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Trading With An ECN Broker

August 23, 2012 in Forex Articles

ECN (or Electronic Communications Network) organizations enable day traders and other small market participants to link up with high liquidity institutions through their forex brokerage services. Sometimes also referred to as Alternative Trading Systems, ECNs help to lower market barriers and provide a more level playing field for those seeking to get involved in both stock and currency markets. Essentially, the ECN broker allows access to liquidity from major banks for its clients, whilst transferring orders for execution. A commission on each transaction allows the broker to make its money on the deal, with higher trading volumes leading to more profit. In contrast to the traditional ‘market maker‘ model, ECN organisations allow each small trader to act as their own middleman.


ECN trading has a number of significant advantages for individual participants in the trading markets. For a start, each deal is entirely anonymous, which allows smaller traders to access real-time market conditions without any fear that the picture being viewed is biased by a broker’s own strategy or agenda. In the other direction, such anonymity also provides the freedom for traders to pursue an aggressive market strategy without fear of alienating other participants or tipping off the competition too early.

Most ECN trades are also completed instantaneously, allowing rapid reaction on the part of traders and avoiding the problem of re-quotes which can arise when dealing with a middle man. Such speed, when combined with the breadth of data provided by most ECN software, allows traders to deal in tight bid/offer spreads, and to react rapidly to changing market conditions. Such flexibility is not often present in more highly brokered situations, in which restrictions on allowable trading strategies are often imposed for the convenience of the broker rather than the client.

The depth of data mentioned above really comes into its own when used to provide a wider perspective on changing market conditions. Rather than dealing with only one liquidity provider, or through the fixed strategy of a middleman broker, users of an ECN are able to view institutional feedback from many different major players in the marketplace. This can enable day traders to spot shifts in market price as they happen, and enables smaller market participants to use the same information as major traders.

Of course, there are risks as well as rewards to an ECN strategy. Unlike more heavily brokered platforms, an ECN participant relies on his or her own knowledge of the market and understanding of trading strategy. ECNs tend to reflect market volatility, and so in difficult trading conditions it is entirely possible to make significant losses without much warning. Similarly, whilst ECNs often claim to be accessible 24 hours a day and 7 days a week, major trading activity is only usually possible when there is liquidity in the market. For this reason, ECN trading does not transcend the usual market opening patterns in the way that is often promised by brokers.


Ultimately, ECN forex brokers are suitable for small investors who have garnered sufficient experience through retail trading to understand the conditions of the market and to be comfortable in a fast-moving and often changeable commercial situation. As long as you are confident in your trading strategy, engaging with a reputable ECN broker should be a positive experience.

Euro Rallies on Outbreak of Optimism

August 22, 2012 in Forex Fundamentals and News

The euro market loaded has an abundance of speculative shorts, according to the last COT data. A few optimistic comments from the right people seems to be all that was needed to start a rally. With German Chancellor Merkel hinting, through her Christian Democratic Union’s budget chairman, they would be willing to make some small concessions to the Greeks – this seemed to get the ball rolling.

This is good news for Greek Prime Minister Samaras who is scheduled to meet with Merkel, and later in the week with French President Francois Hollande. It remains to be seen if the austerity requirements will be lightened or there will be any plans to stimulate Greek growth.

The five-year recession has reduced the Greek GDP by over 20%, a real depression. The original austerity plan called for the Greeks to sell state owned assets to reduce debt.  In a depression there are not many domestic buyers, and finding foreign investors is a fruitless endeavor.

Despite some of the negative rhetoric calling for the expulsion of Greece from the euro, Germany does not want to be viewed as the cruel creditor that evicts the Greeks. It remains to be seen how this plays in Greece, but a few token concessions may not be enough to appease the populace; the democratic roots in Greece are not deep.  It is too early to pop the champagne cork, celebrating the end of the Greek Crisis.

The continued rumors the ECB, despite the grumbling Bundesbank, is going to buy some bonds and pump some liquidity into the market, has debt yields decreasing. Yesterday, Spain sold €4.5B 12 and 18 month bills.  At a yield of 3.07% basis the 12 month, this is down from the last auction when it traded at 3.918. German one-year bills yield a negative .03%.

In Portugal, the 10-year bonds dropped to a 15 month low, 9.25%, and in Ireland yields on nine-year paper dropped to a low of 5.96%. The debt markets sense a change is coming, so ECB President Draghi had best deliver.

How much more can the euro rally?

Well, the futures specs are still short, but most of these are the big specs, probably funds, who are well-heeled.  It is, however, the dog days of summer, when trading can be light and erratic. They used to claim many traders were on vacation, away from the markets, but with all the communication devices we now have, this is probably no longer true, unless you are in Siberia or maybe Palawan.

