The Ups and Downs of the Greenback Pendulum

The Greenback pendulum swings again.

Against all the other majors and commodity pairs, the US Dollar index surged at a meteoric pace, and in August 2022, it looked like there was no end in sight to the rise of the USD.

But then things turned around, and after a rough three months, from late 2022 until mid-January this year, the Greenback looked to be reversing much of the historically high levels achieved during 2022. 

What happened? What’s Changed?

In late 2022, inflation showed signs of easing due to the most aggressive interest rate rise seen in decades by a very determined and hawkish US Federal Reserve.

A helpful shove in this universal inflation battle was a sharp drop in oil and energy prices, boosted by easing the supply chain crisis, an improved computer chip, and other industrial hardware shortages.

The Russian war machine looked very tired, and it was a distinct possibility that Putin might be looking to pack up his armaments and head home. So Covid hardly got a mention, even though China still had its fair share of it.  

The stock and equity markets showed significant gains, and some heavily battered blue chip stocks began to bounce back. The light on the horizon shone a little brighter. Moreover, the Eurozone outlook improved as the battered currencies embarked on a solid comeback.

Now, the pendulum is swinging back as the USD surges ahead.

2023: The Greenback Pendulum is Swinging Back

First – let’s look to the Federal Reserve for some answers. Interest rate hikes are continuing to be in focus.

The initial US peak bank rate of 4.8% for 2023 is no longer on the cards, and the talk now is 5.5% moving closer to 6%. 

As mentioned earlier, interest rate hikes have always had a direct bearing on the value of a currency, and it’s always been evident regarding the USD. But unfortunately, inflation is rearing its ugly head again, and we are all feeling it at the gas pump.

The Pendulum Swings as Russia Regroups

Putin has re-grouped his Russian forces, and I do not believe he’s prepared to place the Ukraine war in the loss section. Instead, he will do whatever is necessary to win, even if tactical nukes are on the table. This a game changer.

I pray this does not happen. But the combination of the recent surge in the Greenback, the latest inflation reports, the stock market reversal, and a few other factors I mentioned earlier means one thing. All the hallmarks of movement to the relative haven of the USD are on the cards. 

So, smart money is moving in that direction. 

As always, we will be watching!

Our job in these times is to spot trading opportunities as they unfold, and keep you informed with precise Entry, Take Profit, and Stop Loss levels. 

These markets are fluid and dynamic. We will be watching, so you don’t need to! 

Did you miss this trade?

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Which Is The Best Trading Method? Breakouts, Continuations, or Reversals?

What is the best trading method? I’ve seen many traders ask this question over the past 25 years of working with Forex traders across the globe.

Our answer is always the same; all three strategies can be the best trading method at one time or another! Each method has its place and time; it always depends on the prevailing market circumstances.

I know this may sound a little confusing; however, it’s simpler than you think. 

Reversal Trade

There are times when the markets are oversold or overbought. That particular moment in time presents strong trade possibilities. As a result, we see the trading method called Reversal Trades come into focus. It does not necessarily mean a definite current market trend is reversing. Instead, it means it’s likely due for a pause, and, in turn, a great opportunity is staring us in the eye.

We are well aware that markets do not travel in a straight line and every larger-than-normal market move has an end in sight as the move exhausts. This scenario does not necessarily mean the long-term direction reverses; it may just be a hiatus. However, this hiatus can create a powerful opportunity for a Reversal Trade.

 These Reversal Trade moves are particularly worthwhile. The reversal is usually quick and robust after a sustained movement due to large or institutional traders taking profits. Retail and smaller traders get nervous and follow suit, and volume accelerates until the momentum runs out of gas.

Then What?

Now we look for our next trade opportunity and trading method. Will it be a Breakout or Continuation Trade?

In our next article, we will examine in more depth what trading method may work after a reversal trade. But, again, discipline is essential to trading success.

 We never guess or preempt the market’s next move. The key is to stay with our tested method and strategy and allow the market pattern to show us the next move. 

As always – we don’t just trade for the sake of it. 

“We trade to Win.”

If you still need to get our trades, you can try us out for a no-obligation 14-day trial using the link below.

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This last week we saw some significant reversal activity in the Forex market. For weeks, the USD had pounded (no pun intended) on most majors with no end in sight.

The question on everyone’s mind: Can the USD reversal momentum continue, or is it just a knee bend before the next upward spike?

Consider The Technicals

Technically speaking, the charts are giving us some clear indications. But, unfortunately, it’s as clear as mud. On the one hand, it’s been vastly overbought these past few weeks, and yet, depending on your chart time, we haven’t gotten close to our first Fibonacci retracement level. 

Some indicators are showing overbought, and short-term ones are showing oversold. There is no solid answer, and it’s all about the process and discipline to follow what has worked more often than not and follow the rules. 

