Forex Trading ... On the forex front, we noted the change in tone toward the carry trade pairs over recent sessions and they were not helped by the release of slightly soft Chinese PMI Manufacturing data today.

Both the Aussie and Kiwi were notable losers in the morning session and we were happy to take a short the Kiwi this morning in light of its short-term sideways trend on the 4-hourly chart, after having broken a key up sloping support line yesterday.

Meanwhile, the dollar-yen managed to creep up to the 80-yen mark, though looks exceptionally overbought and subject to a risk assessment that would benefit the yen. After a near 5% movement this month for the pair, which is the most it has moved in a single month in nearly a year.

AUDUSD Commentary and Forex Trading Signals:  The Aussie stalled near the medium term horizontal resistance region over the past few days and overnight it appeared to give up trying any further. We have noted that over the past few sessions the price looked susceptible to a pullback. With the Greece debt situation being resolved, there is less risk for short sellers to be squeezed. The RBA Minutes from the last meeting this week suggests further rate cuts are likely. Meanwhile, the softer Chinese eco data has not helped.

CFD Trading... The Aussie bourse managed to shake off the negative tone provided by the SPI Futures lead at the close of the North American session thanks to a slightly firmer performance amongst Asian bourses. They managed to absorb a disappointing Chinese Manufacturing PMI data which all but confirmed the reasons why the PBoC Acted over the weekend by cutting the RRR by an aggressive 50 basis points. However, at the same time upside was limited after the SPI once again had trouble clearing the resistance region on the SPI near the February highs. The Aussie market closed largely unchanged, suggesting that investors remained cautious in spite of the Greece bailout affirmation yesterday.

One of the notable standouts today amongst the Aussie 200 came from a stock that we highlighted yesterday.

• We provided a Long trade suggestion for Ausenco (AAX)yesterday on our CFD Snapshots, which triggered in at yesterday’s opening and actually reached dour profit taking target of $3.43 from the $3.23 opening before the close of yesterday’s session. At the time we noted that it would report its results this week and we categorised it as a Speculative Buy, but cited the underlying institutional support. The stock surged today in the wake of its profit result, which came in ahead of market estimates and the stock jumped a massive 8.4%.

It was a mixed bag amongst the retailers today. The majors in Wesfarmers and Woolies notably underperformed the market on profit taking, but the pure discretionary plays retained a mild bid bias. Current CFD Snapshots long in Myer Limited (Long @ 2.11) surged by a healthy 3.2% on solid trading volume, whilst major competitor David Jones also gained moderate ground.

However, of interest to us for the next few sessions was the movement in JB Hi FI Limited, which put in its best trading performance in nearly a month by firming 2.8% Whilst it is an early call, the prospect of a mini double bottom-like play is now evidenced in the charts. The added speculation that retailer Woolies may bid for it (attributed to a leading breakage house research report) only adds to the positive risk demand.

We touched on gold this morning as being a notable short-term selling opportunity. It drifted around $5 lower from the New York close over the Asian time zone, reaffirming the presence of the horizontal resistance, which we highlighted this morning. As noted from our Morning Insights, a short around $1759 and a stop of $1770 with a target of $1742-3 is currently being entertained. For those looking for a share CFD trade and a potential corrective movement in gold may consider Newcrest Mining as a potential short as it approaches the October-November highs, which is also a gap refill resistance back to September 2011.

FTSE Commentary:  The Japanese bourse has easily surpassed the 200-day MA line and remains in a solid upside trajectory. However, the RSI is heavily overbought and a correction is imminent. The BoJ did its bit by last week by announcing an inflation target, as well as increasing the quant easing program. This has stirred weakness in the yen, which benefits its exporters. Over the past couple of sessions, there have been some fatigue signs.

The article below is arguing that as necessary as many current central bank policies are, there is a turning point. In Australia the RBA has provided a steady hand. Off shore in the hardest hit western economies, time is still their friend. But current trends are consistent with the warning economists always give about moral hazard – the idea that no-fault bailouts and easy money encourage future reckless behaviour.

Are We Already Planting the Seeds of the Next Financial Crisis?

(Michael Sivy  - Time Business) Central banks are trying to revive weak economies by injecting large amounts of money. That policy helps in the short run, but easy money can also create the conditions for future booms and busts.

