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Fundamental Analysis: German CPI
European traders anticipate the publication of the German CPI. The German Consumer Price Index (CPI) measures the changes in the price of goods and services. The CPI measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation in Germany.
A higher than expected reading should be taken as positive/bullish for the EUR (as the common way to fight inflation is raising rates, which may attract foreign investment), while a lower than expected reading should be taken as negative/bearish for the EUR.
Analysts predict a future reading of -0.10%.
I will be interested in markets’ reaction to inflation data. Deflation, if it comes in as expected, should be taken as good news by the European credit markets as falling inflation is good for bond prices.
At this point, a mobile experience shouldn’t be an afterthought
It wasn’t long ago that mobile phones had weak browsers and 3g was a network that the carriers built but without the “killer app”.
Smartphones with amazing browsers changed all of that. The web is the killer app. The browser on iPhone and Android are incredible and only getting better.
So if you are building a consumer web service these days, I highly encourage you to think of the mobile experience right away. Don’t think of mobile as something you’ll get around to doing one day. It has to be a high priority.
That doesn’t mean you have to build a native Android or iPhone app. It really depends on the service. I can’t imagine an app like Bump working without a native app while Techmeme mobile web site is amazing. It often comes down to whether your app requires access to local iphone resources (camera, address book, etc) or not.
At the very least your application/service should be optimized for mobile browsing experience and has an open API.
That’s the minimum these days.
Defined by A 4X Trader
Despite my analysis, which has been spot on, my trading has been shotty the past 2 weeks. Since the start of the year, I have had now 2 down weeks. I know this week will be the second considering the drawdown I suffered earlier in today’s session (unless the EUR/GBP, which is still on my books, rips down ridiculous prior to week’s end).
So I’m putting myself on a GBP/USD timeout for the rest of the week. During this time, I will do the following in order to clear my mind and get back on track:
- SLEEP!! - The 24/6 per week schedule that us forex traders keep is one reason we choose this market. However, it can be extremely draining. My best times to trade is in the middle of the night (Los Angeles time). The kids are asleep, the house is quiet and calm, and I am able to concentrate with virtually no distractions. But when do I sleep? Come morning, its time to deal with children (7, 6, and 2 so they need seemingly constant attention), deal with the demands of managing a household, and the demands of being a professor. Not to mention check in with the markets constantly throughout the day and by the time the day winds down, I’m back to the markets full time.
This has never been a real problem until now. I realize now that I need to rest. I need to rest my mind as well as my body. That may mean days I just don’t trade. Looking at markets is pleasant. Trading, however, can be stressful. I need to allow myself more than 1 day some weeks to refresh and recoup for battle.
- CLOSE THE COMPUTER - Technology is great and Lord knows I utilize it to the upmost. I connect with friends and family on FaceBook, traders on Twitter and StockTwits, and colleagues via email. It’s great!! But all this connectedness is also leaving me drained and a little too wired. When I take long stretches with the computer off, not just away from the computer but with it OFF, I find that my attention and thought get more focused. I can see things clearly and with more forethought and wisdom. And being focused mentally gives me even more of an edge in my trading as well as in my businesses. In fact, the more LED lights I can cut off the better. The buzz of the computer, TV, and even clocks can be maddening without us even noticing. Take time to turn off the technology and breathe in the silence that comes with it.
- GO OUTSIDE - Fresh air and sunshine have always been great medicine. Even when I’m sick, probably especially so, I love to take neighborhood or beach walks. I feel clearer and even healthier. I’ll sometimes take the kids with me and let them dictate the pace of the walk. Which leads me to…
- SLOW DOWN - Our entire society has become faster. The now web. Instant gratification. Fast food. So many times we are rushing through our day. Ripping and running from charts, to meetings, to school, to dance practice, through dinner and off to bed. Phew! Now I can get back to my charts. Even my time outside, I’ve rushed the kids through our walks constantly asking them to walk faster or not stare at that flower for so long. NO MORE OF THAT! Children slow us down. At least during these walks and times outside, I will simply let them. And it is GREAT. In fact, I’m looking to see where else I can add slow in my life. SLOW is good for the mind and soul.
These are just 4 things I will look to do more often during my trading week so as to avoid traders burnout and, ultimately, eliminate mistakes. I hope this helps other traders as well, particularly my fellow lady traders.
P.S. This really can apply to all people, not just traders.
Fundamental Analysis: U.S. Retail Sales
Traders of the US anticipate the publication of the Retail Sales this Friday. The Retail Sales is a monthly measurement of all goods sold by retailers based on a sampling of retail stores of different types and sizes in the US. It is an important indicator of consumer spending and also correlated to consumer confidence and considered as a pace indicator of the US economy.
