Germany Industrial Production - Data Leak leads to sell off before the release

Today on Thursday April 5th 2012, the Industrial Production figures for Germany were released. The data came out at 11:00 GMT (6:00 EST). This blog entry is included as it shows what is sometimes refered to as "Buy the rumor, sell the news", but often it can be "Sell the leak, buy the news"....and either it shows how good the research departments at the major banks are, or that indeed the information is getting leaked from the Department of Statistics from some underpaid secretary or janitor. Also it does show that the estimates provided to Bloomberg which are used to compose the 'Median Estimate' can also be skewed to provide the wrong forward projection for the release, when elsewhere it is known to be different. Whatever it is, we have no proof other than the proof of the price chart.

Here is the data:

Germany Industrial Production MoM (sa)
Estimates- Median: -0.5% Average: -0.4% Low: -1.9% High: +1.3%
Actual: -1.3% Prior: +1.6% Revised: +1.2%

Germany Industrial Production YoY (nsa wda)
Estimates- Median: +0.5% Average: +0.5% Low: -1.8% High: +2.3%
Actual: -1.0% Prior: +1.8% Revised: +1.5%

As we can see it was much lower. Now from the start of the European session it was very natural to sell EURUSD from its Central pivot point at 1.3160...it soon moved down to the big round number of 1.3100, and quite naturally took out stops there and moved down further into the 1.3080-95 region. However then the further extension from there down to 1.3060 in the 15 minutes leading into the release of the German data was highly suspect and points to early release amoungst an elite few. The data came out and there was no further price reaction, indeed the EURUSD had sold off all it could by that time, and a period of slow profit taking commenced which moved the pair back into the 1.3080 zone.

Here is the chart, the red mark is where the data was released:

German Factory Orders Lower - DAX Sells off

This morning of March 7th at 11:00 GMT (6:00 EST) the Factory Orders were released from Germany. This is not one I ordinarily watch, but there was a really nice deviation on it today and I am usually trading the DAX during the day, so really liked the move and thought I should mention it here.

Here is the data:

Germany Factory Orders YoY (nsa)
Estimates- Median: -1.7% Average: -1.6% Low Estimate: -3.2% High Estimate: +0.4%
Actual: -4.9% Prior: 0.0% No Revision

Germany Factory Orders MoM (sa)
Estimates- Median: +0.6% Average: +0.6% Low Estimate: -1.8% High Estimate: +2.1%
Actual: -2.7% Prior: +1.7% Revised: +1.6%

This is the 15 second chart of the DAX Future Contract which shows the move lower on this bad print.

This 1 minute chart of the DAX shows more of the price action after the release it continued to sell off for awhile.

Here is the 1 minute chart of the EURUSD, although the pair had already sold off a bit ahead of the news, the news certainly did not help as the pair has been selling off alot this week. Still the DAX was the preferred instrument to trade.

German IFO - Rumor of higher number leads to rally, prints higher

This morning of February 23rd at 9:00 GMT (4:00 EST) the IFO figures were released from Germany. There was a rumor of a better number during the early European open and this lead the Euro to gain during the morning leading into the release. There were Middle-Eastern names seen buying the Euro but also some barrier protection at 1.3300 the round figure. The number was indeed higher, but not really by that much, this one is good to trade on a deviation of about +/- 1.2 and we didn't get that much higher than the median analsyst estimates. So this could have been a buy-the-rumour/sell-the-news setup, but actually price managed to continue on up even after the release, despite all the movement before the news. Alot of bidders and once the barrier option broke then further upside was attaing. However 1.3350 the mid-handle was frontrun, barrier protection again perhaps?, or just market-makers protecting the next hedging level....interesting anyhow. Anyhow we had resistance marked from 1.3340-50 so rode it down to 1.3270 as New York opened.

Here is the data:

German IFO - Business Climate
Estimates- Median: +108.8 Average: +109.0 Range: +108.0 to +111.0
Actual: +109.6 Prior: +108.3 No Revision

German IFO - Current Assessment
Estimates- Median: +116.5 Average: +116.5 Range: +115.0 to +118.0
Actual: +117.5 Prior: +116.3 No Revision

German IFO - Expectations
Estimates- Median: +102.0 Average: +102.0 Range: +100.4 to +104.5
Actual: +102.3 Prior: +100.9 No Revision

Here is the 1 minute chart of EURUSD:

and here is the 1 minute chart of EURJPY

ECB Rate Announcement and Press Conference - No big moves

This Thursday afternoon on February 9th 2012 the Interest Rates Announcment was made by the ECB. They were not expected to raise rates this time and did not. The ECB's mandate is price stability and although lowering rates might help the liquidity problems caused by the Debt Crisis, the LTRO in December 2011 has helped that. There is another LTRO in February. The only thing that could have surprised the market is if Mario Draghi had announced a longer term LTRO.

