Trading Ranges and the FX Market

When determining forex trading strategy, it can be helpful to look at the trading ranges experienced by some currency pairs. Wider ranges indicate higher volatility and lower ranges indicate something a little less risky.

It is important, however, to remember that forex trading in general is a rather risky form of investing. GFT's Kathy Lien offers this insight, via FX360, on using trading ranges in your forex trading strategy:

Being aware of the average daily trading range of each currency pair can help you set stops more appropriately and hopefully increase your selectivity of trades. A 100 pip move in GBP/AUD for example can happen in a blink of an eye and because of that, you could be stopped out on just a minor fluctuation only to see the currency pair move back in your desired direction. It can also help set more realistic expectations. A 100 pip move in your desired direction in EUR/GBP could take days while a similar move in EUR/NZD could take minutes. 

Canadian Dollar Gains Against U.S. Dollar in Currency Trading

The loonie is advancing in forex trading on the currency market. The U.S. dollar is struggling today in currency trading, and that is giving the Canadian dollar a chance to make up a lot of lost ground.

Because it is so dependent upon commodities, the Canadian dollar has dropped in currency trading as the market for resources and goods has dried up in response to the global recession. Now, however, there is hope that the economic slowdown may be coming to an end and that commodities may soon be back in demand.

However, the loonie lost so much in forex trading to the greenback that it will take quite a bit of time to catch up. Plus, economic data isn't helping the cause for the Canadian dollar, meaning that it has a ways to go before it approaches parity with the U.S. dollar, as it did in mid-2008.

President Obama Says Economic Stimulus Under Budget

President Obama says that the transportation projects meant to receive funding under the recently passed economic stimulus bill are coming in under budget. This is good news he points, out, adding that it means more economic stimulus dollars for other projects. MarketWatch reports on some of the economic stimulus areas seeing savings:

Obama noted that Oregon in February and March reported that infrastructure projects have averaged are 30% below what the state had originally budgeted. He also pointed out that competitive bids for a road project in Louisiana brought in a winning offer that was $4.7 million less than the state had budgeted for the project.

"As a result we have more recovery dollars to go around," Obama said.
This news is likely to help speed up optimism in terms of the chances of economic recovery. It will be interesting how financial markets take this news. It may not help the dollar much -- promoting risk appetite and sending other currencies higher -- but it should help the stock market.

U.S. Dollar Forex Trading Forecast

While both the dollar and the yen are down against other currencies in forex trading, the greenback maintains the upper hand in the USD/JPY pair. Indeed, the dollar has gained quite a bit in recent weeks against the yen.

The U.S. dollar forex trading forecast should be interesting in coming weeks. How the greenback does against an array of currencies is mainly dependent upon how the global economy is doing. Whether or not the global recession begins to recede will have a big impact on the U.S. dollar forex trading forecast.

For now, though, it appears that the greenback will remain strong against the yen this week. How it does against the euro in forex trading remains to be seen, but at the moment the euro has the upper hand.

U.S. Dollar, Japanese Yen Lower in Currency Trading

The U.S. dollar and the Japanese yen are both lower in currency trading on the FX market. Even with equities moving lower today (after a three-day weekend in the U.S.), risk appetite seems to be present in forex trading right now.

The greenback gained against the euro in forex trading last week, but now the tables have turned. The U.S. dollar is down as optimism with regard to the global economy begins to return. The Japanese yen is falling in currency trading for much the same reason.

With economic stimulus measures in places around the world, there is hope that the recession may soon start to reverse. Especially helpful today has been reports of China's output. Additionally, higher-yielding currencies are in favor due to the risk appetite situation. With the euro zone maintaining something other than a rate that is effectively zero, that helps.

The Canadian dollar and the Australian dollar are also both gaining against the U.S. dollar and the Japanese yen in currency trading.

Will the Euro Fall to a Low Against the Sterling?

