1. Kelas Pelaburan Emas dan Analisis Teknikal akan di adakan pada 17 Disember 2011 di Cititel Midvalley, KL. Yuran RM300.

2. Kelas Forex Patterns and Strategies akan di adakan pada 22 Disember 2011 di Anjung Technology, Ayer Keroh, Melaka. Yuran RM500.

Hubungi saya untuk pendaftaran. Tq.

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Good day traders!

Not much of a trading today because its Thanks Giving Day in the US. For that reason, I want to share something important but often neglected by some traders. It is called interest rate.

A quick quiz would do the trick here, do you know what is the interest rate of your country? Say… Malaysia? How about China? India? I bet we know the US and Euro interest rate because these country (zone) are always on the header. Attached is a the interest table that you might find useful:

For a full list of the interest rate, you can read here.

So, why do traders listen to interest rate?  Now, generally speaking, when all other variables are kept equal, rising interest rate (central bank tightening) have a tendency to contribute to an appreciation in a currency. This is because higher-yielding currencies attract more demand from large institutional investors, who are consistently in search of ways to earn more on their money.

By the way, yield means the income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value. (Read more: http://www.investopedia.com/terms/y/yield.asp#ixzz1echyfV6c).

If on the other hand, there is a lowering of interest rates (central bank easing), the tendency is towards a depreciation of the currency. This is due to decreasing demand by the institutional investors, who generally tend to move their money away from lower yielding assets.

Kept in mind that from a foreign exchange trading perspective, the appreciation or depreciation in the exchange rate is less a product of the absolute value of the interest rate than the direction of change in the interest rate itself. In other words, although the current interest rate for a country’s currency is important in helping the market to determine its exchange value, the direction of interest rate change is even more important.

Lets face it, just because a currency carries a high yield, it does not ensure an appreciation in the exchange rate. But if the currency’s central bank continue to raise interest rate, and indicates an intention to keep doing so, this can have a considerable impact on appreciation in the currency. And it goes vice versa.

As you already know, central banks are the one who initiate the interest rate changes. These institutions also make decisions that help determine the direction on the interest rate. In adjusting the interest rate, central banks seek to achieve a delicate balance between attaining a significant level of economic growth while staving off excessive inflation.

A certain controlled level of inflation is necessary for economic growth, as a country without inflation is a sign of a stagnant economy. At the same time however, excessive inflation can be enormously disadvantageous to an economy and its consumer. Therefore, each central bank must take both goals of economic growth and inflation control into serious consideration when setting monetary policy.

Generally speaking, central banks will look to increase interest rate (tighten) in order to help stave off excessive inflation. Conversely, central banks will look to decrease interest rates (ease) in order to help stimulate economic growth. Either way, central banks have the power to impact the foreign exchange markets enormously by making changes in interest rate policy.

Often, an actual change in rate policy is not even needed to affect a currency’s value. Merely a comment hinting at potential policy intention within a speech by the Fed chairman, for example, is often sufficient to trigger drastic price moves. This highlights the fact that it is not as much the actual fundamental that move currency exchange rates. Rather, it is more the trader’s collective perceptions and expectations of the fundamentals that truly drive these markets.

With the understanding of the interest rates, traders created a new breed of trading called carry trade, which I’ll share with you later.

Happy piping!

Shufaad

+60166447174

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Trading Philosophy

“The dictionary is the only place that success comes before work. Hard work is the price we must pay for success. I think you can accomplish anything if you’re willing to pay the price”

- Vince Lombardi, Pro Football Hall of Fame

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Good day traders!

I believed most of us had been caught by surprise on the yellow metal recent drop. In my trading years, I’ve never seen such a big drop from gold, although I did mentioned that its going to be a technical correction. The most popular reason for the downfall were:

1. Profit taking activities by traders. Its too common.
2. Big players are waiting for Papa Bernanke to pull the rabbit from the hat to save the economy; namely Quantitative Easing round 3. That didn’t happen.
3. Positive moves to stimulate the economy would also help stocks regain their feet. Now you know why they sell gold? That didn’t happen either.
4. Worse, they left it to the Republicans and Democrats to make the decision. Haven’t they learn anything from the debt ceiling fairy tale?
5. CME increase gold margin margin requirements by 27%. They did raised it at 22% last two weeks and ooppss they did it again. This again stimulated more selling activities as traders cover their position.

Now lets talk technical:

Gold Weekly Strategies

So, technically;

1. The point of reverse comes in the form of a) hammer pattern and b)psycho level $1700, although its a bit undershoot.
2. Trade were a bit quiet during the Bernanke speech last Friday, as traders carefully setting up their trade positions. You can see how the price hovering at Fibo 38.2% ($1782.78) and 10 EMA and 50 EMA in horizontal state.
3. When Bernanke failed to produce any magic, bulls took over and pushed the price up. Two Marubozu shows how strong the bull is.
4. Next resistances are in the zone of fibo level 23.6%/38.2% and round number $1850. Gold could stay longer in this territory.
5. A break in this zone however would pushed the price to the next resistance at $1877 or fibo level 61.8%.
6. In longer term, expect the price to test the psycho level $1900 and all time high at $1911.
7. Reverse, a return to psycho level $1800 is always possible. Breaking that strong support would bring price back to $1750/52 and fibo level 23.6%. Next support come in the form of another strong psycho level at $1700.
8. Both MACD and RSI show strong sign of upwards.

