7) “Smoothing Out” other Indicators ie. Stochastic Oscillator:

The construction of the Ichimoku shows that we don’t have to use the MA of the close price. In fact if you think about what the moving average really is, it is simply a look at a series of data and smooths them out. Therefore, another use of the MA is to smooth out not only price data, but indicator data. For example, the stochastic oscillator uses a smoothing out process in its calculation:

Here is the formula as well as an image of the stochastic oscillator copied from the FXTimes glossary:

When plotted on a chart, the indicator is usually plotted as 2 lines: %K and %D. %K is the main (fast) line and %D is the signal (slow) line.

A component of the stochastic formula is as follows:

Fast %K = ((Today’s Close – Lowest Low in %K Periods) / (Highest High in %K Periods – Lowest Low in %K Periods)) * 100
%D = 3-period simple moving average of Fast %K (This basically smooths out the Fast%K line)

The stic Oscillator is calculated by the formula:

Fast %K = ((Today’s Close – Lowest Low in %K Periods) / (Highest High in %K Periods – Lowest Low in %K Periods)) * 100
Slowing %K = N-period moving average of Fast %K
%D = N-period simple moving average of Slowing %K

You can see in the example that the “full” stochastic has a smoother, rounder path, while the “fast” stochastic has a more jagged one.

Note: technical indicators are all derived from price data.

1) As an indicator of general trend relative to price
2) As an indicator of general trend based on the 2 different moving averages
3) Other multiple moving average systems

In construction of other indicators:

4) MACD
5) MA envelop – Bollinger Band
6) Horizontal shift; in Ichimoku Charts
7) “Smoothing Out” other Indicators ie. Stochastic Oscillator

NEXT: Channels, Bands, and Envelops (Intro)

Fan Yang CMT is the Chief Technical Strategist FXTimes – provider of x News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.

19 Trading Rules to Beat the Markets

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Since entering the financial markets in 1969, Martin J. Pring has become a leader in the global investor community. He is the chairman of a conservative money management firm, Pring Turner Capital. He is known for developing economic indicators and also well known for his contribution in educating traders and investors. In fact some of his books are requirements for those seeking the CMT (Chartered Market Technician) designation. In one of these books, Investment Psychology Explained – Classic Strategies to Beat the Markets, he lists 19 classic trading rules. Below is a summary and my interpretation of his rules and how I think they can be applied. Rule 1-10 are psychological management rules while 11-19 are risk management rules.

Rule 1: When in Doubt, Stay Out – Sure, you can’t ever get rid of all uncertainty. However, if you are going to do the research and come up with a trade idea, you need to have confidence in the reason you are entering the trade. Otherwise, you will not have the conviction to stick with a trade and might get “shaken” out by noise. On the other hand if you do have a sound reason to enter the trade, but that reason becomes invalid, you no longer have the justification to stay in. In this case, an exit is warranted because otherwise it is simply a gamble. You are not in this business to gamble, but to invest or trade into sound market research and analysis.

Application: make a list of setups, or events that need to happen before a trade should be considered.

Rule 2: Never Invest or Trade Based on Hope – This complements rule 1. If you are not confident in your analysis and reason for trading, you invite hope into the picture. When you start praying to your God or lady luck, you have become a gambler, and not a trader/investor. Because in both gambling and investing,  there is uncertainty, there is a thin line between the two “fields”.

Application: Try to be as mechanical as possible when it comes to entry and exit methodology. Don’t leave room for hope when the market is against you and hit your stop level.

Rule 3: Act on Your Own Judgement or Else Absolutely and Entirely on the Judgement of Others - Basically, what Pring is saying here is to have consistent method in your trading, and have confidence in it. Your sources of information from which you derive a strategy should be sound, and if you trade frequently, they should not vary from trade to trade. You don’t scrap all your analysis just because some analyst somewhere offers his or her expert opinion. If you try to resolve what all these “experts” are trying to say, you might end up with analysis paralysis. Find a consistent method and stick to it, otherwise keep working on your method, OR let a professional manage your account. (In this scenario, make sure you do the research on your money manager).

Application: Make a checklist of resources that you based your information on. ie. economic releases, technical analysis, opinions of analysts you follow consistently. If someone offers analysis you have not encountered before, take time to work it into your routine decision making instead of just taking it face value.