There is a likelihood that the euro will fall to a six week low against the sterling in currency trading on the FX market. The euro forex trading forecast may call for increased bearishness against the U.K. pound. Bloomberg reports on the levels that might be seen for the euro in forex trading:

“The euro-sterling is meeting support at 89.50, now seen as a key level on the downside,” Claude Mattern, a Paris-based technical analyst at BNP Paribas, wrote in a research note today. “A clear break would argue for a bearish bias.” 

The euro is already struggling in forex trading against the U.S. dollar. It will be interesting to see how long global economic conditions keep the euro down in currency trading.

Japanese Yen Gains Against the U.S. Dollar in FX Trading

The Japanese yen is gaining again versus the U.S. dollar in FX trading. The yen has had a bit of a winning streak against the greenback in forex trading lately on risk appetite concerns.

While the dollar is gaining against other major currencies on the FX market, it is struggling against the yen in currency trading. Indeed, the yen is making a comeback as risk aversion becomes the main issue. U.S. retail sales is one of the main causes of risk aversion today.

This development is not likely to placate Japanese officials, who like to have a weak yen for the export advantage it provides. However, short of direct intervention, there is not much that the Bank of Japan can do about it. Until the global economy is back on track, a certain amount of yen strength in FX trading is likely.

Thai Local Currency Rating is Cut

Thanks to economic issues and political upheaval in Thailand, the country is seeing its financial ratings cut. Right now, S&P has cut the Thai local currency rating to reflect the unrest and concerns about the economic situation in the Southeast Asian nation. MarketWatch reports on the ratings downgrade:

"The rating downgrade reflects the latest deterioration in the Thai political situation, which has diminished further the prospects of a near-term return to stability," said S&P credit analyst Kim Eng Tan in a statement on Tuesday.

There are continued concerns about Thailand's security and financial situation, stemming from protests against the government.

Euro Drops in Forex Trading on Risk Aversion

The euro has moved lower in forex trading on the currency market today. The euro is down against the dollar in currency trading as concerns about the economy come to light. Risk aversion is back in vogue as forex traders and others re-evaluate optimism that the economy is ready to begin its recovery.

U.S. retail sales data appears to be one of the main culprits today. With retail sales information for March showing serious weakness, there are concerns that consumer spending isn't stabilizing in the U.S. after all. As a result, forex traders are turning to safe haven investments, like the dollar.

For the euro, this means more weakness ahead. After all, it is widely considered that the rest of the world -- including the euro zone -- will not recover until after the U.S. begins its economic recovery. Until the rest of the world begins to move out of recession mode, the euro is likely to remain lower in forex trading.

U.S. Retail Sales Data Worse Than Forecast

After surprising retail sales data for February, forecast for March were expected to be on the up-and-up. A certain amount of optimism has been a part of the financial markets recently, and now that has been tempered by the most recent retail numbers.

Forecasters expected a 0.3% gain in March retail sales. However, retail sales numbers came in at a dismal -1.1%. This news is obviously causing some confusion and distress amongst economy bulls who have been expecting things to stabilize.

As a result, the greenback is gaining in currency trading on the risk aversion. With risk aversion once more at the forefront of forex traders' minds, it is little surprise that the dollar is once again showing strength as investors look for safe haven investments.

Federal Reserve Beige Book Notes That the Economy May Be Stabilizing

The Fed today pointed out that the economy appears to be stabilizing somewhat. Even though the economy is weak (today's consumer prices data added to the bad news), the pace of decline has slowed and evened out to some degree. This means that things may be stabilizing in a number of areas. CNN Money reports on some of the areas of stabilization:

Overall U.S. overall economic activity continued to contract or remained weak the Federal Reserve said Wednesday. However, five of the 12 districts noted a moderation in the pace of decline, and several saw signs that activity in some sectors was stabilizing at a low level.

If things really do arrest their decline and begin to stabilize, there are hopes that the beginnings of an economic recovery could be on the way.

Carry Trade and the Forex Trading Forecast

One of the questions that many are asking with regard to the forex trading forecast is this one: When will the carry trade resume?

The carry trade is one of the most popular types of trades overall, but it is risky. In the current environment of risk aversion -- due in large part to a slowing global economy -- the risky carry trade has fallen out of favor. Today's release of U.S. consumer prices data hasn't helped.

