FXCC Blog Updated: If I knew then what I (think) I know now

So I was at my circuit training class on Monday and during the warm up (a few laps around the gym and some stretching) I got talking to a guy I hadn’t seen for a while. Last time we spoke he was looking for a new direction. Having been an accountant he felt he’d become stale, he wanted a fresh start and a new challenge. We got onto the subject of trading last time we spoke due to him having a temporary assignment at a subsidiary of Deutsche bank, a former very reputable FX broker I’d used in the past.

On Monday he proceeded to tell me about his foray into the world of spread betting, he had been ‘punting’ on the UK FTSE 100 primarily based on his fundamental views and pattern recognition. We didn’t have too much time to dwell on the subject, (believe me this training session taken by an ex services guy leaves you little time to breathe, let alone talk), but during our few laps he told me he’d wiped out his account. Perhaps impolitely I asked how much? He said he’d rather not put an exact figure on it, but I was relieved to hear him say that it wasn’t in the thousands. I had this overwhelming compulsion to offer help and advice, but where do you start given my belief is that it takes 2-3 years of full time total immersion and dedication in our industry to become consistently profitable? And my belief is steadfast; there’s no such thing as shortcuts, short cuts will leave you SHORT and there could be death by a thousand CUTS.

“Books!” was my first thought, he needs books. Mark Douglas’s, Trading In The Zone and the Jesse Livermore classic, Reminiscences Of A Stock Market Operator. Why these two? Well firstly TITZ hits most new traders right between the eyes; it’s not method it’s money management and your mind that’ll win through. Secondly the biography on Jesse I always recommend as a test of a potential trader’s overall level of intellectual market curiosity. It’s not about whether or not you ‘get it’, Jesse’s methods and technique had very little in common with how a retail forex trader would operate today, it’s more a test as to how (and if) the book stimulated you.

Whilst we can all hold subjective views on a book’s relative merits Reminiscences is, in my humble opinion, a ‘gift’ to the trading world we inhabit. I mentally debated whether or not I should lend him my two copies of these books, I’m a generous person so I was inclined to do so. But then I remembered how important these two books were on my journey, even to arrive were I sit right now in typing out this advice. One summer I often took Trading in the Zone and ‘reminiscences’ to a secluded beach surrounded by huge rocks shaped by the power of the Irish sea and sat there sheltered for hours devouring their content. These books are individual and ( I realise this sounds a bit ‘sad’) precious to me. Whilst I’ll gladly share and discuss the content I couldn’t possibly hand them over.

It’s essential that he buys the books or conveniently (given the time of year) asks for them as Xmas presents and makes his own decisions and discoveries. He could put his feet up, whilst the same old yearly tat is on tv over the Xmas period, and become absorbed into the worlds of Douglas and Livermore, what bliss..

But what other tips would you give someone making their first tentative steps into our industry as a retail trader? How could you possibly strain, sieve and produce a concentrate of everything you’ve learned over perhaps decades of private investment and speculation into bite sized chunks without making them appear to be soundbites? In no particular order I thought I’d assemble a few short tips, most needing very little explanation. Please feel free to add to those by way of email or the comments section.

Look after the bottom line and the top line will take care of itself. Make sure your money management is sound, perhaps risking no more than 2% of your account balance per individual trade.

Construct a comprehensive trading plan. A thorough article on this subject is already on this blog. Diarise a journal early days and refer back to it from time to time to realise how far you’ve come over a relatively short space of time.

Luck plays as much a part of trading success as ability, but probabilities are everything. The luck of discovering trading can often arrive by being in the right place at the right time, the more you put yourself about in this industry the luckier you’ll get.

You’ll probably be successful if you stick to to your backtested proven technique than dipping in and out of others or bailing at the first sign of failure. You have to measure any strategy and edge’s returns over a significant series of trades, perhaps fifty on one currency pair if swing trading.

Engage in and with fellow traders on one trading forum only, without losing sight of why you’re there; to absorb as much trading. info as possible, perhaps create ‘real’ relationships with like minded traders and to be made aware of new market developments. Be aware that many of the regular members are sophists with agendas and tools for sale.

Patience and humility. After a few dozen trades I thought I knew how to trade. After a few hundred I thought I was a trader. Now, after a few thousand trades, I know what I must still learn in order to one day be a trader.

Win pennies consistently before you win pounds. Use demo accounts with the same level of discipline as you’d give a live account. When live use an amount that will annoy you if you lose it, but won’t critically affect the quality of your, or your family’s life.

Traders who don’t make mistakes don’t make money. You will make thousands of mistakes during your trading evolution. Embrace that inevitability, it’s part of the learning curve.

You have to discover your own way of trading, there is no point in attempting to copy somebody else’s method.

Buying ‘black-box’ forex systems is a waste of time and money. You have to learn this business by doing it yourself, all of it.

Buy trading books that have been recommended to you, particularly recommendations on trading forums.

The road to profitability can be quicker and less costly if you accept from the outset that you know very little and prepare to put in the time to do proper research, including only paper trading at first and then only committing real money when profitable on paper.

Ignore people who say if you have determination and perseverance and you are committed you can make it, this is wrong. Neither of those two (arguably laudable) characteristics will make you successful in trading. Whilst cultivating a winner’s mindset is essential it won’t make you a successful trader. Many people study “the markets” ten hours a day for years with all the help, advice and tools to succeed at their disposal and are not profitable. You have to find the right path (for you) out of the infinite number of possibilities. There is an element of luck in this. Once you have found the path you have to stay on it and that is a skill in itself.

Technically speaking, price action provides the biggest clues as to where price is headed if you can learn to read it. You have to learn price action by way of candlesticks and or bars and I state this as a ‘hard core’ technical trader who uses indicators constantly, but cements and underpins each trading decision with price action.

You really don’t have to know what will happen next to make money, it really is a question of playing your trading edge, whatever that highly personal edge for you is.

Having an edge, understanding your edge and playing your edge requires different skills. Consistently profitable traders are those that have, understand and play it.

Trading is a marathon not a sprint although we all start out hoping it’s a sprint. Prepare yourself from day one that it’ll take years to become proficient and profitable, can you fund yourself during this time?

Consistency is key, many successful traders relate to how they find the job a drudge, boring, they’ve simply reached a stage were they’re no longer trading by the seat their pants. But they’ve all put in the hours and taken a highly disciplined, professional and respectful approach, to what is a highly complex profession, in order to view their profession in such a way.

Trading doesn’t have to take over your life although to get to the stage of being a consistently profitable trader it probably will.

Once consistently profitable you may get parts of your life ‘back’ that you sacrificed getting there. Perhaps you’ll discover new life enhancing benefits or things about yourself in your trading journey. Time is something that you cannot get back so enjoy the trading journey, don’t wish it away, embrace it.

