Sunday Afternoon- EST

I usually like to do my beginning of the week analysis on Sunday afternoon’s and occasionally trading opportunities will present themselves! One of these opportunities is a gap that occurs during  Sundays Market open.

GAP Defined:  A gap occurs when price jumps from one bar to another with a considerable amount of price distance in between the bars.  The most likely cause of  gaps is due to a lack of liquidity, volume, and market participants. One of the nice things about Forex trading is that typically you will not see gaps on charts. Disallows the Forex trader to take advantage of all market moves. The only time that this usually happens in the Forex market is when the markets are reopening on Sunday afternoon/evening EST (Monday’s Open)

The Gap Strategy -  in a Nutshell is that when you have a gap it will be filled. The opportunity for this strategy occurs more often in the stocks, equity, and futures world due to the fact  that those markets open and close on a daily basis with several hours in between. The reason why gaps rarely occur in the Forex world is due to its 24 hour, highly liquid nature. So when a genuine gap is posted on Forex chart.  It’s time to take notice. 

There could be legitimate reasons for a gap to occur, such as a geopolitical, economic, or natural disaster type of event that takes place before the institutional traders begin taking their seats again.

Carrying a Trade Over the Weekend - These gaps also highlight the potential risk of carrying a trade through the weekend.  In the event that there is a legitimate reason for a gap, price may move hundreds of pips and never come back to fill the gap for quite a long time.  Perhaps even months! This can obviously be detrimental to any account. So it is always wise to judge the level of risk before the weekend, and possibly readjust your trade. Try to calculate how wide your stops should be for minor and major gaps. You might even consider closing trade and reopening with a new position on Monday.

Example: Looking at the chart that I have posted – we have a nice gap that occurred Sunday October 29, 2006 on the GBPUSD.  Friday’s close was at approximately 1.8975 and Sunday afternoons open was approximately 1.8955 That’s s a gap of about 20 Pip’s!  In this example on the three-minute chart, you can see that price coiled very nicely back up to fill the gap. 

More importantly, you should notice that Friday’s close had created a resistance level that held for several hours. Price was repelled from the resistance zone twice at approximately 20:00 in the course of six minutes. At 21:30 the gap was filled and then continued up to 8985, which would have allowed for almost 30 pips, if you would have participated in the entire move.

Be Careful: Now don’t just take the trade before you do a little bit of research. Determine if there is a logical reason for the gap. Check the other "Majors"  to see if they are all gaping. If they are then check the news quickly to find out what may be the cause. You may want to go with the Gap. if everything basically looks the same as Friday afternoon fundamentally, and there’s no real surprises, then you can probably expect that this gap will be filled within a short/reasonable amount of time.

So that’s a quick lesson for today, as gaps could be a great way to start your week!

Good Trading - Jerry Furst is "1st on Forex"

No surprise today as you all know by now that interest rates were kept steady by the FOMC -  But have you noticed how the financial talking heads and analysts are starting to resemble their political counterparts. They think they can change policy if they talk about it enough! I bring your attention to how some people with the power of the financial media keep talking about interest rate cuts for the US. I don’t buy it!

Some of the noise coming from where it really matters (the Fed Governors) is indicating that rate hikes are actually more likely.  Continuing from my last blog post (see Oct 23  and the chart of historical interest rates) - We will likely see 7% interest rates before we see 4%! Now it may take a year to get there. But I have a slew of reasons why raising rates could be in the cards - stay tuned!

Have you ever noticed how there could be a presidential news conference taking place and the TV reporters are actually talk while the president is still speaking! The reporters give us "their commentary" and ask their guests what they think - without even listening to the actual person in charge of policy (the President) or in this case the Fed Governors.  The next time you hear talk about lower interest rates ahead for the US I want you to ask yourself this question. " is this a report of facts - or an opinion of a reporter or trader?"

What is the Fed Really Saying? I heard nothing of lowering rates, and in fact there was one vote for raising rates. From the FOMC announcement today " extent and timing of any additional firming that may be needed to address these risks will depend on evolution of the outlook"  The risks alluded to were, "US economy seems likely to expand and some inflation risks remain" The Fed bases this on the ASSumption of continued lower energy costs. Well I am not assuming anything when it comes to oil or politics these days. As Walter Cronkite would say, "and that’s the way it is!"

I did have fun trading the GBP-USD  for 7 minutes from 14:13 to 14:20 as I hedged a position just before the announcement and scalped a few pips off both directions - then took 7 pips from 8789 to 8796 (Note: The high of the day was 8799 until 21:00 EST)

The Real Story is now coming up… The US election on November 7th ! This should be good!