Application: In a range bound market, define areas of support and resistance. Look for selling opportunities at resistance and buying opportunities at support. In a trending market, say bullish, only look to buy on dips. Vice versa during a bearish market look to fade rallies. Again, this is just a general concept and the actual decision to trade should be determined along with other factors.

Rule 5: Don’t Overtrade – The only reason to trade is if the market is giving you the signals you believe to provide trading opportunities. However, there will be times when being objective is difficult. Other reasons can cloud your judgement. For example if you had a disappointing week, you might pin your hopes in trading to pick yourself up. Or subconsciously trading might be an entertainment and provide emotional fulfillment.

Application: Making the trading process as mechanical as you can will eliminate some of the “garbage” factors in trading. It is also important to prepare yourself mentally and emotionally before your trading sessions. Get your mind cleared up of outside influences. Treat trading as a professional endeavor, because as soon as you don’t, it becomes gambling.

Rule 6: After a Successful and Profitable Trading Campaign, Take a Trading Vacation - This rule helps to eliminate overconfidence and addresses the fact that trading performance is cyclical. Besides, don’t you want to have a life?

Application: Knowing when NOT to trade is as much a discipline as knowing when to trade. Therefore you need to define what it is to have a profitable campaign and what it takes to return to objectivity after gaining confidence. When you feel like you’re superman, and when you start making projections into the future based on your recent period of success, you should be alarmed that you are near that peak of your cycle.

Rule 7: Take a Periodic Mental Inventory to See How You are Doing - This rule basically reminds you to stay objective, and understand that trading is a very cerebral process.

Application: Create a checklist of questions before you trade ie. Am I emotionally stable at the moment? Am I overtrading? Am I sticking to my trading plan? Can I afford the risk if the market does not go the direction anticipated?

Rule 8: Constantly Analyze Your Mistakes – Understanding yourself is very important in a world full of uncertainties. When you win, it is very likely that you attribute success to hard work, and when you lose the tendency is to attribute it to bad luck. Knowing this bias, you should look deeper to recognize mistakes in judgement.

Application: There are different types of mistakes. 1) Bad execution – Did you make a trade that is not part of your system? If so ask yourself why. Did it come from an emotional trigger like fear of missing a trade. 2) Bad trade management – It is one thing to make the wrong call, it is another to allow the bad call to become a major drawdown. Ask yourself if the mistake was contained. Were you hoping the market comes back? Did you exit due to despair after loss of hope? If so, you probably entered the trade without enough consideration of the risk and only looked at the prospect of profit. Lack of preparation therefore can lead to inability to manage your loss. 3) Systematic – Only when you can rule out the first 2 types of mistake, can you truly be objective in analyzing your method. If losses are piling up despite sticking to your plan and containing losses, it is time to get back to the drawing board. Step away and look at your trading strategy.

Rule 9: Don’t Jump the Gun - Be disciplined. That’s all. If you have a specific trading strategy, you have to wait until the signals are there. Otherwise, what’s the point of having a strategy. Unless you have been in this profession for 20 years and still surviving, don’t rely on “intuition”. This is something you have to build through countless trades, and the only way to gain intuition is to begin with discipline.

Application: Be as mechanical as you can. Refrain from the temptation of justifying a trade without your signals simply because you believe it is an exceptional situation. There can be exceptional factors everyday, so if you go on these reasons, you might as well not have a trading plan at all. So again, a checklist of signals required might be helpful in making the trading process as mechanical as possible.

Rule 10: Don’t Try to Call Every Market Turn – Yes we want to buy into weakness and sell into strength. But that does not mean picking tops and bottoms. It might be emotionally satisfying to be able to call the top, then pick the bottom, but to be able to do this is an unrealistic expectation.

Application: You might want to set up for counter-trend trades near some major market tops and bottoms, but trying to get in at all the twist and turns will make you overtrade and be chopped up by the market.

Rule 11: Never Enter into a Position Without First Establishing a Reward to Risk- Pring suggests trading at least 3-1 reward to risk ratio. Also, knowing what type of risk is involved helps with position sizing and limiting losses to level that won’t devastate your account. This also provides emotional preparation in the case of a bad call.

