US industrial production 1.1% vs 0.5% exp m/m in November

• Prior -0.1%
• Manufacturing 0.6% vs 0.4% exp. Prior 0.3%
• Capacity utilisation 79.0 vs 78.4 exp. Prior 78.1

Motor vehicles and parts lead the way rising to 3.45 from -1.3% prior, Utilities +3.9% from -0.3% in Oct, Mining industries +1.7% vs -1.5% prior, consumer goods +1.5% from -0.1% prior. The same sectors saw decent gains in capacity utilisation also.

USD/JPY shrugs off the numbers but cable and the euro continue to slide.

US Industrial production 16 12 2013

Source: http://www.forexlive.com/

US Stocks Jump At The Open Market

The S&P 500 is up 14 points to 1790 shortly after the open. The index was flat on Friday and the jump is significantly stronger than futures were indicating.

US stock futures were down overnight, touching as low as 1760 at one point — 30 points below the current level.

Source: http://www.forexlive.com/

euro slide continues

We went through 1.3760 on the second attempt after it became intraday resistance, but are holding just ahead of 1.3750.  The 55 h1 has also held up here and a fall through will see us looking at 1.3735 and then last Fridays lows just ahead of 1.3700.

EUR/USD h1 chart 16 12 2013

Elsewhere the dollar is largely doing nothing with USD/JPY stuck in a 30 pip range.

Source:http://www.forexlive.com

Latest Pakistan Open Market Forex Rates

FOREX RATES Pakistan Open Market Forex Rates Updated at : 16/12/2013 6:25 PM (PST)
Currency	Buying	Selling
Australian Dollar	96	96.25
Canadian Dollar	101	101.25
China Yuan	17.55	17.8
Euro	146.75	147
Japanese Yen	1.055	1.08
Saudi Riyal	28.4	28.65
U.A.E Dirham	29.1	29.35
UK Pound Sterling	175	175.25
US Dollar	107	107.25

Australian Dollar Faces Make-or-Break Event Risk as FOMC Meets

Australian Dollar Faces Make-or-Break Event Risk as FOMC Meets

Fundamental Forecast for Australian Dollar: Neutral

• Australian Dollar Floundered Alongside US Treasury Yields on Fed QE “Taper” Bets
• FOMC Now in Focus; Outright QE Reduction, Hawkish Rhetoric to Sink the Aussie
• DailyFXSSI Speculative Sentiment Gauge Argues for Further Aussie Dollar Selling

The Australian Dollar accelerated downward last week, losing nearly 2 percent against its US namesake and entering the weekend at the lowest level in three months. The move lower over the past eight weeks has closely mirrored a recovery in benchmark 10-year US Treasury bond yields, suggesting the liquidation reflects building speculation about an imminent cutback of the Federal Reserve’s QE3 asset purchases.

The foundation for scaling down stimulus appears to be in place. Fiscal drag fears – already on the decline since end of the government shutdown in mid-October – appear to have all but faded after Congress secured a two-year budget deal last week. Meanwhile, US economic data has increasingly outperformed relative to market forecasts since the beginning of November (according to data compiled by Citigroup). Finally, near-term inflation expectations have started to perk up, with the 1-year breakeven rate (a measure of the price growth outlook priced into bond yields) surging in late November to the highest level since mid-April.

The moment of truth arrives next week as the Fed’s policy-setting FOMC committee meets for its sit-down of the year. A Bloomberg survey shows that 14 out of 65 polled economists expect a slowdown in MBS purchases while 20 out of 65 predict a reduction in Treasury bond intake. That points to a dramatic increase in taper bets compared with what the same survey showed just a few weeks ago but leaves those calling for the status quo in the majority. 

On balance, that skews outsized volatility risk toward the hawkish side of the spectrum, meaning the most potent outcome is likely to be an outright QE cutback. A decision to hold off this time around against a backdrop of taper-supportive cues in the Fed’s updated set of economic forecasts and/or Ben Bernanke’s last press conference as Chairman represents the second-most volatile scenario. 

Either outcome is likely to give a negative jolt to risk appetite trends while pushing the US Dollar higher, amplifying selling pressure on the Aussie in the process. Needless to say, the absence of either of these developments stands to yield the inverse dynamic, although follow-through might be less dramatic considering such a result would fall broadly in line with the consensus view.

On the domestic front, December’s HSBC Chinese Manufacturing PMI report represents the only bit of noteworthy event risk. Expectations call for a slight pickup in factory-sector activity. As a stand-alone release, this might have helped the Aussie higher, but taken against a backdrop of Fed-related macro gyrations across the financial markets the data may not even register on investors’ radar.
Source: http://www.investopedia.com/forex/news/

Why You Are Going Opposite Way About Growing Your Accounts

Talking Points

• Why Improper Trade Size Is Tempting
• Why Too Large A Trade Will Likely Eventually Cause Ruin
• Risk: Reward With Proper Trade Size Is A Safer Path

It’s easy to over simplify trading. Many traders think that trading is a two pronged game made of very simple rules. Rule 1: Guess or know where the market is going next based on superior analysis and Rule 2: Place a trade in the direction of your analysis and depending on how good you are the bigger the better. Of course, it isn’t that simple. 