But there is an argument that the carry trade could be on the verge of resuming its place. With the economy expected to start to recover at some point in the relatively near future, there is speculation that the forex trading forecast will see a return to the yen carry trade.

Consumer Prices Fall in March

After yesterday's retail sales data, there were doubts in some camps about how today's consumer prices data would turn out. And those doubts proved founded. CPI data is in, and consumer prices dipped more than expected for the month of March.

Falling consumer prices are evidence of deflation, the opposite of inflation. Instead of economic growth, which often drives a rise in prices, the economy appears to be experiencing deflation, or a drop in prices. With decreased jobs and wages, it is no surprise that low demand is keeping retailers and others from raising their prices.

The U.S. dollar is expected to see some gains in forex trading on this information. With economic data still showing weakness, the greenback is likely to be used as a safe haven investment. However, once the economy picks up, there is a chance that dollar weakeness will return to forex trading.

Pip Movement Ranges and Risk Management

A couple of days ago, we looked at how trading ranges can offer insight into volatility on the FX market. With risk aversion make a bit of a comeback in currency trading, it is a good idea to be aware of how helpful trading ranges can be when it comes to risk management.

Forex trading strategy should take into account a number of factors when it comes to pip movement ranges. Indeed, it is a good idea to understand trading ranges -- as well as resistance and support levels -- in order to get a better picture of what is going on. It's always better to be informed when you are currency trading. For technical analysis, pip movement ranges is especially important.

Baby Pips offers an excellent video about pip movement ranges and how to use them for risk management purposes and when you are considering your trade expectations.

Forex Trading Forecast: Down Under Currencies

The forex trading forecast for down under currencies looks to be a little lacking right now. The Aussie and the kiwi are currencies that rely heavily on China for their support on the FX market. However, with China's growth easing, it is little wonder that the down under currencies are struggling a bit.

Both Australia and New Zealand count China as a major trading partner. If China continues to slow down, then goods aren't being bought from Australia and New Zealand by China. Australia especially benefits from Chinese trade, since China buys a lot of its industrial gold from the country/continent.

However, is China really has reached a bottom in growth, and is poised to recover, the long-term forex trading forecast for the Aussie and the kiwi could be quite good. After all, if China really does end up being the next global economic superpower, Australia and New Zealand are likely to be along for the ride.

GBP Run at 1.5000: FAIL

The U.K. pound made a run at 1.5000 in currency trading against the U.S. dollar on the FX market this morning. However, the attempt was rejected. There's not quite enough risk appetite on the market right now, in spite of some of the positive news coming out of the U.S.

Sterling is at 1.4908, however. The run at 1.5000 was shut down, as the currency proved unable to maintain above that crucial psychological level, but there is some speculation that sterling is gearing up for another attempt in forex trading with risk appetite improvement in view.

Right now, jobless data is providing some optimism that things might be stabilizing for the economy. Jobs has been considered one of the cornerstones of economic recovery, and if jobless claims are receding a little bit, that could be a positive sign that things are on the way to recovery.

If risk appetite does return to the FX market, fueled by positive data and a stock market market rally, it is possible that sterling could break through the 1.5000 barrier in the near future.

U.S. Jobless Claims Down

Even though jobless claims have reached 6 million total, there is some optimism for the job market. Signs of stabilization are appearing, since this week's unemployment numbers are lower than expected. The Street reports on the latest unemployment data:

The Labor Department said Thursday that its tally of initial unemployment claims dropped to a seasonally adjusted 610,000 from a revised 663,000 the previous week. That was significantly below analysts' expectations of 655,000 and the lowest level since late January.

The hope is that this new information points to a stabilization in the labor markets, and means that the freefall experienced by jobs lately is coming to an end. There is hope that economic stimulus measures may be kicking in to provide jobs.