A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.
Analysts predict a reading of -0.10% for US core retail sales.
Trading Strategy for BoE Rate Decision Tonight
Fundamental Analysis: Interest Rate Decision
The Bank of England (BOE) decision on short term interest rate is due to be published tomorrow (Jan 7). The decision on where to set interest rates depends mostly on growth outlook and inflation. The primary objective of the central bank is to achieve price stability. High interest rates attract foreigners looking for the best “risk-free” return on their money, which can dramatically increases demand for the nation’s currency.
A higher than expected rate is positive/bullish for the GBP, while a lower than expected rate is negative/bearish for the GBP.
Analysts predict that the rate will remain at 0.50%.
(the above analysis via Forexpros)
Though the rate is expected to remain steady, traders will be looking for sentiment regarding the BoE’s quantitative easing (QE) policy. Any signs of exiting QE will be bullish for the GBP while any signs of prolonging or even extending the QE policy will be quite GBP negative.
I fully expect BoE minutes to be dovish - kinda like what we saw from FOMC - and the market will spike on GBP weakness on its release. The difference, however, is that the markets expect the BoE to be dovish. Market actually expected a more hawkish Fed. So I do not expect GBP weakness to last. The technical outlook poises both the GBP/USD and the EUR/GBP to gain further GBP strength especially as it turns out that the Federal Reserve is not so hawkish anymore and the EU is more debt-burdened and economically fragile than previously thought.
I am looking to short the EUR/GBP on any spikes. I have limit orders set up all the way to 0.9100 where a break of this whole number opens up price to the November 30/December 1, 2009 highs at 0.9150. Expect price, however, to find resistance and pause or reverse at 0.9050.
For the GBP/USD, I have limit orders set to buy the pair on GBP weakness. Keep an eye on support levels on cable at 1.5963 and 1.5934, the lows this week. I think GBP/USD will be unable to break and sustainbly hold below these levels and we see the pair rally.
As always, trade what you see, not what I think.
A Personal Reflection of The Noughties (2000-2009)
This decade has really been one of tremendous growth for me. At the end of 2009, I am at a place that I NEVER in my wildest dreams would have seen myself at 31 years of age. During the 2000s, The Noughties, I:
- Experienced the joy and frustrations and joy of motherhood as I became a mother in 2002 with the birth of my daughter, Imani Finkley. That joy (and frustration and joy) became ampified with the birth of my only son, Jelani Finkley and my baby baby, Laila Finkley. These 3 people have been my BIGGEST inspiration of change in my life EVER. PERIOD.
- Closed the chapter of my life as a child/student and entered real life graduating from Vanderbilt Univeristy in 2000 and from Georgia Tech in 2002.
- Became a true son of God in 2005. I have always known about God and Jesus and all the Bible stories going to a Lutheran school up until high school (secondary school). But I came to KNOW Him, fasted for 40 days, and have never looked back. I am where I am and I am who I am today because of Him.
- Changed my online identity from maryjane510 to faithmight (before the social media craze) when I changed my email from hotmail to gmail. My best friend recognized immediately what a big identity change that was for me at the time.
- Entered my 30s and realized that I didn’t know a single thing in my 20s.
- Married my college sweetheart and became a wife. My riskiest and most rewarding decision EVER. PERIOD.
- Entered the social media fray starting then joining BlackTree TV, then joined Twitter and then Facebook. So many tremendous opportunities and connections have been had through these social media outlets in ways that I would have NEVER anticipated. My world became flatter, I have honed in on my passions, and I anticipate the capitalization on these opportunities and connections to be had in the new decade.
- Found my passion in the capital markets after being introduced to forex trading in 2006. I hope to become more fully involved in venture capital, microfinancing and foreign exchange in a very unique cross-section of all 3 as this decade unfolds.
- Discovered I am a really good teacher when I became a professor in 2006. I NEVER saw this coming and I really do enjoy imparting knowledge to students.
- Became the first Zeta to walk the stage as an undergrad when I graduated Vanderbilt University in 2000. I am so proud to have established the Omnipotent Omega Pi chapter of Zeta Phi Beta Sorority Incorporated in 1999. We celebrated 10 years back in October 2009 and I realized that I helped make a lasting mark of history on campus. I love my Sorors!
- Blessed and lucky enough to live in New Orleans BEFORE Katrina, live in New York BEFORE 911, live in Atlanta before all the construction that has changed the face of the city, and live in Italy before the euro.
- Became an entrepreneur with the formation of my first business, BlackTree Enterprises, Inc. in 2002. I was CEO from 2002-2006 and saw the company through its formative years. My decision to step back from daily operations and serve in a more advisory role was a very difficult decision for me to make but the best decision for the company. BlackTree is experiencing tremendous growth right now and I am so proud to be a part of it.
