Carnival of Forex Trading — February 3, 2008

Welcome to the February 3, 2008 edition of Carnival of Forex Trading.

Nate presents Scalping: Don't Lose Your Head posted at Legion Forex, saying, "Become a legionnaire!"

Raymond presents Invest In Gold As A Hedge Against Inflation, Recession, and The Weakening Dollar posted at Money Blue Book.

Jed Norwood presents Having Profitable Losses posted at Forex Strategy Secrets, saying, "Forex trading is a business that carries risk but that doesn't mean risk has to be a factor that scares you away. simply learn how to manage your risk and learn from mistakes." Another author from this site — ioventuresinc.com — presents How Much Should You Trade?, saying, "This post is just one of the tips and tricks offered to Forex Traders. Learn the ins and outs of Forex trading"

James D. Brausch presents TMI (Too Much Information) posted at Internet Business Blog, saying, "To succeed with trading (or any financial goal), you have to stop endlessly reading books, create a basic plan, and ACT."

Sagar presents 10 Reasons to Be Critical of the Federal Reserve posted at Currency Trading.net.

Vahid Chaychi presents How To Use Fibonacci Numbers in Forex and Stock Trading posted at Weboma.com, saying, "Fibonacci levels can act as strong support/resistance. We have to consider them in our trading strategies." The same author also suggests reading The Language of Japanese CandleSticks — The Only Real Time Indicators, saying — "Candlesticks are the best indicators of the market psychology. We have to learn their language."

That concludes this Carnival of Forex Trading edition. This month I've got more interesting articles than usually. So you can even chose from something. I hope that it would as interesting for you as it was for me.

Forex Technical Analysis for 02/04-02/08 Week

EUR/USD trend: sell.
GBP/USD trend: sell.
USD/JPY trend: sell.
EUR/JPY trend: sell.

Floor Pivot Points:
Pair	3rd Sup	2nd Sup	1st Sup	Pivot	1st Res	2nd Res	3rd Res
EUR/USD	1.4390	1.4526	1.4662	1.4798	1.4934	1.5070	1.5206
GBP/USD	1.9230	1.9438	1.9543	1.9751	1.9856	2.0064	2.0169
USD/JPY	103.92	104.82	105.67	106.57	107.42	108.32	109.17
EUR/JPY	151.70	153.63	155.63	157.56	159.56	161.49	163.49

Woodie's Pivot Points:
Pair	2nd Sup	1st Sup	Pivot	1st Res	2nd Res
EUR/USD	1.4526	1.4663	1.4798	1.4935	1.5070
GBP/USD	1.9438	1.9543	1.9751	1.9856	2.0064
USD/JPY	104.82	105.67	106.57	107.42	108.32
EUR/JPY	153.63	155.63	157.56	159.56	161.49

Camarilla Pivot Points:
Pair	4th Sup	3rd Sup	2nd Sup	1st Sup	1st Res	2nd Res	3rd Res	4th Res
EUR/USD	1.4649	1.4724	1.4749	1.4774	1.4824	1.4849	1.4874	1.4949
GBP/USD	1.9477	1.9563	1.9592	1.9620	1.9678	1.9706	1.9735	1.9821
USD/JPY	105.57	106.05	106.21	106.37	106.69	106.85	107.01	107.49
EUR/JPY	155.48	156.56	156.92	157.28	158.00	158.36	158.72	159.80

Tom DeMark's Pivot Points:
Pair:	EUR/USD	GBP/USD	USD/JPY	EUR/JPY
Resistance:	1.4866	1.9804	107.87	158.56
Support:	1.4594	1.9490	106.12	154.63

Fibonacci Retracement Levels:
Pairs	EUR/USD	GBP/USD	USD/JPY	EUR/JPY
100.0%	1.4933	1.9958	107.46	159.48
61.8%	1.4829	1.9838	106.79	157.98
50.0%	1.4797	1.9802	106.59	157.51
38.2%	1.4765	1.9765	106.38	157.05
23.6%	1.4725	1.9719	106.12	156.48
0.0%	1.4661	1.9645	105.71	155.55

Falling Nonfarm Payrolls Fail to Support EUR/USD

Nonfarm payrolls is one of the most important indicators of the U.S. economy’s health. Market analysts expected it to grow up in January by 50,000. But in reality it didn’t grow at all, instead it dropped by 17,000. At first, this fueled dollar bears’ activity and drove EUR/USD up close to the historical borders, but then, after release of some other important indicators, it went down to about 1.4800.