Application: Be careful not to give false expectation of reward to risk in order to justify a trade. You have to define where your trade idea becomes invalid. That is your projected stop. You also have to define where you can expect the market to go in your favor by looking at some pivots (support and resistance). Now just because you made these assessments, it doesn’t mean you should always just set your stop and limit and walk away. There will be times where you have to adjust and maybe lock in profits before the market reaches your target. Sometimes you might have to make an emergency exit before reaching your stop. While your exit might require more agility, your entry should follow a more rigid reasoning and having a minimum reward to risk is important. While 3-1 is a good reward to risk ratio, a minimum could probably be 2-1.

Rule 12: Cut losses, Let Profits Run – This is another one of those sounds easier said than done type of rule, but it is probably the most important as far as trade management is concerned.  Cutting losses requires discipline and leaves no room for hope. Don’t justify staying in the trade if the market action already invalidates your reason of entry. This does not mean to abandon a trade at the first sign of failure. You will often need to give the market some “elbow space” to have a chance to go in the direction you anticipated. Cutting losses means your original reasoning is invalid AND the risk is no longer acceptable. Of course, you would have ad to establish what risk is involved before hand. Letting profit run is also a difficult task. You have to define before hand what signals you look for in exiting. If these signs are not there, letting the profit run is the prudent action. But you also have to consider locking in profits.

Application: Again, in reality this process is more difficult then it sounds. Knowing when to cut your losses and how to let your profit run will require experience with your trading methodology. Spend as much time if not more in developing exit strategy as developing your entry tactic. A trade is not over until the exit and it is the exit that defines the performance of trade, not the entry.

Rule 13: Place Numerous Small Bets on Low Risk Ideas – Statistically, the more you trade your system, the more likely the performance will reflect that of the system. There will be inevitable losses and in having few trades with large exposure, you risk being in the period of drawdown in your system. Allowing more trades means allowing more chance of your trading system to show its true nature. This means limiting the exposure for each trade.

Application: Pring and the conventional suggestion for exposure per trade (EPT) is 5%. I would say even lower EPT is better especially if you plan on having multiple positions open because there could be a period where you will actually have exposure up to 10%. If you do, make it a point to reduce that exposure at specific times. For example if you are a intraday trader, you might want to close some positions that are not looking as good as others  during the end of a trading session for the region ie (end of the US trading session). Or if your positions are already in the black, you might want to move your stop close to lock in a profit and thereby reducing exposure. Remember, exposure is how much you are willing to risk and can be defined by where you place your stop.

Rule 14: Look Down, not Up – Pring reminds traders that the decision to trade is not just based on potential profit, but also potential of loss and acceptability of this loss relative to expectation of the profit.

Application: Also start a trade decision with consideration of loss. Then look at what the potential reward is. This is important because if you look at the potential reward first, you might become too optimistic and overlook the real risk involved.

Rule 15: Never Trade or Invest More Than you Can Reasonably Afford to Lose - Only trade your risk capital. Not diaper money, not grocery money. If you trade money that if lost will devastate your living standard, you will have too much emotional attachment to each trade and that can cloud your judgement.

Application: I think this is quite clear – only invest risk capital. This is why brokers will ask you about your income and such. Regulatory agencies have made it the broker’s responsibility to deny accounts to people that are not suitable in terms of having risk capital. As a trader though, this responsibility should be all on your shoulder.

Rule 16: Don’t Fight the Trend – The trend is your friend is a common saying in the trading/investment community. While there are times to be contrarian and play major tops or bottoms, it wouldn’t be wise to always be a contrarian. Most of the time you want to run with the herd. Don’t try to catch a falling knife is another saying warning you from trading against a sharp move.

Application: You might ask, doesn’t this go against the buy into strength, sell into weakness rule? f you can resolve these two rules you understand the uncertainty of the market and how you have to juggle contradicting ideas. As mentioned in the application of rule 4, trade in the direction of the trend, after noise against the trend. In order to do all these, you have to define what is a trend, and what is noise. That is a topic for another day.

Rule 17: Whenever Possible Trade Liquid Markets – A Liquid market as Pring defines it is one that has many participants with differing opinions so there are traders on each side of the market willing to take positions. In this case, your trading cost will be lower. Although forex is the most liquid financial market, especially in popular instruments like EUR/USD, the spread can widen in event of economic releases or important press conferences and speeches. Trading during these events can be costly not only because of the wider spread, but also because it is often impossible to determine how the market will react, and react to the reaction, and so forth. For the short-term trader, it is probably more prudent to stay away from these event risks, and wait for the dust to settle before getting in.