Realise that learning how to trade should be free, or at least very inexpensive other than the funding yourself cost until you begin to make money. You can trade for a very long time with a small amount of capital. In that time, you can learn a great deal at little or no cost.

The trading business can often be a question of simply staying in the game as long as your initial accounts will last. You can’t continue your learning process if you’re out of the game.

You can trust in this business. Your broker wants you to win, don’t buy into all the negative horror stories constantly regurgitated on trading forums. Communicate with your broker, ask questions, if they’re in the UK why not take a day out for an office tour, you may be surprised at where that ‘open door’ can lead. Get out of your comfort zone meet people.

It is a very difficult task to learn this business ‘part time’ while still doing the day job. If this is how you intend to learn and then trade you must be prepared to spend double the average time to be become profitable.

It’s a long hard road (thousands upon thousands of hours screen time) to find out what works, and more importantly what doesn’t. When you do find something that works you need to develop it into some kind of repeatable method that makes more money than it loses in the long run and keep doing it over and over.

Nobody knows what is going to happen next, not the guy on Bloomberg, not traders on forums claiming to be the bees knees, your coach/mentor doesn’t know. Anyone who claims they do either has inside information, is the ultimate decision maker at the Fed, ECB or Bank Of England or is quite simply delusional.

The ‘mind issues’ far outweigh the importance of a strategy/system. Whilst it’s impossible to place an exact percentage breakdown I’d hazard a guess that your edge in this game is 70% psyche and money management (strict MM helps support a healthy psyche) and 30% method.

Always be looking at the ‘big picture’, be able to quantify what is actually ‘going on’ out there due to the fundamental macro economic picture and as a result tie this all together in a strategy instead of solely trading entry on indicators on a certain timeframe.

Always view trading as a probabilities game, and understanding the importance of taking all your trades. If you don’t take all the trades according to the system then the probabilities will become skewed.

Never trade full time if you are on an unsure footing financially, stress about loans/rent etc will only be played out in your trading decisions, which will ultimately kill your account.

For months and months I studied charts, looking for Dojis, Hammers, Shooting Stars, engulfing patterns, black crows, you name it, I’d read and tried it. On a chart, I could pinpoint a lesser spotted tripled-eyed green leopard sitting on a fairy’s toadstool, ( I just made that up, no such pattern exists) Then there were trend-lines, MAs, s/r, Fibs. In my opinion it’s often meaningless without looking at volume.

I’ll close with perhaps my main advice, slow it down, all of it. Slowing down translates to ‘working off’ higher time frames. Slowing every aspect of trading down, taking trades off higher time frames, thinking every decision through helps to eliminate noise from every angle. You’re very unlikely to be able to replicate what the ‘big boys do’ from the comfort of your home office. Part of your edge is realising where you sit in the food chain; hoovering up the crumbs brushed from Deutsche Bank’s table. As retail traders we find the gaps they create, we don’t make the market, we don’t alter the market. We trade with the trends they create in their wakes when they turn their massive tankers.

Source: FX Central Clearing Ltd. (FXCC BLOG)
http://blog.fxcc.com/if-i-knew-then-what-i-think-i-know-now/

Daily Market Roundup by FXCC - Cannes, the Modern Day Potemkin Village

Potemkin villages or Potyomkin villages (Russian: Потёмкинские деревни) is an idiom based on a historical myth. According to the myth, there were fake settlements purportedly erected at the direction of Russian minister Grigory Potemkin to fool Empress Catherine II during her visit to Crimea in 1787. According to this story, Potemkin, who led the Crimean military campaign, had hollow facades of villages constructed along the desolate banks of the Dnieper River in order to impress the monarch and her travel party with the value of her new conquests, thus enhancing his standing in the empress’s eyes.

Modern historians are divided on the degree of truth behind Potemkin villages. While tales of the fake villages are generally considered exaggerations, some historians dismiss them as malicious rumours spread by Potemkin’s opponents. These historians argue that Potemkin did mount efforts to develop the Crimea and probably directed peasants to spruce up the riverfront in advance of the Empress’s arrival. According to Simon Sebag-Montefiore, Potemkin’s most comprehensive English-language biographer, the tale of elaborate, fake settlements with glowing fires designed to comfort the monarch and her entourage as they surveyed the barren territory at night, is largely fictional.

Regardless, Potemkin had in fact directed the building of fortresses, ships of the line, and thriving settlements, and the tour (which saw real and significant accomplishments) solidified his power. So, while “Potemkin village” has come to mean, especially in a political context, any hollow or false construct, physical or figurative, meant to hide an undesirable or potentially damaging situation, the phrase may not apply to its original context

According to a legend, in 1787, when Catherine passed through Tula on her way back from the trip, the local governor, Mikhail Krechetnikov, indeed attempted a deception of that kind in order to hide the effects of a bad harvest. (Wikipedia)

The Potemkin facade, permanently in place at Cannes, provides the perfect juxtaposition to the hardship many Europeans are feeling due to the recession and not the austerity measures they’ll have to endure as they’re put in place, measures that each EU17 or G20 meeting appears to crank up. Whilst Italian cites such as Napoli, and French cities such as Marseilles are being torn apart by hardship, the great and the good dine out at Cannes. One aspect the mainstream media hasn’t broached is the cost of this gathering, you can be sure the travel arrangements are first class and the security bill alone (cumulatively racked up over the past dozen or so meetings) would probably have paid to clear Naples streets of the infested, uncleared rubbish that piles up daily…

Apparently stunned by Greece’s show of defiant independence the Merkozy alliance has blown apart any thoughts that the EU en masse is a democratic entity by throwing the ‘made up as you go along’ rule book at Greece. As to what rights the ‘Merkozys’ have to issue diktat and threats to another member state, without the full support of other members by way of unified permission, remains unclear. But threaten they have, not only using threats of with-holding cash bailout support, but attempting to put words into the mouths of Greek officials as to how they should frame the referendum questionnaire which is a matter for the Greeks not the EU.

If any more proof were needed that it would have been far better for the French and German leaders to have acted statesmanlike and said nothing then this impasse has provided it. We now have a situation were a cool, calm series of questions put to the Greek people is by far the least damaging option as opposed to G Papa’s government suddenly imploding and being replaced with an interim emergency govt. that may still insist on a people’s referendum. The deeply disappointing aspect of this whole affair is that it was avoidable, Greece should have been allowed to default in an ‘orderly’ fashion in 2010. The blame for not allowing it to do so lies at the feet of the Merkozys who are now vainly scrambling to control their own domestic political careers.

