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Discussion of article "Several Ways of Finding a Trend in MQL5"
newdigital, 2014.06.25 20:45
How to detect forex trends
Detecting a trend is an important part of predicting direction in a
currency pair. Tomorrow’s prices usually follow or continue today’s
trend. There will, of course, be reversals and ranging behavior within
the trend but it is easier to trade with a known trend than to predict
when it changes. The task of the forex trader is to detect variations or
waves of sentiment. The trader needs to ask: is there a shape to
changes in sentiment and can it be detected? To answer this question, we
can turn to price break charts (also called three-line break charts).
In recent months, Bloomberg Professional stations added these charts.
They also are available in many retail charting programs such as eSignal
Price break charts show only a new high close or a new low close. For
example, if a trader using a candlestick chart of a daytime interval
converts it to a three-line price break chart, he would see the price
action from a different vantage point. The price break chart would only
show consecutive new day high closes, or consecutive new day low closes.
If no new high or new low is reached, then no additional bar would
appear. But when the price reverses, it shows a new column only if the
price reverses three previous highs (downward reversal) or three
previous lows. This is why it is called a
three-line break chart. The conditions for a bullish and bearish
reversal are easily identified.
Three-line break charts enable significant insights into the shape of
sentiment in the price action. A trader can detect the prevailing
sentiment, how strong it is, whether a change in sentiment has occurred
and project where the next trend reversal will occur. Several examples
of using the three-line break as an indicator occurred in the GBP/USD
pair in 2009 (see “Show me the move”).
The year started with a series of three consecutive new lows. It then
reversed to a distance of four new consecutive highs. The sequence
reversed back to four new consecutive lows followed by three consecutive
new highs. In April, we see a very significant sentiment event, a
flip-flop. This is a new downward reversal followed immediately by an
upward reversal. In other words, market sentiment did not continue into a
series. When a flip-flop occurs, it is rarely followed by another
immediate reversal and therefore is a signal that the trend direction
after the flip-flop will continue for a longer distance. This is exactly
what occurred. The GBP/USD flipped from a low of 1.4252 on March 30 to a
high of 1.5002 on April 15.
Also in the pound, we see a long sequence of 20 new consecutive day
highs that occurred between May 1 and June 11, taking it from 1.4490 to
1.6598. While the ultimate length of the sequence is not predicable,
what was clear to the trader was that the previous highest uptrend
sequence before the long run up was five new consecutive highs. When a
previous sequence of highs or lows is broken by a new sequence, this is
an alert that the sentiment is becoming stronger than ever.
After the 20 new consecutive highs were achieved, GBP/USD no longer
had the energy to repeat this sequence. It entered into a series of
smaller consecutive new daily highs, and reversals into consecutive new
lows. GBP/USD ended with a reversal up with two consecutive new daily
Price break charts can be used for any time frame. Scalpers could use
a one-minute price break to spot what is the intra-hour prevailing
sentiment. While price break charts do not predict the duration, or the
distance of a new trend, they reveal the strength of the prevailing
sentiment. That can be enough to get an edge for the scalper or the
The long arm of Dodd-Frank
The U.S. Securities and Exchange Commission plans to vote today on a
plan that will define how far its regulations reach into a segment of
the $710 trillion global swaps market.
Transactions executed by foreign divisions of banks including
JPMorgan Chase & Co. and Goldman Sachs Group Inc. will be subject to
U.S. rules if the affiliate’s trades are legally guaranteed by the
parent company, the SEC said in a statement. The new rule comes as Wall
Street takes steps to restructure trades overseas to avoid Dodd-Frank Act regulations intended to increase competition and price transparency.
U.S. regulators have faced a backlash from European and Asian
authorities for overreaching in their desire to apply Dodd-Frank rules
overseas. Meanwhile, Wall Street lobbying organizations have sued the Commodity Futures Trading Commission, which is the primary U.S. regulator of derivatives, to limit the international scope of the agency’s power.
“The SEC has no excuse not to strongly regulate Wall Street’s
overseas derivatives gambling,” Dennis M. Kelleher, president of Better
Markets, a Washington-based nonprofit that advocates stricter bank
regulation, said in an e-mail.