Why Trade Size Is Tempting

New traders all too often look for the ‘can’t fail’ system or Holy Grail of analysis. It’s easy to feel that once you’ve found the Holy Grail, then you can amp up the trade size to immediate riches. It’s important to understand, this is a short-term recipe for excitement and long-term recipe for disaster. The reason is that one bade trade with too large a trade size can set you back, days, weeks or months. 

Learn Forex: Regardless Of My Conviction, Trade Size Needs To Stay Limited

Presented by FXCM’s Marketscope Charts

This chart of GBPUSD could give you very clear conviction that GBPUSD could move higher. There is an Elliott Wave count that looks to be taking GBPUSD higher along with a Fibonacci Expansion moving showing a 1.67500 target, the UK economy is fast improving, and the Speculative Sentiment Index is at -3.29 showing 67% of retail traders are short (this is a contrarian buy signal). However, despite all the confluence that is happening on this chart, there is no certainty in the end. 

The key issue is that many traders need to avoid is the belief that once they have figure out how the markets work then they’ll be ahead of the markets and can capitalize on that by placing trades with a lot of leverage. The temptation needs to take a cold shower because there are thing beyond your control that can take the best ideas and see them fail and your account drop.

Bottom Line: Traders should look for confluence or for an objective edge before entering a trade but no strategy should lull you into trading to large trade size because one outlier event or miss placed analysis can hurt you possibly beyond repair.

Why Too Large A Trade Will Likely Eventually Cause Ruin

Of course, it’s great to find a trade where everything comes together. Maybe, a large disparity develops where a central bank like the Reserve Bank of New Zealand begins discussing raising interest rates while another discusses lowering interest rates or QE. That type of monetary policy disparity is the type of fundamental set-up that many traders crave. 

However, regardless of the background behind the set-up, it’s easy to think that now is the time to go “all-in”. However, there is always risk in a trade because you don’t know the outcome and as Mark Douglas pointed out in his seminal book, Trading in the Zone,” The market can do anything at any moment because every person who trades is a market variable. That means you will never learn enough to anticipate every possible way that the market can make you wrong or cause you to lose money.”

It may help you to think of the “rogue traders” that have worked for banks like JPMorgan, UBS, Société Générale, or Barings (since sold due to the bad trader). These traders had the same emotional make up as you do and knew that a big trade would pay-off big. However, the risk got out of hand and the market went the wrong way which cost their banks billions and them their ability to trade again. 

Bottom Line: Your emotional makeup will make it tempting to trade large when you think the stars have aligned for your trade but think of others before you who acted on that temptation and brought down major institutions and careers.

Risk: Reward with Proper Trade Size Is a Safer Path

If you wanted to sell a trading system, the quickest and easiest way (this is not a recommendation) would be to tout a very high win%. Win percentage or the ratio of winning trades to overall trades makes you sound like you’ve cracked the code to the markets. However, because even Wall Street’s biggest institutions that devote millions of dollars in a research and analysis desk have losing quarters, it’s not a matter of if you’ll lose but rather how much of your hard earned equity will you give back to the market when you do? 

Learn Forex: USDMXN Made an Impressive and Surprise Break To the Downside


Presented by FXCM’s Marketscope Charts

This may seem like a pessimistic question but it is important that you have a plan when the market goes against your trade. A recent example was after the December NFP when USDMXN broke a major trendline to the downside off a positive NFP as the fed is considering tapering which is overall US DOLLAR positive and likely negative for EMFX like the MXN. I bring this up because I placed a losing trade on USDMXN but my loss was limited to 2% of my account capital because I knew that I didn’t know what the future would bring even with the confluence that was present. Even though a loss was taken, it was a good trade due to the risk to reward or reward sought on risk taken. 

The longer you trade; you’ll quickly realize that the ability to survive trendless markets is part skill and part science. The skill comes from knowing that there are trending markets and there are ranging markets and if you’re familiar with which market you trade best, you’ll be able to focus on the skill set that favors your success and stay away from the market environment where your edge dissipates. Lastly, you’re survivability will be in larger part toyour ability to manage risk. When you’ve learned to manage risk, regardless of your expertise in analysis, you’ll be able to weather the storm and be there when the market that favors your expertise. 

FXCM App Store: Risk Management Tool

Available Through FXCM’s App Store

Bottom Line: You can only ignore how much risk you’re taking for so long. Eventually, you’ll need to decide how consistent you want to be in the markets and long-term consistency and success will come from an appropriate method to manage risk while seeking reward on every trade regardless of how many favoring factors are behind the idea. 

Closing Thoughts

Trading FX or any other market is overloaded with tempting but disappointing shortcuts. Of course, a shortcut doesn’t necessarily represent the best bath. What’s worse, when you believe you’ve found a shortcut, you’re likely to increase the trade size which only requires one trade to not play out like my USDMXN trade which if overleveraged could have wiped out a successful end to 2013. The better and safer path overall is to focus on the limited risk in relation to the reward you’re seeking on every trade. 