Greece’s Finance Minister Evangelos Venizelos defied Prime Minister George Papandreou’s call for a referendum on the country’s membership of the euro, opening up a split before a confidence vote in the government tomorrow.

Greece’s position within the euro area is a historic conquest of the country that cannot be put in doubt, it cannot depend on a referendum.

European leaders during their meeting in Cannes last night cut off aid to Greece until the results of a the referendum are known, which is likely to be held on Dec. 4 or 5, raising the spectre of a disorderly default as soon as next month. Hours later, Greek Agriculture Minister Costas Skandalidis called for an emergency meeting of lawmakers from the ruling socialist Pasok party to discuss developments before tomorrow’s vote. Polls show most Greeks object to the austerity required for aid, yet more than seven in 10 favour remaining in the euro, according to a survey last week of 1,009 people published in To Vima newspaper.

Naturally the ‘markets’ have reacted to the turmoil, equities have fallen albeit modestly in all European bourses, the euro has weakened to near a three-week low versus the dollar and its major counter parts while Treasury 10-year notes rose for a fifth day. The MSCI World Index dropped 0.9 percent as of 8:01 a.m. in London and the Stoxx Europe 600 Index sank 1.4 percent. Standard & Poor’s 500 Index futures retreated 1.4 percent. The euro lost 0.5 percent to $1.3676, New Zealand’s dollar slid 1 percent after the nation’s jobless rate gained. Treasury 10-year yields fell basis points to 1.96 percent. Oil, copper and silver dipped at least 1.5 percent.

Market data and snapshot at 9:45 am GMT (London time)

Asia/Pacific markets fared badly in the overnight and early morning sessions, the Nikkei closed down 2.21%, the Hang Seng closed down 2.49% and the CSI closed slightly up at 0.07%. The ASX 200 closed down 0.31% and the NZX 50 closed up 0.08. The SET is down 1.31%.

European indices are down moderately considering the Greek and Italian questions stalking the markets adversely affecting sentiment. The STOXX is currently down 0.48%, the UK FTSE is flat, the CAC is down 0.06%, the DAX is down 0.20% and the ASE (Athens main index) is up 0.23%.

Economic calendar data releases that may affect the afternoon market sentiment

12:30 US – Non-Farm Productivity Q3
12:30 US – Unit Labour Costs 3Q
12:30 US – Initial and Continuing Jobless Claims
12:45 Eurozone – ECB Rate Announcement
14:00 US – ISM Non-Manufacturing Index October
14:00 US – Factory Orders September

Analysts surveyed by Bloomberg predict that the ECB will keep rates unchanged at 1.5%. A Bloomberg survey forecasts Initial Jobless Claims of 400K, compared with the previous figure released which was 402K. A similar survey predicts 3693K for continuing claims, compared with the previous figure of 3645K. Based on a survey of economists, the median estimate was -1.0% for unit labour costs from last months figure of 3.3%.

Source: FX Central Clearing Ltd. (FXCC BLOG)
http://blog.fxcc.com/cannes-the-modern-day-potemkin-village/

Daily Market Roundup by FXCC - November 3 am

Le Coq and La Conquete

Nicolas Sarkozy can’t watch a film released in May exploring why his wife left him on the same day he was elected as he needs to “protect his sanity”. The film, La Conquete, (The Conquest) covers Sarkozy’s second divorce from Cecilia Attias and his rise to power until his election in 2007. It showed at the Cannes Film Festival in May and it features a number of potentially embarrassing scenes for the French president; him waking up alone at a hotel on the Champs-Elysees after celebrating his election victory, and his colourful use of language throughout. In an interview with a French magazine, Mr Sarkozy, who has so far remained quiet about the film, said he had “absolutely no desire” to see it.

“I don’t usually read what is written about me, because it never makes me happy. If it’s critical I find it unfair, and if it’s complimentary, it never goes far enough, so what’s the point? I respect the freedom to create, and feel people are expecting me to try and stop this film screening at Cannes, or that I want to see it alone first so I can censor it, but not at all. Don’t talk to me about recent English films on living politicians, like those by Steven Frears about Tony Blair or Gordon Brown. Those films didn’t intrude on their private lives, like this one apparently does on mine, and without having checked the most basic facts. As you know, my life has changed a lot since that time, and it’s also out of respect for my wife Carla that I won’t see it. Basically it’s to protect my sanity. Narcissism is never a good thing, and too much narcissism will drive you mad.”

We can only hope and pray G. Papa hasn’t pushed the narcissistic high heel wearing President to the edge, or that the film isn’t on screen in honour of Sarkozy’s visit to the incredibly upmarket town to discuss the austerity measures that Greece has to suffer in order that tinsel towns such as Cannes continue to thrive in its rarified Disneyland style existence. G. Papa’s inclusion of the democratic process, in the form of a potential referendum in Greece, has apparently angered the Merkozy alliance who have apparently summoned him into a private meeting (or two) in Cannes ahead of the G20 meetings that are scheduled to take place over the next few days. What does he say, what does he have to say to the Merkozy act given he’s outsmarted the good and great of the EU? This is surely one conquest that Sarkozy cannot pull off despite the hard ball rhetoric and implied threat that Greece won’t get a cent of fresh bail out cash until they adopt the bailout and austerity measures without question.

“Hey Nic, wazzup? How’s Carla and the baby dude? You da man, still don’t know how you pulled her, nice work you slick old dog, it was the power trip right? Hey, some girls dig it man, why not use it baby? You’re looking smooth buddy, you’re looking a bit taller, new shoes? Hey Ange, hey, listen luv, really sorry about those posters all over Athens and in the papers depicting you as Waffen SS, bad taste that, but come on you can tell me, does the hubby ever ask you to dress up like that? To be honest those old English repeats of ‘Allo ‘Allo with the girl dressed up in the German uniform used to really get my juices flowing…” Anyway guys, something on your minds? Shoot..”

Perhaps the Greece officials have finally come around to the conclusion many of us economists and market commentators realised months back; when your country is being stiffed with bond bills of anywhere between 150-200% give it up. Just ‘give it the finger’ and move on. You can’t fight that punishment, you can’t win and it’s not honourable to pay back such punitive sickening costs. Default, do an Argentina. Orderly, disorderly who cares, as only 2.5% of the EU GDP does it matter what Greece does, really? Well here’s the thing, it’s not the “contagion” that has the banking and political elite petrified, it’s the concern that if Greece puts two fingers up to the system (and G Papa is depicted as a domestic hero) nothing will stop Silvio Berlusconi from being next, and if that shoe drops it’ll be terminal to the matrix like system the exclusive banking elite have created.