Cross-border application of U.S. derivatives rules is one of the most
contentious features of Dodd-Frank, the regulatory expansion enacted
after the 2008 credit crisis. The law gave the SEC authority over trading in equity and some credit-default swaps, about 5 percent of U.S. swaps, while the CFTC oversees the rest: swaps on interest rates, currencies, and credit indexes.
David Felsenthal, a New York-based partner at the Clifford Chance law
firm, said the split oversight could cause problems for credit-default
“It will be very difficult if there is any inconsistency to try to
mesh the two markets together,” Felsenthal said in a phone interview.
The SEC last year proposed to exempt U.S. banks’ overseas affiliates
from registration when they deal predominantly with foreign clients. The
agency changed that approach in the final rule, saying overseas trades
guaranteed by the U.S. parent will be regulated when the guarantee is “a
legally enforceable right.”
Critics of the SEC’s approach faulted the agency last year for taking
a different approach than the CFTC, which oversees about 95 percent of
the U.S. swaps market. Others said the SEC’s strategy would allow banks
to escape regulation by moving more swaps deals offshore, which would
raise the risk that an affiliate’s collapse could harm the U.S. parent
The SEC’s final rule should cover any trading by an affiliate whose
trades are guaranteed by its U.S. owners, whether legally or implicitly,
said Better Markets’ Kelleher.
“They have seen how Wall Street has evaded the CFTC’s rules since
last July,” Kelleher said. “We have spent hours with the SEC staff
discussing this and a straightforward solution: Directly prohibit de
facto guarantees, Wall Street’s latest tactic to avoid sensible and
The Federal Deposit Insurance Corp., which regulates Wall Street
banks, has said it is monitoring the move by banks to remove parent
guarantees from affiliates or specific transactions so they can trade in
the interdealer market free of many Dodd-Frank restrictions. The CFTC
is reviewing the overseas changes and analyzing whether there is
“evasive activity under way,” Commissioner Mark P. Wetjen said on May
Under CFTC guidelines,
overseas affiliates that lack a parent guarantee fall under fewer
restrictions than do foreign branches or guaranteed affiliates of U.S.
banks. As a result, the swaps market is fracturing with trades in the
U.S. falling under Dodd-Frank and trades elsewhere subject to local
Trades with non-U.S. participants are occurring off of the new
Dodd-Frank swap-execution facilities because they are being done by the
non-guaranteed subsidiaries, John Nixon, an executive at London-based
ICAP Plc, the world’s largest interdealer broker, said at a CFTC
advisory meeting on May 21.
The U.S. House voted 265-144 to approve legislation yesterday that
would restrict the CFTC’s ability to impose rules overseas, among other
changes to the agency’s authority over agriculture, energy and financial
U.S. Economic Mash-Up: Mortgage Applications Fall, Durable Goods Orders and Services
U.S. home mortgage applications declined last week, with both
applications for purchase and refinancing declining, according to the
Mortgage Bankers Association.
MBA’s seasonally-adjusted gauge of mortgage application trends, which
incorporates refinancing and house purchases, declined 1 percent in the
week through June 20. The index of refinancing applications plunged 0.9
percent while that for home purchases declined 1.2 percent.
The rates for fixed 30-year mortgage averaged 4.33 percent last week,
much lower than 4.36 percent recorded the previous week. The survey
reviews at least 75 percent of U.S. retail home mortgage filings.
Separate data showed that orders for durable manufactured items in the U.S. unexpectedly plunged in May, indicating that the economy may not grow as fast as expected, despite another set of data showing businesses plan to spend more on capital investment.
Orders for long-lasting goods fell 1.0 percent after demand for
machinery, transportation, computers and other electronic products,
defense capital items, electrical appliances, equipments and components
Overall orders for durable goods had accelerated by 0.8 percent in April due to more orders for defense equipment.
Non-defense capital item orders adjusted for aircraft, which signals
how businesses intend to spend their money on capital goods, rose 0.7
percent. This compares with a decline of 1.1 percent posted in April.
Another report showed that U.S. services sector grew by the quickest pace in over 4 ½ years, as business activity increased.
