Hi Erol has posted his video analysis below. He is American and it is interesting to get a different perspective on the current states of the markets. On one thing we are definately agreed is that the current choppiness is very difficult to trade. I have had a decent few days though trading my M1 method. A simple break out strategy from the asian over night sessions. I also caught a bounce off a double top on the Euro, so there are trades out there but you need to be flexible and not just rely on one strategy. Erol’s video is at the bottom of the page. I have posted before that my thoughts on where the markets are now and where do we go next. Have a great week-end, marc
The current state of the forex market and where do we go from here.
I get emails virtually every day asking why the markets are behaving the way they are and where do I think that the price of a pair is going next. I have no more of a crystal ball then any one else! What is important to note is that what is happening right now on a daily basis is more to do with sentiment than fact. Sentiment that is based not on which economy is doing best, but rather which is the least worst!
As a result of this lack of fundamental support we are currently exposed to nervous, jumpy days which can be a nightmare to trade ANY system.
So where does it leave the poor forex trader? Our 1st priority as traders is? DO NOT LOSE MONEY. Without it we can not continue to trade. The sensible, cautious one will simply take a time-out. I realise that the newer members amongst you are simply dying to get started making your forex fortune, but those of you who have been with me a while know the mantra by now : Patience & discipline. I work far too hard to see the gains I have made disappear in what in the scheme of things is a mere blink of the eye.
I said at the beginning of tonights post that what is important to note is that what is happening right now on a daily basis is more to do with sentiment than fact. Sentiment that is based not on which economy is doing best, but rather which is the least worst!
Last weeks $ NFP news was the worst for 26 years and therefore we expected the $ to plummet again. But late October the UK had its own poor news. British gross domestic product fell so far that they were the worst results since records began in in 1955. The last few weeks has seen more positive UK news than negative and thus it was reasonable to assume (tip: assume NOTHING in forex)! that the Gbp/$ would continue its upward movement. This weeks news spike on the Gbp on Tuesday over some re-hashed comment from a minor player shows just how fragile the markets are at the moment.
If the USA & UK were companies they would have both gone bust last year. Fundamental analysis (ie the value of a company/countries assets minus its debts would say that they have little or no value). From a fundamental point of view one could even argue that these currencies should have litle or no value, but in which case why are they stilll around and considering their plight still going/doing relatively ok? The eurozone seems, this far, to have got off relatively lightly, however I live in the euro zone and there is a strong suspicion both in and out of europe that there is a lot of bad news that has been thus far hidden or at least dumbed down.
On top of that many countries from a political point of view, would like nothing better than to see these currencies collapse. However despite the fact that many of them would like to put the boot in they can’t because they hold too much of it themselves! Part of the reason that the the $, Gbp and the Euro are still up there is that countries like China alone, one of the USA’s major suppliers, is thought to be sat on over $3 Trillion. Equally the oil producers and mineral producing countries get paid in these currencies. Thus it is in no ones interest to see their values fall any further.
China keeps talking about having another currency to replace the $ as the reserve currency of the world. A couple of years ago there was talk that the oil producers wanted to be paid in Euros instead of $’s. So what is left? I suspect that all or most of the UK bad news is already out there. One of the major British banks came within hours of running out of cash last year. The current range of politicians (all parties) are so dumb that parliament must surely now resemble the mad hatters tea party.
The Eurozone on the other hand is so diverse and without any real central spokesman (only now are they looking to appoint a president) that it is strongly rumoured that a lot of bad news is still to come, especially from some of the less well regulated eastern states who have joined recently. However this rumour has now been doing the rounds for almost a year and still nothing concrete has surfaced. The USA is rumoured to have a HUGE personal credit card mountain of debt that is still to be written off. So the bottom line is that it is in no ones interest to see the status quo broken, at least not until some of these other countries can reduce their $, Euro and Gbp holdings into other things, like gold- which this week has hit an all time high, minerals, shares in non us,uk, euro companies etc etc.
So on a daily basis what we are left with is a mixture of fear, news and sentiment. Last year as the crisis started to develop the $ gained in strength. The $ was always considered a safe haven in times of crisis. Then the depth of the the USA’s problems saw the currency plunge from the new year through to the summer. The last few months the sentiment was that the gbp was worse than the other 2 so the price of the gbp fell. Until recently things seemed to be looking up for the gbp. We could see that the trend was turning and the next potential stop was up at 1.70. But that was a fortnight ago! Now no-one knows where we are heading next.
I often get asked which currency it would be best to have your money in. I am not a registered financial adviser, so please don’t act upon these musings! I said earlier that minerals were a non $ commodity. The mineral rich western style countries would be Canada, Australia, and to a lesser degree New Zealand. The latter are almost in chinas back yard and china is the biggest purchaser of minerals in the world. I did expect all of these currencies to achieve parity within the coming months, ie they will be 1.1 with the $, but the governments of these countries don’t want to see their curency too highly valued as it causes problems for them. Norway was even mentioned to me today by a USA Financial expert whose musings I trust.
This is my interpretation of current events. What is going on and why. Personally all I want to do is earn my 100 pips a week minimum target and let the rest fight it out amongst themselves 
Patience amigos we will get there in the end, best wishes, marc
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