French President Nicolas Sarkozy has said on Wednesday evening that the Greek referendum (to be pencilled in for Dec. 4 or Dec. 5) will determine Greece’s future in the euro. Greece must adopt the entire bailout package in order to receive payment of the sixth tranche of aid, Sarkozy told reporters in Cannes, France, today after talks with Greek Prime Minister George Papandreou and German Chancellor Angela Merkel. According to Sarkozy; European leaders are seeking a coordinated, firm, definitive strategy to combat the region’s debt crisis, he said. Europe can’t have a prolonged period of uncertainty.

The chairman of euro zone finance ministers, Jean-Claude Juncker, said Greece could go bankrupt if voters rejected the bailout package. European Commission chief Jose Manuel Barroso urged Greeks to unite in support of the bailout plan, warning that the alternative would be too ghastly to predict.

Without the agreement of Greece to the EU/IMF program, the conditions for Greek citizens would become much more painful, in particular for the most vulnerable. The consequences would be impossible to foresee.

It’s too early for China to discuss further bond purchases from Europe’s rescue fund, China’s Vice Finance Minister Zhu Guangyao has informed reporters in Cannes, France. While there are proposals to bolster the European Financial Stability Facility.

There are no concrete plans yet so it’s too early to talk about further investments in these tools. At present there’s no specific plan that people have clear understanding of.

Federal Reserve Chairman Ben S. Bernanke stated that unemployment is still “far too high” and the Fed may take further steps to boost growth, such as buying mortgage bonds or changing the way it communicates its policy goals to the public at the latest FOMC meeting. Bernanke and the panel have cut their growth forecasts for 2012 and said unemployment will average 8.5 percent to 8.7 percent in the final three months of next year, up from a prior range of 7.8 percent to 8.2 percent.

The medium-term outlook relative to our June projections has been downgraded and remains unsatisfactory. Unemployment is far too high, I fully sympathise with the notion that the economy is not performing the way we would like.

U.S. stocks rebounded following a two-day slump and commodities rose, while the dollar fell, Ben S. Bernanke said the central bank will use monetary tools if necessary to safeguard the economic recovery – coded language for QE3. Treasuries erased losses.

The Standard & Poor’s 500 Index close up 1.6 percent at 1,237.90 at 4 p.m. in New York. The Stoxx Europe 600 Index closed up 0.9 percent. The Dollar Index slipped 0.2 percent, reducing an earlier drop of 0.7 percent. Treasury ten year yields were static at 1.99 percent after rising 9 points earlier. The euro gained versus 10 of 16 major peers as European leaders turned up the pressure on Greece to accept a bailout. Copper halted its two-day drop and oil rose.

The Stoxx 600 pared this week’s drop to 4.7 percent, basic-resource producers, auto companies and insurers led gains. Lloyds Banking Group Plc slumped 4.4 percent as Chief Executive Officer Antonio Horta-Osorio took leave of absence from his duties following medical advice. Benchmark indexes in Italy, France and Germany rose at least 1.4 percent, rebounding from plunges of at least 5 percent yesterday. The euro strengthened 0.3 percent to $1.3746. The dollar weakened against 10 of 16 major peers, losing at least 0.5 percent versus the Mexican peso, Canadian dollar and South African rand. German bund yields were six basis points higher at 1.83 percent after dropping 26 basis points yesterday, the biggest decline since Bloomberg began collecting the data in 1992. Greek two-year yields rose as much as 944 basis points to a record 96.72 percent.

Economic calendar data releases that may affect the morning London and European sessions.

09:30 UK – PMI Services October

This is a monthly survey of UK purchasing managers that measures their views on the business outlook in the services sector. The responses recorded by the survey are used to compile an index, the headline figure of which lies between 1 and 100, indicating growth above a figure of 50, but contraction beneath 50 (50 represents the so called ‘boom-bust’ line). The analysts polled by Bloomberg showed a median forecast of 52, as compared with last month’s figure of 52.9.


Source: FX Central Clearing Ltd. (FXCC BLOG)
http://blog.fxcc.com/november-3-am/

The Price Actionistas

Price action is one of the most charismatic and enigmatic definitions to describe a mechanism for trading the markets, particularly the forex market. Whilst many traders and ‘price action aficionados’ may disagree on the interpretation of the ‘raw’ data generated off the vanilla charts they will agree that price action is their only preferred method given it allows them to trade as close to the action in the market as possible.

Price action (PA) could be defined as the closest relative to order flow in FX (and across all markets) that any trader can visualise and then put to use given that PA is the direct result of order flow. Even traders who use indicator based strategies will often have elements of price action as an essential support ingredient to their trading decisions. For example, using the daily pivot, support and resistance combined with leading and lagging indicators as part of your overall method, is arguably part price action trading as is identifying the highest high and lowest low of the session, or the turning (reversal) point in order to place your stop. In short, whatever your preferred trading method a basic understanding of PA and its benefits is a critical success factor for any FX trader.

Price action has at its core; bias, the speed of buying or selling, where buying and selling is occurring (principally support/resistance), when a breakout is genuine and where a likely reversal is occurring. Due to the continuous flow of price action which bleeds onto our charts, all indicators are ‘created’ and thus dependent upon price action. Interpreting price action is an essential component to our trading.

Many traders adopt the KISS principle to trading (keeping it simple stupid). Price action traders can be described as technical traders that rely on technical analysis, but do not rely on conventional indicators to establish the direction of price movements and trading opportunities. These traders rely on a combination of price movement, chart patterns, volume, and other raw market data to gauge whether or not they should take a trade. This is often described as a “simplistic” and “minimalist” approach to trading, however, it should not be regarded as easier to implement than any other trading methodology. PA trading requires a sound background in understanding how markets work and the core principles within a market, it can take months (in some instances years) to become proficient at PA.

Price action is the pattern of movement of the price of a security over time. The skill of price action analysis involves using the trail of raw price data on a chart to make predictions about the future direction of the forex currency pair or security you are analysing. Price action trading is free from what purists may describe as the “clutter and confusion” of overly complicated indicator based systems. When traders learn how to read this ‘price trail’ they can clearly identify and interpret the price movements of any forex currency pair at any given time.

Price action analysis is the visual illustration of the current supply and demand condition of the forex currency pair, or other security for the specific period of time a trader is analysing. It could be considered straight forward and more efficient to learn how to analyse the supply and demand situation of a specific security, by learning to read its price action trail on a simple price chart, rather than attempt to interpret and make use of the other economic variables, indicators or chart patterns that traders could analyse. The movement of the price of any security is simply a reflection of the aggregate beliefs of all the players engaged in the market; speculators, investors and traders, forex traders can take advantage of this trail of beliefs by learning to analyse and trade off simple price action setups.