EUR/USD Technical Analysis – Trying to Renew Recovery
The Euro is attempting to extend is recovery against the US Dollar
but a defined bullish breakout remains elusive. Prices are testing
falling trend line resistance at 1.3632, with a daily close above that
exposing the 1.3676-89 area marked by the June 6 high and the 38.2%
Fibonacci retracement. Resistance-turned-support is at 1.3585, the May
29 low. A reversal back below that opens the door for a test of the
1.3476-1.3502 zone bracketed by the February 3 and June 5 bottoms.
The Signal And The Noise
U.S. Federal Reserve Chairwoman Janet Yellen's press
conference last week came just hours after Consumer Price Index data
revealed inflation of 2.1 percent year over year. Nevertheless, she was
exceptionally dovish and sanguine on inflation. Yellen contended that
even though the U.S. economy is near the Fed's objectives of full
employment and price stability, recent data on inflation was "noise" and
there continues to be considerable underutilization in the labor
market. This was only the most recent demonstration of a willingness
among Fed policymakers to highlight any number of economic data points
to support accommodative monetary policy. It came even though labor
conditions are improving toward a level associated with the
non-accelerating inflation rate of unemployment (NAIRU); a tipping point
of around 5.5 percent unemployment which has historically corresponded
with a period of Fed tightening.
I am increasingly of the view
that the Fed and investors are complacent about inflation. While a
broad-based secular increase in inflation is most likely a problem for
the next decade, there are a number of technical and cyclical forces
working to push consumer prices higher. One technical factor is the
one-time 2 percent Medicare payment cut which went into effect in 2013
and temporarily depressed healthcare costs for Medicare recipients. The
recent increase in healthcare costs results largely from the
year-over-year effects of this one-time cost reduction expiring.
inflation factor at work is shelter. With rental vacancy rates hovering
near 13-year lows and new home sales soaring by 18.6 percent to an
annualized pace of 504,000 units in May, we can expect a continued rise
in shelter costs for the rest of the year and possibly into early 2015.
As a result of these technical issues and the cyclical factors
associated with the economic expansion and employment growth gathering
pace, we are likely to see inflationary pressures continuing to build.
It is clear that we have now passed the days of low inflation growth.
are in the late stages of a bull market and, as I have noted before,
bull markets do not die of old age, but typically end as a result of a
policy misstep. If Fed policymakers want to avoid such a mistake, they
might start listening more closely to the "noise."
Consumer Price Index (CPI) data surprised to the upside, with
transportation and medical costs adding to the 0.3 percent
month-over-month gain in core CPI. However, the biggest contributor to
increasing consumer prices continues to be shelter costs, which account
for over 40 percent of core CPI (and 22 percent of core Personal
Consumer Expenditures (PCE), the Federal Reserve's favored gauge of
inflation). Shelter inflation measured by CPI is already up 2.9 percent
from a year ago, and due to falling vacancy rates and gains in home
prices, shelter costs could accelerate to nearly 4 percent growth over
the next year, which would push core CPI well above 2 percent.
This is some advice made by Nicholas Pardini in November last year.
Nicholas Pardini is the founder and managing partner of investment
firm Nomadic Capital Partners, which specializes in investing in
emerging and frontier markets around the globe. His book, “The
Definitive Guide to Emerging Market Currencies,” was written in response
to his inability to find research on the subject.
7 best currencies for long term investors
markets tend to be the domain for short-term technical and momentum
based speculators. However, with central banks around the world holding
real interest rates negative and printing large quantities of money,
investors’ home currencies in developed nations such as the United
States, Europe and Japan may not be a safe store of value.
Stretched valuations across bond and equity markets make this an apt
time to take profits, but what currencies should investors hold their
cash? Here’s my top seven strongest currencies based on long-term
economic fundamentals.7) Korean won
South Korea has become a manufacturing powerhouse.