The wreckage of the housing bubble and the banking crisis haven’t yet been cleared away completely, but already there are hints of renewed speculation – warning signs of a problem that often arises when central banks try to bolster weak economies.

• Expanding the amount of money in circulation is, of course, beneficial in the short run because it stimulates business activity and takes some of the pressure off overextended borrowers and banks. But easy money also encourages risk-taking and temporarily pushes the prices of safe investments up to unsustainable levels, thereby creating the potential for future financial crises.

This problem last occurred – with catastrophic results – in the years following the 2000 technology stock crash, when Federal Reserve Chairman Alan Greenspan repeatedly stoked the money supply. That did help revive the U.S. economy, but it also fuelled a bubble in home prices that contributed greatly to the 2008 banking crisis.

Moreover, Fed officials seemingly failed to recognise this side effect as it was happening. Around the time the housing bubble peaked in 2006, Fed Vice Chairman Timothy Geithner (now the Secretary of the Treasury) summed up the official outlook: “This, on balance, still leaves us with what looks like a relatively balanced set of risks around what is still a quite favourable growth forecast.” In retrospect, that assessment was much too blithe. Indeed, in testimony before Congress in October 2008, Greenspan himself acknowledged that he had underestimated the risks of his policies.

Is current Fed Chairman Ben Bernanke making the same mistake – risking future bubbles because he is trying to compensate for a past one? Obviously, it’s too soon to tell. But Bernanke has already gone further than previous Fed officials in one respect, at least. Traditionally, Fed Chairmen have refused to tip their hand. Alan Greenspan once famously remarked: “Since becoming a central banker, I have learned to mumble with great incoherence. If I seem unduly clear to you, you must have misunderstood what I said.” Bernanke, by contrast, has bluntly announced that he will hold down interest rates close to zero until 2014. That may be intended as a confidence-building measure, but it will also make speculators feel more secure.

Consider these signs of a growing appetite for risk:

• Aggressive investments are becoming more popular.
• Low interest rates are making investors take greater risks in the search for yield. Sales of junk bonds picked up in January, and February looks strong as well, with billion-dollar-plus offerings by casino owner Caesars Entertainment and hospital operator HCA.
• Insiders at tech companies are also finally seeing a chance to cash out after four years in which a bad stock market discouraged initial public offerings.
• IPO activity at the start of 2012 was the greatest in seven years, and will likely pick up further if Facebook’s enormous offering goes off well. This IPO would value Facebook at as much as $100 billion, or more than three times as much as Google’s 2004 IPO, which took place just as the housing bubble really got going.
• Safe investments have enjoyed big price gains recently. The Dow has climbed 20% since October on economic statistics that are only mildly encouraging.
• Moreover, the Congressional Budget Office projects that the economy will slow later this year.

In my view, the explanation for share-price gains that are stronger than the economic outlook justifies is that hot money fleeing Europe is looking for safe havens – one of which is the U.S. stock market.

Today’s biggest bubble in safe assets, however, is the one in Treasury bonds, which is a direct consequence of the Fed’s policy of holding interest rates down at abnormally low levels. Bond prices move in the opposite direction of interest rates, so when the Fed holds rates down, it is propping prices up. And when the Fed eventually does allow rates to rise to more normal levels – even if that really isn’t until 2014 – bond prices will fall significantly.

European banking policies are also encouraging risk-taking.

Similar to the Fed’s attempts to reflate the U.S. economy, the European Central Bank has made hundreds of billions of euros available to European banks on extraordinarily generous terms. The institutions are not only using the money to meet their own short-term financing needs, they are also borrowing additional money to purchase the bonds of troubled countries and earn the spread between the yields on those bonds and the much lower rate the ECB is charging them for money. This strategy is known as the carry trade, which I discussed in a recent column.

By trying to make a little extra money, European banks are increasing their exposure to Eurozone problems. If the Eurozone crisis gets worse, the entire global banking system will feel the effects, including institutions in the U.S.

None of these bellwethers – either individually or taken together – means that there will be another financial crisis in the next few months – or even the next few years.