A drop toward trend support and a resurgence of buying will end the USD short-term decline, and a breakthrough of support will accelerate the fall. 

That’s why technical studies have always intrigued me. Sometimes, we can be so correct, and sometimes just so wrong. So, money and risk management are essential.

Money And Risk Management

Of course, if you have practiced proper money and risk management, you have planned your exit to minimize damage if you are wrong. But, on the other hand, when you’re correct, tighten up and set a realistic target objective. I know it’s easier said than done. At times, it can make the toughest of the tough weep. But nobody ever said trading was for the weak of heart! 

Right now, it’s a lot bigger than just technical analysis!

Upcoming Forex Trading 

We expect to see volatility in all directions in the next two weeks. For one thing, the USA mid-term elections are bound to rock the markets regardless of the outcome. In addition, bond rates are under pressure as inflation shows no sign of easing. Finally, the stock market recovery this last week has left traders wondering if the uptick will continue.

It depends on the news cycle and political outcomes, so the answers will unfold as the markets settle down and decide the direction.

The bottom line: This is an opportunity for us to take advantage of the current situation and make it work.

As always, our ForexSignal trading desk will observe the market closely for trade opportunities and keep you informed as they unfold.

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Volatility Ahead!

We firmly believe every trading market has a season of lean and abundant periods of opportunity. However, not since the GFC (Global Financial Crash) have we witnessed such activity and increased trading opportunity as volatility continues to soar in the Forex markets. 

Added volatility opens up lots of possibilities. Speculators and traders are sensing it, and market participation is surging. It is a known fact that in times of high volatility, the options of profit are high, but as a word of caution, so is the RISK! One must always weigh the Risk / Reward scenario under these circumstances. Forex is a risky business nobody can deny that, but the sizable reward side is what attracts traders like honey to bees. Risk appetite is how this translates, in our opinion, and SPECULATORS swarm the honeypot looking for the opportunities as they unfold. 

Unfortunately, many unseasoned traders without exposure to these fluid markets are clouded by the illusion of easy money. The sad news is that, in reality, most of them will be unsuccessful, and yes, many will also be highly successful. The last few years, with the Crypto markets exploding with quick rich schemes and the never-ending bull market in stocks, have attracted new and returning Forex traders in numbers not seen in years. 

What’s Changed – Why The Increase In Volatility? 

It’s all straightforward. Whenever the traditional markets such as stocks or even crypto lose their glitter, all eyes turn to Forex with its evergreen opportunity. The Forex market is active 24hrs daily, five days a week. Traders have a unique mentality and are constantly scanning the horizon for opportunities.  

The last few years’ stock markets’ rise and the surge in bitcoin / crypto attracted hordes of new traders worldwide. A broker famously said it felt like a feeding frenzy at one stage. 

The last few months have ended as traders regroup and decide what’s next. The stock market has been down almost a third from recent highs. Bitcoin, crypto, and some of the altcoins have virtually evaporated.

The Majors Are Paving The Way Forward

 The USD has surged against all primary and secondary currencies. In fact, as of this writing, we see no end anytime soon. Oversold and trend acceleration conditions appear. In a nutshell, this is none other than a great opportunity unfolding.

How Can We Help?

Since 1998 we have been helping Forex traders in over 40 countries. We provide real time trading signals by SMS, email, and directly to your account with our Trade Copier software.

Our team of Forex traders monitors the market looking for trade possibilities, and will alert you whenever we identify what we believe to be the best of the best at that time. Every signal includes precise Entry Point, Stop and Take profit levels.

When And Why Are Signals Sent?

Trade alerts are usually sent out after the close of the USA session, around 5:30 – 7:00 pm EST daily. Our highly selective criteria identify only those trades we believe can yield 45+ pips. We don’t just trade for the sake of it! If the requirements are substantial; you can expect a signal. 

We know that nothing is guaranteed in Forex, so we have a complete history of every trade taken for the last 20 years. The good and the bad are on full display. No other Forex signal provider can match our high level of transparency.

Don’t just take my word for it. Try it yourself!

We invite you to take a Test Drive – Today!   $1.00 gets you a 14 Day test drive of our signals by SMS and email the minute we spot a trade opportunity. Included is access to our member’s logon with charts, trend meters, and an economic calendar. We even offer our Trade Copier software if you don’t have time to trade yourself. 

After 14 days, you are not obligated to subscribe to our monthly service and can cancel anytime!

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Eur/Usd Parity Horizon

As early as April, the avalanche of storm clouds began to appear on the Eur/Usd parity horizon. I wrote in previous articles that the energy crisis, out-of-control inflation, and fast-rising interest rates would propel the USD against the other majors. Still, the most significant damage was to the Eur/Usd pair. 

