun Jul Aug Sep Oct Nov Dec 2010 Mar Apr MayJun Jul Aug Sep Oct No The gold uptrend (black line) dates back to October 2008 and a low of $681. and with roughly the same low and high dates.” points of rate hikes.3 If we have inflation so low that fear of 1. Inflation fear didn’t come from the oil gang. going the way 1.3 1. perhaps starting as early as October. In other words. December 2009 at $1.5 Faces of ‘The Peril.2 1.2 1. making it the best-performing What is the Fed’s concern about deflation? Let’s consult asset in the world.5 130 1. For one thing.3 1.3 Whence the fear? Not from the usual source. and oil retreated in line er dollar does that to the extent it facilitates exports.00 and peaked the first time in a grip.5 rates.2 1. For “the dollar” is the policy property of the Treasury.4 worthwhile to avoid Japanese-style defla1. but it’s a stretch to think it was a primary goal. not to prevent the leaves from suffocating the Why? Part of the rise can be attributed to the existing trend lawn. only a That doesn’t mean entirely absent. Treasuries fell across the yield curve — along with some flattening of the curve. Note the Euro was rising at about the an inflation hawk.S.2 1. the exercise.2 1.1 1. either.3 105 1. would help U. the Energy Department’s weekly report showed have a mandate to promote full employment. not more.226.4 1.40.3 1.4 1.4 115 1. ation is simply not how the Fed operates.1 1. Like oil traders. He supports quantitative easing as an emergency measure Starting in February 2010.3 1. When he was Fed Chairman. In a paper ominously titled “Seven 1. Louis Fed President James Bullard.2 1. 1.2 1. The Fed does day later. for example. The only intermarket culprit left is the gold market.294.226. but only modestly. not the once. joining Japan.energy) was only 1. the Euro Barbara Rockefeller productive.
This raises the issue will really be available is more like €250 billion. After all. the worst level since late-December 2008. We can ratification by all members. but at the same time we sell government paper to high private-market demand — have to admit that fear-mongering works when fears are but at horrible prices.ON THE MONEY Barbara Rockefeller Currency Trader Mag Oct 2010 Fig 3 Reuters 10-Year Treasury Note Yield Index FIGURE 3: REUTERS 10-YEAR T-NOTE YIELD INDEX 55 54 53 52 51 50 49 48 47 46 45 44 43 42 41 40 39 38 37 36 35 34 33 32 31 30 29 28 27 26 25 24 23 22 21 20 19 18 with the dollar. when the Greek that gives the U. gold seemingly became inversely correnot the nominal advantage that counts. From last December. Portugal. and Portugal are paying about 4 percent more.S. Besides. and pretty niment. the EMU leadership rushed in to say. are running around saying the European sovereign-debt crisis 2006 D 2007M A M J J A S O N D 2008 M A M J J A S O N D 2009M A M J J A S O N D 2010 A M J J A S O N D is over. Ah. Fear of inflation right now is ing a booming export economy and its natural accompanot reasonable. New confidence in the Euro is founded on a loss of fear over the European debt problem. and low as 2. fail to prevent an asset bubble in China. Greece is already paying almost 9 perversal distrust of governments that are sure to do somecent more than Germany for 10-year paper. every answer supporting a rise in gold. is suspect. or only about €60 billion.5 percent. The inevitable result carries no rate of return. Really? The EFSF has yet to be If U. If they can’t find entire EFSF. but it’s drama began. out of the private market would potentially eat up the The gold bulls have an axe to grind.25-3. or because some other commodity is rising.75 percent (gold lines). At the same time. traded together. in practice the amount that would still be the Euro. If the data is bad. meaning the correlation of gold with the With the U. 10-year interest rate at about 2. dollar was inverse. and debt alone is about €260 billion. OK. it’s the real advanlated with the Euro. meaning it was positively correlated 14 October 2010 • CURRENCY TRADER . Some European officials. but any crisis that takes Greece Just about anything can be used to justify a rise in gold. in Q4 it will darn quickly. or because the Euro fund repayment of the €110 billion borrowed from the is falling. economic data suggests a decent recovery.30 percent. Spain. Germany is enjoynot entirely unreasonable. in the latest period (roughly.S. or European Central Bank (ECB) and International Monetary because political uncertainty is high. gold and the Euro 2. which could drive the yield as country already said it won’t agree. It’s often said gold Greece has said it intends to use short-term paper to is rising because the dollar is falling. the new European Financial Stability Facility (EFSF) got a triple-A rating from all three major ratings agencies. leaving nothing for Ireland. not the dollar. a small nominal advantage. One the Fed is likely to renew quantitative easing. Fund (IMF) in the spring. from the end of July) the Euro is rising again with gold. The Facility is authorized to issue diate high resistance. such as Spanish Prime Minister Jose Luis Rodriguez Zapatero. something specific. we’ll re-allocate that share to the started to rise again and gold broke out above the intermerest of the members. Monetary Union (EMU) countries.S. Anyone can invent an extreme scenario to issue €29 billion less in government debt than originally beguile the gullible and sell them an “investment” that expected. In the first period. they can always fall back on the unior anyone else. up to €440 billion of bonds in its own name. Now. As a result. while Ireland thing boneheaded again — start a trade war with China. or the Euro of smaller German supply and fear of default by peripherals was a drop in the yield on the German Bund to a mere and gold. but it can become reasonable.S. The correlation between the dollar and gold. and so on. but because You would think the giant sell-off in the FX market of strict reserve requirements. This makes as little sense as seeing inflation lurking under the bed in the U. neglect to shore remember the Facility’s triple-A rating is contingent on up enough defense against terrorism. poke fun at the gold bulls for inflating the prospects for The so-called peripheral European countries are able to the need of a safe-haven in gold.064 percent. Greek of the gold market having an answer to everything. yields will return to the approved by each of the European “normal” recovery zone of 3. higher tax collections.
yield advantage over Germany is not resulting in the pro-dollar effect it should. It is not an extreme scenario to imagine the U. both the Eurozone and the U. This is a good thing. with the European Financial Stability Facility probably underfunded.25-3. and probably in the fourth quarter. whereupon the yield could fall as low as 2. evidently. and some countries yet to admit they will need to access it — Bund yields could fall further as investors want the one top-European country debt and no other. but the U. yield advantage over Bunds as high as 1-1. Gold bulls and others fear that once the inflation genie is out of the bottle. our experience with Mr. This is probably true. at least so far.S. yields will return to the “normal” recovery zone of 3. Only if economic data starts coming in at frighteningly bad levels will the Fed actually activate QE2. In late September.S.S. y For information on the author. Today.064 percent. But if the sovereign debt crisis continues to get hotter — and it should. it can’t be put back in. what the FX market is missing is that the Fed may not have to engage in a new round of quantitative easing.S. tolerates higher inflation because of its greater flexibility and adaptability. to have higher inflation than Europe over the life of the investment. and it’s premature to be thinking about controlling inflation before it exists. taken that away. 4. right after the Lehman bust. is expected to pull ahead of Europe eventually. the U.75 percent (marked by gold lines in Figure 3).S. If U. economic data shows a decent recovery. have approximately the same level of inflation. see p. Historically. the worst level from December 2008. This is why the emerging U.5 percent. QE2 has. CURRENCY TRADER • October 2010 15 . meaning investors expect the U.tage after inflation.S.S. Volcker notwithstanding. Defeating deflation is the primary policy goal. Is that enough to overcome the expected inflation differential and country risk? We shall see.