Perhaps everyone will back off a bit and calm down after the November elections. But current trends are consistent with the warning economists always give about moral hazard – the idea that no-fault bailouts and easy money encourage future reckless behaviour. At the very least, the proper response for investors is greater prudence and caution.

Sourced from: http://business.time.com/2012/02/13/are-we-already-planting-the-seeds-of-the-next-financial-crisis/?xid=newsletter-asia-weekly

On a $300 position size outlay, the AUDUSD trade idea yielded a profit of $239 or 80% on funds deployed (based on 100 x leverage) for the Forex trader. 

On the 16th February, TRUMarkets provided an Email/SMS Alert trade which was to Buy the AUDUSD @ Best (1.0685) based upon the price returning back to a key up sloping support line on the daily chart, in addition to displaying a potential inverse head and shoulders pattern on the 4-hourly chart. Overnight, the trade idea reached our profit taking target of 1.0770. The trade idea delivered Subscribers a profit of 85 pips.

Synopsis of the trade idea:

• The daily chart reveals that the price has returned back once again to the medium-term up-sloping support line and is holding.
• The stochastics is providing a hint of a turnaround.
• We like the technical formation on the hourly chart, which looks like a potential inverse head and shoulders like set up.
• Buying at these levels at the right shoulder appears to be a low risk reward trade idea. We will not aim for a break of the neckline, but rather to taker profit near there.
• Today's much stronger than expected domestic jobs data has enhanced its attraction as a carry trade pair.

AUDUSD Four-hourly Chart

AUDUSD Daily Chart

Past performance is not a reliable indicator of future performance, and the CFD trader and Forex trader should be aware that future results may vary and may be negative from time to time depending upon market conditions and as such, we do not guarantee or imply future success

Forex Trading ... The foreign currency market initially traded with a ‘risk off’ tone after a lack of announcement on the Greek bailout front over the European and US time zone, which was largely expected. Concerns over further delays in the bailout decision impacted the market in the early part with the euro and carry trade pairs the notable losers. However, the 1.30 p.m. announcement caught traders off guard and the Euro surged well in excess of 100 pips on a moderate relief rally. Meanwhile, although carry trade pairs rebounded off their lows, they remained largely unconvincing, to be moderately lower in spite of the apparent lift in risk appetite stemming from the Greece deal.

USDJPY Commentary and Forex Trading Signals:  The pair found bounced from the long term horizontal support and easily took out the 200-day EMA line last week. Softer Japanese economic data versus firmer US data has benefited the pair. However, it was the move last week by the Bank of Japan, which surprised the market by announcing an inflation target, as well as increasing the quantitative easing program, which saw a marked turnaround in the pair.  There was a major trimming of shorts by hedge funds last week, perhaps a little overdone. The oscillators are well overbought on most time frames now. After the PBoC boost yesterday morning, the pair succumbed to profit taking and a potential reversal candle presents, but needs confirmation over coming days.

CFD Trading... The Aussie sharemarket posted moderate gains after the EU finally delivered Greece their much coveted bailout funds. The announcement, which occurred just after 1.30 p.m. gave the local bourse a fillip at a time when it had been largely been treading water. The formal announcement came more than 6 hours after the expected deadline, though there was little in the place that had not already been expected. Nevertheless, there was a mild recovery in the euro, which sparked a moderate risk recovery. In the short term it does not change our opinion that the domestic market appears to be caught in a moderate sideways range.

We maintain the views expressed over recent days that with the confirmation of a bailout to Greece, it has removed not so much (negative) uncertainty in the markets, but a potential positive development. Asian bourses were clearly not getting carried away by the outcome with Japan, Hong Kong and Shanghai all lower and to an extend providing a “buy the rumour, sell the fact” reaction.

• The move by troika has removed the short-term uncertainty but has instead put into place a longer term one. The big test will be Greece’s ability to pay down its debt at a time when the country is crimped by austerity restraints. Ultimately we feel that it is merely delaying the inevitable that either a default occurs or another bailout is conjured up.

The other major domestic news came from the release of the RBA Board Minutes from the last meeting in which the central bank surprised the market by leaving interest rates on hold. The key takeout noted was the fact that concerns surrounding Europe and a major credit crunch had subsided, which was largely behind why they held back from cutting rates. Nevertheless, they outlined an accommodative stance toward cutting as appropriate, especially given that the domestic inflation rate appears under control. In our opinion there was very little in the statement to sway the fact that the current cycle will see at least two more rate movements to the south side.