Application: Avoid trading 30 minutes before or after an important release. This means you will inevitably miss some moves. But if you look at it objectively, you are always missing moves. When you happen to be right and miss a move, you might kick yourself. But is your emotional impact the same when your opinion is wrong and instead of missing profit, you avoided a loss? You’re likely to give the latter the same weight and therefore have a faulty bias that you are always missing good calls. Now, if objectively you do find yourself to always make good calls in terms of reactions to risk events, go for it. But the wiser thing to do is probably to first see how the market reacts to them before making a decision to trade these events.

Rule 18: Never Meet a Margin Call - “Never meet it by sending in more money” is Pring’s advice. If you are meeting a margin call, something very wrong is happening. Either you are overleveraged or overtrading, or both. Also, it means you are not monitoring your EPT. Whatever the reason, adding more funds immediately to remedy a margin call is like pouring more gas into a leaking tank. You have to first fix the leak.

Application: In this unfortunate time, Pring suggests taking a vacation. Your emotional state is probably not right for trading at the moment and you will have to step away from the market to regain clarity before deciding to add more funds. If you have enough funds, and it was solely overleveraging and overtrading, you might have to make a request to your broke to lessen that leverage, and also get it in your head to limit your EPT.

Rule 19: If You Are Going to Place a Stop, Put it at a Logical, Not Convenient Place - The position of the stop should be based on fundamental and technical reasons, and not based on how much you can afford to lose. For example, if you determine that you can only expose $300 in the trade, don’t place the stop simply where the market would give you that loss. Instead, after determining the stop placement, and with the understanding of your EPT, decide on your position size.

Application: Here are a couple of links for risk management applications that deal with stop placement and position sizing among other issues:
Basic Risk Management
Risk Management II

This summary and interpretation was provided by Fan Yang CMT, Chief Technical Strategist

Traders new and seasoned deal with many common emotions while trading. These might even linger when they are not trading. The experts differ from the rest by recognizing these emotions and developing methods for dealing with them. Let’s take a look at some common emotions. See if you can recognize them while you are trading.

The Common Trading Emotions

1. Fear (of financial failure, can’t support family, etc.) – Fear is a natural response towards the unknown. Your mind is seeking for end-results and trying to see if the scenarios are acceptable. If one of those scenarios is doom to your finance, you should naturally fear trading. But there are ALWAYS unknowns in the market, and factors out of your control, so how can you beat fear?
2. Greed – The want of more than should be realistically expected. This usually happens after positive experience with the markets, and is a major factor that breaks down ones discipline in risk management. Greed can also occur after some flat periods when a trader feels that he is mostly right, but hasn’t been placing a large enough position to make it an “exciting” or a “meaningful” gain. Position size increases. Stops aren’t planned out with due diligence, aggressive targets are regarded as if they were conservative targets. All this leads up to breaks down your strategy, and you are left with basically a gambling habit.
3. Desperation – You win some you lose some. Many beginning and even seasoned traders fall in the trap of trying to make back what they lost. This is a desperation move to get back to the starting level, or maintain a certain profit-loss ratio. Without carefully planning positions sizing, changes in position out of desperation usually means adding a larger and larger position. What’s worse is that sometimes, this works! But over time, the odds are your desperation moves will harm you more than cover your last few bad trades.
4. Euphoria/Pride – Hubris. It is a feeling almost that one is superhuman, or has a special gift. This is usually generated by a string of winners. Winners build confidence, and without any losers to shape character, the trader can develop so much pride that he or she forgoes disciplined steps. What ends up happening is a cycle of a bad trading life where – the winners build confidence – confidence builds bad habits – greed will amplify bad habits eating up the gains – and finally desperation causes an even quicker decline. The fall from great heights to dismal lows are easier than you might think, especially if you are not aware of these emotions.

If you trade long enough you should experience all these emotions. Going through them the first time while trading live can be a roller coaster, I have been there, but it was anything too serious. I want to talk about how to deal with these emotions, but it is time to make dinner and socialize a bit, so I will continue in our next article.