Euro Continues to Fall in Forex Trading

The euro is falling rather rapidly in forex trading this week. After a bit of a bounce earlier today, the 15-nation currency is back down on the FX market. The main problem the euro is having against the U.S. dollar in currency trading revolves around the fact that policymakers in the euro zone haven't taken very aggressive measures in terms of economic stimulus. GFT's Boris Schlossberg reports in FX360 on the problems faced by the euro in forex trading:

The euro has been a terrible underperformer this week, battered by the growing perception that EZ policymakers are out of touch with the conditions on the ground and could exacerbate the recession by keeping rates too high.

Even with economic data continuing to deteriorate in the U.S., the greenback continues to perform well against the euro in forex trading. It appears that, until the euro zone officials start taking economic stimulus seriously, the euro will continue to lose ground to the U.S. dollar in currency trading.

China's economic growth continues to slow

China is also in the news for its economic growth numbers. Quarter 1 numbers are in, and the Chinese economy grew at a rate of 6.1% -- the slowest its grown in 10 years. So far, China is not on track to hit the 8% growth forecasted for this year. However, Chinese officials insist that there are signs that the economy has bottomed out and that growth should be the norm for the remainder of the year.

Asian Currencies Gain as Risk Appetite Increases

Asian currencies are gaining as risk appetite increases. There is a general feeling of optimism about the global economy and that the recession might be receding. Profit reports from companies like JPMorgan and other banks are fueling the optimism that the financial crisis may be coming to an end.

As a result of this optimism, risk appetite is increasing. Emerging market currencies in Asia are benefiting quite a bit from the situation. As forex traders become willing to take more risk, they will move out of the U.S. dollar and into less safe currencies, like the rupiah and the won.

However, the U.S. dollar is still doing well against other developed currencies, gaining today against the sterling, yen and euro.

Will the ECB Cut the Euro Zone Rate to Below 1%

The ECB is showing signs that it might cut the euro zone interest rate to below 1%. In remarks today, ECB President Jean Claude Trichet seemed to indicate that more monetary easing is possible for the euro zone. His comments sent the euro reeling in forex trading.

Indeed, after the smaller-than-expected rate cut earlier this month, it was assumed that 1% would most likely be the floor for ECB interest rates. Now, however, it seems as though ECB leaders are considering taking rates lower.

Lower interest rates are meant to help stimulate the economy, and there have been murmurings that the euro zone monetary leaders haven't done enough to help the economy. A lower rate, however, would indicate that the euro zone economy hasn't been doing as well as European leaders would like the rest of the world to believe.

Forex Trading Forecast: Volatility to Decrease

The forex trading forecast is calling for less volatility in the medium to long term. As the global economy recovers from the current recession, the volatility that we have seen in a number of currencies -- especially in currencies that trade frequently and popularly with the U.S. dollar -- is likely to wan. Although some volatility, particularly in the case of the euro, is likely continue in the short term.

GFT's Kathy Lien points this out about the forex trading forecast for currency market volatility:

Although the current market environment is unlike any other that we have seen in the past 50 years, most of the bad news has already been priced in and therefore surprises will probably be limited. Volatility usually picks up when there is a ton of bad news causing massive and broad based liquidation. Over the next few months we should begin to see the fruits of all the global stimulus and therefore stability could mean lower volatility.

Trichet Crushes the Euro in Forex Trading

The euro continues its headlong descent in forex trading on the currency market today. The main catalyst for today's losses for the 15-nation currency were remarks from the ECB's Jean Claude Trichet. He indicated that the ECB may actually drop rates below the current 1%. GFT's Boris Schlossberg reports on the problems Trichet's comments are causing for the euro in forex trading:

The seeming disagreement with Mr. Weber over the course of European monetary policy created a loss of confidence in the currency market and the unit which has already suffered for most of this week dropped to monthly low of 1.3055. With 1.3000 clearly in their sights euro bears will make every effort to run stops through that level and the latest rumor of a threat by Moody’s to downgrade Ireland will only help them achieve their cause.

Trichet's comments underscore the concerns that many have about the euro zone economy -- that it's not doing as well as leaders keep saying that it is. Hawkish comments have been largely the norm coming out of euro zone leaders and the ECB in recent months. However, admissions that more easing may be needed serve to provide forex traders with indications that the euro zone economy is a long way from recovery.