In the midst of all this the negotiations in Greece continue, with the PSI (Private Sector Involvement) negotiations on a bond haircut as well as Greece agreeing to more austerity to receive the next tranche of AID from the Troika. The Rates came out at 12:45 GMT (7:45 EST) and Draghi began his press conference at 13:30 GMT (8:30 EST). About 15 minutes before it started there was an headline that some Greek officials had said a deal was done. Later in the day some other Dutch and Germans officials said this was not the case. Anyhow the EURUSD shot up. It then just whipped around in its range as he spoke. There was nothing particularly market moving in what he said, which basically was to wait for the the EuroZone meeting of politicians. He didn't want to say anything about any losses the ECB might take on its Greek bond holdings.

Here is a summary of some of his comments:

Draghi: Stabilization of economic activity at low level

-Activity subdued
-Inflation to fall below 2% after staying above for several months
-Downside risks remain
-Will continue to support financial sector via LTRO
-LTRO has eased collateral availability
-Low interest rates and LTRO lending support to economy
-Stresses in financial markets have diminished

Draghi: No comment on Greek bonds/EFSF
-Says Greek PM tells him Greek deal reached

Draghi: New collateral rules more risky
-Will have to be managed; over collateralized

Draghi would not answer questions on Greek bonds...losses, surrendering profits etc.

Draghi: Survey and hard data point to economic stabilization at low levels
-When asked on removal of word “substantial” to downside risks
-Experts say demand for second LTRO should be around the same as the first (EUR 490 bln)
-Haircuts of about 2/3rds on new collateral
-ECB to avoid “legal tricks”: Will not share Greek losses, Talk unfounded
-Will not give money to Greek program, would violate monetary financing
-A well-functioning financial system does not need non-standard measures, they are temporary in
nature
-Euro area “as a whole” in better budget shape than US or Japan

Draghi: ECB not a party to PSI but hear agreement near
-Will discuss in Eurogroup
-Has nothing to say on Greek bonds other than will not violate ECB Treaty
-Selling Greek bonds to EFSF would be monetary financing if ECB books a loss

Drgahi: Fiscal Compact a major event
-Governments give up partial sovereignty on budgets
-A sign of commitment to the euro; makes euro a strong reality
-A first step toward fiscal union
-In union, each country would be responsible and strong
-A Plan B on Greece means defeat; no comment on ECB holding of Greek debt

No trade off between interest rate changes, LTRO: Draghi
-Two different things, address two different problems
-On Japanese interventions, should be done in mulch-lateral framework, not unilateral
-Irish government should be praised for reform progress
-“Greece is unique in everything”
-No stigma on use of LTRO facilities
-If ECB give money to EFSF, that is monetary financing; if it gives part of its profit to governments (EFSF) that is not monetary financing (got it? )

anyway lots of talk, nothing exciting...loads of banker talk, nothing for the traders.

Here is the 1 minute chart during the talking:

US NonFarm Payroll - Much Higher Risk-On except for European Currencies and Gold

This Friday, February 3rd 2012 at 8:30 EST (13:30 GMT) the montly payroll data from the USA was released. This is basically an indication of the Employment Situation and is the most well known and widely watched piece of economic data known to the market. Almost every market instrument will move based on this data. If there are jobs in the USA then there will be confidence and Americans will have money in the pockets to buy stuff...whether houses from the large stock available or things fabricated in China.