Have a Happy & Safe Trading This Holiday Season & Beyond. 
Source: http://www.investopedia.com/forex/news/

Federal Reserve’s $85 billion of monthly bond purchases

The yen rose from a five-year low versus the dollar amid speculation on the timing of a cut in the Federal Reserve’s $85 billion of monthly bond purchases.

The Japanese currency fell earlier as the yield difference between Treasuries and Japanese bonds traded at almost the widest since April 2011. The euro weakened as European Central Bank policy maker Peter Praet said the region’s recovery is “fragile.” The Federal Reserve and Bank of Japan are scheduled to hold policy meetings next week.

“The yen’s fall to fresh lows prompted some profit-taking,” Joe Manimbo, a market analyst in Washington at Western Union Business solutions, a unit of Western Union Co., said in a phone interview. “The yen’s rebound partially stems from caution in the runup to the Fed next week.”

The yen gained 0.2 percent to 103.21 per dollar at 5 p.m. New York time, down 0.3 percent this week, after reaching 103.92, the weakest level since October 2008. Japan’s currency added 0.2 percent to 141.87 per euro. It reached 142.83, also the weakest since October 2008. The shared European currency fell 0.1 percent to $1.3742.

The JPMorgan G-7 FX Volatility Index dropped to 8.64 percent after rising to 8.78 percent, the highest level since Oct. 2. It has increased from a 2013 low of 7.48 percent reached on Oct. 28, and is still below the year’s average of 9.23 percent.

Futures Positions

Hedge funds and other large speculators trimmed bets the yen will weaken, according to data from the Commodity Futures Trading Commission. The difference in the number of wagers on a decline in the currency compared with those on a gain -- so-called net shorts -- was 129,711 as of Dec. 10, compared with 133,383 a week earlier.

The British pound weakened for a third day against the dollar on speculation its advance to a two-year high this week was overdone and as Bank of England Chief Economist Spencer Dale said interest rates will stay low. Sterling is the worst performer out of its 16 major peers and slipped 0.3 percent to $1.63, after falling to its weakest level since Nov. 27.

South Africa’s rand strengthened versus all of its major counterparts as Chile’s largest drug maker raised its takeover offer for Adcock Ingram Holdings Ltd., the largest producer of South African hospital products. The currency climbed 0.9 percent to 10.2920 per dollar.

The Chilean peso rose versus all but one of its 31 most-traded peers as the country’s central bank kept borrowing costs unchanged yesterday after inflation accelerated more than expected in November, climbing back to the target range for the third time in the past 12 months. The currency increased 0.4 percent to 529.89 per dollar after gaining 0.8 percent, the most in a week.

Yield Spreads

The dollar rose versus the yen this week as Treasury 10-year yield traded at 2.86 percent after rising two basis points yesterday, according to Bloomberg Bond Trader prices. The yield premium over equivalent Japanese government bonds was at 2.18 percentage points, almost the 2 1/2-year high of 2.24 reached on Dec. 5.

The Fed will probably begin reducing $85 billion in monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists surveyed on Dec. 6 by Bloomberg News, an increase from 17 percent on Nov. 8.

“The prospect of Fed tapering, either sooner or later, and continued monetary easing by the Bank of Japan remain a powerful driver of dollar-yen gains specifically, and obviously broad yen trade-weighted depreciation,” said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore. The yen will drop to 110 per dollar at the end of next year, according to Standard Chartered, compared with a median forecast of 108 in a Bloomberg News survey of analysts.

Central Bank

The BOJ, which buys more than 7 trillion yen ($70 billion) of Japanese government bonds every month in its bid to stoke inflation, starts a two-day meeting on Dec. 19. The central bank aims to keep ultra-easy monetary policy in place beyond the two-year timeframe, the Financial Times reported, citing an interview with Governor Haruhiko Kuroda.

The yen has weakened 14.5 percent this year, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar appreciated 3.8 percent and the euro climbed 8.6 percent, the biggest advance.

“The reasons why the yen is depreciating now are the same reasons it was depreciating earlier in the year, it’s the fact that people are talking about chances that the BOJ will expand its monetary policy again” next year, said Sonja Marten, a currency strategist at DZ Bank AG in Frankfurt. “To a degree if the Fed begins tapering this puts it on a path that can eventually lead to higher rates and this might be a factor too” pushing the yen lower against the dollar, she said.

The euro area’s recovery is muted and fragile, ECB Executive Board member Praet said in Antwerp.

Options Trade

Trading in over-the-counter foreign-exchange options totaled $43 billion, from $52 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $13.9 billion, the largest share of trades at 33 percent. Options on the euro-dollar rate totaled $5.9 billion, or 14 percent.

Dollar-yen options trading was 5.7 percent less than the average for the past five Fridays at a similar time in the day, according to Bloomberg analysis. Euro-greenback options trading was 16 percent below average.

Source: Bloomberg