Many dedicated followers of price action believe that indicators add an unnecessary layer of confusion to trading forex, they contend that learning how numerous lagging or leading indicators combine, in order to enable trading decisions, is unnecessary when compared to developing the skill of analysing a naked price chart and taking advantage of the predictive capacity it contains, price action purists insist this is a skill set that traders should be developing over and above indicator proficiency.

PA traders often suggest that using indicators is a psychological issue; They would contend that not only are traders looking for crutches, the suspicion is that traders often want to over-complicate trading as trading off a naked price chart can appear to be far too simplistic. This does have an element of truth given that many traders put more emphasis on the technical side of trading and ignore the more important issues of money management and psychology.

Fledgling traders can be guilty of over complicating their forex trading by using trading strategies based on indicators or trading software that makes trading appear to be far too complex. If we took a fairly large and broad sample size of professional forex traders you’d quickly discover that the majority employ simple trading methods utilising core market price data, this could be primarily because they believe there are no advantages to be gained by over complicating the trading strategy, or the fact that the higher up the food chain you are you tend to react to the fundamental news and use the barest of charting elements. The majority of lucrative and successful trading strategies involve trading with the dominant trend direction, price action trading can provide you with an excellent method for trading with and into these trends at the optimum times.

The goal of retail forex traders is to take advantage of the price action trend created by big market players – the institutional traders are the force who create and maintain forex trends. As a consequence of this activity price action setups repeat themselves in the market on a fairly regular basis. Traders can learn to spot these repeating setups and trade the trend created by bigger market players.

Typical Price Action Candlestick Formations

Candlestick Forex Trading - Kicker Candlesticks

Using forex price action techniques works very effectively on the higher time frames, whilst the words “price action” suggest immediacy traders can efficiently trade the forex market with simple price action setups on either the daily or weekly charts together with lower time frames. Trading intra-day, price action is a very effective strategy to employ, signals can be generated on the one hour and four hour time frames. FX price action trading is an adaptable trading method that can be sculpted to fit any individual schedule or trading style.

Traders who have actively traded the forex market for any significant period of time (and as a consequence are more likely to have been successful) will testify that their trading success is a result of psychology and money management. Traders often begin their career by thinking that method (technical strategies) is the more important element over and above the psychological and money management aspects of trading. What forex price action trading can provide is a simple, logical, and effective trading strategy allowing more time to focus energy on the important psychological and money management aspects of forex trading.

Source: FX Central Clearing Ltd. (FXCC BLOG)
http://blog.fxcc.com/the-price-actionistas/

Daily Market Roundup by FXCC - $500 billion just doesn’t buy what it used to

There are times when the mechanics of high finance can leave even the most economically literate amongst us speechless. Whilst there’s an argument that burning through $500 billion is simply emotive and extreme language to describe the ‘spend’ the Bank of Japan has engaged in to support the yen, the fact remains that estimates put the dollar loss to date in that ‘ball park’ according to JP Morgan, this from a country with debt to GDP of circa 220%. On Monday Japan sold nearly $100 billion worth of yen, a record amount for single-day intervention, in attempts to tame its high-flying currency.

The obvious analogies of rouge traders being imprisoned for losing a fraction of that overall sum and it being the GDP of combined impoverished African States may eventually be voiced in the mainstream media. However, it’s at times such as these, when many economists and commentators are searching for (or anticipating) the next Lehman event horizon, you begin to wonder if it isn’t an unforeseen outlier event that won’t hit the system, or more worryingly that event could already be alive and in the system..

Japan’s government faces almost $512 billion in losses from intervening in the foreign-exchange markets to stem the yen’s advance, according to estimates by JPMorgan Chase & Co. Valuation losses on Japan’s foreign-exchange reserves minus yen liabilities totalled 35.3 trillion yen at the end of 2010, according to Finance Ministry data. The losses may swell further as the yen is projected to climb to 72 versus the dollar by September 2012.

Tohru Sasaki, head of Japan rates and foreign-exchange research at JPMorgan Chase in Tokyo;

It’s difficult to change the trend of the currency market with intervention. Even if the action can stem the currency’s gains temporarily, the yen will eventually appreciate.

Having won over his cabinet Greek Prime Minister George Papandreou believes that a referendum on Europe’s overall rescue package will confirm the nation’s membership of the euro as he stuck to plans to hold the vote amid signs his government may collapse.

The referendum will be a clear mandate and strong message within and outside Greece on our European course and our participation in the euro, it will ensure this course in the most decisive way. The dilemma isn’t this or another government. The dilemma is; yes or no to the loan accord, yes or no to Europe, yes or no to the euro.

Papandreou will travel to Cannes, France today to brief German Chancellor Angela Merkel, French President Nicolas Sarkozy and European Central Bank President Mario Draghi and other officials on developments in the country ahead of the scheduled G20 meeting. They will be joined by Luxembourg Prime Minister Jean-Claude Juncker, European Commission President Jose Manuel Barroso, International Monetary Fund Managing Director Christine Lagarde and EU Monetary Affairs Commissioner Olli Rehn. These key European leaders and policy makers are racing to prevent their week-old debt crisis management strategy from unravelling. At the hastily convened emergency talks today they’re likely to instruct Greece that there is no alternative to the budget cuts imposed in the bailout plan.

Whilst domestic matters may be taking a back seat Chancellor Merkel may be concerned that Europe’s economic catalysing powerhouse may be stalling. With recent GDP figures illustrating a stagnating economy German unemployment unexpectedly rose for the first time in more than two years in October and manufacturing contracted as pessimism mounts among businesses in Europe’s largest economy.

German companies are reluctant to hire workers as Europe’s fiscal crisis hurts prospects. German investor sentiment fell to its lowest level almost three years in September whilst business confidence dropped to a 16-month low. In the 17-member euro region, manufacturing output declined more than previously forecast in October, suggesting the region is moving towards the feared double dip recession. A manufacturing gauge based on a survey of purchasing managers in the 17-nation euro region fell to 47.1 from 48.5 in September, London-based Markit Economics said today. That’s below an initial estimate of 47.3 published on Oct. 24. A reading below 50 indicates contraction.

Over in the USA moves appear to be taking shape to allow the Federal Reserve to begin QE3 at least according to a Bloomberg news poll survey which on matters such as these are unerringly accurate. Sixty-nine percent of those surveyed believe the Fed Chairman Ben Bernanke will embark on the third round of quantitative easing, or QE3, 36 percent predict the event will take place in the first quarter of next year, according to the poll of 42 economists from Oct. 26th. The FOMC plans to release a policy statement at 12:30 p.m. in Washington after a two-day meeting. The FOMC forecasts will be released at 2 p.m., Bernanke is scheduled to hold a press conference beginning at 2:15 p.m.