Stay Tuned - and Good Trading - Jerry Furst - is "1st on Forex"

Not the FOMC meeting this week - No-  The wait is on for the US Election two weeks from this writing. Markets hate uncertainty. Political uncertainty for the US is obviously in the air. So the consolidation on the EURUSD will likely continue until Nov 8th. Until then, Enjoy the Trading Range from 1.2500-1.2900!

But OK… I will play along and admit that I am anxiously awaiting the Wednesday 2:15 EST FOMC announcement. The anticipation of this report tends to bring everything to a standstill. That consolidation alone can be the impetus to cause a nice spike in volatility - or create an excuse for a major move.

But lets look more closely at Interest Rates. Click on the chart for a close up view of where interest rates have been in the past and where we are now. It is generally expected that the FOMC will hold rates steady in October. However - Read me now and believe me later.
Interest Rates for the US will probably be going up… and then up some more!

So Dollar Bears - Beware…

Good Trading - Jerry Furst for "1st on Forex"

From the Internet:

Hi Jerry,  I really enjoy reading your blog and looks like you are making some good observations. I have a question.

Q: I was trading the EUR-USD long this morning (Oct 16 2006 EST) and I got my 1st profit target of 1.2527,and should have gotten my Profit Target 2 of 1.2537 according to my charting program.  My broker apparently did not see that the markets reached my PT2. By the time I looked at my charts again I was loosing 2 Pip’s on PT2, and then I closed my trade. At least I did make 4 PIPS on PT1 of 1.2527. 

Can You Tell Me Why I was Not Filled at 1.2537?
Grass Hopper 

A: Grass Hopper, The EUR-USD only ticked at your target: 1.2537, briefly this morning. Congratulations on calling "Thee Top" of the day! Butt I have to ask,  Were you being greedy with a pip or two? If so, Let that be a lesson to you. (Hey, that rhymes!). Although you did not provide me with a chart of your analysis or how you calculated 2537 - I will assume for the purpose of this blog that you tried to capture the absolute top - instead of being happy with one or two pips less.

The bottom line is that your charting service (which I have concealed the name of) is a composite of several hundred banks and brokers trading on the inter-bank market. It appears as if your broker (who I have concealed the name of) never traded at the high of 1.2537 for the few ticks that a few others did. Remember, there is no central exchange and although the Forex market is extremely liquid - your broker might not be!

This begs me to tell you that in all trading - whatever you trade (stocks options, futures, milk, corn, gold, EUR-USD) EXECUTION IS KING! It’s worth every pip as your example clearly points out - as you lost much more than one pip. I also suspect that you were trading with market and not limit orders.

Tsk tsk, Grass Hopper!….. I suggest you demo trade Tuesdays PPI and TIC Reports and Wednesdays CPI and Housing Starts  :>)

Happy Trading - Jerry Furst for "1st in Forex"

Thursday’s US reports of International Trade, Crude Oil Inventories, and the Fed Beige book had me all dressed up and ready to go and then - well - nothing happened! Even Trichet’s comments could not move the currencies today. I was able to scratch out some pips but was expecting a spike out of one of these reports!

Wednesdays FOMC minutes report was good to me - and it should be a heads up for Oct 25th as there seems to be a good debate now between raising versus lowering interest rates. Stay tuned…

Fridays Scheduled Reports  (Import Price Index, Retails Sales, Consumer Confidence Report) in the beginning of the week seemed benign to me in comparison to Thursdays

Maybe they saved the best for last for Furst!

Good Trading - from Jerry Furst - for "1st on Forex"

EUR-USD trading range continues with a fantastic consolidation range that will soon break one way or the other! Trichet is scheduled to speak today and Wednesday’s release of Septembers FOMC announcement should be at the minimum an excuse to move these prices a bit.

The Head and Shoulder pattern on the 4 hour chart for the EUR-USD that I had mentioned last week (see Oct 6th post)  before the NFP has stalled half way to completion. But anything can happen in a cartoon!

JPY - Friday has some important events for the YEN as the BOJ meets, and Fukui is scheduled to give a press conference.

Gold is predictably ticking up after a nice retracement over the last few weeks and a renewed appreciation for "real money".  China had stated a consistent appetite for the "shiny metal" as it wants to diversify its holdings.