The part of the employment report was the U.S. unemployment rate in January — it fell down from 5.0% to 4.9%.

Construction spendings in December fell down by 1.1%, faster than the analysts expected (0.5% drop).

Non-manufacturing ISM report on business activity in January resulted in PMI at 50.7%, showing an increase from the last month’s 48.4% and that it’s significantly better than the forecasted 47.5%.

Index of Consumer Confidence, reported by Reuters and University of Michigan, fell to 78.4 in January from 80.5 in December. Expected value for this indicator was 79.0.

U.S. Dollar Regains Positions on Mixed Fundamentals

Today, EUR/USD lost a small part of the pips that were gained yesterday after the Fed’s interest rate cut by 0.50%. Even the bad employment statistics didn’t prevent dollar from recovering from 1.4860 to 1.4814 against European currency. This can be also partially explained by the major resistance level that has formed near 1.4870 rate on EUR/USD.

Personal income in December rose by 0.5% — better than the analysts expected (0.4%), which can be a good sign for U.S. economy. Personal spendings were at 0.2%, higher than the expected value, but lower than 1.1% growth a year earlier. Core PCE inflation, as expected, didn’t change and was at 0.2% last month.

Initial jobless claims report showed a very disappointing dynamic this time — last week claims grew up from 306,000 (revised from 301,000) to 375,000 — that’s much more than 320,000 predicted by the economic experts.

Chicago PMI — the index of business purchasing activity — fell below the expectations (53.0) fro, 56.4 to 51.5.

Crude oil inventories in U.S. continued weekly growth trend and rose 3.6 million barrels last week, which is nothing but a good sign for the dollar, as the oil prices may stop affecting it negatively.

Dollar Falls after FOMC Lowers Interest Rates

The main intrigue for today Forex trading session was the FOMC’s meeting at which the next interest rate should have been decided. As the most market participants expected FOMC lowered overnight interest rate in U.S. by 0.50% to 3.00%, farther widening the gap between U.S. and European interest rates. The decision was made under the pressure from the deepening crisis in the both housing and financial markets. EUR/USD jumped up by almost 100 pips after the release, showing that the dollar is going to be less attractive currency with the new 3% interest rate.

Another important statistics report came out today — it was the GDP growth for the fourth quarter of 2007. It grew far worse than the analysts expected — 0.6% compared to forecasted 1.2%. Now the signs of recession given by the real estate sector, financial market and employment situation have got confirmed by the economy output.

Forex Trading Edge — New MetaTrader 4 Broker

Recently I’ve been contacted by the manager of Forex Trading Edge. It’s quite a new Forex broker that started to operate near the end of 2007. Forex Trading Edge is the introducing broker for Forex.com broker. Usually I don’t like to list the introducing brokers as the separate entities, but this one got my attention, because it offers a MetaTrader 4 platform, something that Forex.com is missing. Besides MT4, it also offers original trading platform of Forex.com and the NinjaTrader platform. Payments methods are limited — only wire transfer, checks and credit cards — no e-currencies. Another disadvantage that Forex Trading Edge has is that it’s not accepting citizens of the United Kingdom. But for other Forex traders that wanted to join Forex.com, but prefer MetaTrader 4 over other platforms, this is definitely a good choice.

Slight Strengthening of Dollar

Good fundamental macroeconomic data that was coming out today helped the U.S. dollar to fight back some of the pips, lost to euro yesterday. EUR/USD began this day at 1.4779, but now it hovers near the 1.4756 level. It's not a big gain for the greenback, but it has a potential to continue the trend during the rest of the week.

Durable goods orders in December unexpectedly rose by 5.2%, which is a lot higher than the 1.5% expected by the markets. This indicator has a strong influence on the U.S. economy and also the Forex market, so it can be a really positive news for dollar.

Consumer confidence surveyed by the Conference Board landed at 87.9 in January, after it was 90.6 in December (revised from 88.6). So, it really fell a just little down, but it's still better than forecasted 87.0.

Forex Research Paper on Volatility, Spreads and Quotes Frequency

Now you can download a new free research paper related to the Forex market from the e-books section of my site. It is "The Interaction Between the Frequency of Market Quotes, Spread and Volatility in Forex" that was published in the Applied Economics journal more than 10 years ago. This paper researches the relations between volatility, spreads and the frequency of the new market data in the Forex. It can be considered outdated for the majority of the modern traders, but it can help in understanding of how the interbank Forex market works. This e-book is definitely not for the general traders' community, but it holds a lot of information for the experienced and professional traders.

Support and Resistance MetaTrader Indicator

Enjoy the new MetaTrader indicator — Support and Resistance — ready to be downloaded from the indicators page. This indicator shows the dynamic support and resistance levels directly on the chart. It applies the levels to the certain periods that are treated as the trends or sub-trends. This indicator was originally developed by Barry Stander (http://myweb.absa.co.za/stander/4meta/), but I have received by e-mail from one of my reader — Muntazir Mehdi. So, thanks should go to both of them. And I hope to receive and publish even more of such interesting and yet simple Forex indicators.

Forex Technical Analysis for 01/28-02/01 Week

EUR/USD trend: sell.
GBP/USD trend: hold.
USD/JPY trend: buy.
EUR/JPY trend: hold.

Floor Pivot Points:
Pair	3rd Sup	2nd Sup	1st Sup	Pivot	1st Res	2nd Res	3rd Res
EUR/USD	98.3103	49.8734	98.3517	49.9148	98.3931	49.9562	98.4345
GBP/USD	1.8987	1.9162	1.9497	1.9672	2.0007	2.0182	2.0517
USD/JPY	102.27	103.62	105.18	106.53	108.09	109.44	111.00
EUR/JPY	145.84	148.98	152.84	155.98	159.84	162.98	166.84

Woodie's Pivot Points:
Pair	2nd Sup	1st Sup	Pivot	1st Res	2nd Res
EUR/USD	74.1022	146.8093	74.1436	146.8507	74.1850
GBP/USD	1.9162	1.9497	1.9672	2.0007	2.0182
USD/JPY	103.62	105.18	106.53	108.09	109.44
EUR/JPY	148.98	152.84	155.98	159.84	162.98

Camarilla Pivot Points:
Pair	4th Sup	3rd Sup	2nd Sup	1st Sup	1st Res	2nd Res	3rd Res	4th Res
EUR/USD	146.8072	146.8186	146.8224	146.8262	146.8338	146.8376	146.8414	146.8528
GBP/USD	1.9551	1.9691	1.9738	1.9784	1.9878	1.9925	1.9971	2.0112
USD/JPY	105.13	105.93	106.20	106.46	107.00	107.26	107.53	108.33
EUR/JPY	152.86	154.79	155.43	156.07	157.35	157.99	158.64	160.56

Tom DeMark's Pivot Points:
Pair:	EUR/USD	GBP/USD	USD/JPY	EUR/JPY
Resistance:	1.4938	1.9840	108.77	161.41
Support:	1.4524	1.9330	105.86	154.41

Fibonacci Retracement Levels:
Pairs	EUR/USD	GBP/USD	USD/JPY	EUR/JPY
100.0%	1.4779	1.9848	107.89	159.11
61.8%	1.4621	1.9653	106.78	156.44
50.0%	1.4572	1.9593	106.44	155.61
38.2%	1.4523	1.9533	106.09	154.78
23.6%	1.4463	1.9458	105.67	153.76
0.0%	1.4365	1.9338	104.98	152.11