Earlier in the week on Wednesday the ADP data came out slightly lower. This is a smaller sample but it gives an advanced indication of what is likely to happen with the NonFarm Payroll Number.
There are other economic data figures which attempt to gauge the employment situation in the USA. The weekly Initial Jobless Claims for instance has been coming out below 400k since December 2011. This broke the low seen in February 2011 and the number has been consistently at around 360k now. The Challenger Job Cuts was higher however, which indicates more people were laid-off from their jobs. The Employment Component of ISM Manufacturing PMI was also slightly lower, but Consumer Confidence definately has been up. Anyhow despite all these advanced readings on the day there is little you can do to predict what the NonFarm Payroll number will be unless you have special connections or something. This time there was an upward surprise. Here is the data:

US Change in Nonfarm Payrolls
Estimates- Median: +140k Average: +146k Range: +95k to +225k
Actual: +243k Prior: +200k Revised: +203k

US Change in Private Payrolls
Estimates- Median: +160k Average: +162k Range: +110k to +250k
Actual: +257k Prior: +212k Revised: +220k

US Change in Manufacturing Payrolls
Estimates- Median: +12k Average: +14k Range: +9k to +25k
Actual: +50k Prior: +23k Revised: +32k

Unemployment Rates
Estimates- Median: +8.5% Average: +8.5% Range: +8.3% to +8.7%
Actual: +8.3% Prior: +8.5% No Revision

Average Hourly Earning MOM All Emp
Estimates- Median: +0.2% Average: +0.2% Range: 0.0% to +0.3%
Actual: +0.2% Prior: +0.2% Revised: +0.1%

Average Hourly Earning YOY All Emp
Estimates- Median: +1.9% Average: +1.9% Range: +1.8% to +2.0%
Actual: +1.9% Prior: +2.1% No Revision

Average Weekly Hours All Employees
Estimates- Median: 34.4 Average: 34.4 Range: 34.3 to 34.5
Actual: 34.5 Prior: 34.4 Revised: 34.5

Change in Household Employment w/Pop
Actual: 847 Prior: 176 No Revision

Underemployment Rate
Actual: 15.1% Prior: 15.2% No Revision

So where to start. Of course there were some nice moves, however while the commodity currencies forex pairs rallied the european currencies sold off. Gold sold off while Crude rallied. We will start with the Stock Index Futures, these are actually the most reliable to trade on US news in general these days. Here is the 1 minute chart of the Emini S&P 500 Future and the DAX Future:

After the Stock Index futures the CADJPY or another Commodity Currency like Australian dollar or New Zealand versus the Japanese Yen, AUDJPY or NZDJPY. Here is the 10 second chart of the CADJPY:

and this is the 1 minute chart of the CADJPY to show more of the move:

It is always good to keep an eye on the USDJPY, although the moves are not always so many pips. Here is the 10 second chart of the USDJPY:

and a 1 minute chart of the USDJPY to show more of the move:

So now a 30 second chart of the EURUSD will show how it moved down on the release. It did briefly run up about 30 pips but then dropped 120 pips:

In contrast to the AUDUSD which spiked up, pulled back, and kepted rallying. The GBPUSD, USDCHF, USDNOK followed the Euro by weakening against the Dollar, only the Swedish Krona escaped the sell-off in European Currencies. The NZDUSD, USDCAD, USDZAR and Asian Currencies all rallied against the US Dollar much like this Australian Dollar did in this 1 minute chart of AUDUSD:

Also here is the 1 minute chart of Gold. It was whippy initially, basically it lost some of its shine as a safe-haven when better employment in the USA meant risk appetite. Interesting to note shifting correlations, Crude Oil did rally in contrast:

German Unemployment - Leaked Perhaps but good follow thru

This morning at 3:55 EST (8:55 GMT) the Unemployment data from Germany was released. It was a better print and with last night's agreement of Eurozone members at their latest meeting and also reports of a increased take-up by european banks of the next LTRO, the markets have been risk on.

Here is the data:

Germany Unemployment Change
Estimates- Median: -10k Average: -9k Range: -30k to +10k
Actual: -34k Prior: -22k Revised: -25k
Germany Unemployment Rates (s.a)
Estimates- Median: 6.8% Average: 6.8% Range: 6.6% to 6.9%
Actual: 6.7% Prior: 6.8% No Revision

The German DAX stock index had been selling off during the beginning of the european session, while the commodity currencies were rallying and the EURUSD and GBPUSD where holding near their swing highs for the overnight asian session.

Here is a 1 minute chart of the DAX, notice how it started rallying 3 minutes before the actual release:

Next is the 10 second chart of the EURUSD, the pair took out its swing highs from the Asian Session just below the 1.3200 round figure handle, making a swing low heading into 8:55 gmt:

Also the 5 minute chart of the EURUSD to show a bit more perspective of the overnight move leading into the European session:

Fed Interest Rate Statement, FOMC Meeting Minutes & Feds Press Conference = Risk On Rally Extension

Today January 25th at 12:30 EST (17:30 GMT) the Fed released their interest rates which were left unchanged as predicted. They also released a Statement, which basically push the forecasted date of their 'exceptionally low fed funds rate' from mid-2013 last time to the end of 2014 with this statement, see the statement differences side-by-side here. This was a bullish statement which lead the markets to rally. As can be seen in the statement little else changed other than slight reordering of the phrases, other than this key statement.