With the RBA painting a relatively smooth picture for the domestic economy in their board minutes, the consumer discretionary sector was a standout. The department store retailers Myer and David Jones recorded impressive trading candles to put in their best advances in nearly a month. Harvey Norman added a healthy 2.9% to score its best 4-day advance in nearly 4 months. The movements suggest mild institutional interest in a sector that has been battered by the downturn in retail in its traditional form, namely the ‘bricks and mortar’ model. However, their cheap valuations and dividend yields have obviously stoked some fund manager interest once more.

Nikkei Commentary:  The Japanese bourse has easily surpassed the 200-day MA line and remains in a solid upside trajectory. However, the RSI is heavily overbought and a correction is imminent. The BoJ did its bit by last week by announcing an inflation target, as well as increasing the quant easing program. This has stirred weakness in the yen, which benefits its exporters. Over the past couple of sessions, there have been some fatigue signs.

In the article below the author argues that many traders fail in the pragmatic concept of accepting accountability. To alleviate this common approach, apply the rules of your previous working life and build in the concept of being accountable to someone else complete with incentives or falling into the sinbin.

Being Accountable.

(Adrienne Toghraie – Trader Planet) From the time we are born, most of us learn that we must be accountable for our actions. First it is to our families and then later to our teachers, and society.  Since traders are already conditioned to be accountable, they should make use of this tool in reaching for trading mastery.

Sweeping it under the carpet

Traders like to think that they only need to be accountable to themselves in order to get the best out of their trading. But it has been my experience that most traders fail miserably at this task.  So why are traders not able to do this?

They do not want to:

• Be wrong
• Admit that they are changing their rules
• Face up to the fact that they do not have good rules
• Realise that they need psychological help
• Realise that they do not have what it takes

If you are committed to doing whatever it takes to follow your rules to reach a higher level of profit, you should consider asking someone to help you with this task if you are not doing a good job of it yourself.

Who could take on the role of a trader’s accountability?

•    A significant other
•    A friend
•    A trading buddy
•    A teacher
•    A coach

What would a person need to help you be more accountable?

• A clearly defined set of rules from you
• Your commitment to telling the truth to them
• An accounting of the trades you took
• Why you think the trades you took were good opportunities
• The risk/reward ratios before the trade
• The money management procedure you followed
• Whether or not you followed your rules
• The lessons you learned
• And at the four month periodical review, the changes you would make and why

Reward or punishment

There should be a clearly defined predetermined punishment or reward that both of you agree upon for not following your rules.  Here are some examples of punishments or rewards to consider.

Punishment

• No trading the rest of the day
• Walk around the block before taking the next trade
• Twenty push ups
• Limit the size of your trades for the rest of the week

Rewards

• Ten percent of every good trade will go into a rewards account for you
• A food or entertainment treat
• Time with a special friend
• Any - my favourite, a massage

Conclusion

When you make yourself accountable in trading to someone else, you activate that part of you that has already been programmed for accountability.  In doing this you will be more accountable to yourself.

Sourced from: http://www.traderplanet.com/newsletter_articles/view/6931/distribution:7

On a $312 position size outlay, the NZDUSD trade idea yielded a profit of $275 or 88% on funds deployed (based on 100 x leverage) for the Forex trader. 

On the 15th February, TRUMarkets provided an Email/SMS Alert trade which was to Sell the NZDUSD @ Best (0.8383) based upon the price returning back to a key horizontal resistance region on the 4-hourly chart.  The next day, we sent out an Email/SMS Alert to Buy @ 0.8310 to take profit. The trade idea delivered Subscribers a profit of 74 pips.

Synopsis of the trade idea:

• As can be seen from the 4-hourly chart, the price has largely been oscillating between the two horizontal support and resistance lines.
• The move back to the top end of resistance over the Asian time zone/early European session offers an opportunity to short it for a play back toward the lower band of support.
• There is notable negative divergence building on the oscillators.
• Risk appetite benefited from some fresh jawboning support by the PBoC Governor over their support for the EFSF.
• However, the real test comes tonight with some important outcomes for Greece. With much of the positive news already in the pricing, we feel the skew will be to the down side on any surprises.