I enter this new decade a little older and much wiser. I am a mother, a wife, a trader, a blogger, a professor, a Soror, and the light of the world. 2010 is The Year of Harvest. I like to think I spent the previous decade sowing good seed. This year, I fully expect a bountiful harvest and to see myself and others become great in this new decade. HAPPY NEW YEAR!
“Faith might do, accomplish, and create a lot. In fact, it does.”
DEFINED By A 4X Trader
- Set the price alert.
- When price gave up the 20 level after achieving 50, that warned of a deeper correction (EUR/GBP). Trade what you see.
- SET a new limit to sooth the ever bougoeining ego.
- Move stop after target achieved and after 3 days in the trade.
I didn’t do the above and didn’t get the trading outcome I carefully planned and managed for. The moral of the trade is this! Always cover yourself - in trading and in business. It’s a mistake not to.
50 Cent: Turn Shit Into Sugar
The following is an excerpt from The 50th Law, adapted for HuffPost.
“Every negative situation contains the possibility for something positive, an opportunity. It is how you look at it that matters. Your lack of resources can be an advantage, forcing you to be more inventive with the little that you have. Losing a battle can allow you to frame yourself as the sympathetic underdog. Do not let fears make you wait for a better moment or become conservative. If there are circumstances you cannot control, make the best of them. It is the ultimate alchemy to transform all such negatives into advantages and power.
Events in life are not negative or positive. They are completely neutral. The universe does not care about your fate; it is indifferent to the violence that may hit you or to death itself. Things merely happen to you. It is your mind that chooses to interpret them as negative or positive. And because you have layers of fear that dwell deep within you, your natural tendency is to interpret temporary obstacles in your path as something larger—setbacks and crises.”
the only 3 strategies for modern news organizations
- speed (TMZ, Drudge Report, etc.)
- deep (includes Wall Street Journal, New York Times, etc.l )
- spin (includes Daily Show, Fox News, ect.)
There are some organizations that try to be a hybrid of two or three the most successful usually focus only on one.
Excerpt from "The Next Crisis: Coming in 2011"
You advise CEOs every day. Assuming you are CEO of a company today, what do you do?
I'd be extraordinarily focused on investments outside of this country. To the extent you have a global footprint, if you are not overinvesting in Asia and the developing countries, you are out of your mind because that's the source of growth. I would also do everything I could within the Western countries to gain share in the next six quarters, whether through acquisitions, prices, or whatever it takes to get you in an extraordinarily strong market position. If you're not there, or don't think you can get there, then I would get out of those businesses.
-- Bill Achtmeyer, Chairman and Managing Partner of the Parthenon Group, gives some great insight in his interview for this article. If you in any kind of business, READ THIS ARTICLE. It makes a lot of sense.
http://blogs.harvardbusiness.org/tjan/2009/09/the-next-crisis-coming-in-2011.html (sorry it's not a link.)
DEFINED by A Dictionary of Economics
ex ante: As viewed in advance. The ex ante value of a variable is what the person or organization responsible expects it to be. An individual’s ex ante savings, for example, is the amount they intend to save. Ex ante is contrasted with ex post , meaning as viewed after the event. Ex ante plans may not get carried out: individuals may save more than they intended if the goods they meant to buy are not available, or may save less if their incomes fall unexpectedly. Ex ante investment is what a firm intends to invest. Actual or ex post investment may be less or more.
I was watching this BBC interview with Alan Greenspan and the former FOMC chairman threw out the phrase, ex ante savings. Huh? Needless to say, I looked it up.
DEFINED by an Investor
DEFINED by a Trader
If you are an inflationist you are implicitly positive on growth and therefore long equities, long oil and long risk FX. If you are a deflationist you envision a protracted period of sub-par growth and therefore you are long cash, long US bonds and long the US dollar and the yen.
The Break Up
Risk and currencies have split. I say good riddance! The employment numbers in today’s non-farm payrolls report did 2 things today:
Solidified the evidence that the US economy is beginning to show concrete signs of stabilizing; and
Significantly shifted the fundamental landscape of the currency markets
Both these points gave forex markets the warm fuzzies for the USD as The United States seems to know how to navigate these crisis waters.
The Proof Finally Showed Up In The Pudding
The second half of this year has seen strong corporate earnings in US companies and banks, slowing declines in consumer spending, and increasing activity in manufacturing and construction. US companies are proving that their cost management tatics are working as fewer workers are loosing their jobs. Consequently, people feel more confident and as they save and spend more. Government spending has helped the manufacturing and construction sectors. The Fed has been cautiously bullish. Because labor markets are a lagging indicator, today’s report signals that the US economy has been on the road to recovery since the start of the second quarter of this year.