The markets took off, all risky assets rallied, only space to focus on a few. First the 10 second chart of the EURUSD:

and a 30 second chart which shows the rally extending up to 1.3100 until 14:00 when the FOMC Meeting Minutes were released:

Here is the 3 minute chart of the EMini S&P 500 :

So 1.5 hours after this initial statement the FOMC Meeting Minutes were released, of course there was alot they discussed. What stood out at the time was that 3 members were discussing hiking rates this year as well as the Fed adopting a specific inflation target. There were also revisions to their forecasts for GDP, PCE Inflation and Employment. The EURUSD took a 50 pip dive from the 1.3100 round figure based on this news.

Here is a 10 second chart of the EURUSD based on this response to the FOMC Meeting Minutes:

Then 15 minutes later the Fed's Press Conference started where Ben Beranke answered questions of journalists. Many things were said and it went on for some time, see more here, here, here & here, New Zealand Interest Rates and statements were released at 15:00 while this Press Conference was still going on, so it was a bit of an overload. Basically the Fed sounded more upbeat, that they will continue their monetary policies even if things improve and giving some hint of QE3 for possibly March. Basically the Fed has their foot on the pedal. The dip seen from the 14:00 FOMC minutes reversed and even higher highs were made accross all the markets.

There is a 5 minute chart of the EURUSD which shows more of the move thru all these events:

Interesting to point out Gold here as it breaks out a major trendline on the Daily Chart:

Yesterday Gold had come right up to this trendline and started bouncing off it. Here is a 30 minute chart showing this:

This is the 5 minute chart of Gold from the start of the 12:30 Statement. The time on the chart is GMT+2:

Currency COT Report for January 20th 2012

German ZEW Survey Economic Sentiment - much higher than expectations extends rally

This morning of January 17th at 10:00 GMT (5:00 EST) the ZEW Survey figures were released from Germany and for the Eurozone, along with CPI figures for the Euro-Zone. These ZEW figures have been quite low for awhile now. The one that matters the most in terms of its ability to actually move the EURUSD forex pair is the German ZEW Survey (Economic Sentiment) which today printed much higher than the highest expectation. However the figure overall is still quite low compared to where it has been in the past, but it is a big improvement since last month.

Here is the data:

Euro-Zone CPI - Core (YoY)
Estimates: Median +1.6% Average +1.6% Range +1.5% to +2.0%
Actual: +1.6% Prior: +1.6% No Revision

Euro-Zone CPI (MoM)
Estimates: Median +0.4% Average +0.4% Range +0.3% to +0.4%
Actual: +0.3% Prior: +0.1% No Revision

Euro-Zone CPI (YoY)
Estimates: Median +2.8% Average +2.8% Range +2.7% to +2.9%
Actual: +2.7% Prior: +3.0% No Revision

Euro-Zone ZEW Survey (Econ. Sentiment)
Actual: -32.5 Prior: -54.1 No Revision

Germany ZEW Survey (Econ. Sentiment)
Estimates: Median -49.4 Average -49.5 Range -56.0 to -40.0
Actual: -21.6 Prior: -53.8 No Revision

Germany ZEW Survey (Current Situation)
Estimates: Median +24.0 Average +23.6 Range +16.0 to +28.0
Actual: +28.4 Prior: +26.8 No Revision

Here is the 10 second chart of the EURUSD forex pair showing the initial reaction to the release:

The EURUSD had been rallying anyhow since the good GDP, Retail Sales and Industrial Production data out of China overnight. About 15-20 minutes before this data there was a Spanish Bond auction which went quite well and after the news and about 10-15 minutes after the news was a Greek Bond auction which could have been worse. Finally about 40-45 minutes after the news was a Belgian Bond auction. Watching these auctions has become very important for the EURUSD and the overall market indices, especially the auctions for Italy, Spain, Greece, Ireland & Portugal.

This is a 30 second chart of the EURUSD pair showing how eventually it made it to the 1.2800 round figure where it sold off.