My guess is this is not a time when new trades are initiated, but bad ones may be taken off.

The EURUSD made a good trade today when it took out the previous tops at around 1.2442. Looking at the MACD on the daily chart, it is giving us a buy signal. The shorter term chart shows the pair overextended, but a quick retracement to the 1.2390 level looks like support. As long as we continue to get optimism from the political chattering class, the rally can continue, perhaps to the 1.2650 area.

Looking further ahead, I fail to see reasons to expect growth in the European economy. Further, soaring energy costs will be a nasty drag on global economies, so the 1.2650 might be a target to establish a short position in the longer term.

EURUSD Daily 21 August 2012, Cash Back Forex Brokers Online

EURUSD Weekly 21 August 2012, Cash Back Forex Brokers Online

Any opinions, news, research, analyses, prices, or other information contained in this post are provided as general market commentary, and do not constitute investment advice from

Selling Continues in the USD

August 21, 2012 in Forex Analysis

Trends in the currency futures continue uninterrupted.  For the past several weeks there has been spec-buying in the so called ‘commodity currencies’ versus sales of the USD. The buying has been most pronounced in the Canadian and Australian Dollars.  The spec long C$ has grown to 45,283 contracts, and to 75,242 contracts in the Australian Dollar.  In addition, the specs are piling onto the long side of the NZ$.

The biggest position in the currency markets is a short euro.  Since the base currency at the CME, this then means the position is long the USD versus a short euro position.  The spec short in the euro increased slightly to 171.3K contracts, up from 167.3 in the prior reporting period.

The SF is tied to the euro because of the SNB’s peg to the euro at 1.20.  Consequently the specs are  heavily committed to the short side of the SF.  The SF is not a big market, with the OI a shade less than 58K contracts, but specs are net short about 29.5K contracts.

We note an announcement by the CME, the largest futures clearing exchange: they are going to start clearing derivatives and futures in London next year.  They claim one of their first entries into the London market will be to clear currency futures.  Will the pound then be the base currency?

  • US Dollar Index: There was very little change in the DI positions for the week.  Specs remain long the DI, 42,703 contracts, down from 43,461 contracts in the previous period.  Large specs are a 5.66 to 1 long.
  • Euro (EUR/USD): Large specs added 6.4K to their net short position in the euro.  Large specs are a 4.46 ratio short.  Specs have a total net short position of 171,362 contracts, up slightly from 167,396 last week.  It is surprising to see the net short position build in a market that has been trading sideways.
  • British Pound Sterling (GBP/USD):  Specs remain short the pound, but they have reduced their net positions.  The large spec reduced his net short by 7.8K contracts and is now short less than 900 contracts. The small spec has not moved as quickly.  He remains 8.8K contracts short.  Until Friday, the pound had been gradually creeping higher.
  • Japanese Yen (JPY/USD): Again in the yen, there was very little change from the prior report.  The large spec is long the yen, and the small spec is short.  Large specs hold the bigger net position, 35% of the total market, while the small spec is short 25.9% of the total market.
  • Swiss Franc (CHF/USD):  Both the large and small specs favor the short side of the SF.  Small specs are a 2.08 ratio net short, and the large spec is a 4.07 to 1 short.  The total net spec short increased by 1K during the period.
  • Canadian Dollar (CAD/USD): The open interest grew by 15.8K as the specs continued to buy the C$.  The spec net long has grown to 45,283 contracts, up from 32,331, and flipping from a short of 1622 on the report of 06, 24.  Spreading (likely option trade) has grown to 4.6% of the expanded OI.  Much of the strength probably relates to the strong crude oil market.
  • New Zealand Dollar (NZD/USD):  The OI continues to grow in this small market as the large specs continue to buy the Kiwi.  Large specs are now a 6 to 1 long, and the small spec is a 2.4 to 1 long.
  • Australian Dollar (AUD/USD): The large specs continue to aggressive accumulate the A$.  The OI was up 14,286 in the period, and the net long of the big specs increased by 13,578 contracts.  The total spec long in the A$ is now above 75K.  Part of the interest in the A$ may be in anticipation of a stimulus plan in China. However, recent advances in real estate prices in China, and an increase in food costs may defer the stimulus.

Commitment of Traders (COT) Report, Cash Back Forex Brokers Online Technical Analysis

For general information about the COT report please see the article The CFTC Commitment of Trader Report


GBPUSD is in symmetrical triangle

August 20, 2012 in Forex Analysis

GBPUSD is in symmetrical triangle
it is in rangebound  and hovering between fibonacci level 23.6 &61.8
if pair breaks upside above 1.5720 then pair may test 1.5740 & 1.59

alternate view if pair breaks downside below 1.5680 then pair will be short term downside

resistance @1.5742 and support@1..5680

long term view is bullish

Recommend strong buy above 1.5742  Target @1.6 &1.64

for More Detail charts please click here

Mixed Economic News – Is the Yen Finally Weakening?