Candlestick patterns and tick volume Traditionally. August 2010). An interesting example using this concept was illustrated in “Time-adjusted range and volume” (Currency Trader. we can design a strategy around the doubledoji pattern in the EUR/USD pair. In this case we’ll use a “normalized volume oscillator” (NVO) that creates a histogram of tick volume based on its 50-period high and low values. we can use it to interpret different price patterns. or wicks — is a perfect pattern to exemplify this concept (Figure 1). (A free NVO indicator for Metatrader 4 can be downloaded from http://codebase.) Double-doji breakout strategy The double doji consists of two consecutive candles with very narrow bodies and large shadows. along with regular tick volume. in the Euro/U. which makes them viable candidates for a breakout strategy. Tick-volume data makes it possible to identify those patterns that are accompanied by significant volume. it’s necessary to normalize tick volume so results are as broker-independent as possible. but sometimes it can simply reflect a general lack of trading volume. BY DANIEL FERNANDEZ One disadvantage forex traders have had relative to futures and stock traders is the general lack of accurate volume information. or wicks. they can produce very different absolute tick-volume data (even though the general characteristics or profiles of the data are likely to be similar). As a result. in which Caspar Marney designed a system using tick-volume information and the patterns that FIGURE 1: DOUBLE-DOJI PATTERN develop within it. if not impossible. dollar pair (EUR/USD). Figure 2 shows an example of the indicator. The following strategy uses hourly (60-minute) data. “tick-volume” data can be used as a proxy for true market volume.com/source/9250. The absence of a central exchange and the FX market’s large turnover make gathering any meaningful real-time volume information impractical.TRADING STRATEGIES Validating candlestick patterns with tick volume A “double-doji” breakout strategy gets a boost from a tick-volume filter. However.S.mql4. with the highest value being 100 and the lowest value being -100. If tick volume information can reliably represent actual forex volume. the double-doji pattern is interpreted as a signal of market uncertainty. The first thing we need to do is to establish a mathemat October 2010 • CURRENCY TRADER . because different brokers may use different liquidity providers. 16 Now that we have an indicator that displays normalized tick volume. However. because there is a correlation between the number of ticks (simply the number of price changes that occur within a given time increment) issued by a given forex dealer and the volume in a currency pair. The “double doji” — a candlestick pattern consisting of two consecutive candles with very narrow bodies and large shadows.
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the pattern low becomes the stop-loss for long trades while the pattern high is the stop-loss for short trades. FIGURE 3: TRADE EXAMPLE This long trade was signaled when price pushed above the high of the double-doji pattern by an amount equal to the high-low range of the pattern itself. buy-stop and sellstop orders are placed to take advantage of a possible breakout from the pattern.2440 minus five times the pattern size). October 2010 • CURRENCY TRADER The NVO normalizes tick volume by measuring each period’s volume relative to the highest and lowest volume readings of the past 50 periods.2460 (pattern size of 10 pips). 18 .2460 (pattern high) and a profit target at 1.2470 (1. while a sell-stop would be placed at 1. The body of the candles must be less than 20 percent of the value of the 14-period daily average true range (ATR).2450 (pattern low) and a profit target at 1. The ratio of the range of the two candles (High-Low) and the body of the candles (Close-Open) must be greater than five. The buystop is placed one “pattern size” (the high-low range of the larger of the two candles) above the pattern’s high and the sell-stop is placed one pattern size below the pattern’s low. After a valid double doji is detected.2450 minus 10 pips) with a stoploss at 1. if a valid pattern had a low of 1.2520 (1. A valid pattern will fulfill the following requirements: FIGURE 2: NORMALIZED VOLUME OSCILLATOR 1.TRADING STRATEGIES ical definition of a double doji so that we can identify the patterns accurately and consistently. Conversely.2470 plus five times the pattern size).2390 (1. Both stop orders expire after 24 hours. The 50-period NVO indicator for the second candle must be above 35. Figure 3 shows a sample trade.2450 and a high of 1. a buy-stop would be placed at 1.) For example. 3.2440 (1. (Note: None of these values were previously optimized. 2.2460 plus 10 pips) with a stop-loss at 1. The profit target is five times the pattern size.
4. 2000. hourly tick volume — which is adequate for the implementation of this strategy — was available. but more importantly. it is a good idea to adjust trade size according to the 14-period daily ATR. which is a better measurement of potential market movement.46 percent) and 2003 (-0.62% 2. as double dojis resulting from market uncertainty tend to end in successful breakouts while those resulting from a general lack of volume do not lead to any outcome with a significant probability.6 lots. the position size taken would be 2. with an initial account value of $100.87 Filtering trades with the normalized volume oscillator improved the system in almost every aspect of its performance. the strategy does not trade very frequently –– it triggered only 221 trades during the test period. This indicates volume validated the pattern. but its overall performance was still profitable — in stark contrast to the trading the same pattern without the NVO filter. including Gain Capital tick data.62% -19.000 and the 14-day ATR was 150 pips. the use of the following position-sizing equation will result in a risk of approximately 2 percent per trade: Lot Size = (400*Account Balance/ (Contract size*(14-daily ATR in pips))) For example.3 times the size of the average loser.41 percent). Removing the NVO filter resulted in approximately 10 times as many trades and wiped out almost all the account’s initial equity in the first four years of testing (Figure 4). 19 . The strategy might not trade frequently enough to be used exclusively. if the account balance was $100. for an average of 22 trades per year. 1. the NVO volume filter was vital to its success. y For information on the author. Comparing the NVO values across select time periods in this data to other data sources. The strategy was profitable in simulation. The performance summary in Table 1 also highlights some interesting characteristics of the system. see p. compounded yearly profit Maximum drawdown Avg. TABLE 1: PERFORMANCE SUMMARY With NVO Total profit Avg. because valid patterns are quite rare.58% -95. Testing on other currency pairs. which suggests the NVO approach allows the strategy to work under various different feeds. (Also.000. Trading costs were set at two pips per trade.3 26% 2094 0. In general. as well as experimenting with other patterns (or optimization techniques) will shed more light on the approach’s potential.3 38% 221 1. Even though Metaquotes does not provide actual tick data.44 Without NVO -95. The system illustrates how to get a better understanding of candlestick patterns by using tick-volume data. with almost a year with no signal.000 standard lot size. with only two slightly negative years in 2000 (-2. Testing the strategy The strategy was tested in the Metatrader platform using hourly EUR/USD data from Jan. The system’s primary shortcoming was its failure to signal trades for long stretches. with the average trade being 2. The system also achieved new equity highs in every year. First.) The strategy’s CURRENCY TRADER • October 2010 reward-to-risk ratio is also very favorable. revealed only minor differences after volume normalization. to Jan. 2010. 1. using a $100. there was a tendency for valid patterns to cluster in certain months.FIGURE 4: EQUITY CURVE Because these patterns are usually very small and their ranges are not representative of typical market volatility. profit-to-loss ratio Winning percentage Number of trades Profit factor 223% 12% 19% 2. but it does provide a valuable tool for any trading strategy based on candlestick patterns.