Of course the EURUSD was a bit overextended from the rally overnight due to the good chinese news, and this good ZEW data extended this a bit and then punctuated it as the USA woke up and arrived back from holiday ready to sell.

ECB Rate Announcement and Press Conference - Pullback and Blast higher for short squeeze

This morning at 12:45 GMT (7:45 EST) the ECB made their Interest Rate Announcment followed by ECB's Mario Draghi's Press Conference 45 minutes later at 13:30 GMT (8:30 EST). Out of the 53 analysts surveyed by Bloomberg only 6 expected a further cut of 25 basis points today, the rest expected the ECB to keep rates steady. Since they cut at their last meeting and there have been a few signs that things have improved and about 2-3 hours before the Rate announcement there were very successful Bond Auctions for Spain and Italy. Click here for another article from Reuters.

So basically the EURUSD had been rallying since these bond auctions anyhow, but after the release the pair did retrace some and actually the US Retail Sales did come out just as Mario Draghi was about to release the ECB statement. Here is a 10 second chart of the price action on the EURUSD after the No Change rate figures was released thru the wires, the EURUSD was basically at its highs for the day when it came out, but it was a no change as expected, and the fact that 6 analysts expected a cut was not enough to push the pair up when the decision no to cut was made by the ECB. Basically the ECB has a little breathing room with the recent LTRO bonds and today's successful Italian and Spanish auctions:

We can see from the 1 minute chart below the Yellow Arrow is the release of the Rates then the Red Arrow is when the US Retail Sales number hit. It was a poor reading the EURUSD also sold off along with all risky assets...then there was some chop as the Daily Central pivot was tested at 1.2724 before it rallied thru Draghis Speech and the Q&A session which followed. Here are links to the Text of the Speech: ECB's Draghi Speech Text Part 1 and Part II, a Summary of Draghi's Statements, Summary of the Q&A session, Another Summary, More from MNI Link 1 Link 2 Link 3 Yes that's alot of stuff to read...the chart is alot more simple and straight-forward!!! 8)

German IFO - Higher but little initial reaction

This morning at 9am GMT or 4am EST the IFO figures were released from Germany

Here the figures:

German IFO Business Climate
Estimates: Media 106.0 expected, Average 106.0 , Range 105.0 to 107.3
Actual: 107.2 Prior: 106.6
German IFO Business Expectations
Estimates: Median 97.0 expected, Average 96.8 , Range 94.6 to 97.5
Actual: 98.4, 97.3 prior
German IFO Current Assessment m/m
Estimates: Median 116.0 expected, Average 116.0, Range 115.2 to 117.0
Actual: 116.7 Prior: 116.7

Here is the chart of the EURUSD 10 seconds:

and the EURUSD 1 minute chart:

A rally in the EURUSD and all the risky assets did start about 45 minutes after the release when the results of the Spanish Bond auction came out positive Click Here

The DAX had a much better initial reaction as seen here on the 1 minute chart (this is a spreadbet chart so might be slightly different than EUREX)

FOMC Statement - EURUSD drops on Merkel Comments leading into a FOMC Statements

Below is a chart of the Price Action leading into the FOMC Statement by the Fed on December 13th 2012 at around 19:15 GMT or 14:15 EST. Sometimes they are a few minutes late but this time they
were a few minutes early actually...anything but consistent.

Just under an hour after the New York Cash Equity Open Germany's Merkel made comments about the new ESM upper funding limit...

This is shown by the 1st green circle on the chart. The 2nd green circle shows when the FOMC Statement was given, there was no change in rates or Policy, however the statement did basically
say that the economic situation remained risky, this was enough to push the sell-off further.
Here is a link to the Side-by-side statement from the FOMC compared to the last release on November 2nd...

Here is the 5 minute chart of the EURUSD:

...and here is a 5 minute chart of the EMini S&P 500 Future of the same timeframe with green circles at the same places in time as the first chart (this is a spreadbet platform so prices are similar but might be slightly different in places)

German ZEW - Slightly better but still bad

This Tuesday morning at 10am london at 5am EST, the German ZEW data was released along with the ZEW figure for the whole Eurozone. In April of 2010 this figure was +50 and now it is in the -50 area. Very grim...slight improvement today, but still bad...not enough to get a trade on.

