Risk of losing your whole investment!

There is risk of losing your whole investment!There is always risk of losing your money in investments. Any Amount of money can let you hold a Forex position many times bigger than the value of your account. This is called “gearing”.I would say you don’t buy too much shares all at once, in that case you can lose a lot of money, and you don’t want that. I suggest you talk around with the forex dealers and other people or those who have knowledge about this and you will surely get profit in this business.

MAKE MONEY WITH FOREX SIGNALS

There are a lot of ways to work in the FOREX market. One of the is called the fundamental brokers.This is one of the worst ways of work because it depends on many things such as the market doesn't evaluate the news that is the market gets affected by any news shortly (50 points maximum) then gets back to it's original position.We recommend our clients not to take any position based on news or passion. When you discover that you have taken a wrong position, you have to stop your losses immediately and take another position to compensate your loss. We work on giving you tips to make all your positions taken correctly.You don't have to work everyday and take tens of positions (which mostly are wrong) every month.Our technique is to adopt the right positions not numerous wrong ones.We provide you 10-20 positions from which you gain 800-1200 points rather than 50 positions that causes you pressure and few points.We don't adopt some types of news like interest rates, real estate, productivity, unemployment rate in our work.We provide the suitable conditions to be able to take the right positions with high gains for a better life for you.Some people work on the base that the currency has two limits, high and low. For example, the EUR has reached its high limit, they sell it and if it reaches its low limit, they buy it. This is a wrong way also as currencies always sets new records in each circle and thus the dealer might bear high losses.There are a lot of ways in this business, some of them makes profits and others causes a lot of losses. Yet, we have our own way in this market which we don't publish and we adopt our own knowledge which we acquired and developed during long years of experience in this field and it proved it's efficiency by gaining high profits for our clientsYou can check our archive to notice the points we have gained in the past.In 2006, our work was restricted on EUR/USD and GBP/USDIn 2007, we expanded our work to major currencies such as USD/CAD. USD/CHF, AUD/USD and USD/JPY.In 2008 we started our work in the cross like GBP/JPY

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Online Forex News

USD Firms in early Asian Trading by Korman TamThe greenback edged higher at the start of the Asian session, rallying sharply against the Aussie initially and pushing the sterling beneath the key 1.40-level. With US equity bourses still mired near its lowest levels in 12-years, risk aversion will continue to benefit the dollar – which has pushed the euro beneath the 1.25-handle.US economic reports slated for release later today include the February ADP private sector payrolls, which are seen posting a loss of 615k jobs, deteriorating further from the loss of 522k jobs in January and non-manufacturing ISM. Consensus estimates for February non-manufacturing ISM call for a decline to 41.0 from 42.9, remaining mired beneath the key 50-level for its 5th consecutive month.Traders will closely scrutinize Friday’s key labor report given the weakness in the US jobs market. The unemployment rate in February is expected to spike to 7.9%, a level not seen since 1984 and up sharply from 7.6% from January. The non-farm payrolls figure is estimated to reveal a loss of 600k jobs – its worse level since 1974.
Posted by Md.Dosa at 1:46 AM 0 comments