Fortunately. Stock indices.” or oscillate. inefficient markets. they will often make a minor correction before resuming the new trend. but they often extend much further than most people anticipate. Although the following analysis of “First October 2010 • CURRENCY TRADER Efficient vs.. In these situations the maximum number of people are trapped on the wrong side of the market. is the goal of “transitional” patterns. consumers and producers of specific commodities) tend to cancel each other out. even all-time highs or lows tend to work best. Entering after that minor correction. Sometimes what appears to be a market transition might turn out to be only a correction in the longer-term trend. An efficient market is. on the other hand. trends. An inefficient market is one in which all information isn’t “priced in. More often FIGURE 1: TRANSITIONAL OPPORTUNITIES than not efficient markets tend to “chop around. Speculators. and the forex market. When attempting to capture major transitions. as illustrated in Figure 1. hedgers. BY DAVE LANDRY Trends don’t last forever. Efficient markets are crowded playing fields. commodities.” Following a few guidelines will help you minimize the arrows you take as a “trend pioneer. Obviously.” Before looking at different transitional setups.” These markets trend as increasing numbers of traders and investors discover them and pile into them. inefficient markets 20 . is well-analyzed and traded. and other participants (e. It’s like the old saying. Lower volume stocks (within reason) tend to be more inefficient. The payoff of catching a new trend early is huge. “Pioneers got the gold. this comes with risk. and most information is priced in it. the best trades occur when the currency pair is coming off major lows (for long trades) or major highs (for shorts).g. longer-term investors. Multi-year or even all-time highs or lows tend to work best. This doesn’t mean longer-term trends don’t occur in more efficient markets. let’s first consider the concept of efficient vs. it just means you have to pick your spots more carefully. and major currencies tend to be more efficient. Trying to buy a currency pair because it’s low or short one because it’s high is a loser’s game. markets can leave clues the trend is turning: After an initial reversal. and The best transitional trades occur when a currency pair is coming off their predicament will help your position when major lows (for long trades) or major highs (for shorts). but only if the new trend shows signs of resuming.TRADING STRATEGIES Trend transitions in forex Transitional patterns offer earlier entry into developing price moves than typical trend-following techniques. Multi-year or the new trend develops. but they also got the arrows.
These instances represent riskier trades because the market has corrected very little.” and “First Kiss After Daylight” setups focuses on capturing longer-term trends. shorter-term traders could apply these patterns on intraday charts. In these situations the market often pulls back only briefly before resuming its new trend. followed by a sharp thrust lower (2).e. If the thrust resumes after this brief pause. A long trade is signaled when price moves above the high of the pullback bar (4).” “Bow Ties. Ideally though. risk often comes with reward. these traders find themselves waiting for the market to reverse so they can get out of the market with as little damage as possible. Trapped on the wrong side of the market. a more aggressive entry would be to enter on the first down move after the pair made only a higher low (a). dollar pair (EUR/ USD) hit a one-year-plus high (1). that meaningful correction may never come. Second. However. Figure 3 shows a First Thrust short setup. The pair then corrected to the upside.S. followed by at least a one-bar pullback (a lower low and lower high) at point 3.Thrusts. Bottom pickers and top pickers who missed their mark and do not want to pay up are also waiting for some sort of meaningful correction. FIGURE 3: FIRST THRUST SHORT SETUP A short trade is triggered (4) when the price turned back down after making higher highs and higher lows (3). First Thrusts Markets in major trend transitions often start by making a sharp move in the new direction — a “first thrust” that tends to catch traders off guard. take signals only when price is hitting significant new highs or lows on the higher time frame. most are waiting for a more meaningful pullback. by entering at the first sign of a correction rather than waiting for a more substantial move. Figure 2 shows how after making a significant new low (1) price should make a sharp thrust in the new direction (2). These brief corrections give players very little time to get in.. First. rather than waiting for a more substantial move. you avoid the pitfalls associated with trying to pick highs or lows. Unfortunately. making two consecutive higher lows and higher FIGURE 2: FIRST THRUST By entering at the first sign of a correction after a sharp thrust. One important point: Sometimes the pullback is very brief and shallow — i. but in trading. The First Thrust strategy has two advantages. the position can potentially benefit from the trapped traders’ efforts to get out of the market. and the trapped market participants are soon forced out at unfavorable prices. by waiting for the market to make a sharp move in a new direction. 21 . The setup rules CURRENCY TRADER • October 2010 are reversed for short trades. these traders must either jump in or risk being left behind. In November 2009 the Euro/U. the market only makes a lower high. the position can potentially be helped along by the trapped traders’ efforts to scramble out of the market.
A short trade was signaled after price made its first lower low after beginning the correction (4). Because the market is still prone to correct in these situations. the pair began to implode. Ideally. Although all indicators are prone to lag. they go from “proper” downtrend order (the faster moving average lengths below the slower moving average lengths) to proper uptrend order (the faster moving averages above the slower moving averages). When this happens over a short time period. The Bow-Tie pattern uses a series of moving averages to signal these transitions. it gives the appearance of a bow tie.TRADING STRATEGIES FIGURE 4: BOW-TIE PATTERN highs (3). the Bow-Tie moving averages can often alert you to a trend change in markets that have been going through extended consolidations. After some adverse price action. Sometimes though. but quickly invert after point 1 to proper uptrend order (10-bar SMA > 20-bar EMA > 30-bar EMA). especially those that have recently made a major high or low. entry occurs only after the market makes at least a one-bar pullback (2). Bow Ties The pattern is formed by the inversion of a 10-day simple moving average and 20-day and 30-day exponential moving averages over a short period of time. The First-Thrust pattern does a good job of capturing new trends that begin with an obvious bang. The more aggressive entry would be to enter on the first down move after the pair made only a higher low (the inside day at point a). Notice the moving averages are in proper downtrend order (10-bar SMA < 20-bar EMA < 30-bar EMA). FIGURE 5: AUSSIE DOLLAR BOW TIE After the moving averages inverted their order. these moves start more gradually: The market goes through a “distribution” phase before accelerating in the new direction. as shown in Figure 4. A short trade was signaled when the pair then made a lower low. this should happen over a period of three to four bars. use a 10-day simple moving average (SMA) and 20-day and 30-day exponential moving averages (EMAs). The inversion suggests the market has made a major trend shift. the pair completed the pattern at point 3 by making a higher high and higher low. A long trade October 2010 • CURRENCY TRADER 22 . For this pattern. These averages often come together and then spread out in the opposite direction right before a market makes a major transition. That is.