German ZEW Economic Sentiment Survey
Median Estimate -55.8 Average Estimate -55.4 Range of Estimates -60.0 to -47.0
Prior -55.2 Actual -53.8

German ZEW Current Situation Survey
Median Estimate 31.0 Average Estimate 29.9 Range of Estimates 16.0 to 34.0
Prior 34.2 Actual 26.8

Eurozone ZEW Economic Sentiment Survey
Prior -59.1 Actual -54.1

Soon after the release the Zew made some comments Click Here to See
then a Spanish Bond Auction See Here and a Greek Bond Auction Click Here and so the Euro did manage to rally US Bank buying euros

Here are some Charts:
1st the initial reaction in 5 sec

then a 30 sec to show more of the action especially thru those bond auctions

ECB Cuts Rates 25 bps to 1.0% as expected then announce Bond Buy and GDP forecast cut

54 out of 58 analysts surveyed by Bloomberg expected the ECB to cut rates today by 0.25% or 25 basis points. 2 analysts expect them to hold rates steady at 1.25% and another 2-3* expected a bigger cut of 0.5% or 50 basis points (bps) to 0.75%

Some expected the EURUSD might sell off on this news, but the cut was highly expected and had been already priced into the market as we had already seen the EURUSD sell off from 1.3430 to 1.3380 before the rate announcement. So actually the EURUSD rallied on the announcment up 40 pips to 1.3320 into the 8:30am EST ECB Press Conference which saw the announcement of 2 further Bond Buying programs and we see the EURUSD then did rally into the 1.3340-50 area.

After this ECB then cut their GDP forcasts and the EURUSD sold off over 100 pips to 1.3310-15.

* Bloomberg reported 2 but talking-forex write said 3

London Open Forex Entry Signal in the Live Online Traderoom

The day after thanksgiving, which saw a thin US market and gave the marketmakers a chance to chase and squeeze the traders who were short the EURUSD. After a decent sell off during the London Forex Session yesterday, all of these moves were reversed and the EURUSD nearly achieved 1.3400. As soon as the Asian Session started though more sellers showed up and as European traders woke up this Friday morning they found the EURUSD at news lows again, this time at 1.3265, which is the 61% of the September rally, see on the included Daily chart.

As trading commenced in Frankfurt at 7am GMT (2am EST), the EURUSD initially bounced off this level perfectly - see first circle on the 2nd chart. This produced a decent 30 pip bounce. The news out of the Euro zone continues to be bad. Not only Ireland, but now concerns about Portugal, possibly Spain and even Belgium now. Worries of a domino effect are in traders minds. Definitely the safe trade is to short after a rally, for instance at the Tokyo open last night, but a trader needs to get some sleep. Sometimes as a trader you have to be prepared to take the hard trade, this is the contrarian trade - the trade no one is thinking about. Sometimes it is easy to get caught up in the bad news coming thru the news wire, it can make a trader overlook the technical setups that are occuring right in front of them. Some purely technical traders go so far as to not even listen to the news, to them the price has everything priced into it.

Anyhow despite all the news, this was a significant fibonacci retracement level from the daily and I was prepared to go long a few minutes ahead of the London open. A key candlestick formation on the 1 and 5 minute charts indicated the opportunity to go long - just for a scalp. Naturally using tight stops as the EURUSD is definately in a downtrend and this looks set to continue now below 1.3000, possibly to 1.2800 depending on how the situation progresses. Got in around 1.3255 as a long lower wick doji closed 3 minutes before the London Forex Market Open, then the 5 minute candle confirmed. This also correlated to the big Quarter Century Level in the EURUSD at 1.3250 - this is another forex trading strategy that has merged with existing techniques. Here is a book about this:

Price was a bit indecisive for a few minutes but soon moved up and took out the last swing and hit the target pretty much spot on at 1.3295. One thing to look for around the London Open, and also the Tokyo and New York opens is some sort of reversal. It might be a temporary reversal before the main trend heading into the Open resumes or it could reverse the previous trend and set a new course for price action during the session. Basically the big banks have order books which they must fill, if they have customers who want to sell euros above where the market is at the open, they might buy in the spot market to move price to these levels to settle these customers orders. The market wants to do business, especially if it is a big order or a customer who gives the bank alot of business. It is also a chance to stop out any shorts who jumped in short too soon and were using a typical 20-30 pip stop loss, and also gets asian traders to take profit. All sorts of traders are entering or exiting for various reason and it is helpful to observe the price action during the open and think about what other market participants maybe doing and where they have their stops and limits. The market wants to do business and that means filling stops and limits as it goes.