AceTrader: Market Moving News
6 Mar 2009 08:52 GMT
Eur/gbp...0.8930... The pair surged in European morning session on the back of active buying fm Eastern European names. Bids are now seen fm 0.8920 down to 0.8890 n 0.8860/70 with stops located at 0.8850/55 n 0.8820/30. On the upside, some offers are noted at 0.8945/50 n 0.8965/70 with stops (sizeable) only emerging abv 0.9000/10.
6 Mar 2009 07:00 GMT
Usd/maj. - The greenback fell broadly against major currencies on position adjustments as investors continue to close long-dollar positions ahead of the release of U.S. non-farm payrolls data on talks that the number will show more job losses (may be 1 million) than the expectation of 648,000 drop.
6 Mar 2009 06:34 GMT
Gbp/usd - 1.4207 ... The British pound rose in tandem with euro n order book is relatively thin ahead of the release of U.S. employment data. At the moment, some bids are noted at 1.4155/60, 1.4110/20 with stops seen below 1.4100 whilst on the upside, fair size offers are located at 1.4230, 1.4270/80 with stops reported at further out abv 1.4300...
6 Mar 2009 06:14 GMT
Eur/usd - 1.2603 ... The single currency strengthened against U.S. dollar on short-covering together with rumours that sizeable defensive bids are lined up fm 1.2535 down to 1.2485 to protect option barrier at 1.2450. On the upside, some offers are reported at 1.2650 n 1.2670 as investors are focusing on the release of U.S. non-farm payrolls data later today.
6 Mar 2009 05:55 GMT
Usd/jpy - 98.22 ... The greenback rebounded briefly fm y'day's low of 97.72 to 98.51 on fixing demand together with short-covering in jpy crosses. Eur/jpy maintained a firm undertone after early rise to 123.77 in Asian morning on rumours that a major U.S. inv. bank bought the pair actively. Bids by good Japanese names are noted at 98.00, 97.55/60 with some stops seen below 97.50 n more buying interest is noted at 97.00/10. On the upside, some offers are reported at 98.70 n 98.85/90.
6 Mar 2009 02:12 GMT
Gbp/usd - 1.4153 ... The Bank of England lowered interest rate by 50 basis points to 0.50% as widely expected y'day n announced that they would start to buy assets up to 75 billion pounds. The British pound tumbled fm 1.4234 to 1.4037 after the announcement b4 rebounding to 1.4176 in Asian morning on short-covering. Some bids are noted at 1.4100/10 n 1.4050/60 with stops seen below 1.4000. On the upside, offers are reported at 1.4175/80, 1.4200 n further out at 1.4230.
6 Mar 2009 02:03 GMT
Eur/usd - 1.2548 ... The single currency bounced briefly to 1.2574 on rumors that a major US inv. bank bought eur/jpy (rose fm y'day's 122.70 low to 123.77) aggressively in Asian morning, however, selling interest fm various accounts below 1.2580 limited euro's upside somewhat. The trading book is relatively thin in Asia after this week's choppy movements n ahead of the important U.S. non-farm payroll data later today. Some offers are noted at 1.2580 n 1.2610/20 while some bids fm Asian names are located at 1.2520 n 1.2500/05 with sizeable stops building up below 1.2450.
6 Mar 2009 01:47 GMT
Usd/jpy - 98.32 ... The greenback rose briefly to 99.69 y'day b4 running into heavy offers there to protect major option barrier at 100.00 n price subsequently tumbled to 97.72 on the renewed selling in global stock markets, however, fixing demand in Tokyo lifted the pair to 98.49/51. Offers by Japanese exporters are reported at 98.55/60, 98.80/90 n further out at 99.20/30. On the downside, bids by Asian names are noted at 97.75/80 with some stops seen below 97.50.
5 Mar 2009 19:44 GMT
Eur/usd - 1.2548...Euro's sideway trading inside near term range of 1.2522-1.2584 is likely to continue with traders citing relatively thin volume following the volatile trading earlier (caused by Trichet's bearish comments, the fall in U.S. equities to multi-year lows n a disruption in the EBS system). Bids are tipped at 1.2500/10 n further out at 1.2450/60 with stops placed below latter lvl. Offers are noted at 1.2600 n also 1.2620/30...
5 Mar 2009 19:36 GMT
Usd/jpy - 98.38...Dlr has stabilised after finding buying interest around 98.00 n trading activity is expected to wind down as NY session approaches its close. Stops are tipped below 98.00 n also below 98.50/60. Offers are likely to emerge at 98.90/00. U.S. Treasury Sec Geithner says in his testimony that the government will provide capital to banks in order to to prevent a reduction in lending. In other news, the Japanese Government announced that it wud extend its ban on short selling in stocks because the financial markets remain volatile...
5 Mar 2009 17:13 GMT
Gbp/usd - 1.4121...Cable has rebounded after the intra-day selloff to 1.4037 with traders citing a broad-based weakness in the dlr n also short-covering in sterling after the BOE's rate cut matched market expectations. Stops remain at 1.4030 n further out at 1.4000 while on the upside, a mixture of offers n stops at 1.4150 is in focus with more stops likely to emerge around 1.4180...
5 Mar 2009 17:05 GMT
Eur/usd - 1.2562...Despite the intra-day selloff to 1.2482 following ECB chief Trichet's bearish comments, euro has rebounded fm there with sovereign names reported to be among the buyers. Fresh bids are tipped at 1.2500 n also 1.2450/60 with stops likely to emerge below latter lvl. On the upside, offers are noted at 1.2590/00 with stops lined up at 1.2625/30 as previously mentioned...
5 Mar 2009 16:52 GMT
Usd/jpy - 98.29...Dlr fell to around 98.00 (stops at 98.70 n 98.50 were triggeed) on active cross buying in yen as U.S. equity markets weakened again with the Dow n S&P 500 hitting multi-year lows, however, buying interest fm various accounts (incl. investors) at 98.00 has emerged n more buying interest is tipped at 97.50/60. On the upside, offers are seen at 99.00 n 99.50/60...
5 Mar 2009 15:58 GMT
Eur/jpy - 123.40... The pair remained under pressure in U.S. morning session as traders buy Japanese yen on risk aversion (DJI is currently trading down 158 points at 6,713 n is poised to re-test this yr's low at 6,705). At the moment, heavy selling interest fm various accounts is seen fm 123.50 up to 124.00 with stops only emerging abv 124.50/60 n further out at 125.00 while bids (for profit taking purposes) are noted at 123.00/10, 122.70/80 n 122.40/50.
5 Mar 2009 14:28 GMT
Dlr/majors - Reuters reported that the EBS forex trading system was down in some financial centres according to traders, which have led to some of the volatile movements in currencies with wide spreads being shown on the board. Market focus is on ECB President Trichet's press conference n his bearish comments on eurozone growth have continued to pressure eur/usd n eur/jpy...
5 Mar 2009 13:49 GMT
Eur/usd - 1.2515 ... The single currency extended intra-day decline on dovish comments fm ECB President Trichet after cutting interest rates to a record low of 1.5 percent (fm 2.0 percent) as expected, he said inflation had cooled n eurozone growth is likely to remain weak in 2009. A mixture of bids n stops at 1.2500 is now in focus n more option-defensive buying interest is likely to emerge around 1.2460-70 with stops placed below 1.2450 barrier. On the upside, offers fm various names (including macro funds) are lined up fm 1.2540 up to 1.2580 with stops starting to build abv latter lvl but sizeable stops only emerge abv 1.2625/30...
5 Mar 2009 12:21 GMT
Gbp/usd - 1.4060 ... Sterling dropped after triggering stops below 1.4120 n 1.4100 n although cable recovered after the anticipated 50 b.p. rate cut by Bank of England to record low of 0.5 percent, the pair has fallen again as BOE announced gbp 75 bln asset buying programme of medium term n long term gilts in order to boost money supply. At the moment, stops below 1.4030 n 1.4000 are in focus, however, mixture of bids n stops remains at 1.3980-90 with more sizeable stops located below 1.3950. On the upside, offers are lined up fm 1.4080 up to 1.4120 with stops starting to build abv 1.4150 n 1.4180...
5 Mar 2009 10:05 GMT
Usd/jpy - 99.44 ... The option barrier at 99.50 was finally triggered in European morning n although stops abv there were tripped, the greenback met offers fm exporters around 99.70/75 n has retreated fm 99.69. At the moment, more option-defensive offers (related to huge 100.00 barrier) are reported at 99.90-00 with more stops placed abv 100.05/10. On the downside, bids fm various parties remain at 99.20-30 with stops starting to build below 99.10, 98.90 n more at 98.65/70...
5 Mar 2009 09:08 GMT
Gbp/usd - 1.4208 ... The British pound surged in London morning on active buying by Middle East names n stops abv 1.4205/10 were triggered, however, cable has retreated fm 1.4234 as traders booked profit ahead of BOE rate decision. The release of slightly weaker-than-expected U.K. Halifax house price data (-2.3% vs forecast of -2.0%) may put some pressure on sterling but impact is ltd so far. At the moment, offers fm German names are reported fm 1.4230 up to 1.4270 with mixture of offers n stops located further out at 1.4300. On the downside, bids are tipped fm 1.4180 down to 1.4160 with stops starting to build below 1.4150...
5 Mar 2009 08:32 GMT
Eur/gbp...0.8864... The pair continued to move lower in European morning session n stops below 0.8870 were triggered. Heavy selling interest fm U.K. clearer is seen fm 0.8880 up to 0.8910 with more offers noted at 0.8930/35 n 0.8950. On the downside, stops at 0.8840/45 are now in focus n bids fm various parties are reported at 0.8815/20 n 0.8800.\Source: www.forexnews.com/FI/default.asp?type=acetrader&loc=marketmovingnews
Posted by Md.Dosa at 1:40 AM 0 comments