Now is the time to begin watching for the next big trend transition. During this rally. The pair made a multi-month high in November 2009 (1). when trading transitions you are either going to get the gold or the arrows. The pair then pulls back to the moving average (3). or five or more highs below the SMA for a short trade. The best setups occur after major highs and lows. There are at least five days where (seven. 4. (This is similar to Linda Raschke’s “Holy Grail” setup except Raschke uses an indicator to define trend while this pattern only looks for daylight after a major low. CURRENCY TRADER • October 2010 Major transitions don’t occur every day Not all transitional patterns will turn into major tops or bottoms. The market consolidated for a while before beginning to sell off. or five or more highs below the SMA for a short trade. First Thrusts. Figure 5 illustrates an example in the Aussie dollar/U. The chance for gold makes it all worthwhile. see p. except it uses a moving average to define the thrust: The market must make five or more lows above the 10-day SMA for a long trade. but all major tops or bottoms will have transitional patterns. and a long entry is signaled when price makes its first higher high after this correction (4). in this case) of “daylight” — lows above the moving average (2). and Bow Ties can be used to catch new trends early.S.) In Figure 6 the EUR/USD pair makes a multi-year low (1) and then begins to rally off this bottom. As of late-September. Like the pioneers. 23 . You’re much better off waiting for the market to show signs the trend is turning and then look to enter after the first correction.” the moving average — the low must be at or below the moving average. y For information on the author. The market must first make a major new low (the lower the better — all-time lows make the best setups). This action caused the moving averages to flip from uptrend proper order (10-bar SMA > 20-bar EMA > 30-bar EMA) to downtrend proper order (10-bar SMA < 20-bar EMA < 30-bar EMA) over the course of three bars. The market should subsequently begin to rally. or “kiss. Short entry occurred when the pair then made a lower low (4). Here. the market must make five or more lows above the 10-day SMA for a long trade. after which the market must pull back and touch. The First Kiss After Daylight The First Kiss After Daylight setup is similar to the First Thrust. To read about these and other transitional setups applied to stocks. however. the lows of at least five bars must be above the 10-day SMA. those that occur in the wake of major highs or lows are preferable. Trying to picks tops or bottoms is a loser’s game. Enter when the trend resumes. because this increases the odds a large number of traders are trapped on the wrong side of the market. Major trend transitions don’t occur every day. The pair then made a higher high and higher low to complete the pattern (3).FIGURE 6: THE FIRST KISS AFTER DAYLIGHT is signaled when price makes a higher high after that minor correction (3). several currency pairs were at or near multi-year highs or lows. creating the appearance of a bow tie (2). which was just a few ticks shy of a multi-year high. long entry occurs when the AUD/USD pair makes its first higher high after the subsequent correction to the moving average. see Dave Landry’s article in the December issue of Active Trader magazine (on newsstands in November). dollar (AUD/USD). Like all the transitional patterns. First Kiss After Daylight. For this setup.
But just as no clothFIGURE 1: CRUDE OIL AND EURO POSITIVELY CORRELATED ing fashion lasts forever. If the world’s traders had to grapple with such. neither does any market fashion. curves and correlations” (Currency Trader. and Swedish krona) and the total return of crude oil futures. this post-May 2003 pattern lar index subsumes accounts for the general sentiment. yield curves. Some of these unusual intermarket relationships included. the dollar firming when interest rates fell and the trade deficit soared. SIMONS rates were being cut and rallying when interest rates were rising. September 2010). in no particular order. and equity markets is an exercise in futility. gold plunging during times of financial crisis. as we saw in “Currencies. The total return of the dollar into the six The oscillating correlation pattern gave way to a nearly continuous stretch of positive correlations components of the dolafter May 2003. negative breakeven rates of inflation. British pound.ADVANCED CONCEPTS TRADING STRATEGIES Crude oil and major currencies Searching for long-term predictive relationships between currencies. we did not even mention the ability of long-term U. Let’s extend this analysis to the correlation of returns between total returns of the U. bonds rallying while the price of various commodities soared. The motivation here is to test the oft-asserted proposition that “the dollar” either benefits from or is hurt by the rising or falling price of crude oil. inflation remaining under control while the price of various commodities soared. Canadian dollar.” How that magazine has managed to stay in operation with such dull copywriters is beyond us. Swiss franc. BY HOWARD L. budget deficit reached stratospheric levels.” but a better name might be the “The Decade of Unusual Intermarket Relationships. how could policymakers possibly have succeeded? Moreover. interest rates to fall while the U. Japanese yen. stocks falling while interest .S.S. dollar into the six components of the dollar index (the Euro. negative short-term interest rates. As the Euro represents 57. negative long-term swap spreads.S. and so on.6 percent of the dollar index. but life is full of mysteries. the combination of 24 October 2010 • CURRENCY TRADER Time magazine may have dubbed 2000-2009 “The Decade From Hell.
How did we get to that unhappy point? The starting point was the Federal Reserve’s first War on Deflation. is a continuous buy-andhold strategy. The yen demonstrates a very different pattern than Euro. and is a more realistic representation than the continuous spot rate of what an investor will earn by expatriating funds. too. The relationship shifted to strongly negative in mid-2009. to China. The central bank’s monetary largesse weakened the dollar on a supply/demand basis and stimulated demand for crude oil globally by shifting production from the U. It. FIGURE 3: CRUDE OIL AND POUND POSITIVELY CORRELATED The British pound’s correlation history looks like a variation of the Euro’s (Figure 1). The following charts begin with the January 1999 advent of the Euro. As currencies were trading well before that and crude oil futures were trading from 1983 onward. commencing in May 2003.S.FIGURE 2: CRUDE OIL AND JAPANESE YEN NEGATIVELY CORRELATED spot rate changes and interest-rate spreads. The total return on crude oil futures as calculated by Dow Jones-UBS includes the impact of roll yield as well as gains on the funds deposited in collateral against a futures position. with nothing notable occurring around May 2003 and correlations oscillating in long stretches from positive to negative. Its correlation of returns against crude oil did not turn consistently positive until the financial crisis began in August 2007. Most certainly. we should mention in passing the correlations between the dollar index and crude oil from 1983 through 1998 were unimpressive and seldom entered into the realm of serious discussion. the pseudo-analysis heard in recent years — “Crude oil rose/fell as the dollar fell/rose” — was not part of the thought process of either crude oil or currency traders. CURRENCY TRADER • October 2010 25 .
