UK GDP and MPC Meeting Minutes Vote Count - Lower deviation on GDP but no votes for raising APF leads to GBPUSD rally after sell-the-rumor move into the release.

This morning at 9:30 GMT (4:30 EST) the Preliminary GDP figures for Q4 2011 were released out of the UK. This came along-side the vote count of the MPC's January meeting, which complicated things a bit. There had been much talk of lower GDP figures for Q4 from various think tanks and the Chancellor of the Exchequer himself George Osborne. The GBPUSD forex pair had been near its highs for the week around 1.5615 as the European Session began, so no hint of selling this rumor of a lower print on GDP until about 15 minutes after the 8am London open, finally cable started to move down. Sometimes rumor lead moves can start the day before, but in this case it was just an hour or so before. Cable sold off 70 pips into the release and when the GDP did come out lower there was a slight further tick down for a lower low.

However the MPC Meeting Minutes Vote Count for the January Interest Rate Decision was released at the same time. Many are expecting the BOE to raise the APF (Asset Purchase Facility - the BOE'f name for QE or Quantitative Easing) even more as soon as February. However when the vote count came in unanimously at 9-0 against raising APF, this was bullish, even the arch-Dove Posen did not vote for it, although he has been talking about it. Raising APF is usually bearish for the GBPUSD because basically the bank is printing money, thus creating a larger supply of it and more supply means that its value is lower. However longer term raising APF can be bullish as it will stimulate the economy. When the BOE raised the APF on October 6th by 75 Billion, GBPUSD sold off quite hard to 1.5270, but then turned around and rallied non-stop thru-out October to 1.6165 on October 27th....anyway here are the Figures:

UK GDP (QoQ)
EStimates- Median: -0.1% Average: -0.1% Range: -0.7% to +0.2%
Actual: -0.2% Prior: +0.6% No Revision
UK GBP (YoY)
EStimates- Median: +0.8% Average: +0.8% Range: +0.2% to +1.1%
Actual: +0.8% Prior: +0.5% No Revision

Bank of England MPC Vote Count :
Unanimous to hold Rates Steady 0.5%
Unanimous to hold APF STeady at 275B


Here is the 5 second chart of the GBPUSD, you can see how initially price action was whippy and indecisive:

Here is the 1 minute chart of GBPUSD which shows the pair resolving higher after this intial wiggle (whippy on 5 second is a wiggle on the 1 minute), back to the 1.5600 round figure:

This 5 minute chart of GBPUSD shows the sell-off on the pair leading into the news starting from 8:15 GMT. This came off the 38% fibonacci retracement of the October 6th low of 1.5270 to the October 27th high of 1.6165 @ 1.5613:

This Daily Chart shows the fibonacci better:

Scalping the Loonie USDCAD pair - Don't trade in low volume holiday markets?

Many will warn of the dangers of trading when volume gets light and liquidity in the market drains away in the run up to Christmas, Thanksgiving, Easter and the August Summer holidays. Well definately it is good to take some time off, recharge the batteries and unplug from the dam computer, eat real home cooked food and enjoy the company of friends and family...but why not make some pips if you are waiting for that turkey to bake or family to arrive or to catch your plane.

If you have some good analysis why not. Holiday markets can take 2 shapes, 1. moves can be exacerbated because some big-pockets can swing things around on the cheap, or 2. things might not move much at all or in tight ranges.

Today was Friday December 23st, how lucky that Christmas is on a weekend this year and the Forex market is open Sunday night December 25 all the way to Friday December 30th because somewhere on the planet they don't have Christmas...joking...lol. Not alot of news out of Europe but North America had Canadian GDP and the USA had a bunch of smaller economic news reports. I showed up and posted a chart of the Fibonacci cluster on the Daily Chart of the USDCAD to my members at SecretFXTrading and followers on twitter.