forex trading robot secrets revealed by ozz
Forex trading is a system set up to allow people to trade currencies in the various markets. It is extremely volatile, which in part lends itself to providing opportunities for traders. With so much volatility every day by adopting a short term trading strategy you can make consistently large profits.http://rakim818.fapturbo.hop.clickbank.net/Among the multiple variables affecting the Forex trading system, news is one of them. When news arises, changes are created in the market which often results in large spikes. Hence huge profits or huge losses can be made. The most important thing is to find a good trading strategy.Successful traders find a strategy and stick to it. Making money depends entirely on the predictions you make. Don't keep on changing your strategy because other traders have failed. Traders who follow their emotions usually wind up failing."Learn about one thing a lot rather than knowing a little about a lot of things."In Forex trading one can consistently profit through good and bad economic times. Position sizing is the most important component in the Forex market. It is simply deciding on how much you are going to put into any one Forex market trade.The trader should understand the trends in the market. When one rides in the trends there is always a possibility of attaining huge profits. If one goes against the trend you are fighting against the momentum in which the market is heading.The trader should analyze the multiple time trends otherwise you will be facing huge losses when the market moves against you.

Cable’s Intraday Gain Evaporates

It started so well today with the market setting up for intraday rally. So it did with minimal news to sway opinion any other way. As analyzed in our earlier post, “Cable Analysis” below, the market broke the 38 and 50% resistance barriers on the Fibonacci numbers reaching the 1.4600, (over 40-pips above our expected level).
The market soon receded below the 1.4560 level our 50% Fib. One would have expected a consolidation but, to our surprise Cable, GBPUSD shifted gear in the rapid sell-off by sliding further to the 1.4400 mark.

Cable Gain Evaporates
From the hourly timeframe, this minor trend is still remain intact but positional traders may still have a lot to say about it. At the moment, the pair is looking bearish on the 4H and daily timeframes and as the 50- and 200-moving averages are violated this could only heighten players’ bias.
Will I be shocked to find the market where the day began at 1.4350? Certainly not. With the G7 meeting coming up over the weekend that could only build support traders for the need to clear the table to keep gains.
For us here, we will keep our options open as ever.

Cable’s Intraday Gain Evaporates

started so well today with the market setting up for intraday rally. So it did with minimal news to sway opinion any other way. As analyzed in our earlier post, “Cable Analysis” below, the market broke the 38 and 50% resistance barriers on the Fibonacci numbers reaching the 1.4600, (over 40-pips above our expected level).
The market soon receded below the 1.4560 level our 50% Fib. One would have expected a consolidation but, to our surprise Cable, GBPUSD shifted gear in the rapid sell-off by sliding further to the 1.4400 mark.

Cable Gain Evaporates
From the hourly timeframe, this minor trend is still remain intact but positional traders may still have a lot to say about it. At the moment, the pair is looking bearish on the 4H and daily timeframes and as the 50- and 200-moving averages are violated this could only heighten players’ bias.
Will I be shocked to find the market where the day began at 1.4350? Certainly not. With the G7 meeting coming up over the weekend that could only build support traders for the need to clear the table to keep gains.
For us here, we will keep our options open as ever.

Another Retest?

That is what seem so imminent on the cable GBPUSD, front at the moment. The announcement of further interest rates cut last week to 0.5% (a-315-year low) was the first sign of the Bank of England’s MPC willingness to start printing money. They made no secret about this except that they can’t really say if this bold step will work.