NZDUSD Four-hourly Chart

Past performance is not a reliable indicator of future performance, and the CFD trader and Forex trader should be aware that future results may vary and may be negative from time to time depending upon market conditions and as such, we do not guarantee or imply future success

Forex Trading ... Over the past week there have been notable signs of mild decoupling of the risked-based pairs such as the Aussie and Kiwi from that of the S & P 500’s performance. Whilst the PBoC move over the weekend provided a knee-jerk boost in the Asian session today, the carry trade attraction of the high yielders is starting to be diminished by the prospect of an earlier wind back of easy money in the States. Base metal prices, in particular have been coming off their highs and the outlook is becoming increasing bullish the US dollar. Meanwhile, in Australia the market continues to expect another two rate cuts of 25 basis points in the current cycle by the RBA.  The Aussie/Kiwi cross remains an interesting alternative to trading the Aussie as a southbound play per se. The Kiwi economy continues to benefit from the post earthquake stimulus so selling the cross may be an interesting alternative.

EURUSD Commentary and Forex Trading Signals:  The price broke beneath the short term up sloping support line, but then found support near the 50-day MA line.  Last week, there were a number of downgrade events that were ignored by the market, fixated by a potential resolution on the Greece uncertainty. As the price has bounced on hopes that a Greece deal will be done shortly, the positive news of a likely EU Finance Minister deal has been factored in.

CFD Trading... A much firmer than expected opening resulted this morning on the Aussie 200 thanks to the PBoC decision caught the market off guard over the weekend. The move by the People’s Bank of China to cut the Reserve Ratio Requirement by 50 basis points saw a substantial uplift in risk appetite at the commencement of the Asian session. However, the big test for markets comes tonight with the impending EU Finance Minister’s decision over whether or not it will release bailout funds to Greece. With a near 20-point dividend drop off associated with heavyweights Commonwealth Bank and Telstra trading ex-dividend, the performance was easily the Aussie bourse’s best trading session in around two months.

The sector to receive the biggest fillip from the surprise PBoC announcement over the weekend was the resources. Last week the big miners were under extreme pressure with base metal prices slipping well off highs. However, the move is expected to boost base metal prices tonight on the London Metal Exchange and it resuscitated the sector in need of a spark. The ‘shorts’ from last Friday on RIO Tinto (and looking at the candle formation there would be plenty) would have rued the Chinese central bank’s decision, whilst BHP Billiton, likewise gapped much higher than Friday’s closing level, though volumes were far from convincing.

This morning we noted that the prospect of an early ‘risk on’ environment at the commencement of the week. However, we suggest caution at these levels after a heady run of late. The US bourse has surged by over 25% in the space 4 months and the US economic recovery is still at its early stages; the austerity measures across Europe will crimp growth rebound prospects and we need to wait until mid-year at least before we gauge whether or not China has in fact avoided a hard landing in spite of what appears to be an increased urgency to prevent their economy from slipping backwards. Hence we would remain wary about get carried away too far as to how far this bullish sentiment will carry markets.

The Euro Finance Ministers scheduled meeting for tonight is anticipated to deliver Greece the long awaited bailout package.  Funny enough we’d argue that bulls will not really want to see an outcome tonight since over the past two to three weeks, markets have readily rallied on hopes of a rescue package being done and have fallen back on a little when no such deal eventuated. The irony is if it is deliverer, there will be no further (positive) uncertainty to drive short covering rallies and speculation since the prospect of an imminent bailout has been driving risk appetite per se. So whether or not we see a “buy the rumour sell the fact” reaction appears irrelevant, but what is clear that putting an end to this saga (even if it is for only a few months) actually puts to bed a reason for markets to rally.

DJIA Commentary:  The US bourse remains on a general upward trajectory in spite of bouts of volatility, with liquidity driving the rally. Technically, the bourse is pushing up to last year's highs and it is within 1% of the all time high.  It is closed for the President's Day holiday, but is expected to see the Greek developments resolved come Tuesday. The PBoC rate cut provided a boost in Asian trading today.