The UK economy has shown similar signs of stability but the BoE was surprisingly bearish in their decision announcement yesterday. By extending their QE program even more than expected, the BoE signaled the UK economy is not doing very well still. In addition to some still poor UK corporate earnings report, market sentiment is making fundamentally stark contrasts between the US and UK economies.
Fundamentals — “I’m Baaack”
Since the start of this economic crisis, risk appetite has determined currency flows. When bad economic reports and news caused equity markets to move down, the USD actually gained as folks sold risky assets for dollars. When good news hit, people felt more comfortable investing in riskier assets and, therefore, sold dollars to buy those assets. Currency traders could trade accordingly based on which direction equities moved depending on the currency. Today’s NFP report, moved BOTH the dollar and US stock markets to rally. The markets are moving based on fundamentals again. Good US economic data now fuels dollar strength.
Time Will Tell
The US dollar strengthened at the same time that Wall Street rallied for the first time in roughly 2 years. Very interesting development.
Now I muse by asking: Is this a new shift in market sentiment or is this a one-off event?
BREAK Out Or FAKE Out
On Friday, July 31, GBP/USD finally broke out of the narrowing range that it had been trapped in since June. Just looking at the quarter points, price had been bound by 1.6750/1.6000 at the beginning of this channel in June but in recent weeks the range had narrowed to 1.6550/1.6380. This had signaled a breakout for sure but which way will the breakout go? The top side was littered with significant resistance levels at 1.6500, 1.6550, 1.6580, 1.6600, and 1.6750. So it is easy to cheer Friday’s price action as a breakout but with only a high of 1.6732, we are still technically stuck within the larger range.
Making a high of 1.6732, the GBP/USD completed the quarter to the large quarter point at 1.6750. However, price has not broke above resistance at 1.6742 (Jun 30, 2009 high) nor has it remained above the LQP at 1.6750. Now natural retracement is OK and does not threaten the current up trend momentum as long as price finds support at certain Fibonacci retracement levels. I like to use 50% as a clue but in these choppy market conditions I have had to relax to even 61.% (See the hourly chart). Price closed the week (day, and month) way above these retracement levels — a bullish signal.
The green shoots theory is starting to take root as the US and UK have released economic data that has been stronger than expected. In BOTH countries, the housing markets have shown increasing signs of stabilziation but increasingly due to continued drops in house prices and not up ticks in demand. The same can be said for retail sales, corporate earnings, and consequently GDP. However, if the economy is being stablized by bottom line actions (cutting costs to boost profit and cutting prices to boost demand), it cannot recover unless top line action (higher revenues and consumer spending) is seen. The consumer is still not spending and that spells trouble for the economic recovery story. But for now, the market is content with seeing a supposed bottom in the current economic depression and as such equity markets around the world rallied when US GDP came in not as weak as expected (but weak nonetheless).
Quantitative easing has been a source of concern for the markets as central banks also contend with balancing inflation and deflation. Deflation is a natural phenomenon in a weak economy as prices fall to a point where demand will occur again. However with the global quantitive easing programs, central banks have flooded the markets with money in hopes of keeping the economy inflated and credit markets liquid. In the UK and US inflation has not been a concern but it is being monitored by the markets and the central banks. If the QE is still necessary that will be a hit to that respective currency. Right now, both the BoE and the FOMC are not looking to increase the size of their respective QE programs to the relief of the markets.
Comparing economies, the US economy looks to be in better health than the UK economy as manufacturing and construction are still very weak within the UK. In the US, the consumer is still very weak as wages are decreasing, spending is sunk, and everyone is saving more of their money. A healthy US economy actually spells doom for the USD as traders and investors increase their risk appetite and sell dollars for other assets. Continued good news out of the US will help the GBP/USD to break out beyond 1.6750.
The Game Plan
Looking at this week’s economic calendar, the spotlight events are the BoE interest rate decision on Thursday and NFP on Friday. As such all news releases coming out of the UK will cause traders to speculate on this rate meeting’s outcome. So it will be important to watch house prices, PMI #s, industrial production, and consumer confidence all set for release before Thursday’s rate decision. Out of the US, we have ISM #s, construction spending, pending home sales, personal income, personal consumption, and ADP employment all before Friday’s employment number. The market will be watching the US data for more signs of economic bottoming and possible recovery. Since labor markets are lagging indicators, a better than expected number will solidify other good economic releases we have seen in US GDP, retail sales, and consumer confidence.
I’m looking for a continuation of the up trend after 2 months of consolidation. But I will not be surprised if prices retreat and stay confined within the larger range (1.6750/1.6000). News this week will confirm.