Cable Slides on Cut
As you would expect after Thursday’s surprise news today trading was the first indication that the market is losing faith in the pound sterling.
From the Pivot numbers above, it is evident that the negative market forces have not fully played out yet on cable. How long this last would depend on how well the gatekeepers of the pound sterling are willing to put a lead of their ‘bad smell’.
At the moment, we are trading the 1.3830. If this slide continues it won’t be surprising to see cable trading below 1.3000 in the near-term. Whilst this might be a great news for the Government and Treasury in their quest for toxic assets purchase, but the long-term effect is that it discourages savings and increase spending. In an economic cycle where unemployment is at record levels, it is getting harder to see the rationale behind this thinking as everyone holds on to what they’ve got.

EUR Spikes To New High - Hovers $1.6000 Mark

spiked to new highs of 1.5906 yesterday triggering speculation in the forex market and other global financial institutions of the greenback, (dollar, USD) collapse. Is this trend sustainable to the EUR zone economy?
The greenback has been under immense pressure in the last few months. Since christmas the floor have finally caved in which has brought the dollar to its knees.
At the moment, the US economy is recession. Whether there is an official acknowledgement or not we now know that the numbers prove it. The consumer spending one of the economic prime movers has dried out, fuel price soaring and equity market facing collapse, it is becoming more and more difficult to convince people otherwise.
While these economic mayhems are happening across the pond, the EUR forex has soared to record levels. What does this mean to the average shopper on the street?
Simply put, it means you get abundance of dollars for your EURo on travels and shopping. It terms of replacing what you have spent, your goods and services become more expensive and unattractive for the rest of the world. Industrial nations like Germany, Japan, new power play like China and India would certainly feel the heat. On the flipside, the EURo zone econmy would also benefit because of foreign influx of investments.
The Pounds sterlings has also felt the dollar impasse because of the British economic proclivity to the US. The GBP/JPY, GBP/USD has felt the weight the most. With USD/JPY hitting new lows it does not seam the end is in sight yet. Let’s hope we don’t test the dollar-yen, USD/JPY low of 79.75 of 1995.
However, it would be naive of the euro zone economic financial power brokers to rest on their laurels of the spike because the long-term effect is retarded growths year-on-year. Every developed nation need American market. With the dollar crumbling, inflation will also be soaring in most the developed nations meaning more expense.
With global economic chaos looming, could the rest of the world watch America fall on its knees? Could the World afford it? It may be America’s problem for now, it’s already becoming a global phenomenon. As Melvyn King, Bank of England Governor, succinct expressed, ”When US sneazes the rest of the world catches cold

GBP/USD, GBP/JPY, EUR/GBP - Low Risks Opportunities Today

Across board, the pounds sterling, faired well against other currencies, GBP/USD, GBP/JPY and even the grand old lady, EUR/GPB. All presented low risks opportunities today. From the blast of the bell this morning the pound shot out like a man who stole.
Right from the Euro-session start, there were shared bullish sentiments about the pound sterling.


The GDP Report came in at even with expectations of 0.4%. This was seen as positive news in view of the recent turbulence in the financial markets especially in the UK banking sector.
The report was a welcomed news a breadth of fresh air that further rekindled the bullish optimism in the market for Cable, GBP/USD. The charts below highlights points already.

Choppy GBPUSD This Morning

The morning market has been very indicisive. The Cable has been vaccilating between the 50 and 61.8% range (8835~8870 respectively) of May 17th Hi @1.9025 and yesteday’s Lo of 1.8632 . It has been fairly difficult picking a decent position though. In the last hour or two there seem to be a directional bias southward breaking the EMA9 on the chart. I have taken a very small position on the downside @8842 with the hope to load the barrel @ 8800 mark. I still very much an outsider with fingers crossed.
Whilst I was waiting for some action in the EUR/USD and Cable instruments to set, I managed to pick up a few pips from the GBP/JPY. Nothing significant, 32 pips. 209.52 ~ 209.84.
I wish you every success in your trades today.
Benny…“A Mentor’s footprint is worth a thousand walk of trailblazing.Seek the WISDOM of the fore-runners.”

Cable, GBP/USD Presented Several Trading Opportunities Today

The upward burst we had experienced yesterday continued in the early morning trades until a resersal signaled just before 0900hrs (GMT).
Since then the market have moved like a yo-yo. It had vaccilated between 1.9807/1.9974 which is great for us traders but something an investor might frown upon.
The market has trended very well in either direction with huge rewards opportunities in-between. The chart opposite demonstrate the various opportunities presented.
I took a couple of positions today. One early entry in the morning was almost eroded by the downward turn but closed out with 19 pips. That 0900hrs sharp turn was an abberation. As the day worn on, I took a further position at 1.9914 sighting the reversal flag on the 5-min chart. With my limit adjusted to 1.9850 half-way my anticipated level. I made a further 64 pips. A total of 83 pips from cable and a further 58 from GBP/JPY made a very nice day in the office.
However, taking a sneak peek at the second chart, can you see a head and shoulder developed?
Another interesting thought is that the market ended up a little lower than the Asian market overnight low. See the top chart above.
Finally, while the equity market remain volatile, macro economic reports show weaknesses and carry-over remain tentative, these sorts of daily see-saw movements would remain inevitable

GBP/USD, EUR/USD and GBP/JPY: ‘We’ve Never Had It So Good’.