Market snapshot at 10:15 – 10:30 am UK time
In Asia Pacific markets the Nikkei fell sharply closing down 2.21%, the Hang Seng closed up 1.88% and the CSI closed up 1.66%. The ASX 200 closed down 1.14% a 10.99% fall year on year. European bourses are relatively calm after yesterday’s stormy session induced by news of the potential Greek referendum. At 10:15 GMT (London time) the STOXX is down 0.14%, the UK FTSE is down 0.18%, the CAC is down 0.35%, the DAX is down 0.32%. the main Italian bourse, the MIB is down 0.03% and down 30% year on year. The Athens main equity market is down 0.58%, 50.44% year on year. Brent crude is currently up $67 a barrel and gold is up $12 an ounce. The SPX equity index future is up circa 1%.

Economic calendar releases that may affect the afternoon sessions’ sentiment

11:00 US – MBA Mortgage Applications
12:15 US – ADP Employment Change October
16:30 US – FOMC Policy Announcement

Employment data is released today by a private data firm. A Bloomberg survey of analysts forecasts a figure of 100,000, compared with last month’s 91,000. Focus on FOMC policy change will look for news on QE and interest rate policy. Of the economists surveyed by Bloomberg, the median consensus was 0.25% which remains unchanged from the previous figure.

Source: FX Central Clearing Ltd. (FXCC BLOG)
http://blog.fxcc.com/500-billion-just-doesnt-buy-what-it-used-to/

Daily Market Roundup by FXCC - November 02 am

Threaten the Markets with Democracy and a Collapse Ensues

There is a sub text to the threatened Papa G referendum that’s been missed by the mainstream media and it’s not the obvious fact that he’s actually an American and may have another agenda. He was born George Papandreou in 1952 in Saint Paul, Minnesota, United States and didn’t repatriate to Greece until 1974. George Papandreou came to Greece after the restoration of Greek democracy in 1974. His father was a previous prime minister of Greece and his grandfather was elected three times to the post so being a cute operator, despite the traces of nepotism in certain posts he occupied, is hard wired into his DNA.

No, the subtext is that one of the most crucial decisions that could be made for Greece since WW II can’t be made by the little people, no siree, only the ‘big brains’ can make these decisions. These are the very same big brains that got Greece and the Eurozone into this calamitous mess originally.

The little people can’t be permitted to have any input in signing off; mass unemployment, decades of austerity, savage social cuts, no pensions and their investments further trashed, they simply get to shrug their shoulders when faced with debt slavery and ask “how high Sir?” when told to jump in order to protect the interests of the banking and political elite. The further irony that the markets began a revised collapse, when faced with the prospect of democracy in action, should not be lost on European citizens. If ever a glaring example was needed, of just how far the system has de-coupled from the interests of the majority, then Tuesday’s trading sessions have certainly provided it.

Apparently the Merkozy siamese alliance is not best pleased, they had mistakenly believed ordinary Greeks should leap for joy at the prospect of 50% haircuts on bond debts that are swapped amongst the banking elite and change hands at up to 200% interest. Well they (the Greeks) get to continue using the euro, what’s not to like?

Sarkozy told reporters in Paris that the referendum proposal;

surprised all of Europe. The plan adopted unanimously by the 17 members of the euro area last Thursday is the only possible way to resolve the problem of Greek debt.

Fitch Ratings said in a statement on Tuesday that;

a rejection of the aid plan would increase the risk of a forced and disorderly sovereign default and raises the chance of Greece leaving the euro.

Ruling Free Democrat (FDP) German lawmaker Frank Schaeffler told Reuters;

I think it’s good, because you can’t keep carrying out policies against the will of the people, it won’t work. In Greece and in Germany we are making the mistake of not consulting the population enough in this process. I fear that the Greek people will speak out against these measures because they haven’t been consulted, which will mean the collapse of this debt bailout logic.

The majority of the 1,009 Greek’s surveyed on Oct. 27, the very day the new bailout package was announced and agreed in principle, said the accord should be put to a referendum, according to the results of a Kapa Research SA poll, published in the Greek To Vima newspaper. Forty-six percent said they’d oppose the plan at such a referendum. In the same poll, more than seven in 10 favoured Greece remaining in the euro.

Greece will proceed with a referendum on the European Union’s financing package and Prime Minister George Papandreou will win a vote of confidence in Parliament this week, according to the government spokesman Angelos Tolkas. Investors are concerned that a failed referendum will spark a default where bondholders get paid less than what is on offer under the terms of current bailout agreements, a complete default could see banks and investors receiving nothing.

Manufacturing in the U.S. was close to stagnation in October as cooling global demand prompted factories to curtail production and reduce their stock inventories. The Institute for Supply Management’s factory index dropped to 50.8 last month from 51.6 in September, the group’s data showed on Tuesday. A reading of 52 was the median forecast in a Bloomberg News survey of economists. Fifty is the normally accepted dividing line between growth and contraction.

Morgan Stanley fell up to 12 percent in New York trading on Tuesday, leading financial stocks lower on concerns that a Greek referendum on Europe’s bailout plan will worsen the region’s debt crisis. Morgan Stanley has dropped 14 percent in the past two trading days. Shares of the New York-based firm rallied 27 percent during the previous two weeks, the bank finally closed down $1.11, (6.3 percent), to $16.53 at 10:37 a.m., the biggest decline in the Standard & Poor’s 500 Financials Index, which slid 2.3 percent. Citigroup Inc. fell 4.3 percent and JPMorgan Chase & Co. decreased 4.1 percent.

Markets
Equities sank in both trading sessions on Tuesday as the euro weakened, a surge in German bunds sent yields down the most on record, amid concern Europe’s bailout of Greece will unravel. The dollar and U.S. Treasuries rallied. The MSCI All-Country World Index fell 3.4 percent at 4 p.m. in New York as indices in Italy, France and Germany plunged at least 5 percent. The Standard & Poor’s 500 Index lost 2.8 percent. German 10-year yields fell up to 29 basis points to 1.73 percent. Rates on 10-year Italian and French debt touched euro-era records above German debt. The euro fell 1.2 percent to $1.3686. Copper and oil paced losses in commodities after China’s manufacturing growth cooled.

The Stoxx Index declined 3.5 percent, the largest drop in almost six weeks. Greece’s ASE Index collapsed by 6.9 percent, the biggest drop in three years. The National Bank of Greece SA, Banco Commercial Portugues SA and France’s Societe Generale SA and Credit Agricole SA tumbled more than 12 percent. Credit Suisse Group AG sank 8.2 percent after the Swiss bank reported this morning earnings that missed analysts’ estimates.

Oil fell for a third day amid concern that Europe’s plan to bail out Greece will completely unravel if the country conducts its referendum, Brent oil for December settlement dropped 2 cents to end the session at $109.54 a barrel on the London-based ICE Futures Europe exchange. The difference between Nymex crude and Brent widened to $17.35 today. The European benchmark traded at a $16.37 premium yesterday, the least since June 28.

