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Forex traders like to use different methods and tools to help them trade profitably. There are hundreds of technical indicators available to choose from; some of them work well and some of them only seem to work some of the time.
Often, traders like to combine indicators as doing so helps to provide more robust trading signals. By doing so, traders have more chance of making money. As well, filtering out trades helps to reduce commission costs overall. Here are three ways to combine forex indicators:
Volume and Breakout
Volume and breakout is a classic combination that traders use but unfortunately some brokers do not provide much in the way of volume data in forex markets.
Nevertheless, the combo works because breakouts often signal changes in trend and lead to long-term market moves.
Similarly, volume helps show direction as it indicates the move is “real” and not just a technical move. Combining the two greatly reduces the chance of whipsaws.
Moving Average and RSI
These two indicators work well as confirmation indicators in their own right and they can also be combined together for two different types of strategies.
Mean reversion strategies can benefit if the RSI is oversold or overbought. If the forex pair is a good way from its moving average, it also signals a return to the mean is likely so combining the two signals helps strengthen the trade.
In trending markets, RSI and the moving average can work in the opposite way. If a currency is overbought, and the moving average has just crossed over a slower MA, or if the price has crossed over the MA, then it’s a stronger signal to enter a trend following trade.
Either one can also be used as a filter against the other. For example, if RSI is overbought but there is no MA cross, then the trade signal can be annoyed.
Bollinger Band and Open Positions
Indicators can be combined with fundamental metrics too and this is sensible in forex markets.
Open position data or COT (Commitment of Traders) data, can be used to support or restrict technical signals.
As an example, let’s say that GBP/USD is riding high and has just climbed towards the top of its upper Bollinger Band. In some cases, this could be interpreted as a bullish sign but a look at the open position data suggests a one-sided situation that could limit any further move upwards.
In this example, open position data suggests that around 80% of open positions in GBP/USD are long positions. If this is the case, then there are very few bulls left in the market to buy. The situation is very one-sided and only a few short positions would be needed to make the currency drop back.
Thus when a currency hits a Bollinger Band and open position data suggests a one-sided market, there is a great potential for a reversal.
2014-03-31 00:00 GMT (or 02:00 MQ MT5 time) | [AUD - New Home Sales]
if actual > forecast = good for currency (for AUD in our case)
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Queensland drives surge in new home sales, according to Housing Industry Association figures for February
The Housing Industry Association has reported a strong rise in new home sales, particularly freestanding houses.
The HIA - which represents the country's large players in the housing construction sector - says sales of new detached homes rose by 6.9 per cent in February.
Overall new home sales rose by 4.6 per cent in seasonally adjusted terms.
HIA chief economist Harley Dale says the result was not particularly surprising.
"There's been growing momentum in new home sales for some months now," he said.
"After a couple of months where we had growth but it was quite modest we were probably overdue for a stronger result and that's certainly what we got."
That was despite a 6.8 per cent fall in the new apartment category of the sector.
Dr Dale says the change reflects shifting preferences and that the homes are being built in different areas.
"There's a little bit of change going on in terms of what we build in Australia," he said.
"In the first instance the recovery in new home building was driven primarily by New South Wales and to a lesser extent Western Australia.
Euro Trades near One-Month Low as Dollar Gains before PMI Data
The euro almost hit a one-month low before Monday’s release of inflation statistics in the euro zone that show that it slowed down, raising prospects that the European Central Bank will roll out stimulus measures when it meets this week.
The dollar traded near a two-week peak against the yen before Tuesday’s release of U.S. manufacturing statistics by the Federal Reserve Chair Janet Yellen. The Australian dollar rose 0.5 percent from a four-month peak as analysts predicted the country’s Reserve Bank won’t lower interest rates on Tuesday.
“If the euro area’s inflation estimate comes in below consensus, it’ll feed speculation of further easing,” Toshiya Yamauchi, a Tokyo-based senior analyst at Ueda Harlow Ltd told Bloomberg. “The euro could drop below $1.37.”
The euro was trading at $1.3754 by 8.43 a.m. in Tokyo from last week’s close of $1.3752, when it reached an intraday low of $2.3705. The currency has changed slightly against the dollar since Dec. 31. It was trading at 141.52 yen from Friday’s close of 141.40 and is headed for 2.2 percent decline this quarter.
The dollar was trading slightly higher at 102.89 yen from Friday’s close of 102.83, when it touched a high of 102.98, the highest level in two weeks. So far, the dollar has declined 2.3 percent against the yen in 2014. The Aussie dollar was trading at 92.49 U.S. cents, up from a high of 92.95 last week, the highest such level since Nov. 21.