The last few months have been exciting for us all forex traders. When the story of the year is told I believe many of us should be able to look back to 2006, and say ‘..that was a very good year.’
On the GBP/USD for example, the year presented several windows of opportunities within range of 1.7200 and 1.9524 (current level). What has been very interesting is the huge volatility created within it. On my short term trades, I managed to capture several take.
Most traders that I know, short, swing mid and long terms they are also saying, “We’ve never had it so good.” What has been the secret that has created many smiles in the face of some misery and woes of forex trading? Education and training.
For sometime now, I have been a stern advocate of proper forex trading training. Those who have heeded this advice have also been rewarded by the market. While those who hasn’t would have also been rewarded by constantly donating to the market. The stark reality is that while some are rejoicing some go home sad. Forex trading presents great opportunities, but only those who are prepared reaps the reward. How will your story be told in the coming year - 2007? As this year draws to a close, now is the time to start planning for the coming one.
I must take this oppotunity to appologize for not being able to keep up with my daily update here as I would have loved to. But I felt it would be nice to write these few lines no matter what. Please bear with me. It is my utmost desire that you gain from this market even as I am.
Happy trading,
Benny Nardino
“A Mentor’s footprint is worth a thousand walk of trailblazing.Seek the WISDOM of the fore-runners.”

GBP JPY: My Best Trades of the Year

Today was a busy day. I had two trades running simultaneously today. It’s been a long while yet since I last traded this way on a personal level. For some reason both trades came up

Currency Trade - GBPUSD Analysis.
trumps and that was very encouraging. I traded cable, GBPUSD and pound yen, GBP/JPY this morning. The weakening cable run encouraged me to trade both pairs southward this morning. I took the first position at 1.7434 came off at 1.7362 and this recorded 72 pips within 3hrs. The chart expalins this.
The second trade was more rewarding and the gift of patience eventually paid off.
About the same time the above trade was placed I shorted GBP/JPY at 204.93 as well. This kind of trade highlights why it is worth sticking with the signals. Took profit at 202.65 just before 1600hrs GMT and that was a whopping 228 pips. I can tell you that it was one of my best days of the year 2005 with 300 pips in the bag on both trades. This eclipse my weekly expectation which had certainly paid for my girls school uniforms. LOL.
Here’s the other chart too.

Currency Trade - GBPJPY Analysis.
Some may wondered why I stayed that long for an advocate of 2hrs trading per day. At point A, you should have seen a Tweezer-Tops for a reversal.
Having made a few pips in my earlier trade I was tempted to stay in which isn’t wise but it paid off. I saw B as nothing but a consolidation. I was waited some more drag from the US market open and I got it just before 1600hrs at point C. Game over for me. I hope this helps the anonymous traders. Have you traded today? Did you gain anything? Let’s see how you did. Have a pleasant trading day.

Cable Analysis

Cable sets itself up for an early morning rise. After a dip from New York trading session yesterday, the GBPUSD found its bearing from Asian trading hours which saw the pair traded up again to setup this morning opportunities.

Cable Set to Rise
The price chart shows a built up activity above the 23.6% of the Fibonacci levels, thus creating a falling wedge on the hourly timeframe. This confirm the the 15-, 30- and the 240-mins on the intraday.
However, we anticipate a breakout around the 1.4385/90 points. If this is achieved, we would expect to see 1.4460 and possibly the 1.4560. Our daily our target remain around the 1.4560 level, but if there is a breakdown we shall be seeing another retest of the 1.4170.
For now, our bias remain bullish and optimistic. Have a great day

Cable’s Intraday Gain Evaporates

It started so well today with the market setting up for intraday rally. So it did with minimal news to sway opinion any other way. As analyzed in our earlier post, “Cable Analysis” below, the market broke the 38 and 50% resistance barriers on the Fibonacci numbers reaching the 1.4600, (over 40-pips above our expected level).
The market soon receded below the 1.4560 level our 50% Fib. One would have expected a consolidation but, to our surprise Cable, GBPUSD shifted gear in the rapid sell-off by sliding further to the 1.4400 mark.

Cable Gain Evaporates
From the hourly timeframe, this minor trend is still remain intact but positional traders may still have a lot to say about it. At the moment, the pair is looking bearish on the 4H and daily timeframes and as the 50- and 200-moving averages are violated this could only heighten players’ bias.
Will I be shocked to find the market where the day began at 1.4350? Certainly not. With the G7 meeting coming up over the weekend that could only build support traders for the need to clear the table to keep gains.
For us here, we will keep our options open as ever.

The Forex Market Diagram (1996):

1996 (see Structure of the BoP accounts), there was a £2bn. deficit in the Balance of Payments (Imports + Capital Outflows > Exports + Capital Inflows). Other things being equal, this deficit (supply greater than demand) should have led to a depreciation of the exchange rate to Ee - the exchange rate was "too high" in 1996. This depreciation was prevented by the Bank of England selling some of its own Forex reserves and thus adding to the demand for £s by £2 bn. This "official financing" of the Forex market supported the exchange rate at $1.6/£ (at Ea) rather than allowing it to depreciate to Ee.
Since the UK was operating under a floating exchange rate system in 1996 (and still is) the implication of the 1996 BoP account (with a negative balance offset by a running down of the Forex reserves) was that (over the course of the year) the exchange rate was tending to depreciate, with the Bank of England slowing this depreciation by buying in £s and selling forex reserves. In fact, by the last quarter of 1996, the exchange rate began to appreciate (allowing the bank to begin to re-build forex reserves by selling £s and buying forex). It appreciated and remained strong, at least against the Euro, throughout the 1990's and early 00's.