EURUSD short trade during London Open - Live Trade Room Forex Entry Signal

This Thursday morning Nov.25th 2010 we were live in the ProfitMongers Live Forex Trading Signal and Eduction Room when the EURUSD setup for a nice scalp trade short. It is Thanksgiving so the markets in the USA are closed, however there was still some decent price action during the European Session.

The chart shows how a initially at the 8am GMT London Open the EURUSD moved up to 1.3350, this corresponded with the 50% retracement of Wednesday's sharp move down during the European Session from 1.3413 to 1.3284. We did not get the live forex trade entry signal right on this fibonacci retracement level, rather we waited for price action to confirm a key reversal candlestick formation and some news hit the wires at 8:44am. Basically Moodys said they were placing several Irish banks ratings under review for a possible downgrade. The reaction was not automatic but when price showed us evidence of responding to this we did not hesitate to pull the trigger and enter the short EURUSD trade. As price moved in our favor, more news continued to come thru the news wires which supported the EURUSD short. ECB's Makuch said the Euro was slightly overvalued and then talk of an expected sovereign ratings downgrade for Italy was rumoured to be circulating the dealing desks. We took some profit around 1.3315 and were targeting 1.3290, but stretched this out to just above the big 61% fib of the September rally at 1.3270. The EURUSD 5 minute candlestick did close with a long lower wick doji right at 1.3290 while I was away, so this was a good reason to take the rest here, but regardless the stop loss was moved to lock in profit on the remaining position at 1.3320

German IFO - Good Number but EURUSD still in trouble

This Wednesday morning at 9am GMT (4am EST) the numbers for the German Ifo from the Institute for Economic Research. This consists of 3 numbers the most important of which is the Business Climate Number. It is an index which is based on surveyed manufacturers, builders, wholesalers, and retailers. It is a leading indicator of the economic situation and is highly regarded as historically it has corresponded to how the market has done. Here is the Data:

GERMANY NOV IFO BUSINESS CLIMATE: 109.3 V 107.5E; CURRENT ASSESSMENT:112.3 V 110.4E
- Expectations Survey: 106.3 v 104.7e
- Prior Business Climate revised higher from 107.6 to 107.7
- Prior Expectations Survey revised higher from 105.1 to 105.2

This was a decent deviation higher, actually +1.8 higher than the expected 107.5 , and in the past deviations of this amount have lead to good moves higher on the EURUSD and other Euro forex cross pairs. The Euro has been under alot of pressure the past few weeks with the situation in Ireland opening the old wounds that were caused by the Greek situation just 1 year ago. The markets gave the Euro a break while the Fed's QE2 was in focus, but now that is a done deal this has taken center stage. This week especially the sell-off has intensified, with last week's low being taken out, we recall that the EURUSD did then recover significantly from last wednesday until the end of the week, rallying some +300 pips. Since the market commenced for trading this week the EURUSD has moved down and comments from Merkel yesterday about the Euro being in a crisis did not help. The asian session saw some moderate retracement up for the EURUSD after the step losses seen yesterday. Euro Peripheral Bond spreads again were widening as the London open began and all the euro forex crosses dropped from the start. Concerns are that the debt problem will spread to Portugal, although their problems are different than Ireland, but their economy is small enough that the EuroZone rescue fund should be able to cope with this. The bigger concern is the situation in Spain because they have a much larger economy and this would bring alot of pressure on bail-out fund.

As the included chart shows, the EURUSD spiked up some 10-15 pips from its pre news release price of around 1.3335, but within 1 minute is was back down to this price and quickly moved below it and lower. With the strong negative sentiment and general bad news about the Euro, it was not wise to try and trade with the number when it was positive, in fact when there is a strong Sentiment-based Flow in the market, when there is a number which moves the market in the other direction, it can be a good entry to get back into the Trend. This moved very quick and already being short on some position trades did not get a chance to add here. Spike traders did have a moment to get out within a few pips of entry unless they experienced slippage, but it does help to be aware of the Sentiment-based Price and News Flow and Major Trends in the market even if you just take forex news spike trades.