For now try an exercise. Can you recognize the pattern of WHEN these emotions come up? After a gain of 200 pips do you feel Greed? After winning 5 consecutive trades, do you feel Euphoria? What about after 5 consecutive losses? Do you feel desperation? Or fear? It might be helpful to create a journal.

Next: How to Deal with Fear, Greed, Desperation, Euphoria and Pride

Fan Yang CMT
Chief Technical Strategist
FXTimes

The GBP/USD continues to struggle even as employment numbers were positive in the UK. The pound sterling (GBP) continues trending lower toward US$1.50 and recent British retail sales figures are the culprit. Though analysts had expected little to no decline, Great Britain’s April retail sales were 1.3% lower than the previous month. As a result, the GBP continued to lose ground versus the greenback

Monday is a holiday in the US and the UK and next week there is are German and European inflation releases as well as GDP releases in the US and Canada.

• Germany Reports Sluggish Growth
• EUR/JPY at 131 Before German Data
• Bullard Recommends the ECB Follow the US Fed Policy
• UK Mortgages Rise to 4 Year High
• UK Inflation Drops in April
• ECB President Sees Encouraging Signs in UK Economy
• ECB’s Draghi Says Buying Government Bonds is Helping
• ECB Weidmann Monetary Policy cannot Solve the Crisis
• UK First Quarter Growth Confirmed
• BoE Minutes Show King Lost Stimulus Increase Vote 3 – 6
• IMF Warns UK Still a Long Way From Recovery
• BoC Carney Recommends Bold Japanese Style Actions for ECB
• BoE Outgoing Governor Claims UK in Only Modest Recovery
• Santander Exec: Positive Outlook for Spain

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Comments from various Federal Reserve’s members before Chairman Ben Bernanke addressed congress pointed to a possible wind up of the US quantitative easing program as early as June. The different statements lead to a rise of the USD versus the dollar. Bernanke on the other hand warned lawmakers about the dangers a premature stop could have on the moderate recovery of the US economy. The market took the news as a sign to sell the USD which broke through the 1.29 EUR/USD level.

The US continues to occupy the 2nd speed of moderate economic recovery as per the IMF’s Christine Lagarde. While not recovering as fast as the emerging markets the US has more positives than negatives on the economic front. Specially considering the third rung on the speed scale where Europe and Japan keep failing at gathering traction.

Next week US Consumer Confidence and Gross Domestic Product will be released which if they beat market estimates could end up heating up the end of QE arguments again.

• US Durable Goods Beat Forecasts
• Chile, Colombia, Mexico and Peru Scrap Tariff Between the Four Countries
• U.S. Fed’s Bullard: A Big Moment for Japan
• US Home Sales up 2 Percent in April
• US PMI Falls to Seven Month Low in May
• Bullard Fed not Close to Winding Down Stimulus
• US Jobless Claims Dropped More Than Forecast
• U.S. Fed Wants to See “Real and Sustainable” Progress in Reducing Unemployment
• Sales of U.S. Existing Homes Poised for Three-Year High
• QE May Be on Agenda When Bernanke Testifies to Congress
• Fed Bullard Said QE Program Should Continue
• Focus is on Fed
• Fed’s Evans Says U.S. Economy Has Improved ‘Quite a Lot’
• Gold Short Sellers Reach Record High
• Gold Bears Revived as Rout Resumes After Coin Rush
• Canada Inflation Falls to Slowest In 4-years on Gas

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The following table lists the key economic data and other events that came out during the week of May 20ththrough May 24th, with release times displayed for the GMT time zone.

The list also indicates how much each release deviated from the market consensus forecast upon release, as well as what the affected major currency pair or pairs did after each event or set of events.

Monday, May 20th

• All Day CHF Bank Holiday
• All Day EUR French Bank Holiday
• All Day EUR German Bank Holiday
• All Day CAD Bank Holiday

Tuesday, May 21st

• 2:30am AUD Monetary Policy Meeting Minutes noted that, "The Board's decision to leave the cash rate unchanged in April had been largely expected by financial markets. Over the month, average interest rates on outstanding housing and business loans had remained largely unchanged. Members noted that current market pricing implied a near even chance of the cash rate being lowered at the May meeting." The currency fell.
• 9:30am GBP CPI 2.4% versus 2.6% expected. The currency fell.