As the Euro accounts for 57.6 percent of the dollar index. The magenta columns are the rolling three-month correlation of returns. Thus a joint response to a common underlying factor looked like a causal relationship.6 percent weight in the dollar index (Figure 2). This has a very different pattern than Euro: The May 2003 date is scarcely noticeable and 26 October 2010 • CURRENCY TRADER . 2003 declaration of war on deflation really stands out in the case of the Euro (Figure 1). crude oil. and once again we are not disappointed (Figure 5). and once this connection was established. which has a 13. The May 6. it was impossible to break. “The jury will disregard that. Here the correlation of returns shifts from a pattern of meaningless oscillation to a nearly continuous stretch of positive correlations culminating in the spectacular rise of crude oil into July 2008 and then again during the global monetary excess of October 2009. with the exception of the period of CAD weakness against the dollar in 2000.” while everyone present in the courtroom wonders. It is to saying. the total return of the Dow Jones-UBS crude oil index is displayed in green and the total return on the carry of the USD into that currency is displayed in blue. this post-May 2003 pattern accounts for the general sentiment.ADVANCED CONCEPTS ON THE MONEY FIGURE 4: CRUDE OIL AND CAD POSITIVELY CORRELATED Because of Canada’s large crude oil production base. Case studies FIGURE 5: CRUDE OIL AND KRONA POSITIVELY CORRELATED Given the Swedish Riksbank’s efforts to keep the SEK in a band against the EUR. the Canadian dollar has the strongest and most consistent correlation of returns vs. “How?” In all the charts. we should expect to see the krona’s correlation pattern resemble that of the Euro. let’s shift to the Japanese yen. Next.
intermarket relationships over the past decade. Federal Reserve began its rate-cut adventure and the price We can summarize these relationships over in-sample of crude oil began its 10-month doubling adventure. This function has shifted the franc’s against crude oil did not turn consistently positive until correlation of returns away from the Euro’s in recent years the financial crisis began in August 2007. these DW stadollar index. the “Don’t ask.9 percent weight in grin.2 percent and the tistics are all near zero. sive and have betas with opposite signs. this one ed (Figure 5). and For information on the author. however.00. CURRENCY TRADER • October 2010 27 . This always oil production base.not. and then the correlations shifted to strongly negative levels in mid-2009. y tory for crude oil exporters in Russia. Switzerland is a money reposi. the issue would have the Middle East. Large log-log regressions of the return series as follows: sums of money strewn across the landscape can and do The r2 values for the EUR and JPY are not very impresforce changes in market behavior.1 percent of the dollar index. see p. This is when the (Figure 6).S.” October 2008). CAD has something approaching a consistent fit over time. don’t tell” policy was not invented the dollar index. other explanatory variables are required. to have the strongest and most consistent correlations of In all cases. where it does connection.FIGURE 6: CRUDE OIL AND SWISS FRANC POSITIVELY CORRELATED the correlations oscillate in long stretches from positive to negative. and this is no exception: If someone approached the issue of the relationship between currencies and crude oil from a yen-first rather This function has shifted the franc’s correlation of returns away from the Euro’s in recent years. the crude oil total return series 4). we should expect the Canadian SEK and CHF have insignificant r2’s as well. Swiss franc at 3. North Africa. and was weak against the dollar during 2000. than a Euro-first perspective. 4. and once again we are not disappoint. Its correlation of returns in the U. we crude oil and “the dollar” is a short-term artifact and not should expect to see the krona’s correlation pattern resema long-term fundamental relationship. Of all the unusual ble that of the Euro. The small-weight Of all the currencies.6 percent. The yen often is a special case. military. such as for the yen. may be the easiest to explain where it works and easiest to The franc is different (see “The Swiss franc’s commodity debunk in those cases. Only the dollar. A stable Finally we come to the two smallest components of the Durbin-Watson statistic should be near 2. has a correlation history that looks like a by the Clinton administration in response to gays serving variation on the Euro’s (Figure 3). offices of the Arab Bank of Switzerland with a suppressed The British pound. which has an 11. the Swedish krona at 4. second. One writer recalls walking by the Geneva been over and done with quickly. and we are not disappointed (Figure indicates two things: First. The only real exception here occurred when the CAD is autoregressive or reliant on its own past values. which accounts for 9. A positive surge occurred during the financial crisis of late 2008 as crude oil collapsed and yen carry trades were unwound simultaneously. the synopses are plagued by returns against crude oil by virtue of Canada’s large crude massive serial correlation in the residuals. Given the Swedish Riksbank’s We affirm the conclusion that the perceived link between efforts to keep the SEK in a band against the EUR.
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This is also the first final rule the Commission has published to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act. FXCM does believe lower leverage will be to the benefit of traders as higher leverage can often times result in a few losing trades offsetting many winning trades. the regulations nonetheless mean U.S.. including limiting leverage to 10:1 — the equivalent of a 10-percent margin rate. otherwise these investors would have already migrated to foreign markets.” Among the other factors the CFTC cited in making its decision were “futures exchange margin levels. some of which have no limitation on leverage. dollar/Swiss franc (USD/CHF). and 20:1 for all other pairs.. forex market by sending business overseas. securities) from financial institutions to pump money into the financial system.) The announcement appeared to be met with relief by most in the forex industry. so although the new rules officially side30 stepped the spot industry’s fear it would be put at a competitive disadvantage to the futures market. Through quantitative easing. dollar (GBP/USD). mortgages. but enough that some participants will likely still grumble.” CFTC Chairman Gary Gensler said in a press release on the organization’s website. Under a headline reading “We’ve been ready for this” forex brokerage FXCM issued the following message from CEO Drew Niv: “We believe that the reduction in leverage is a reasonable compromise from the initial CFTC proposal of 10:1 leverage. The verdict: Not as much of a limitation as many in the industry feared. the Commodity Futures Trading Commission (CFTC) made a long-awaited announcement regarding the amount of leverage that would be allowed in the U. The “major” currency pair designation has traditionally applied to the Euro/U. the central bank purchases assets (e.S.S. 30.100 according to the CFTC) from retail brokerages and traders. and the Australian dollar/U.S.S. y October 2010 • CURRENCY TRADER October 2010 • CURRENCY .” The CFTC alarmed the forex community in January 2010 when it initially proposed rule changes for retail forex transactions. forex market. U.S. forex brokerages will come up short relative to overseas firms offering as much as 400:1 leverage. Quantitative easing is often referred to as “printing money. “These rules of the road will help protect the American public in the largest area of retail fraud that the CFTC oversees: retail foreign exchange.S. including FX broker licensing and registration and minimum capitalization requirements for retail FX firms. “All CFTC registrants involved in soliciting and selling retail forex contracts to consumers will now have to comply with rules to protect the investing public. U. dollar (AUD/USD) pairs.” Critics contend the practice runs a high risk of creating high inflation.FOREX NEWS Forex world adjusts to leverage “compromise” BY CURRENCY TRADER STAFF At the end of August. Leverage for the major currency pairs will be capped at 50:1.S. While acknowledging the prevalence of comments from individual traders and brokerages about the threat of business migrating out of the U.” and require at least an annual review of these designations to potentially “adjust the designations and requirements as necessary in light of changes in the volatility of currencies and other economic and market factors. The January proposal incited a flood of comments (9. most of whom claimed limiting leverage to 10:1 would kill the U. among other drawbacks.g. We look forward to publishing additional rules to protect the American public. The leverage rule was part of a larger slate of regulatory changes impacting various aspects of the retail off-exchange forex industry.S. dollar (EUR/USD). Niv also noted FXCM has already implemented 50:1 as the default margin setting on FXCM standard forex trading accounts.” (Japan recently capped forex leverage at 50:1 and is scheduled to further reduce it to 25:1 next year. or at least onto futures exchanges. Leverage in currency futures ranges from approximately 25:1 to 40:1. [the] NFA’s current security deposit requirements. dollar/Japanese yen (USD/JPY).” The CFTC released its final ruling on Aug. the CFTC noted it “does not believe that most retail foreign exchange customers select a counterparty based solely on the maximum allowable leverage.” he said. The new rules will go into effect on Oct. The new rules charge the National Futures Association (NFA) with determining which currencies are ‘‘major currencies. 18. treasuries. y KEY CONCEPTS Quantitative easing is a tool a central bank uses to attempt to stimulate the economy when cutting interest rates is not feasible — such as when rates are already at or near zero. British pound/U. and comparable requirements found in other jurisdictions.