Stay tuned… and Good Trading - Jerry Furst for "1st on Forex"

It is often said that the news is already priced into the charts. North Korea’s Nuclear test Late Sunday Night EST was clearly evident on the JPY charts at 10:36pm. It was well after 11pm before the mainstream media began initial "unconfirmed" reports! My search for earlier reports found a post by Market News International at 10:42pm - Clearly six minutes after the spike on the charts - but well ahead of the talking heads. (please let me know of earlier reports if you find them)

I searched for official news on the actual time of the test based on the seismic event. My Google searches unfortunately found older reports of a suspected North Korean test in September of 2004 that was dismissed as a possible forest fire!

Who knows what they are hiding from us so that we continue our day to day activities as if nothing is wrong. Actually not a bad idea - Keep on trading! It’s comforting to know that we traders can be one of the first to know of events like these - Just remember to "Duck and Cover" if you see a flash!

Focus is on the USD-JPY: (Currently at 119.18 @ 4am EST)
Clearly the YEN has been under pressure lately. How low can she go? "Knee Jerk" reactions to the Korean Nuclear Test and it’s perceived negative effects on Japan would suggest that the Japanese and other Asian currencies will suffer.

Daily and Weekly charts show resistance on the USD-JPY being broken well before this development.  Even the Monthly charts are ready to give way. if 119.55 is taken out the next resistance could be retesting the December 2005 peak around 121.39

What If…… This is the time to be a contrarian???
Price could drop back to support around 118.30

If you don;t see it 1st on the FX Charts - You can read it here on "1st on Forex"  -
Good Trading - Jerry Furst

No Surprises Yesterday:
The BOE and ECB did not surprise (me) and we did get a nice move on the GBP-USD right around 6:50EST just as I had written yesterday - (Gotta start claiming some bragging rights here!) It’s interesting to note that the EUR-USD hardly budged.

I know some people who for one reason or another have tunnel vision and "Only trade the EURO". (They usually say it like a zombie) If I could I would smack em with the training manual that taught them to do that! Then I would smack em again with the charts comparing the EUR and the GBP over the same exact period. (Don’t worry - I wouldn’t really smack em)

Looking Ahead: As traders and price continue to consolidate waiting on the Non Farm Payroll, My focus is on the EUR-USD 4 Hour Chart  - Showing a Head and Shoulders pattern.  (Currently trading at 1.2686 - 10/6 - 00:30 EST)

To complete the Pattern:
Support needs to break approx 1.2665 and then 1.2640 to trigger the pattern that would have it complete at around 1.2520.

If it Fails:  Resistance is at 1.2721 and then the 200ma is at approx 1.2740.

As always- these posts are never to be viewed as trading advice or recommendations to trade - Otherwise I would be charging you guys a whole bunch! Do your own analysis and tell me if you agree.

Good Trading - Jerry Furst for "1st on Forex" JerryB1st@ienweb.com

Isn’t that what trading is all about…. What if…….?

The only shorter and more relevant question is…….. Why?

Today October 4th - the question is will things unfold as we expect with the BOE and the ECB?
Will the BOE keep rates steady when the expectation is that the ECB will raise rates?

What if the BOE raises? What if the ECB does not? It’s good to play these scenarios out in your head…. Become the decision maker. 

Why would each scenario be plausible and what effects would result and ripple through the system?  Combine that with your technical analysis and you stand to be much more confident once the charts start to spike!

So it will be white knuckles from 6:45-8:00 EST (10:45 - 12:00 GMT). There is potential for a nice move if there is any deviation from the expectation that the BOE will keep rates steady and the ECB will raise a quarter.

Once thats over, then all eyes begin to focus on the Non-Farm Payroll Friday at 8:30 EST.

Nuff Said???  Good Trading - Jerry 1st for "1st on Forex"

I am looking at the 30 minute charts as we head into the London open we have nice consolidation on all the Majors. These opportunities are great for an easy 10-20 pips. (if you know what you are doing and like the adrenaline rush!)

I am looking for support or resistance to break either way as we head into a few scheduled news announcements between 8:30-9:00am GMT (4:30-5:00am EST)

These types of short term trades you will need to figure out for yourselves - otherwise I would be giving what I consider to be actual trade advice if I listed my Support and Resistance Zones on such a short time frame.

The purpose of this blog is to get you guys in sync with what I am watching and how I determine the support and resistance. As well as my observations on the market(s). Once I start the online Webinars you will have a chance to see more of my Technical Analysis techniques.

How you trade is very personal based on your own risk and reward tolerance, size of your account, experience, strategies, etc…

Good Trading Guys !