August 17, 2012 in Forex Fundamentals and News

There seems to be a disconnect between the economic news and market action. Specifically, the action of the Spanish IBEX 35 Index, today up 2.09%, and the Italian FTSE MIB Index up 1.08% seems to contradict economic reports released earlier this week. GDP reports showed that both Spain and Italy were in recessions with two quarters of negative numbers.  Italy had a 0.7% contraction and Spain a .4% reduction in the most recent quarter. Unemployment in Italy was 10.8%, while Spanish unemployment at 24.8% is even higher than the 22.5% in Greece.

There have been comments made by the Spanish PM that some ECU money will be coming to refinance one of the troubled zombi banks. If money is coming to Spain, then Italy cannot be far behind, right? The trouble here is that while Spain and Italy are too big to fail, they are also way too big to be rescued.  Could it be that Rajoy is setting the stage for a rejection by Merkel, thereby facilitating an early exit from the euro? More likely the markets are just enamoured with the idea that the euro supply is going to grow.

Contrast this to the US where the economic news is mostly positive. Wednesday, the retail sales number came in much better than expected up 0.8% after several months of lower numbers. There are those who doubt the economy is this strong, and the positive number is bloated by ‘seasonal adjustments’. Yesterday, while the Philadelphia survey of manufacturers was negative, the Initial Jobless claims were about as expected, and there was a surge in new US Building Permits.

Initially the USD firmed, as the economic news was thought to be good enough to deter Fed Chairman Bernanke from initiating QE 3. In yesterday’s choppy, late summer trade, the USD has since reversed.

While the trade in the EURUSD has recently been trend less, the USD and other currencies are gaining versus the Japanese yen. Earlier this week it was reported the Japanese growth in the last quarter faltered to a negative 0.3, much less than expected. This puts the annualized GDP estimate down to a positive 1.4%, far less than the previous year’s 5.5%.

Wednesday’s US Net Long Term TIC Flows showed the Japanese were continuing to invest in US Treasuries. According to Bloomberg:

“Investors in Japan bought $10.4 billion of Treasuries in June, bringing their purchases for 2012 to $61.3 billion and total holdings of the debt to $1.1193 trillion, Treasury data released yesterday show.

That compares with China’s addition of $300 million to its portfolio of U.S. government securities for the month, raising its purchases this year to $12.4 billion and its stake in Treasuries to $1.1643 trillion. Should both countries continue buying at their respective paces through 2012, Japan will end the year with more Treasuries.”

The yield spread between US and Japanese notes and bonds make the US paper attractive. Five-year notes in the US yield .80, and the ten-year is now up to 1.81. Contrast this to rates of .24 for the 5, and .86 for the Japanese 10-year bonds. Historically, the yen is very strong versus the USD, which adds to the US Treasuries appeal. In 2010 it traded well above 90, and in 2007, a USD fetched over 120 yen.

Looking at the daily chart of the USDJPY, the pair has spent the last month making a saucer bottom, and may be breaking out to the upside. The down trend line has been broken. A count after breaking the side of the saucer would take the USD back up to about 80.80. The Bank of Japan and the Japanese exporters want a cheaper yen. It looks like they may get it.

USDJPY Daily 16 August 2012, Cash Back Forex Brokers Online

EURUSD Analysis 17th August, 2012

August 17, 2012 in Forex Analysis

EURUSD  Analysis 17th August, 2012

Pair has formed Head & Shoulder pattern in Daily charts, targeting towards 1.2690

It has resistance @1.25 &1.2740 and Support @ 1.2040. Yesterday pair closed above 50 days simple moving average and RSI (14)  is above its midline 

My Overall View is bullish towards level 1.38 

Buy @1.2375 Stop @1.2260 Target @1.25 & 1.2690, 1.2740

For Chart and Elliiot Wave counting please click here


August 15, 2012 in Forex Analysis

I feel AUDUSD has falling wedge pattern in 4 hour chart

resistance @1.0440 and 1.0550

if pair breaks 1.0510 then pair find resistance @1.055 and 1.0610

for more detail in charts click here

“When Will the Euro Collapse” Commentary by Mathew Lynn

August 15, 2012 in Forex Articles

Matthew Lynn has a column called Matthew Lynn’s London Eye which is published  in Market Watch, as well as other outlets, usually on a weekly basis.  Lynn, a financial writer, has also written a series of novels.