I’m bias to the upside. Until the US can create something to save their economy and the Europe agree on some measure to boost the economic region, I see more demand for gold coming. The only outside factor that we can’t control is when CME feels they want to raise the margin again. Sigh!

As I stated before, a correction in gold is always good. Enjoy the bull ride for now!

Shufaad

Yesterday has been a very profitable day for me as I managed to catch some pips during the bouncing period of EURUSD. I remember that I opened 2 buy position at the same area (1.41500) but not at the same time. That 2 positions alone had gave me more than 100 pip. Happy me!

EURUSD 1 hour

So, what the heck am I doing in this early trading hours? I’m sure not to trade the EURUSD..It’s a suicide! I spent a lot of my early morning hours by reading news and doing more technical analysis. It’s kind a habit . Having said so, I came across one article from oanda.com about the Greek tragedy. You can read the full article here. This is what they called the Infographic.  Happy reading guys!

Created by OANDA – Thanks to Oanda for letting me share this Inforgraphic.

Shufaad

twitter/melakafx

shufaad@gmail.com

We have seen a lot of weakness from the precious metal last week and I believe have already benefit from it. What I really mean is buying physical gold at a possible low price. From my opinion, any price below the psycho level $1400 is worth of buying. Remember, this is January. There’s more to come from the yellow metal.

Fundamentally

Last week bearish momentum was due to increasing demand on US stock index and better investor demand at European Union country debt auctions, which worked to assuage notions of a new EU debt contagion.

Tuesday recent high from the gold was due to lower US dollar index data. If the index continue to weakens, I assume we will see a reversal in short term direction from the yellow metal.

We are looking forward for Thursday’s Chinese consumer price inflation data.Any further monetary policy tightening from China would be commodity-market-bearish.

Technically

We are looking for possibilities gold breaking the upper trend line. Managing to do so, would bring the price to our nearest resistance level at $1382. Our second resistance line lies at $1393 and psycho level $1400. Trading above the 50 day moving average support this bullish scenario. This is also confirm by a hike in the RSI.

To maintain its short term bearish momentum, price need to break it nearest support line at $1372 and last Friday’s low at $1354. Good US dollar index data would help this to happen.

Perhaps we will see gold continue its long term bullish scenario after all.

In previous post, I’ve mentioned that gold prices will drop off a little bit due to profit taking activities from long term positions traders/investors. The question is, what inspires them to do so? Here are some fundamental factors that I can think of:

1. November manufacturing orders in Germany climbed 5.2% vs. a prior 1.9%. The jump blew past expectations. The news trumped weak retail sales in the eurozone for the same month as well as the U.K.’s weaker purchasing managers index for December, which slipped below the growth level of 50.
2. An improving jobs picture in the U.S. has also not helped gold. Initial jobless claims for the week ending Jan. 1 rose slightly to 409,000, but expectations are still high headed into Friday’s jobs number. The unemployment rate is expected to slip slightly to 9.7% and where the private sector is expected to add anywhere from 225,000 to 162,000 jobs, according to Briefing.com.

Technically, breaking the 50 day moving average could trigger more sells orders, where traders are forced to sell to lock in profits, and prices could trend down to an incredible but not possible $1,275-$1,250.

Better watch out.

Fundamentally

It seems the eurozone drama has put some pressure back to the eruo. Leading the pack is Ireland where its 10-year note rising to 8.90% compared with Germany’s, the safest European Union economy, which has a 2.45% yield. Greece suffers from unconvincingly internal economic strength. It  can’t barely tap international debt markets and is struggling to meet its deficit reduction targets due to weak revenue. Adding to this is the massive unemployment has offset higher taxes and is preventing the government from making enough money.

The yields on the 10-year bond for Spain and Portugal were 4.5% and 7.23%, respectively, which is a bit lower from the Ireland’s but still putting them on a choppy block.

Technically

The price drops below 1400 and is now hovering at the 38.2 fibo line (1382.72). Breaking the line means it is also breaking the lower trend line  channel. This could result in more weakness in the gold price.  The 1374.96 and 50.0 fibo (1369) would provide the next support line.

Going up is quiet challenging, especially in the midst of the european woos. A strengthen in dollar is more likely to happen today but next week is a different ball game. Nevertheless, the nearest resistance line should be found at the 23.6 fibo line, before stopping at the 1400 psycho line. Breaking the line would bring the price back to yesterday’s price at 1417.23.

Our primary support line lies at 1254.23, support 2 at 1244.26 while the third support line is at 1231.41.

To confirm its re-challenge effort towards 1265.23, the Yellow metal need to face the resistance lines at 1261.6 and beyond that it will craft a new all time high at 1270.

I see more bull to come from looking at the RSI itself. It hasn’t reach the 70 level yet and probably when it does, it will stay there for some time.

With news surrounding Euro economies, the Gold will likely hit the all time high very soon. While the USD has showed some strength, it still need more than that to convince traders. Yes, the greenback did make a comeback versus the Euro, but it still fails to find it bull against Yen and Swiss franc.

This has led investors to park their money on Yen and Swiss franc while others see Gold as the best alternative.

Below is the 4 hour and Daily chart for Gold: