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USD – The consumer price index (CPI) fell by 1% last month, larger than expected. The headline annual CPI figure fell to 3.7%, from 4.9% last year. The record falls in consumer prices raise the possibility of deflation…
GBP – Apparently a 2% interest rate cut was on the table for a while, before the 1.5% cut was decided on last week – there’s more than likely additional cuts on the way, so GBP isn’t strengthening any time soon. Inflation has dropped for the first time in 15 months – but who’s worried about inflation any more?
JPY - Strength in the yen and a market still messy due to the Lehman collapse has caused problems in long-term US interest rate derivatives. Poor liquidity still damaging positions.
Two indicators – same principle. Combine the current price with an exponential moving average (EMA), which is a trend-following, lagging, indicator.
Bull power = Current High – EMA of closing prices
Bear Power = Current Low – EMA of closing prices
Both of these are then plotted as histograms. The exponential moving average is usually 13-period as a good compromise.
See a (5-min) chart of Bears power on GBP/USD.
Here’s a tricky question.
It’s a 5-min chart so the action is thick and fast – doesn’t matter which pair… And the question is what to do at the little bump in the down trend. Parabolic SAR has reversed, and the RSI, plotted below, has also come back above 30 – but, with the wonderful benefit of hindsight, it’s only a pause in the trend…
Heiken Ashi, in Japanese = “average bar”. The standard candlestick uses open, high, low, close price values over the same time period. With Heiken Ashi, previous time periods enter the calculation to provide a modified candlestick. See the chart below of a downtrend…
USD – The G20 announced a “broader policy response” – including the likelihood of more cuts in interest rate and measures to stimulate all matters fiscal, get the banks lending to each again, after their meeting in Washington. Presumably there’s a revised plan in place, which we shall hear about in due time…
JPY – Unexpectedly, Japan has gone into recession. The world’s 2nd largest economy went into negative growth in the 3rd annual quarter, 1st time into recession since 2001.
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Ichimoku Kinko Hyo is a Swiss Army knife of an indicator which tries to do the whole lot on one chart – support/resistance levels, trend direction, and entry/exit points of varying strengths. The name is something like ‘one glance’ in Japanese.
GBP – Trade-weighted sterling reached 82.1, its lowest since mid-1996 and the inception of the euro.
CAD – The Toronto Stock Exchange main index lost most than 2% yesterday – commodity stocks dropping due to perceived lack of future demand – what with this recession and all….
USD – The interbank lending rates for 3-month dollar, euro and pound funds were slightly up today, tracking the first rise in dollar term lending rates in a month.
Overnight Libor Rates
Current Wednesday(17:10 GMT)
USD 0.40000 0.38250
EUR 3.07875 3.16875
GBP 3.00000 3.03750
Having previously discussed the basics of Moving Average let’s look at the 3 different types:
Unlucky for some,
USD – The Treasury Department has changed the plan – the $700 billion bailout may not be having the desired effect in restoring liquidity, getting banks lending to each other again and reducing the clogged credit market. This could cut either way with the US dollar – remaining a safe haven versus the problems in the US internal economy.
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In forex, the moving average is the average of successive currency pair prices over a given number of periods.
The basic plan is smooth out the noise on a chart and therefore to give a clearer picture of the trend, if any. Everything else being equal, a 14-period MA should give a smoother ride than a 7-period MA.
The ‘price’ of a time period is usually the closing price – although it’s possible to take the midpoint of the high and the low over the period, which in theory would be more accurate, in practice, not so vital…
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