Today’s article “When will the euro collapse?  It’s already dead…Commentary: It’s just the shell of a real currency” is the most popular story on Market Watch today.  The Alexa rating for Market Watch is 595 Global and 259 US so this opinion is getting wide global coverage.

This article is well worth a read.

Forex Markets Looking for Direction – Where Do We Sell the Pound?

August 15, 2012 in Forex Analysis

The euro got an early-morning boost when the German GDP Season Adjusted (Q/Q) came in a tick better than expected at a positive 0.3%.  Most of the other German numbers were negative but the market did not want to focus on the negative.

Looking at all of Europe, Industrial Production fell 0.6% and the economy contracted by 0.2%.  In Greece, where the troika is administering the economic blood-letting, the most recent GDP showed – extended to an annualized number – there will be a negative 6.2%. Since the austerity programs have been introduced to the Greeks, in return for bail-out money, the Greek economy has contracted by over 20%.  Contrary to the IMF projections, the austerity programs results in negative numbers that are consistently worse than forecast.

Other European GDP numbers lagged the positive number from Germany.  The French GDP for the 2nd quarter would result in an unchanged yearly number.  The Italian quarterly number fell to a negative .07% and Spain had a negative 0.4%.  Both Italy and Spain are now in a recession.

Yields on Italian and Spanish sovereign debt has been rising as the economies slow.  Last Tuesday week, Italian 2-year notes were yielding 3.51%, and the Spanish 2-year, 4.32%.  In Greece yesterday, they sold €4.06B of 90 day bills which yielded 4.43%.  Contrast this to .27% in the US, .13% in the UK and a negative .04% in Germany for 2-year notes.

Aware the risk is increasing with the Italian and Spanish debt, LCH. Clearnet, the clearinghouse for European debt, Monday raised the margins, and the commissions on existing Italian and Spanish debt; this will make it harder for Italy and Spain to sell their paper.

There were several other meaningful reports yesterday.  The German ZEW Survey of Economic Sentiment fell from a negative 19.3 to a negative 25.5.  Clearly, there are some Germans bearish on the economy.

In the US we got the Retail Sales number, a positive 0.8%.  Coming after two months of negative 0.4% reports, there initially, was some excitement.  After examining the numbers, some of the experts think seasonal adjustments by the Census Bureau resulted in the surprise number.

In Britain, the (Y/Y) CPI was up to 2.6%, higher than the last 2.4% increase and above the Bank of England’s target of 2.0%.  It is doubtful this number will influence the BoE who claims the CPI will come down later in the year.  Looking at the GBPUSD chart, the pound has been gaining against the USD for eight days.

Our COT Report shows the Specs to be modest shorts in the pound.  We note the MACD has turned higher, a friendly sign.  Should the market clear 1.5760 there should be some short covering but fundamentally we do not see the attraction with a long pound position.  We will be watching for a spot to short the pound for a move back to the 1.55 area.

GBPUSD Daily 14 August 2012, Cash Back Forex Brokers Online

Any opinions, news, research, analyses, prices, or other information contained in this post are provided as general market commentary, and do not constitute investment advice from


August 14, 2012 in Forex Analysis

AUDUSD has falling wedge pattern and regular bullish divergence

resistance @1.0540, 1.0610 and support@1.0490 and 1.0440

if pair breaks above 1.0540 then pair may test resistance level @1.0610

Greece – credit rating outlook

August 8, 2012 in Forex Analysis

Greece – Credit Rating

Standard & Poor’s may cut Greece’s credit rating further. The current credit rating of Greece is CCC and that is 8 levels below the investment grade.

The GDP of the troubled nation has been going down for past 5 years. The unemployment rate has sky rocketed to 22.5%.

The credit rating cut would depend again on the disbursement of the rescue package by IMF and European union.

The Euro has gained against US Dollar recently but is running sideways below 1.2500. Overall situation is not in favor of Euro and the recent upward move can best be termed as a normal consolidation.


Forex Blogs – August 7, 2012

August 7, 2012 in Miscellaneous

Forex Blogs At ForexAbode

Till now ForexAbode used to work on the concepts of only In-house contents and analysis. But in doing that, though we have a better control over the contents and over fighting spam but on the other hand we have been doing injustice to our continuously growing community. This is because FA is a platform for Forex traders and by Forex traders and there are so many Great Analysts, Strategists and Coaches whom we all need.

We break that ice by going live with Forex Blogs. We also hope that it will be a great platform for people to come, share, socialize and add value to each other.

A hearty welcome to all and hope your participation will make this ever going community stronger by the day.

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