Wednesday, May 22nd

• 4:07am JPY Monetary Policy Statement noted that, "With regard to the outlook, Japan’s economy is expected to return to a moderate recovery path, mainly against the background that domestic demand remains resilient due to the effects of monetary easing as well as various economic measures, and that growth rates of overseas economies gradually pick up. The year-on-year rate of change in the CPI is expected to register smaller declines for the time being, and thereafter is likely to gradually turn positive."The currency fell.
• 8:24am JPY BOJ Press Conference where BOJ Governor Haruhiko Kuroda said that, "I don't think the recent rise in yields is having a big impact on the economy. We will continue to monitor market moves and respond with flexibility in the pace and maturities of bond purchases and in market operations."The currency fell.
• 9:30am GBP MPC Meeting Minutes vote: 0-0-9, as expected. They noted that, "The outlook for activity and inflation remained broadly in line with that set out in the February Inflation Report. After only weak growth in 2012 business surveys suggested that the pace of expansion in the UK economy was likely to remain muted during the first half of 2013. Employment had continued to rise in spite of the weakness of output growth. Retail sales growth had been strong in February and suggested that the pickup in consumers’ expenditure over 2012 might have been sustained."The currency fell.
• 9:30am GBP Retail Sales -1.3% versus 0.0% expected. The currency fell.
• 11:00am CHF SNB Chairman Jordan said that, "The minimum exchange rate will be kept as long as necessary to achieve monetary policy goals, Adjustment of the minimum exchange rate belongs, just like negative interest rates, as a basic principle to possibilities, when it is necessary." The currency fell.
• 1:30pm CAD Core Retail Sales -0.2% versus 0.2% expected. The currency fell.
• 3:00pm USD Existing Home Sales 4.97M versus 4.99M expected. The currency rose.
• 3:00pm USD Fed Chairman Bernanke testified that, "Severe fiscal and financial strains in Europe, by weighing on U.S. exports and financial markets, have also restrained U.S. economic growth over the past couple of years. However, since last summer, financial conditions in the euro area have improved somewhat, which should help mitigate the economic slowdown there while also reducing the headwinds faced by the U.S. economy." The currency rose.
• 7:00pm USD FOMC Meeting Minutes noted that, "The information reviewed at the April 30–May 1 meeting indicated that economic activity expanded at amoderate pace in the first quarter. In March, the unemployment rate edged down further,although it continued to be elevated, and employment growth slowed." The currency rose.

Thursday, May 23rd

• 2:45am CNY HSBC Flash Manufacturing PMI 49.6 versus 50.5 expected. The currency rose
• 8:00am EUR French Flash Manufacturing PMI 45.5 versus 44.8 expected. The currency rose.
• 8:30am EUR German Flash Manufacturing PMI 49.0 versus 48.9 expected. The currency rose.
• 9:30am GBP Second Estimate GDP 0.3%, as expected. The currency rose.
• 1:30pm USD Weekly Initial Jobless Claims 340K versus 347K expected. The currency fell.
• 3:00pm USD New Home Sales 454K versus 429K expected. The currency fell.
• 8:30pm EUR ECB President Draghi said that, "We have responded to this situation by deploying measures that are part of a central bank’s toolkit but go beyond adjustments to policy rates. These measures have evolved as the crisis itself has morphed. And while they were targeted at specific immediate challenges, the overriding aim has been consistently to achieve our medium-term price stability objective." The currency rose.
• 11:45pm NZD Trade Balance 157M versus 480M expected. The currency rose.

Friday, May 24th

• 3:55am JPY BOJ Governor Kuroda said that, "What is most important is to influence the real economy through various channels and bring a virtuous circle in three fields — output, income and spending".The currency rose.
• 9:00am EUR German Ifo Business Climate 105.7 versus 104.6 expected. The currency fell.
• 1:30pm USD Core Durable Goods Orders 1.3% versus 0.6% expected. The currency fell.

Technical Recap for the Majors This Week

EURUSD:

Forecast: Lower
Actual: Mildly higher from a 1.2845 open to a 1.2922 close.

USDJPY:

Forecast: Mildly Higher
Actual: Lowerfrom a102.59open to a101.04 close.

GBPUSD:

Forecast: Lower
Actual: Mildly lower from a 1.5187open to a 1.5136 close.