A Bloomberg survey of economists forecasts that the European Union’s statistics office will say that consumer prices in the euro zone to surge 0.6 percent in March from a year ago.
2014-03-31 06:00 GMT (or 08:00 MQ MT5 time) | [EUR - German Retail Sales]
if actual > forecast = good for currency (for EUR in our case)
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German Feb Retail Sales Rise Unexpectedly
Germany's retail sales grew unexpectedly in February from the prior month, official data showed Monday.
Retail sales advanced by real 1.3 percent from January, Destatis said. This was the second consecutive rise in retail turnover. Sales were forecast to fall 0.5 percent in February after rising 1.7 percent in January.
Year-on-year, retail sales grew 2 percent, much faster than the 0.9 percent rise posted in January. The rate also exceeded the 0.8 percent increase forecast by economists.
Compared with the previous year, turnover in retail trade was in the first two months of 2014 in real terms 1.5 percent larger than that in the corresponding period of the previous year, Destatis reported.
For Bitcoin Lessons In The History Of Failed Currencies
If someone were to perfect a flying car, governments around the world would be faced with a conundrum. Over the centuries humans have developed a transport system complete with quaint country streets, bustling six-lane highways, electronic toll booths and police officers to monitor it all. So should the powers that be try to fit the flying car into the current model or create a whole new scheme that allows the new technology to flourish?
A comparable question of positioning is the biggest challenge facing Bitcoin and other digital currencies, says Ed Moy former director of the United States Mint. In an interview earlier this year Moy said, “Government moves very slow and cautiously. Digital technology moves very quickly, so eventually the conflict is going to be crypto-currencies moving faster than what governments are comfortable with.”
On Tuesday the U.S. government took a step toward fitting Bitcoin into the existing monetary framework when the Internal Revenue Service issued a notice declaring that virtual currencies will be taxed as property. The IRS pointed out that while Bitcoin may operate like “real” money “it does not have legal tender status in any jurisdiction.” So if you exchange Bitcoin for a good and that good is worth more than what you paid for the Bitcoin you need to pay tax on the difference.
While payment systems tend to evolve, specific currencies have come and gone over the centuries. Take for example the Continental Dollar of early America. Writing by email from Mongolia Jack Weatherford, author of “The History of Money,” explained that Brits immigrating to the American colonies were not allowed to import British money. After failed attempts to use the Mexican silver dollar — there simply weren’t enough to finance a revolution — they started issuing paper dollars known as Continental Dollars.
“Like the Bitcoin, it was a revolutionary idea that got out of hand and the value of the dollars dropped drastically,” writes Weatherford. “After the revolution, the US abandoned paper money and returned to the use of coins. It took another century before the US government was able to create an effective paper money system.”
According to Benjamin Alsop, curator of the Citi Money Gallery at The British Museum, coins were first created about 2,200 years ago in modern Turkey, when people had already been tracking financial transactions in some way for about 2,000 years. These coins were created by some central authority as a way to standardize, but also brought control to the central authority. “I supposed that is one thing Bitcoin doesn’t do,” says Alsop.
Alibaba Will Pay $692M For 35% Stake In Retail Operator Intime
Alibaba and Intime said in a press statement that they will develop online-to-offline (O2O) initiatives in order to “provide a more convenient shopping experience.” This means that Alibaba and Intime will look for ways to combine Alibaba’s e-commerce platforms with Intime’s retail outlets, which consist of high-end department stores, shopping malls, and online marketplace Yintai.com. The two companies previously partnered on O2O projects for promotional events in November 2013 and earlier this year.
Alibaba’s Tmall.com, which hosts online stores for major brands, will have access to Intime’s inventory of offline products. This will “enable a broader product selection of international brands as well as fulfillment of online orders from Intime’s physical stores.”
Intime’s shoppers will also be able to receive targeted promotions through location-based technology while in-store, as well as use virtual pre-paid cards through Alibaba’s mobile wallet service Alipay.
The deal with Intime and focus on Tmall is significant because the site is not only one of Alibaba’s most valuable properties, but also still has significant growth potential, particularly if Alibaba raises its sales commissions.
“We see significant opportunities to extend our e-commerce platform to physical retail, developing a more engaging, omnichannel and digitally-connected shopping experience,” said Daniel Zhang, COO of Alibaba Group, in a statement.