So the 38% of the late July 26th of 0.9405 to the October 4th high of 1.0667 comes in around 1.0179. Also the 38% of the same October 4th high 1.0667 to the October 28th low of 0.9894 comes in around 1.0184....but gosh that October 4th pin bar was such a beauty!!! Almost every major forex pair had a sharp reversal that day...only Cable the GBPUSD forex pair went lower to 1.5270 on October 6th when the Bank of England raised the 'Asset Purchase Facility' (APF) by 75 Billion to 275B....basically printing more money. More supply of paper, less value, however this was good news cloaked as bad because it will help the Economy, hopefully adding a few points to GDP, which would strengthen the Pound-Dollar...but perhaps it will raise inflation, which is a stealth tax...hmm good or bad or a bit of both....grey area, well you can shout, you can scream, but what offering solutions, we can all click a mouse button and place a trade, don't be too drastic, remember social cohesion, the status quo, don't want to rock the boat too much. Wow I got way off topic! Back the Loonie.

Anyhow the CAD GDP was basically flat, and all day the USDCAD pair bounced off this fib cluster. Generally I take 15-20 pips on either a half or a third of the position and move the stop to breakeven. Sometimes I stack entries and build a position up. There was a possibility that the 1st blue October fib level would break and the yellow july-early october fib would be tested which it nearly did but was front-run by a pip or two. Also notice how when the previous swing high was tagged the loonie would reverse back down into the fib cluster zone again for another go. Well how many times can you make 15-20 pips on half a position? After awhile you have racked up quite a few pips...of course it is easy to get greedy, hold the full position for a further move higher, just to get stopped out, give up your patience and leave the charts to start Christmas celebrations. Anyhow it turned out to be a good day and an extra nice bottle of champagne is in order. Here is the 5 minute chart of the fibonacci cluster zone mentioned above, with a summary of entries and exits, most exits were only half the position and the other half got stopped out, just to reenter...so did pay more spread than needed if the position had some more wiggle room but better safe than sorry, if the stop was 10-20 pips below there may have been a reason to hit it...remember the market wants to do business, even on Christmas.

Merry Christmas, Happy Hanukkkah or Happy Holiday

Magister Pips

Australian GDP - positive deviation leads to pop higher and then trend

Australian GDP is released only quarterly and has a good reaction to price. There are some issues with Australian data in terms of the way it is released. Apparently only the Interest Rates are released electronically while the other data is at first transmitted by phone so various news services pick it up at slightly different times.

Tonight's q/q data came out at +1.0% above the +0.8% expect and thus a +0.2 deviation above the median expectation. The previous quarter's release was also revised up from +1.2% to +1.4% so again a positive deviation. This is all for the quarterly figures.

There was also y/y numbers which were also higher coming out at +2.5% above the +1.9% median expectation for a +0.6 deviation higher. Also the previous month was revised from +1.4% to +1.9 for a +0.5 deviation.

First the 1 minute chart shows how the initial reaction all came in the 1st minute, then things went sidewise for over 90 minutes.

then after a pullback to the 61% fibonacci level of the initial news release reaction spike, price again turned to the upside to rally further. Here is the 5 minute. The price action was very similar to the September release, only with the exception that this time there was more of a pullback over 3 hours after the release before things further rallied, but again profit taking did occur an hour or so after the London open, just like September.

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

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!

GBPUSD reacts off Fibonacci Levels during European Session

Initial move on GBPUSD and EURUSD during the London open was to continue the down move which got going in latter half of the asian session. About 2 hours after the london open, an asian sovereign was reported as buying GBPUSD and the pair shot up from 1.6050 to back above the 1.61 handle, see here. Drawing a fibonacci retracement from the 1.6158 high seen at the 5pm Sunday night open to the 1.6040 lows achieved during the 1st half hour after the london open, as well as another fibonacci retracement drawn from the pre-Frankfurt swing high at 1.6130 to these same lows. We can see that the 61% of the larger move and the 78% of the smaller move created an area of confluence, creating a low risk entry area. This was also a standard sweep of the handle, and if no extension of this move down was seen, a trader could at least expect to see some retracement off the burst higher created by the ACB. Of course you might think you are positioning yourself against the trade of the Big Fish, but you do not know for sure if they were taking profit, scalping, or what, nor where their stop loss is if it is a new entry. This is the type of trade to look for, unfortunately after watching rather lackluster price action for 2 hours, I was not around when this occurred, but wanted to make a note of this type of setup so others can get an idea of what to look for.

Alot of data out of the UK this week: CPI, Retail Sales & the UK Employment data, also CPI and Retail Sales out of the US. Not like the start of the month but some decent big reports.