Oil output in the Organisation of Petroleum Exporting Countries (OPEC) rose in October to the highest level in almost three years, gains in Libya and Angola outpaced a Saudi cut, a Bloomberg News survey showed yesterday. Production increased 0.4 percent to average 30.1 million barrels a day, the most since November 2008.

Economic calendar events that may affect the morning session sentiment

09:00 Eurozone – PMI Manufacturing October
09:30 UK – PMI Construction October

Eurozone PMI is expected to remain unchanged. A Bloomberg survey yielded a median estimate of 47.3 unchanged from the previous figure.

Source: FX Central Clearing Ltd. (FXCC BLOG)
http://blog.fxcc.com/november-2-am/

Daily Market Roundup by FXCC - November 01 am

The OECD pricks the Eurozone bubble as 200 million are feared unemployed

Is it irony or coincidence that as we welcome our seventh billionth global citizen into our world global unemployment reaches 200 million according to the ILO. The International Labor Organization said in its report that about 80 million net new jobs will be needed over the next two years to return to pre crisis employment rates—27 million in advanced economies and the remainder in emerging and developing countries. The projection is that only 40 million will be created.

“We have a brief window of opportunity to avoid a major double-dip in employment,” said Raymond Torres, director of the ILO International Institute for Labor Studies, which issued the report.

The risk of social unrest is rising in 45 of the 118 countries it examined—particularly within the European Union and Arab region, the ILO warned. Data released on Monday showed the number of people out of work in the euro zone rose to 16.2 million in September, the highest level since records began in 1998. The ILO said the number of jobless across the world has also hit a record high of more than 200 million.

Ahead of the G20 meeting to be held later this week in Cannes, France the OECD has spoilt the party and pricked the euphoric bubble of last week before the officials have even gathered and got into full debating swing. The OECD said economic growth in the eurozone will slow to 0.3pc next year after 1.6pc growth this year, and will remain weak in the US as emerging markets will experience slower growth than before the financial crisis began. Overall, growth in the G20 nations will slow to 3.8pc in 2012, compared to 3.9pc this year, it could accelerate to 4.6pc in 2013. The OECD added that the scenario will be worse if the eurozone rescue deal fails to restore confidence. The OECD said the U.S. economy will grow 1.8% next year, less than the 3.1% expansion it had forecast in May, and will pick up speed only in 2013, with a 2.5% expansion. Debt-to-GDP ratios will keep rising, reaching in two year’s time 108.7% in the U.S., 97.6% in the euro zone and 227.6% in Japan, the OECD figures showed.

A repeat of the financial crisis of 2007 could wipe up to 5 percent off major economies’ GDP by the first half of 2013, the OECD added. However, a radical action plan by the G20 could help boost growth above its projections. G20 nations need to make structural reforms to address unemployment and rebalance global demand, while interest rates in the eurozone should be lowered under new president Mario Draghi, the OECD added.

Whilst most eyes have been focused on the equity market rally since last week’s announcement of a solution (of sorts) to the Eurozone sovereign debt crisis the euro hasn’t played along having now lost close on all of it’s post solution announcement rally gains. The currency has now erased all of the gains, close on 400 pips versus the USA dollar since late last week. As night follows day the other PIIGS nations, in the best ‘Oliver Twist’ fashion, are politely asking “please Sir, can I have more?” Having witnessed Greece obtain fifty percent debt haircuts they now feel empowered to ask why they should toil and sweat to maintain the onerous and punishing austerity commitments they’ve all agreed to over the past twelve months.

What a clever grey old fox Greece’s prime minister is proving to be, no sooner is the ink dry on the overall deal and he suggests a national referendum on the austerity package, hat doffed, that’s world class ‘stiffing’, but he’s had some exclusive tutors and a helluva education over the past three years. Papandreou also said he would ask for a vote of confidence to secure support for his policy for the rest of his four-year term, which expires in 2013. Analysts said he was likely to win that, despite dissent among his parliamentary team. He was forced to expel a senior party member for voting against part of his latest austerity package and others warned him it was the last time they would vote for measures they did not believe in.

We trust citizens, we believe in their judgment, we believe in their decision. In a few weeks the (EU) agreement will be a new loan contract, we must spell out if we are accepting it or if we are rejecting it.

Prime Minister Silvio Berlusconi faced fresh calls to resign on Monday as markets finally began to turn on Italy, pushing its borrowing costs to dangerous new levels on renewed concern about a worsening of the euro zone crisis. Yields on Italy’s 10-year, fixed-rate bonds known as BTPs rose to 6.1 percent, a level widely seen as unsustainable in the longer term and close to the level which forced Rome to seek help from the European Central Bank in August. The ECB kept up its intervention to cap Rome’s borrowing costs by buying Italian bonds on the market on Monday but the risk premium continued to rise and 10-year Italian yields ended the day more than 407 basis points above benchmark German Bunds.

The jump in the yield reflected widening market concern about measures EU leaders agreed last week to stem the euro zone crisis and underlined Italy’s position at the centre of the emergency. Last week, Italy paid a yield of 6.06 percent at an auction of 10-year bonds, the highest since the launch of the euro more than a decade ago, fuelling growing concern about how it will fund the more than 600 billion euros of bonds it needs to refinance over the coming three years. Italy, the euro zone’s third largest economy, would be too big for euro zone authorities to bail out and EU leaders have been pressing Berlusconi for rapid and far-reaching reforms to cut the deficit and boost growth.

Euro zone inflation was surprisingly high at 3.0 percent for a second straight month in October, the EU announced on Monday, prompting economists to postpone their bets for a central bank rate cut until December. Efforts to woo China to offer the euro zone a lifeline will dominate the G20 Summit and leave Beijing holding the cards as world leaders try to restore market confidence. Despite denials from European officials that they have lost their negotiating position and promises that China would not be offered concessions, Europe’s bid to have Beijing contribute to a special purpose investment vehicle (SPIV) to leverage its EFSF bailout fund has put the ball in China’s court for France’s final G20 gathering.

Investors were so concerned that euro zone leaders would not reach agreement on solving the debt crisis in October that they cut equity holdings to the second lowest level in 12 months, Reuters polls showed on Monday. Reuters surveys of 56 leading investment houses in the United States, Japan, Europe ex UK and Britain showed the average stock holding in a balanced portfolio was 49.5 percent, down from 50.5 percent in September.

