Foreign Currency Trading

The Great Recession is now in our rear-view mirrors and with GDP growth of 5.7 in the fourth quarter, the recovery looks well underway. However, the surge in growth is unlike anything we have seen in a while. The recessions of the early 2000’s and 1990’s saw inconsistent growth after the recession ended. After the 2001 recession, growth peaked at 3.5% before falling back to 0.1% by 2002. The early 90’s recovery saw growth reach 4.5% before declining to a tepid 0.7% a year later.

However the 1980s recession may once again be our best guide for how the current recession may fare.

The recession ended in 1982 and by 1983, the U.S. economy was growing at extremely healthy rates. Between Q1 of 1983 and Q2 of 1984, average GDP growth was more than 7 percent. This is not to say the U.S. economy will replicate this pace of growth in the quarters ahead, but we have previously seen the rubber-band effect after deep recessions and there is no reason why it couldn’t happen again.

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Over the past few trading days, the British pound has been confined to a very tight trading range. The following chart illustrates the predicament that GBP/USD traders find themselves in right now and I believe that the breakout will be to downside with the GBP/USD testing 1.60 in the near term.

This morning, Standard & Poor’s announced that “We no longer classify the United Kingdom (AAA/Negative/A-1+) among the most stable and low-risk banking systems globally” and I have to say that this is HUGE. S&P had already lowered the U.K.’s place in its Banking Industry Country Risk Assessment gauge to Group 3 from Group 2 on Dec. 21. The risk of investing in the U.K. is now on par with the risk of investing in countries like Portugal, Saudi Arabia, Ireland, Chile and Austria. You can imagine what this means to investors looking for a place to put their money.

On top of that, the outlook for consumer spending is quite dismal. In my daily report yesterday for FX360.com, I talked about how the CBI retail sales index fell by the largest amount since August 2009 which suggests that U.K. consumers cut back spending after the holiday shopping season. There is a very good chance that this weakness will feed into the retail sales report and therefore we remain skeptical of the rally in the GBP/USD and believe that the odds are skewed towards a move down to 1.60. The latest announcement only strengthens this call.

Here’s a daily chart of the GBP/USD.

Source: eSignal

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Watch this free Forex video to learn how the market volatility affects the currency pairs. You’ll understand how to use the volatility to your advantage in Forex trading by using the volatility-adjusted stop-loss and take-profit orders based on the standard ATR (Average True Range) indicator that is available on almost all trading platforms. Knowing how to use the market volatility is vital for the professional foreign exchange traders.

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Fundamentals continue to worsen, technical analysis suggests a continuation of a downtrend — so, for EUR/USD it’s all quite clear. Other currency pairs will probably follow the general trend set up by the Euro/Dollar. Watch this Forex analytical video for more details.

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This Forex video preview for the major currency pairs focuses on EUR/USD ability to move further down after the Friday’s consolidation as the dollar bulls’ strength remain a prevailing force in the markets.

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Learn how to use Fibonacci retracements by watching this video, which shows an example of trading the break of the head-and-shoulders chart pattern with the help of Fibonacci levels.

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I was on CNBC Australia last night talking about the outlook for the forex market and how I am HOT on Commodity Currencies

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Watch the daily preview for the major currency pairs with the more detailed view on the EUR/USD pair, which has now confirmed its reverse in a medium-/long-term movement and is heading down towards a U.S. dollar’s recovery.

Posted on Forex Video Zone.
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THV System, originally presented on ForexFactory forum, is explained in this educational Forex video. This trading system is used with the M1 and M5 timeframes and is basically a scalping strategy.

Posted on Forex Video Zone.
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I was on Fox Business yesterday talking about my outlook for oil and the U.S. dollar:

Watch the latest business video at video.foxbusiness.com

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