The "German" Experience

Typically, Germany has followed a more rigorous and generally 'tighter' monetary policy than the UK, probably because Germany experienced (under the inter-war Weimar Republic) a ferocious inflationary period stemming from an unregulated banking sector where many local banks were given the licence to print their own money. This experience is ingrained in the German psyche, and makes them determined to ensure that it never happens again - hence the political independence of the Bundesbank (Germany's Central Bank), which has long been charged with preserving the value of the D-Mark by control of the money supply and interest rates.
Under these conditions, domestic economic growth is associated with rising interest rates, as the controlled money supply is squeezed by increasing transactions demand for cash and liquidity, forcing the speculative demand to be satisfied with a reduced supply of money - driving up interest rates.
Increasing domestic interest rates encourage capital inflows and discourage capital outflows, thus shifting the demand and supply curves in the (D-M) Forex market in the opposite directions to the UK (relaxed monetary policy) case:
Thus, Germany typically experienced BoP surpluses rather than deficits, and the D-M tended to appreciate rather than depreciate over the post war period.
Internal Domestic Pressures arising from an appreciating currency, or a BoP surplus, are rather different from those facing a country with a depreciating currency or a BoP deficit - appreciation tends to reduce the comptetiveness of domestic production - possibly prompting greater efforts to efficiency improvement, while BoP surpluses simply allow for the accumulation of Forex reserves in exchange for sales of domestic currency - which puts further pressure on the Central Bank to limit domestic money supplies and keep interest rates high.
Pressures for re-valuation under fixed exchange rate regimes frequently lead to pressures for devaluation of competing currencies - the Franc, Lira and Sterling, since one country's BoP surplus MUST be offset by other countries deficits - for the world as a whole, there are NO Imports and Exports, and NO interplanetary Capital transactions - hence at the global level Forex balances must balance.
So, How Come German interest rates tend to be below those of the UK? There are two major reasons, on the basis of this analysis.
German inflation rates have typically been lower than those in the UK - so nominal interest rates will also tend to be lower in Germany than in the UK, since nominal interest rates can be expected to be the real interest rate plus the expected inflation rate - otherwise sensible people will not be prepared to save and lend money.
The German style of economic management leads to a more stable economic performance, and to an appreciation rather than depreciation of the currency - leading to a preference for D-M (other things being equal) compared with other international currencies. So German interest rates do not 'need' to be as high as UK rates to attract foreign capital and persuade domestic capital to stay with the D-Mark. However, the unification of Germany in 1989 led to substantial problems for the German governement, especially for its Fiscal balance, as the eastern lander became eligible for the west German rates of social security and the two currencies (East and West DM) were exchanged at 1 for 1. Since 1989, the strength of the German economy has suffered as a consequence, and the D-Mark has weakened somewhat.
Notice the effects of Inflation on the Exchange Rate:
Domestic Inflation at higher rates than international competitors leads to domestic cost increases and loss of international competitiveness - and a depreciation of the currency as a result. - the "British" experience.
Foreign Inflation at higher rates than domestic inflation improves the competitiveness of the domestic economy, leading to appreciation of the currency. - the "German" experience.
Germany, with a background of Monetary Prudence, was better placed and more likely to follow appropriate monetary policy when the world moved from Fixed Exchange rates to Floating Rates in 1971 (the collapse of the Bretton Woods (1947) agreement on fixed exchange rates)
The UK, on the other hand, had not been convinced of the importance of monetary policy (one Governer of the Bank of England in the 1950s/60s is reputed to have said that "money doesn't matter"). As a consequence, UK monetary policy was far too loose or relaxed in the early 1970s, under a Tory administration, and following the floating of exchange rates, which generated a considerable inflationary period and de-stabilised the economy. Hence, policies which had previously tended to lead to chronic BoP Deficits (associated with two major devaluations of sterling during the post war period) now led to inflation, as can be clearly seen from the Forex market analysis (see above

The FOREX MARKET DIAGRAM AT WORK

As domestic growth occurs, imports increase because Y increases - shifting the forex supply curve (of sterling) to the right, while exports possibly tend to fall, as domestic demand captures previous exports and as the economy reaches full capacity - shifting the demand curve for sterling to the left.
The consequence is a BoT deficit, which, if not offset by increasing capital inflows or reduced outflows, gives rise to a BoP deficit.
There is thus pressure for devaluation of sterling (under fixed exchange rate regimes) or for depreciation of the exchange rate - making imports more expensive and exports more competitive, and also tending to be inflationary as import prices rise.
However, there is also some contractionary or deflationary pressure
both from the fact that imports (leakage from the Circular Flow of Income) increase faster than exports (and injection);
and also from the official financing of the BoP deficit - which involves the Bank of England selling Forex reserves in exchange for sterling, and thus absorbing some sterling from the domestic economy, reducing the money supply and increasing interest rates. This Monetary impact of management of the BoP and Forex market gives a different perspective on the macroeconomic effects of the foreign sector - the "German" experience