The quality of Korean goods such as Samsung Electronics, Hyundai and
Posco meets and often exceeds Japanese competitors. In spite of a weak
yen, South Korea maintains competitive advantage versus Japan. South
Korea’s fiscal health is also strong with a 35% debt to GDP, 3.3% GDP
growth, and 3.8% current account surplus.6) Malaysian ringgit
Malaysia is the only developed nation since its independence in 1957
that has not defaulted or experienced a full year of inflation above
20%. The Malaysian central bank has an excellent track record of keeping
inflation low and exports of crude oil, palm oil, minerals, and other
natural resources keep foreign reserves well stocked. The tricky part
for Western investors is that the ringgit can only be traded via
non-deliverable forwards due to capital controls left over from the 1997
Asian financial crisis.5) Norwegian krone
Norway has the most stable currency in Europe. With oil exports, a
high standard of living, a 13% current account surplus, and a debt to
GDP of just 28%, Norway is in excellent shape to maintain currency
strength and hold off the structural problems of the rest of the
continent. Because Norway is not part of the EU, it can serve as a
financial safe haven for investors if the European debt crisis
deteriorates further.4) Chinese renminbi
China is transitioning from an export based economy to one that
relies on more domestic consumption. Part of this transition will be RMB
appreciation as higher domestic purchasing power of imported goods such
as food and energy will be needed to increase the wealth of middle
income Chinese and get them to spend money on local consumer goods and
services. China has stockpiles of foreign reserves and trade surpluses
which will also hold up the renminbi as the government has been
intervening less to keep the currency down. The renminbi would be rated
higher if it was not for strict capital controls.3) Hong Kong dollar
The Hong Kong dollar
is like the call option of currencies. It is pegged to a narrow band to
the U.S. dollar, so downside risk is limited. However, if trade
pressures and a weak dollar break the peg, that the Hong Kong dollar has
appreciation potential of greater than 20% to match the recent gains of
the renminbi against the U.S. dollar.2) Singapore dollar
With increased disclosure in Switzerland, Singapore has become the
new global center of hidden money and a favored tax haven. As income
inequality increases along with the increased rates and enforcement of
taxation, foreign capital inflows will continue to increase in Singapore
that puts upward pressure on the currency. Singapore also has an 18%.6
current account surplus and has been the greatest beneficiary of the
growth of Asian economies and Asian tourism. As seen in the chart, the
Singapore dollar has one of the most stable paths of appreciation
against the U.S. dollar of any currency. 1) New Zealand dollar
The New Zealand dollar is the safest store of value among the bunch.
The Reserve Bank of New Zealand is the only developed nation central
bank that plans on raising interest rates in the near future and the
country has reformed its tax code to lower rates and increase
transparency. New Zealand also has stable exports from undervalued
Something Interesting to Read June 2014
newdigital, 2014.06.26 08:57
With central banks around the world devaluing major currencies such as
the US dollar, Japanese Yen, and the euro, opportunities for higher
returns are available through investing in emerging market currencies.
Investing in exotic currencies such as the Chinese renminbi or Brazilian
real may seem complicated, but with the help of this book we make it
more accessible to investors of all sizes. The Definitive Guide to
Emerging Market Currencies covers the macroeconomic underpinnings
foreign currency markets, the fundamental factors that define the future
strengthening of currencies in emerging markets, and how to trade these
currencies. The book also goes into detail on the economic fundamentals
of every significantly liquid emerging market currency along with an
investing outlook for each one. For those looking to make money trading
emerging market FOREX, or are just curious about emerging market
currencies, this book is the best place to start. Even stock market
investors benefit from learning about these FOREX markets because
currency fluctuations have a huge impact on investors' total returns in
any foreign country.
EUR/USD To Be Halted By 1.37
'It [GDP data] was very disappointing, and in the current situation
we have very low vol, heading into month-end, and half-year end as well.
So, the ducks are all lined up [for] U.S. dollar weakness.' - RBC
Capital Markets (based on Reuters)
The Euro is slowly but surely moving in the direction of the 55 and
200-day SMA on the back of a weaker greenback. This resistance at 1.37
is expected to prevent further appreciation of the single currency and
thus a test of the monthly PP and 100-day SMA. Even if this is not the
case, and the currency pair continues to advance, the long-term outlook
will remain bearish as long as the major down-trend line at 1.39 stays
While the sentiment of the market is lightly bearish towards EUR/USD
(56% of open positions are short), the number of buy orders is
increasing. Their share 50 pips from the spot price soared from 39% up
to 60% compared to the most recent update.