German ZEW Survey Economic Sentiment and EuroZone CPI

A slew of German and Eurozone news releases hit the wires at 10am GMT (5am EST). The main figure we were watching in this batch of Data was the German ZEW Survey Economic Sentiment, which was expected at +2. Usually a deviation of about +/- 10 on this figure can generate a nice forex trading entry signal. This data is normally released with a ZEW Survey Economic Sentiment for the whole EuroZone, as well as the ZEW Survey Current Situation. These other 2 figures are not as important as the main German number but it does help if the Economic Sentiment figure for the EuroZone deviates from expectations in the same direction as the German Economic Sentiment number. However this morning this news also came with CPI data for the EuroZone. The German ZEW has not been reacting so well the past couple of releases as well as they fact that today it was coming out with all this other data. Sometimes it is only good for a small spike trade, but also it can also generate a nice afterspike trade, so one must be cautious when trading this. Here is the data:

(GE) GERMANY NOV ZEW ECONOMIC SENTIMENT: +1.8 V -6.0E; CURRENT SITUATION: 81.5 V 75.0E
- No revisions

(EU) EURO ZONE NOV ZEW ECONOMIC SENTIMENT: 13.8 V 2.0E
- No revisions

(EU) EURO-ZONE OCT CPI M/M: 0.4% V 0.3%E; Y/Y: 1.9% V 1.9%E; CPI CORE Y/Y: 1.1% V 1.0%E
- No revisions

Interestingly, the EURUSD blipped down 10 pips of so in the 5-10 seconds before scheduled release. The EuroZone CPI data was released first right at 10am and it was higher with a +0.1 deviation from expectations, and the EURUSD immediately started to move up. About 8-9 seconds later the German ZEW data came out also higher but with only a +7.8 deviation. Then nearly 17 seconds after the initial EuroZone CPI data the EuroZone ZEW came out with a +11.8 deviation. So all good data, but it trickled out and the EURUSD had already moved quite a bit by the time the German ZEW data came out, which was the main piece of data to use for catching a quick forex news spike trade. The SNW autoclick software has built in safety features for such instances so everything was already cancelled, regardless there was a small continuation up after this release and price stayed steady for about a minute after all the data was released. With all the positive data however it was an opportunity to look for a forex news afterspike trade, and the chart included with this post shows how the price of the EURUSD bounced off the 61% fibonacci retracement of the move of the initial spike directly after the news release, producing a quick scalp of 10-15 pips. This release has not been doing so well so it was not worth holding onto it when it appeared to be unable to regain the original spike high level and continue. However the initial price move caused by the EuroZone CPI initially was very interesting and further research into this news figure will be researched. It is not a frequent occurrence that the CPI is release at the same time as the ZEW so it will interesting to see how the CPI moves the EURUSD on its own.

US Retail Sales - core flat but headline good dev

Today we saw the release of the Retail Sales figures out of the USA. The focus is on the main Core Retail Sales figure to get a spike trade, however today this figure came out as expected. The headline figure, which includes automobile sales, did come out with a -0.5 deviation. This is about the deviation we were looking for on the Core number. Initially price action did not respond much, in fact in the first few seconds the USDJPY actually went up a few pips, however it then turned back down, it was not a fast move however and it did pullback to provide some afterspike forex news trade signals. Here are the figures:

*(US) OCT ADVANCE RETAIL SALES: 1.2% V 0.7%E; RETAIL SALES LESS AUTOS: 0.4% V 0.4%E V
- Retail Sales Ex Auto & Gas: 0.4% v 0.3%e

- Prior Advance Retail Sales revised higher from 0.6% to 0.7%
- Prior Ex Auto revised higher from 0.4% to 0.5%

Always fib the initial swing after the news, this will give the trader certain levels to look for an entry. It can be tempting to chase the price, and often even this will give pips when there is a continuation, especially after a larger deviation. A safer way is to wait for the pullback after the initial spike. In this news release, the market needed a bit of time to make the move. Most traders, not seeing a deviation on the core, stood aside for a moment and then once price started reacting in the expected way to the headline figure, they jumped in. On the EURUSD chart included there was an initial pullback to the 50-61% hot zone, this then extended up to the 161% extension of the same move (this 161% at 1.3650 is also the 61% of Friday Nov.12th range), also later on it came back to the former swing high, and although it did break below this for a few moments, it came back above and started heading higher. On the USDJPY chart the pullback was only to the 38%. Normally we focus on the USDJPY pair when trading this news, however at times the USDJPY does not react so well so it is always advisable to also look at the EURUSD or USDCHF for trade opportunities.

Doug Ragan has also posted about how the EMini S&P Futures Contract traded during the news, including info about trading a the opening gap. I took this trade and made 3 ES Points, or 12 ticks....quite happy about that...Cheers Doug!