2014-03-31 09:00 GMT (or 11:00 MQ MT5 time) | [EUR - CPI Flash Estimate]
if actual > forecast = good for currency (for EUR in our case)
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Eurozone Inflation Falls More Than Forecast In March
Eurozone inflation slowed more than expected in March, flash estimates published by Eurostat showed Monday.
Inflation fell to 0.5 percent in March from 0.7 percent in February. The rate was forecast to fall to 0.6 percent.
The figure has been staying below the European Central Bank's target of 'below, but close to 2 percent' for the fourteenth consecutive month.
Shanghai Gold Cheapest to London Since ’12 on Weak Demand
The spot price of gold in China is on its way to being the cheapest in 18 months relative to the international benchmark in London, indicating waning demand from the world’s largest consumer.
Bullion for immediate delivery on the Shanghai Gold Exchange was $1.40 an ounce below the price in London on a monthly average basis, the first time the Shanghai rate is cheaper than the London price since Sept. 2012, data tracked by Bloomberg News show.
Weakening consumption from China may weigh on the global benchmark price that fell 2.2 percent this month. The price rose 10 percent in January and February, the best start to a year since 2008, as the country more than doubled its net gold imports from Hong Kong in the months. A weaker yuan also undermined bullion’s appeal for the so-called trade financing deals, in which Chinese investors use the precious metal as collateral to get credit.
The discount “proved that as gold gets more expensive, it deterred price-sensitive Chinese consumers from returning to the market after Lunar New Year holidays,” said Fu Peng, chief commodity strategist at Galaxy Futures Co. in Beijing.
Gold for immediate delivery in London reached a six-month high of $1,392.33 an ounce on March 17 on a haven demand amid escalating tensions between Russia and the West over Ukraine. The price was little changed at $1,297.02 an ounce at 9:16 a.m. in Beijing, according to Bloomberg generic pricing. Bullion of 99.99 percent purity on the Shanghai bourse traded at 259.03 yuan a gram ($1,296.7 an ounce).
“The yuan’s sharp loss this month also discouraged traders from using bullion imports in financing deals to obtain short-term liquidity,” Fu said.
The Chinese currency declined against the dollar as the central bank doubled trading limits versus the U.S. currency, allowing greater exchange-rate fluctuations.
Increased volatility and a weaker yuan added to the cost of currency hedging for those who use gold in trade financing deals, Fu said. Such arrangements partly fueled bullion imports in the first two months, he said.
China’s net shipments from Hong Kong more than doubled to 192.8 metric tons in January and February from a year ago, data showed last week. The country consumed a record 1,066 tons last year as demand for bars, coins and jewelry jumped 32 percent, the World Gold Council said last month.
“We are so used to the situation where gold in China is more expensive than in overseas markets,” helping a steady inflow of shipments moving from west to east, said Liu Xu, an analyst at Capital Futures Co. in Beijing. “That premise is now being put to the test for the first time as gold here is cheaper.”
2014-03-31 12:30 GMT (or 14:30 MQ MT5 time) | [CAD - GDP]
if actual > forecast = good for currency (for CAD in our case)
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Broomfield Readies Itself for Further Lawsuits over Fracking Ban
While Broomfield has concluded numerous court cases that were linked to its contentious Nov. 5 polls, the city foresees further lawsuits over its ban on hydraulic fracturing after a judge ruled that the ban is still in place.
Broomfield battled four court cases since the November polls over how it conducted its election that saw it ban fracking with a mere 20 votes.
Most of the lawsuits have either been resolved or are expected to be concluded soon, though city and county attorney Bill Tuthill expects energy firm Sovereign to file a lawsuit as the fracking ban is now official.
"I'm confident that there will be activity in the legal arena with Sovereign anywhere from a month to six weeks from now," said Tuthill last week.
Broomfield contains 97 active wells, though companies that operate the wells such as Sovereign, Anadarko and Encana haven’t re-fracked the sites since summer 2013.
Sovereign, which had planned to frack several new wells to complement the existing ones, will not be able to do so owing to the ban. When contacted by Broomfield Enterprise, Sovereign’s chief operating officer Tom Metzger was unavailable.
Last August, Sovereign entered into a memorandum of understanding with the city that would allow the company to sink 21 wells in four locations, as long as it adhered to 35 Broomfield’s new, strict oil and gas drilling standards.
In one of the cases concluded last February, the judge validated the results of the poll that was opposed by fracking activists Too, It’s Our Broomfield and the Broomfield Balanced Energy Coalition. The groups had 20 days to file an appeal, which elapsed before they did.
“We didn't have the appetite for it," said Tom Cave of It’s Our Broomfield when asked why no appeal was filed.