66% 1.7 86.42% 4.0 135. CURRENCY TRADER • October 2010 31 .4 25.7 2. 3.59% 6.7 45. it shows how the most recent 60-day move compares to the past one-hundred-twenty 60-day moves.4 3.03% / 93% Volatility ratio / rank .40% 0.88% 15. 6.1 2. Plus) Capricorn Advisory Mgmt (fxST VOL+) Sunrise Cap'l Partners (Cur. 7.70% / 100% 0.3 52.50% 1.1 OI 199.4 81. and levels of momentum and volatility.33% 20. 3. 8.55% / 88% 7.38% / 100% 1.48% / 94% 1.6 1.47% / 98% 3.26 / 27% . 20-day moves.4 10-day move / rank 4. in thousands.83% 2. 20-day move: The percentage price move from the close 20 days ago to today’s close.52% 2.8 87.28% / 100% -4.65% / 93% 8.38% / 47% 3.3 132.11% 2. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE.51% 5. 7.22% / 33% 14.11% / 81% 6.81% 10.5X) GTA Group (FX Trading) Wealth Builder FX Group Quant Trading (FX Quant 11) Marek D.63% 0.86% -0.21 / 30% . for the 60-day move.18% -1. 9.70 / 97% .55% / 16% 4.40% 6. For example.88% / 82% 20-day move / rank 7. 6. D2W Capital Mgmt (Radical Wealth) Vaskas Capital Mgmt (Global FX) Sagacity (HedgeFX100) Rove Capital (Dresden) BEAM (FX Prop) M2 Global Mgmt (2.) show the percentile rank of the most recent move to a certain number of the previous moves of the same size and in the same direction.10% / 59% 5.07% 2.66% -4.9 123. Note: Average volume and open interest data includes both pit and side-by-side electronic contracts (where applicable).35% -3. 2. The “% rank” fields for each time window (10-day moves.69% -1. Fund) Ortus Capital Mgmt.28 / 65% . it shows how the most recent 20-day move compares to the past sixty 20-day moves. the % rank for the 10-day move shows how the most recent 10-day move compares to the past twenty 10-day moves.03% 1. It is intended only to provide a brief synopsis of each market’s liquidity.31 / 65% . direction.30% / 20% 2. 10-day move: The percentage price move from the close 10 days ago to today’s close.70% / 100% 60-day move / rank 8.0 15. 5.2 4.30% / 45% 8.79% / 50% -6.6 27. Price activity is based on pit-traded contracts.2 52.3 4.95% / 53% 8.79% 2.82% 4. 8. (Currency) Gables Capital Mgmt (Global FX) August Return 7.92% 1.40 / 98% . 10.54 / 97% Note: Average volume and open interest data includes both pit and side-by-side electronic contracts (where applicable).9 40. 2.8 4. 5.S.33% 1.04% -9.4 31.8 20. OI: 30-day open interest. (Millions) 229. 4.13% / 97% 2.59% / 68% -0.12% / 25% 3.7 108.0 171.44% 3. 9.4 3.24% 9.08% 2.6 113.28 / 90% .18% 94. LEGEND: Volume: 30-day average daily volume.54 / 97% .32% 6.1 104.2 3.5 Based on estimates of the composite of all accounts or the fully funded subset method.99% $ Under Mgmt. 60-day move: The percentage price move from the close 60 days ago to today’s close.91% 32. Highland Stone Capital (HSC Fund) 24FX Management Ltd Excalibur Absolute Return Fund QFS Asset Mgmt (QFS Currency) Auriel Currency 2X Fund Premium Currency (Curr.90% 2.7 1452. dollar index NZD/USD E-Mini EUR/USD Sym EC JY BP AD CD SF MP DX NE ZE Exch CME CME CME CME CME CME CME ICE CME CME Vol 310.41% / 88% 5.6 8. Chelkowski (Forex) 7. etc. while a reading of 0% means the current reading is smaller than the previous readings.CURRENCY FUTURES SNAPSHOT as of 9/29/10 The information does NOT constitute trade signals. 4. (as of 8/31/10.03% / 93% 4. Market EUR/USD JPY/USD GBP/USD AUD/USD CAD/USD CHF/USD MXN/USD U. Volatility ratio/% rank: The ratio is the shortterm volatility (10-day standard deviation of prices) divided by the long-term volatility (100-day standard deviation of prices).52% / 71% -3. 10.4 689.1 86.2 1. for the 20-day move.39% / 97% 4. ranked by August 2010 return) Top 10 currency traders managing more than $10 million Trading Advisor 1. The % rank is the percentile rank of the volatility ratio over the past 60 days.18 / 2% .27% -6.76% / 80% 2. See the legend for explanations of the different fields.38% 2. in thousands.0 18.70% -1.0 22.87% 2010 YTD Return 49.5 1.61% 11. Does not reflect the performance of any single account.88% / 82% 2.7 BarclayHedge Rankings Top 10 currency traders managing less than $10M & more than $1M 1.33% 2.61% / 11% 2. A reading of 100% means the current reading is larger than all the past readings.21% / 39% 4.