Exchange Rate Effects of Changes in Foreign Interest Rates using a RoR Diagram

Suppose that the FOREX is initially in equilibrium such that RoR£ = RoR$ (i.e., interest rate parity holds) at an initial equilibrium exchange rate given by E'$/£. The initial equilibrium is depicted in the adjoining diagram. Next suppose British interest rates rise, ceteris paribus. Ceteris paribus means we assume all other exogenous variables remain fixed at their original values. In this model the US interest rate, i$, and the expected exchange rate, Ee$/£, both remain fixed as British interest rates rise.
The increase in British interest rates, i£, will shift the British RoR line to the right from RoR'£ to RoR"£ as indicted by step 1.
The reason for the shift can be seen by looking at the simple rate of return formula.
Suppose one is at the original equilibrium with exchange rate E'$/£. Looking at the formula, an increase in i£ clearly raises the value of RoR£ for any fixed values of Ee$/£. This could be represented as a shift to the right on the diagram, as from A to B. Once at B with a new interest rate, one could perform the exercise used to plot out the downward sloping RoR curve. (see 20-7). The result would be a curve, like the original, but shifted entirely to the right.
Immediately after the increase, before the exchange rate changes, RoR£ > RoR$. The adjustment to the new equilibrium will follow the "exchange rate too low" equilibrium story presented in 20-8. Accordingly, higher British interest rates will make British £ investments more attractive to investors leading to an increase in demand for £s on the FOREX, resulting in an appreciation of the pound, a depreciation of the dollar and an increase in E$/£. The exchange rate will rise to the new equilibrium rate E"$/£ as indicted by step 2.
In brief: An increase in British interest rates will raise the rate of return on pounds above the rate of return on dollars, lead investors to shift investments to British assets, and result in an increase in the $/£ exchange rate (i.e., an appreciation of the British pound and a depreciation of the US dollar).
In reverse: A decrease in British interest rates will lower the rate of return on British pounds below the rate of return on dollars, lead investors to shift investments to US assets, and result in a decrease in the $/£ exchange rate (i.e., a depreciation of the British pound and an appreciation of the US dollar).

Asset Approach to Exchange Rate Determination

The interest parity condition can be used to develop a model of exchange rate determination. That is, investor behavior in asset markets which generates interest parity can also explain why the exchange rate may rise and fall in response to market changes.
The first step is to reinterpret the rate of return calculation described above in more general (aggregate) terms. Thus instead of using the interest rate on a one year CD, we will interpret the interest rates in the two countries as the average interest rates currently prevailing. Similarly, we will imagine that the expected exchange rate is the average expectation across many different individual investors. The rates of return then are the average expected rates of return on a wide variety of assets between the two countries.
Next we imagine that investors trade currencies in the foreign exchange market. Each day some investors come to a market ready to supply a currency in exchange for another while others come to demand currency in exchange for another.
Consider the market for British pounds(£) in New York depicted in the adjoining diagram. We measure the supply and demand of £s along the horizontal axis and the price of £s (i.e. the exchange rate E$/£) on the vertical axis. Let S£ represent the supply of £s in exchange for dollars at all different exchange rates that might prevail. The supply is generally by British investors who demand dollars to purchase dollar denominated assets. However, supply of £s might also come from US investors who decide to convert previously acquired £ currency. Let D£ the demand for £s in exchange for dollars at all different exchange rates that might prevail. The demand is generally by US investors who supply dollars to purchase £ denominated assets. Of course, demand might also come from British investors who decide to convert previously purchased dollars. Recall that which implies that as E$/£ rises RoR£ falls. This means that British investors would seek to supply more £s at higher £ values but US investors would demand fewer £s at higher £ values. This explains why the supply curve slopes upward and the demand curve slopes downward.
The intersection of supply and demand specifies the equilibrium exchange rate, E1, and the quantity of £s, Q1, traded in the market.

The Effect of Changes in the Expected Exchange Rate on the Spot Exchange Rate

Suppose that the FOREX is initially in equilibrium such that S£ = D£ at the exchange rate E1. Now suppose investors suddenly raise their expected future exchange rate, Ee$/£. This means that if investors had expected the £ to appreciate, they now expect it to appreciate more. Likewise, if investors had expected the $ to depreciate they now expect it to depreciate more. Also, if they had expected the £ to depreciate, they now expect it to depreciate less. Likewise, if they had expected the dollar to appreciate they now expect it to appreciate less.
This change might occur because new information is released. For example the British Central Bank might release information that suggest an increase chance that the £ will rise in value in the future.
The increase in the expected exchange rate raises the rate of return on British assets, RoR£, which, at the original exchange rate causes the rate of return on British assets to exceed the rate of return on US assets, RoR£ > RoR$. This will raise the demand for £ on the FOREX as US investors seek the higher average return on British assets. It will also lower the supply of British £s by British investors who decide to invest at home rather than abroad. Thus in terms of the graph, D£ shifts right (black to red) while S£ shifts left (black to red). The equilibrium exchange rate rises to E2. This means that the increase in the expected exchange rate, Ee$/£, causes a £ appreciation and a $ depreciation.
This is a case of self-fulfilling expectations. If investors suddenly think the £ will appreciate more in the future and if they act upon that belief, then the £ will begin to rise in the present hence fulfilling their expectations.
As the exchange rate rises RoR£ falls since . RoR£ continues to fall until the interest parity condition, RoR$ = RoR£, again holds.