Bonds rose to 35.9 percent from 34.6 percent while cash slipped to 5.9 percent, still the second highest level of the past 12 months after September’s 6.3 percent. The rise in bond allocations reflected some of the fear of investors, but it was by now means even. Global allocations to U.S. debt jumped to 40.3 percent from 35.2 percent and holdings of Japanese bonds ticked up slightly. But euro zone debt holdings fell to 27.4 percent from 29.1 percent – the fourth month in a row they have been cut.

Markets
The SPX closed down 2.47%, the STOXX closed down 3.13%, the FTSE closed down 2.77%, the CAC down 3.16% and the DAX closed down 3.23%. The equity index future for the FTSE suggests an open of circa 1% down, the SPX equity future was down circa 0.3% at 23:00 GMT on Monday.

Economic calendar releases thar may affect market sentiment in the London and European morning sessions.

07:00 UK – Nationwide House Prices October
09:30 UK – PMI Manufacturing October
09:30 UK – GDP Q3
09:30 UK – Index of Services August

The UK GDP figures will prove to be the most effective. Analysts surveyed by Bloomberg gave a median quarterly prediction of 0.30%, from the last quarter’s 0.1%. Year-on-year, the survey predicted 0.4%, from the previous release of 0.6%. However, there is a strong possibility of a negative figure taking the market by surprise.

Source: FX Central Clearing Ltd. (FXCC BLOG)
http://blog.fxcc.com/the-oecd-pricks-the-eurozone-bubble-as-200-million-are-feared-unemployed/

Daily Market Roundup by FXCC - Beware Geeks Bearing Gifts

Despite the efforts of the greatest economic minds available to the European ministers the very best the forecasters, quants, policy ‘makers and shakers’ could devise during the tortured weeks of ‘Merkozy’ meetings was leveraging the initial bailout fund by five times its value to then (fingers crossed) sell the Eurobond paper to Japan, Asia and any BRICS nation that would be prepared to buy into the plan on the basis that if they didn’t their largest market might implode.

Having had time to absorb the overall impact of the provisional decisions reached last week the Greek prime minister has finally suggested that the Greek people should have the final say on an austerity package that will cripple their country for decades, far beyond the negative 5.5% growth predicted for 2012. The secular bear market rally experienced last week was severely over cooked, the market literally bought hope, investors didn’t buy the rumour neither are they selling the news this morning. The words “orderly default” and “contagion” will now be constantly re-visited and regurgitated over the coming months with the referendum scheduled for January 2012.

Dora Bakoyanni, former foreign minister and leader of the small centre-right Democratic Alliance party.

I never expected Papandreou to take such a dangerous and frivolous decision. All the international media will say that Greece itself is putting the EU deal at risk.

Rainer Bruederle, a leader in German Chancellor Angela Merkel’s centre-right coalition said on Tuesday he was “irritated” by Papandreou’s announcement, the parliamentary floor leader for the Free Democrats said;

This sounds to me like someone is trying to wriggle out of what was agreed – a strange thing to do. One can only do one thing: make the preparations for the eventuality that there is a state insolvency in Greece and if it doesn’t fulfill the agreements, then the point will have been reached where the money is turned off.

Once again the mainstream media will point the finger at Greece when the elephant in that corner of the Eurozone room is Italy whose bond costs are dangerously approaching levels at which most commentators would suggest are unsustainable. The key inflection point for Italy’s bonds could be regarded as 7.0%, if that figure is breached then then Italy’s solvency may begin to be brought into question.

On Monday the five-year Italian yield rose 16 basis points, or 0.16 percentage point, to 5.91 percent at 4:04 p.m. London time after climbing to 5.99 percent, the highest since September 1997. The 4.75 percent note due in September 2016 fell 0.635, or 6.35 euros per 1,000-euro ($1,396) face amount, to 95.490. Two-year yields increased as much as 33 basis points to 5.08 percent, the most since 2000.

Amongst the banks who have been hit due to the poor sentiment prevalent this mornings is Credit Suisse. Credit Suisse Group AG, the second largest Swiss bank, said it will cut about 1,500 more jobs and reorganise its securities unit after the division reported its first quarterly loss since 2008. Credit Suisse fell the most in almost three years in Zurich trading as third-quarter net income of 683 million Swiss francs ($776 million) missed the 979 million-franc mean estimate of 12 analysts surveyed by Bloomberg. Credit Suisse dropped as much as 10 percent, the biggest intraday decline since December 2008, and was down 9.7 percent at 23.11 francs as of 9:12 a.m. in Zurich. The stock is down 37 percent this year, compared with a 30 percent decline at larger rival UBS AG and a 27 percent fall in the 46-company Bloomberg Europe Banks and Financial Services Index.

China’s largest manufacturers produced at their slowest pace in October since early 2009, purchasing managers’ data shows, signs of an improvement at smaller firms and a sharp fall in factory-gate prices suggest no swift change to interest rates. China’s official purchasing managers’ index (PMI) fell to 50.4 in October from 51.2 in September, negating expectations of a rise. The National Bureau of Statistics suggested the drop on weak European and U.S. economies.

Australia’s central bank has cut interest rates for the first time since 2009. The Reserve Bank of Australia this morning reduced its key lending rate to 4.5 percent from 4.75 percent, saying Europe’s woes are starting to hit Asian trade. RBA Governor Glenn Stevens indicated that easing inflation had allowed the nation’s first rate cut since April 2009. The local currency and government bond yields fell.

Markets
The Nikkei closed down 1.77%, the Hang Seng closed down 2.49% and the CSI closed up 0.08%. the ASX 200 closed down 1.52% and the SET is down 1.92%. European markets have reacted badly to Greece’s suggestion of a referendum. The euro has fallen for a third day against the dollar and German government bonds have jumped. Commodities slid as China’s manufacturing growth cooled. The MSCI All Country World Index dropped 1.3 percent as of 8:02 a.m. Standard & Poor’s 500 Index futures lost 1.4 percent. Australia’s dollar slumped 1.3 percent after the central bank cut interest rates. German 10-year bund yields decreased 17 basis points to 1.86 percent. Oil retreated for a third day. Copper fell 1.7 percent.

European bourses have been hit hard in the early part of the morning trading session, at 9.14am GMT the STOXX is down 3.35%, the FTSE is down 2.06%, the CAC 3.07% and the DAX is down 3.36%. the MIB is down 3.55%. The ASE, Athens main stock exchange index is down 5.87 %, its year on year fall is now 46.25%.

Economic calendar releases that may affect the afternoon sessions’ sentiment

14:00 US – Construction Spending September
14:00 US – ISM Manufacturing October

A survey of analysts compiled by Bloomberg showed a predicted figure of 52 for manufacturing from last month’s figure of 51.6.

Source: FX Central Clearing Ltd. (FXCC BLOG)
http://blog.fxcc.com/beware-geeks-bearing-gifts/