796.745.02189 0.65% -3.190.40 4.92% 2.011875 0.75% 9.386.98% -1.70 52-week low 15.01053 0.03267 0.34% -7.128915 0.312.603.125. DOLLAR) Rank Currency 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Swedish krona Australian Dollar Euro Swiss franc New Zealand dollar South African rand Canadian dollar Brazilian real Singapore dollar Indian rupee Taiwan dollar Great Britain pound Chinese yuan Thai baht Japanese yen Hong Kong dollar Russian ruble Sept.349145 1.51% 4.338.44% 6-month gain loss 13.0318 1.31% 4.90% 1.576.19% 0.09% 9.573.48% 1.48% 5.94 12. 27 20.88% -5.6877 0.0068 0.94% 8. 27 price vs.1227 0.408.20 3.44 20.032259 0.74% 6-month gain/loss 6.00 Previous 2 6 14 11 12 7 9 13 3 10 5 8 15 1 4 October 2010 • CURRENCY TRADER .43% 1.50 24.722.18 1.45 2.80 5.5882 0.60 18.89% 1.57 1.84 28.50% 4.7635 0.90% 8.559 12.219.92% 4.40% 5.16 1.989.61% 1.98% 0.129 0.1204 0.38 22.20 5.70 18.71% 52-week high 0.07% -3.756405 0.93% 4.00 34.07% 11.03497 52-week low 0.113.14672 0.42 3.85 3.12% 5.30% 5.146 0.90% 0.70 11.09% 1.77% 8.60 29.194.4235 0.12% 6.INTERNATIONAL MARKETS CURRENCIES (vs.816.14246 0.6561 0.063.06% 6.01766 0.79% 6.048.03201 1.S.58% 5.00 28.47% 52-week high 20.15% 4.67% 4.790.77% -2.22% -0.95911 1.87% 1.07% 2.98% 7.1432 1.52% 3-month gain/loss 13.14 3.03077 Previous 16 12 14 3 17 4 15 6 5 7 9 8 11 2 1 10 13 GLOBAL STOCK INDICES Country 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 India Hong Kong South Africa France U.80 6.08% 3.90 24.02932 0.15% 6.20% 6.734055 0.77% 2.20 5.1281 0.26% 0.18% 3-month gain/loss 13.5144 1.267.054.971.40% 1.01206 0.25% 3.60 6.81% 5.142.03% 0.833.278.89 68.122.95% 5.8069 1.9094 0.935.60 5.00 33.088.62% 2.1891 0.330.40 9.990.55% 2.38 6.20% 0.7571 0.29% 1.98 23.81% 0.86% -2.0228 0.26% 4.38% 7.46% 8.41% 5.S.117.910.010.S.84 5.90 1-month gain/loss 11.00 8.87% 2.340.634.099.59% 6.593.97% 1.584165 0.40% 6.46% 1.91 4.18% 7.82% 8.5076 0.149165 0.46 6.045 10.22% 7.52% 9.959.976425 0.03056 1.148 0.06% 0.84% 4.02263 0.29% 7.61% -0.88% -10.47% 0.82% 1.766. dollar 0.321.26% 0.853 0.702 0.40% 6.83% 8. U.30% 6.30% 7.149165 0.31% 3.64 57.29% 7.15% 1.03255 1-month gain/loss 9.58254 0.9619 1. Australia UK Japan Singapore Germany Brazil Mexico Italy Canada Switzerland 32 Index BSE 30 Hang Seng FTSE/JSE All Share CAC 40 S&P 500 All ordinaries FTSE 100 Nikkei 225 Straits Times Xetra Dax Bovespa IPC FTSE MIB S&P/TSX composite Swiss Market Sept.40 4.02045 0. U.16 4.70% 2.13% 2.62% 9.90 71.287.223.89% -0.40% -12.
5 3 9.549 69.0079 2.8928 2.61% 1.8459 52-week low 72.2502 79.75 7 CURRENCY TRADER • October 2010 33 .75 (April 10) 0.25 (May 09) 0.048 138.82 1.33% 0.66% 3. 09) 0.62% -2.96% -0.03% 3.1772 1.2786 1.9096 1.95% 7.40668 0.56% 52-week high 88.5 1 0.25 (Sept 10) 0.82% 6.8244 1.25 0.95% 5.0629 1.01838 1.6978 0.25 5 7 Sept-09 0-0.1 1 0.64% -5.27 1.94247 2.62% -8.87% -2.5 8.065 0.90% -4.25 4.19% -4. 08) 0.36 58.620755 1.381725 82.75 2 1.93% 2.25 0.8065 76.25% 6-month gain loss -3.6328 Previous 17 19 10 6 12 9 21 4 16 13 7 20 18 14 1 15 3 8 2 11 5 GLOBAL CENTRAL BANK LENDING RATES Country United States Japan Eurozone England Canada Switzerland Australia New Zealand Brazil Korea Taiwan India South Africa Interest Rate Fed funds rate Overnight call rate Refi rate Repo rate Overnight funding rate 3-month Swiss Libor Cash rate Cash rate Selic rate Overnight call rate Discount rate Repo rate Repurchase rate Rate 0-0.67% 1.66% 5.19% 2.404 1.24% -0.671495 1.25 4.25 0.78% 4.5 (Dec.28% -2. DOLLAR FOREX CROSS RATES Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Currency pair Aussie $ / Yen Euro / Yen Aussie $ / Real Aussie $ / Canada $ Euro / Pound Franc / Yen New Zeal $ / Yen Aussie $ / New Zeal $ Aussie $ / Franc Euro / Real Euro / Canada $ Canada $ / Yen Euro / Franc Pound / Yen Franc / Canada $ Canada $ / Real Pound / Canada $ Euro / Aussie $ Yen / Real Pound / Franc Pound / Aussie $ Symbol AUD/JPY EUR/JPY AUD/BRL AUD/CAD EUR/GBP CHF/JPY NZD/JPY AUD/NZD AUD/CHF EUR/BRL EUR/CAD CAD/JPY EUR/CHF GBP/JPY CHF/CAD CAD/BRL GBP/CAD EUR/AUD JPY/BRL GBP/CHF GBP/AUD Sept.641855 0.73% -8.6041 94.555065 1.09% 0.55% 5.86% 9.25 4 2.71% 4.25 0.4894 1.93% -5.23 1.0981 105.309535 1.90% -0. 09) 0. 08) 0.25 3 2.25% -1.77% -2.32611 133.S.58% 3.775 113.1 1 0.4954 0.25 0.59% -5.72% -1.5 0.5 2 1.NON-U.24% 0.97% -2.59% 2.1 1 0.9895 0.25 (March 09) 0.5372 1.41% 3.65001 1-month gain/loss 7.18% 4.62 1.38% -2.78% 3.25 (May 10) 0.020325 1.6998 0.042225 1.5 Last change 0.7112 1.56% 5.6003 1.53% -4.3633 0.8643 0.473 1.1931 0.705 61.57% -5.05% 4.82% -7.25 (Feb.1955 1.9411 91.98227 0.98% -5.73% 3.235 1.8989 1.25 (Sept 10) 0.5238 153.61% 8.5 (Feb.26% -0.26% 4.75 2 1.27% -1.35% 1.5 8.5 (March 09) 0.85253 85.5 0.2 (Dec.45% -5.25 6 6.53% 3.5 (Mar. 10) March-10 0-0. 27 80.3233 1.25 (July 10) 0.7189 1.20% -3.59% -1.5573 1.94% 6.18% 8.30658 0.02127 1.2763 127.7882 1.78% 3-month gain/loss 3.26% 1.80% 1.