EURUSD: US and Germany Square Off in World Cup and FX Market
The US and Germany kick off a "massive" World Cup match in just a few
hours, but the currencies of the two countries have also been locked in
a tight competition this week. Yesterday, it appeared the Germans (and
the rest of the Eurozone) were pulling ahead with an attempted breakout
from the EURUSD's 3-week symmetrical triangle pattern (see 4hr chart
below). However, the US stepped up its game at the last second and drove
the pair back down to the bottom of its triangle near 1.3600. As we go
to press, the pair is inching below the lower trend line, but given the
failed upside breakout yesterday, it would be prudent to wait for a
daily close below this level before confirming the breakdown.
For the uninitiated, a breakout from a symmetrical triangle pattern
suggests a strong move in the same direction. Using the measured move
method of projecting a target based on the "height" of the triangle
points to a possible 150-pip move once the breakout is confirmed, which
could drive the EURUSD either back up toward 1.3800 or down to new 2014
lows in the mid 1.3400s, so there could be plenty at stake here for
Unfortunately, the secondary indicators are not giving any advance
warning of which way the pair may trend next. The RSI is essentially
neutral near the 50 level, while the MACD is rolling over, but still
holding above the 0 level, showing receding bullish momentum.
Coincidentally, the resolution of the German-US battle in the FX
market may take place at the same time as the countries' World Cup
clash. Oddsmakers favor the Germans on the futbol pitch, but the
Americans currently have the upper hand on traders' screens. No matter
how these situations resolve, fans and traders are in for some serious
excitement over the course of the day!
2014-06-26 22:45 GMT (or 00:45 MQ MT5 time) | [NZD - Trade Balance]
if actual > forecast = good for currency (for NZD in our case)
[NZD - Trade Balance] = Difference in value between imported and exported goods during the reported month. Export demand and currency demand are directly linked because foreigners
must buy the domestic currency to pay for the nation's exports. Export
demand also impacts production and prices at domestic manufacturers.
Also Called : Overseas Merchandise Trade.
New Zealand Trade Surplus NZ$285 Million
New Zealand posted a merchandise trade surplus of 285 million New
Zealand dollars in May, Statistics New Zealand said on Friday -
representing 6.2 percent of exports.
That topped forecasts for an increase of NZ$250 million following the NZ$534 million surplus in April.
climbed NZ$528 million or 13.0 percent on year to NZ$4.60 billion -
beating expectations for NZ$4.50 billion, which would have been
unchanged from the previous month.
"Goods exports are high this
month compared with May 2013," international statistics manager Jason
Attewell said. "However, it appears the growth in exports seen in the
past year has leveled off."
Exports to China, New Zealand's main
export partner, were up NZ$204 million to NZ$868 million in May. This
was led by milk powder, crude oil, and sheep meat. This is the first
shipment of crude oil to China since July 2009.
growth of exports to China has resulted in the two-way trade of goods
(exports plus imports) reaching NZ$20.1 billion for the first time in
the year ended May 2014. This was up NZ$4.7 billion from the previous
year, with exports contributing NZ$4.0 billion to this increase.
Exports to Australia fell NZ$81 million to NZ$667 million.
added NZ$283 million or 7.0 percent on year to NZ$4.32 billion versus
forecasts for NZ$4.23 billion and up from NZ$3.96 billion a month
Capital goods led the rise, up NZ$186 million. This was led by trucks, cranes, and excavators.
Vehicles, parts, and accessories also fueled the increase in imports, up NZ$114 million.
Seasonally adjusted, exports added 0.5 percent on month in May, while imports jumped 2.9 percent.
to date, New Zealand's trade surplus was NZ$1.373 billion - topping
expectations for NZ$1.350 billion and up from NZ$1.191 billion a month
EUR/USD getting closer weekly high of 1.3650
FXStreet Chief Analyst Valeria Bednarik
comments on the EUR/USD moves following the release of better than
expected German CPI numbers on Friday, saying that the pair is
approaching its weekly high of 1.3650.Key quotes"Stocks
up in the US and some relaxed confidence ahead of next week events with
the EUR/USD hourly chart showing indicators bouncing higher from their
midlines and price advancing above a mild bullish 20 SMA." "In
the 4 hours chart however, the neutral stance prevails with 200 EMA flat
around 1.3645 acting as immediate short term resistance."