FOREX Equilibrium with the Rate of Return Diagram

An alternative graphical approach is sometimes used to depict the equilibrium exchange rate in the foreign exchange market (FOREX). The graph is called the rate of return diagram since it depicts rates of return for assets in two separate countries as functions of the exchange rate. The equilibrium condition depicted in the diagram represents the interest rate parity condition. In effect, the diagram identifies the equilibrium exchange rate that must prevail to satisfy the interest rate parity condition.
Recall the rate of return formulae for deposits in two separate countries. Consider an investor, holding US dollars, comparing the purchase of a one-year certificate of deposit at a US bank with a one-year CD issued by a British (or UK) bank. The rate of return on the US deposit works out simply to be the US interest rate, shown below.
RoR$ = i$
The rate of return on the UK asset, however, is a more complicated formula that depends on the UK interest rate, i£, the spot exchange rate, E$/£, and the expected exchange rate, Ee$/£. In its simplest form it is written as follows,
In the adjoining diagram we plot both RoR equations with respect to the exchange rate, E$/£. Since RoR$ is not a function (i.e., not dependent) on the exchange rate, it is drawn as a vertical line at the level of the US interest rate, i$. This means simply that as the exchange rate rises or falls, the RoR$ always remains immutably fixed at the US interest rate.
The RoR£ however, is a function of the exchange rate. Indeed, the relationship is negative since E$/£ is in the denominator of the equation. This means that as E$/£ rises, RoR£ falls, and vice versa.
The intuition behind this negative relationship is obtained by looking at the alternative (equivalent) formula for RoR£:
Recall from 10-5 that the exchange rate ratio represents the expected percentage change in the value of the pound. Suppose, as an example, that this term were positive. That would mean the investor believes the pound will appreciate during the term of the investment. Furthermore, since it is an expected appreciation of the pound, it will add to the total rate of return on the British investment. Next, suppose the spot exchange rate, E$/£, rises today. Assuming ceteris paribus, as we always do in these exercises, the expected exchange rate remains fixed. That will mean the numerator of the exchange rate expression will fall in value, as will the value of the entire expression. The interpretation of this change is that the investor's expected appreciation of the pound falls, which, in turn, lowers the overall rate of return. Hence, we get the negative relationship between the $/£ exchange rate and RoR£.
The intersection of the two RoR curves in the diagram identifies the unique exchange rate E'$/£ that equalizes rates of return between the two countries. This exchange rate is an equilibrium because any deviations away from interest rate parity (IRP) will motivate changes in investor behavior and force the exchange back to the level necessary to achieve IRP. The equilibrium adjustment story is next.
International Finance Theory and Policy

Exchange Rate Effects of Changes in the Expected Exchange Rate using a RoR Diagram

Suppose that the FOREX is initially in equilibrium such that RoR£ = RoR$ (i.e., interest rate parity holds) at an initial equilibrium exchange rate given by E'$/£. The initial equilibrium is depicted in the adjoining diagram. Next suppose investors beliefs shift so that Ee$/£, rises, ceteris paribus. Ceteris paribus means we assume all other exogenous variables remain fixed at their original values. In this model, the US interest rate, i$, and the British interest rate, i£, both remain fixed as the expected exchange rate rises.
An expected exchange rate increase means that if investors had expected the £ to appreciate, they now expect it to appreciate even more. Likewise, if investors had expected the $ to depreciate they now expect it to depreciate more. Alternatively, if they had expected the £ to depreciate, they now expect it to depreciate less. Likewise, if they had expected the dollar to appreciate they now expect it to appreciate less.
This change might occur because new information is released. For example, the British Central Bank might release information that suggests an increased chance that the £ will rise in value in the future.
The increase in the expected exchange rate, Ee$/£, will shift the British RoR line to the right from RoR'£ to RoR"£ as indicted by step 1.
The reason for the shift can be seen by looking at the simple rate of return formula.

Suppose one is at the original equilibrium with exchange rate E'$/£. Looking at the formula, an increase in Ee$/£ clearly raises the value of RoR£ for any fixed values of i£. This could be represented as a shift to the right on the diagram, as from A to B. Once at B with a new expected exchange rate, one could perform the exercise used to plot out the downward sloping RoR curve. (see 20-7). The result would be a curve, like the original, but shifted entirely to the right.
Immediately after the increase, before the exchange rate changes, RoR£ > RoR$. The adjustment to the new equilibrium will follow the "exchange rate too low" equilibrium story presented in 20-8. Accordingly, higher expected British rates of return will make British £ investments more attractive to investors leading to an increase in demand for £s on the FOREX, resulting in an appreciation of the pound, a depreciation of the dollar and an increase in E$/£. The exchange rate will rise to the new equilibrium rate E"$/£ as indicted by step 2.
In brief: An increase in the expected future $/£ exchange rate will raise the rate of return on pounds above the rate of return on dollars, lead investors to shift investments to British assets, and result in an increase in the $/£ exchange rate (i.e., an appreciation of the British pound and a depreciation of the US dollar).
In reverse: A decrease in the expected future $/£ exchange rate will lower the rate of return on British pounds below the rate of return on dollars, lead investors to shift investments to US assets, and result in a decrease in the $/£ exchange rate (i.e., a depreciation of the British pound and an appreciation of the US dollar).
International Finance Theory and Policy

Buying and Selling Currencies

Traders can generate profits (or losses) whether a currency is rising or falling by buying one currency, which is anticipated to gain value against another currency or selling one currency, which is anticipated to lose value against another currency. Taking a long position is one in which a trader buys a currency at one price and aims to sell it later at a higher price. Alternatively, a short position is one in which the trader sells a currency that he anticipates to depreciate and aims to buy the currency back later at a lower price.
Diagram illustrating how a position is opened and closed generating a profit. Position is closed based on speculated downward market movement. Forex trading involves a substantial risk of loss.
Buying or selling currencies in response to economic or political events which occur are reactive, whereas buying or selling currencies on anticipated events is speculative. The bulk of currency activity is generated by market participants anticipating the direction of currency prices. In general, the value of a currency versus other currencies is a reflection of the condition of that country’s economy with respect to the other major economies.
It is the trader’s option to take either a conservative or a more risk-taking approach. Employing a conservative approach, the trader establishes and liquidates positions quickly and efficiently to capitalize on even the slightest of price fluctuations, using limit and stop orders to manage risk. A limit order is placed to ensure a position is established once a price level in the market has been reached. A stop order is placed to automatically liquidate a position at a chosen price level in order to limit potential loss on a particular trade. By placing orders in relation to technical support and resistance levels, the trader may profit incrementally from the minor price fluctuations that occur each day.