0% -1.9% 0.8% 7.2% 2. PACIFIC CPI Argentina Period Aug. Brazil Canada France Germany UK S.4% -0. July Aug.8% 1-year change 12. Aug. Aug.0% 0.9% -0.4% 1.3% -0.2% 0.1% -0. Rate: Unemployment rate.0% 0.2% 4.4% 19.2% 0.1% 7.4% -0.3% 1.7% 3.9% 3.4% 0.9% -1.0% 0.9% 6.1% 0.7% 2. Aug.1% 0. PACIFIC As of Sept.2% 5.1% 3. May-July Aug.8% 9.7% 6.5% 3.6% 0.0% 9.2% 4.7% 4. Aug.8% 5.0% -0.3% 2. PACIFIC GDP AMERICAS Period Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Release date 9/17 9/3 8/31 8/13 8/13 9/28 8/24 9/1 8/13 8/31 8/16 8/27 Change 23.9% Next release 11/22 10/21 10/8 12/2 10/28 11/17 10/7 10/19 10/1 10/29 EUROPE ASIA and S.7% 8.9% 10. October 2010 • CURRENCY TRADER .1% 0.3% Next release 10/15 10/7 10/22 10/13 10/12 10/12 10/27 10/27 10/21 10/29 10/1 10/25 AMERICAS EUROPE AFRICA ASIA and S.0% -0.1% -0. Africa Australia Hong Kong India Japan Singapore Period Q2 Aug. Aug. Aug. Aug.6% 3.8% 0.7% 1. Q2 Aug.0% -0.7% 0. Africa Australia Hong Kong India Japan Singapore Release date 9/15 9/9 9/21 9/14 9/9 9/14 9/29 7/28 9/21 9/30 8/27 9/23 Change 7. Q2 Aug.6% -0. June-Aug.0% 5.1% 1-year change -0.1% 1-year change 15.8% 1.2% -0.4% 18. Aug. Aug.5% 0.7% 7. PACIFIC PPI AMERICAS EUROPE AFRICA ASIA and S.1% 0.1% 0.9% 5. Release date 9/3 9/29 9/30 9/17 9/10 9/30 7/26 9/13 9/14 9/10 9/29 Change 0.3% Change -0.0% 6.1% -0.8% 0.6% -1. July Q2 Release date 8/23 9/23 9/10 9/2 9/30 9/15 9/9 9/16 8/27 7/30 Rate 7.1% 0.0% 3.9% 1. Aug.0% -0.5% 3.4% 0. Africa Australia Hong Kong India Japan Singapore July Aug.4% -4.1% 3.INTERNATIONAL MARKETS Unemployment AMERICAS Argentina Brazil Canada France Germany UK Australia Hong Kong Japan Singapore Argentina Brazil Canada France Germany UK S.1% 0. 30.6% 0.6% 0.8% -4.1% 9.5% 8.5% 1-year change 11. NLT: No later than.0% 0.4% 0.4% -0.1% -0.1% 3. Aug.2% -0.5% 0.1% 1.1% 0.2% 0. 2010 34 Period Argentina Canada France Germany UK S.3% 6.8% -0. Aug. Aug. Q2 Q3 July Aug.5% Next release 10/15 10/29 9/30 10/20 10/8 10/28 10/25 12/13 10/14 10/14 10/29 LEGEND: Change: Change from previous report release.2% 6.8% Next release 12/17 12/9 11/30 11/30 11/12 12/22 11/30 12/1 11/12 11/30 11/15 NLT 11/26 EUROPE AFRICA ASIA and S.1% 0.
8:30 a.m.m. FND (first notice day): Also known as first intent day.S.S. The clearinghouse also informs the seller. 15 16 17 18 19 2 3 4 5 U. Currency Trader is not responsible for the accuracy of calendar dates beyond press time. 10:00 a.m. 8:30 a.S.S.S.S.: October employment report LTD: November U. dollar index (ICE) U.S.) GDP CPI ECI PPI ISM Unemployment Personal income Durable goods Retail sales Trade balance Leading indicators Release time (ET) 8:30 a. 8:30 a. dollar index (ICE) 29 U.: September durable goods Australia: Q3 CPI South Africa: September CPI 28 France: September PPI Germany: September employment report South Africa: September PPI 8 U.: Fed beige book Germany: September PPI U.: September personal income and October ISM manufacturing report 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 3 4 5 6 The information on this page is subject to change.: September leading indicators Brazil: September employment report Hong Kong: September CPI 2 3 4 5 6 7 22 Japan: Bank of Japan interest-rate announcement Australia: September employment report Brazil: September CPI Mexico: September PPI and Sept. 8:30 a.: September housing starts Canada: Bank of Canada interestrate announcement Hong Kong: July-September employment report CURRENCY TRADER • October 2010 35 .GLOBAL ECONOMIC CALENDAR: OCTOBER CPI: Consumer price index ECB: European Central Bank FDD (first delivery day): The first day on which delivery of a commodity in fulfillment of a futures contract can take place.: September employment report Brazil: September PPI Canada: September employment report UK: September PPI LTD: October U.m.S. FOMC: Federal Open Market Committee GDP: Gross domestic product ISM: Institute for supply management LTD (last trading day): The final day trading can take place in a futures or options contract. 8:30 a.m. PMI: Purchasing managers index PPI: Producer price index Economic release (U.m.S. this is the first day on which a clearinghouse can give notice to a buyer of a futures contract that it intends to deliver a commodity in fulfillment of a futures contract.S.: September ISM manufacturing report and August personal income Japan: August employment report and CPI 20 21 U.m.: Q3 GDP (advance) Canada: September PPI India: September CPI Japan: September employment report and CPI 9 10 11 12 13 14 30 31 Germany: September CPI UK: September CPI France: September CPI U.m. 1 U. 15 CPI 23 24 25 26 27 Australia: Q3 PPI U.: September PPI and August trade balance India: September PPI Japan: September PPI October 2010 26 27 28 29 30 3 4 5 6 7 1 8 2 9 November 1 U.m. 8:30 a. 8:30 a.S.m.: FOMC interest-rate decision U.m.S. 30 CPI ECB: Governing council interest-rate announcement Canada: September CPI Mexico: September employment report and Oct.S. 8:30 a.S. 10:00 a.
20-22 Location: Barcelona.com. Calif.com 36 October 2010 • CURRENCY TRADER .metradersexpo.au Event: Third Annual Inside Commodities Conference Date: Nov.tradingandinvestingexpo.moneyshow. 29-30 Location: Sydney For more information: www. For more information: www. Marriott.com International Traders Conference Date: Oct. Spain For more information: www. Los Angeles For more information: http://bollingerbands. Regis Monarch Beach resort in Dana Point. Qatar For more information: www. 18-20 Location: Ritz-Carlton Beach Resort. 17-20 Location: Caesars Palace. Fla.gflc.com Event: Sydney Trading & Investing Seminars & Expo Date: Oct. Naples. Las Vegas For more information: Go to www.com/br Event: Las Vegas Traders Expo Date: Nov.com Event: 2011 CBOE Risk Management Conference Date: Feb. 17-18 Location: J.com/seminar/ Event: The First Qatar Traders Expo Date: Oct. 4 Location: New York Stock Exchange For more information: Go to www. For more information: Go to www. 27–March 1 Location: St.cboeRMC.insidecommoditiesconference.EVENTS Event: Bollinger Bands Seminar Date: Oct.W.traders-conference.com Event: FXstreet.com Event: CME Group’s Global Financial Leadership Conference Date: Oct. 9-10 Location: Sheraton Gateway Hotel at LAX.
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