AUDUSD:

Forecast: Mildly Higher
Actual: Mildly lower from a 0.9755open to a 0.9677 close.

USDCAD:

Forecast: Mildly Lower
Actual: Mildly higher from a 1.0273open to a 1.0322 close.

NZDUSD:

Forecast: Mildly Higher
Actual: Virtually unchanged from a 0.8098open to a 0.8096 close.

Even though risk aversion promotes holding Yen, it’s the “capitulation” trade that underlies much of the USD/JPY move lower this week. Mind you, investors can also point blame at a few ‘official comments’ that have also aided the Yen’s in its rapid rise. Earlier this week, Japan’s Economic minister said that the Yen’s gain is a natural reaction to curb the overly rapid equity rise. Combine this with the MOF data revealing that the domestic investor was selling foreign assets again last week and this market had the basic ingredients to ignite a Yen rise.

Despite the market being deeply negative on the Yen, which would suggest that dollar bids remain on the downside, the mere presence of such enormous paper profits in long Nikki and short Yen is making profit taking as the markets prime motivator lower. Even though foreign hot money has been driving the Japanese equity rally and the Yen decline, the dollar bids could disappear if prices were to make an assault on ¥100.

Next week Kuroda and BoJ will set the initial tone for Yen trading ahead of Japanese inflation numbers later in the week.

Dean Popplewell, Director of Currency Analysis and Research @ OANDA MarketPulseFX

• Nikkei Climbs 1 Percent after Thursday Fall
• Japan Banks on Edge Thanks to Choppy Bond Markets
• Nikkei Plunge Won’t Upset BOJ’s Plan
• BOJ’s Kuroda Faces Communications Test
• Japan 10 Year Bond Hits 1 Percent
• Nikkei Drops 7 Percent After China PMI and Feds Comments
• China Manufacturing Pushes European Stock-Index Futures Lower
• China’s PMI and Fed Comments Spreads Across Asia
• Asian Stocks Trading Lower on Shrinking Chinese Manufacturing
• Singapore’s Service Sector Driving Economic Growth
• Weak Yen Increases Costs of Imports Japan Posts 10th Deficit
• Bank of Japan Unanimously Maintains Policy
• BOJ Affirms Easing Plan
• Japan Exports Rise in April but Trade Deficit Remains
• China may be clearing some of their USD FX reserves
• Business Spending in Japan remains weak despite Abenomics
• Chinese Property Prices Continue to Climb

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

USD/JPY 4H chart 5/23/2013 9:30AM EDT

http://screencast.com/t/XPRD0Q5n

(click image to view full size)

Top, trendlines: We saw USD/JPY display topping action yesterday. After some pullback during the 5/23 US session, the 5/24 Asian session found resistance around 102.57 and continued the decline into the European and Us session. As it attempts to push below 101, it is breaking below May’s rising trendline and about to test a slower one that goes back to the start of April.

Below these TLs, USD/JPY would be testing the 100 handle, which price held below for a month, so it will be a key level to monitor for support.

Now looking at the 4H chart, you see that we are in a 2nd downswing. If you look back in your 4H USD/JPY chart and look at some past 2 swing corrections, you will see many followed by an upward push that either establishes the high of a new consolidation period, or continues the bull trend. In this case, a minimum expectation could be back up to the newly projected downward trendline.

Also note that a swing projection (including the tails), points toward the 99.65-70 area.

So if you are still thinking buy on a dip. Look for the 4H RSI to tag 30, and look for support showing in the 99.70-100 area. That might be a sign for at least a near-term bullish run to the falling trendline, if not a return to test the top, or the previous resistance pivot around 102.57.

Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.

USD/CHF 4H chart 5/24/2013 9:50AM EDT

http://screencast.com/t/muxR52aR6Zoh

click the link to view image

Powerline: A powerline refers to a rising or falling line that is shown as support as well as resistance. The 4H USD/CHF chart shows a rising powerline in May. 5/24 trading pushed USD/CHF below the powerline, reflecting a possible change in trend in this time-frame.

Rising trendline: But first it will be challenged by a rising trendline which could coincide with a previous support pivot area around 0.9515. We could see at least some near-term support here.

Fan Yang CMT is a forex trader, analyst, educator and Chief Technical Strategist for FXTimes – provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.

Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.

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