Ukraine Invasion 

Sadly, Putin’s Ukraine invasion directly affects the entire European continent. But unfortunately, the collateral damage is also worldwide. Uncertainty is a market killer; nothing will spook markets more than fear of the unknown. Couple that with some of the highest energy prices we have ever experienced, and you have the perfect storm.

Eur/Usd Parity

Mid-July was when it occurred, parity! After more than 20 years, the Euro had sunk below the USD value. However, the breakthrough hardly lasted a day when parity triggered an avalanche of buy orders and stop-losses. There could be no other result – a huge bounce back above the 000 figure, leaving most traders wondering if parity was possibly in the rearview mirror. 

Eur/Usd Parity – Also, a Psychological Level!

Without sounding rhetorical, I spoke about the 00 or big figure influence in a trader’s toolbox in a previous blog. This phenomenon is very consistent in Forex. We often round off our thinking and look to the big figure as a start and endpoint. It is what it is! 

Market Movers

However, market forces always win out in the end. We have seen this often when market movers such as central banks and other parties have intervened to alter market direction. History has shown us that short-term intervention is truly short-lived. Market forces always prevail and win in the end. 

Recent Trading

This week we saw a decisive Parity break again, and with a dwindling of Eur/Usd buy orders, a blip upwards lasted a few hours as the bears were again in complete control.

The Bottom Line

Will we see the 2000 low around the 0.8231 level anytime soon? It won’t be overnight but is undoubtedly on the cards in the next year or two. 

The stock market looks like the summer rally has run its course and now looks to be heading South. 

As is typical after a major sell-off, the “bounce effect” seems to occur, and the strong trend resumes within days. New lows are almost weekly. When tested, they seem to accelerate to the next level of support. This “bounce effect” is happening again and again. Momentum is powerful, and unless something dramatic occurs, it looks like this has a long way to go.

Forex Signals

The ForexSignal Trading Team closely monitors this trading situation and alerts our members worldwide when it is time to trade. Additionally, our member’s forum provides news, trend meters, an economic calendar, and more.

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Where Are the Retail Forex Traders Actually Trading

If you are a retail Forex trader, you will be astonished to know that retail Forex traders are not trading on the “real foreign exchange market.” 

Sounds awkward? Now you may have another question that is then “where are retail traders trading?”

Where Are The Retail Traders Trading?

As a retail trader, you open an account with any broker and then buy or sell currency pairs according to your analysis. If so, then where are your orders executed?

You don’t have access to the giant Forex market as a retail trader. Instead, you only trade with your retail Forex broker. For example, suppose you place a buy or sell order. Your broker takes these orders. So when you are executing an order, who is standing opposite you? Your broker. Yes, you hear it right. Your broker is the counterpart of your orders. 

Your Forex broker creates such an environment that retail traders feel like they are trading in the real forex market. The MT4 or MT5 platform price is very similar to the real market. But the harsh reality is that you are not trading with other big boys such as large institutional investors and big banks (like Barclays, Citigroup, Deutsche Bank, HSBC, JP Morgan Chase, and UBS). Also, you are not trading with non-bank financial institutions, big hedge funds, multinational corporations, or prominent financial institutes. And they are not your counter-party. 

Instead, your broker is your sole counterpart. Your broker is taking the opposite side of your order. When you push the sell button, your broker is the buyer, and when you buy any currency, your broker is the seller.

Why don’t then retail traders can’t understand these facts? Because these retail brokers create a parallel market. But always remember that although they make a parallel market, it is separate. So when you are trading, you are just playing a game created by them. No real money is going outside of the broker. You are using only virtual cash. 

So, where does your deposit go? They use this deposit when they need to hedge. But remember, this hedging position is also made by them, not you.

Your trades never leave the broker’s platform. Therefore, you are not participating with other traders.

A Critical Question

Now one critical question is, “what if two traders trade with the same broker? Do they participate in trades with each other?”

The answer is no; both traders are trading against the broker. They are just playing with brokers’ virtual money.

Retail Forex Trader vs. Institutional Forex Trader

To participate in the real Forex market, you must become an institutional forex trader.

Thus retail Forex brokers act like market makers for retail traders. As the wholesale or institutional forex market is inaccessible to retail Forex traders, your brokers are making a similar market for you. 

Another exciting fact; your broker is your counter-party. So when you make money, your retail broker will lose money, and when you lose money, your broker will make money from you.

Blog Contributor: David Roads

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EUR/USD Approaches Parity: 20-Year Low

This past week we witnessed the Euro at a 20-year low, briefly falling slightly below parity with the USD. However, this was short-lived as Forex traders bought the Euro across the globe for what looked like a bargain price. In addition, short Euro traders were also covering their positions, representing the more significant portion of the strong buying surge shortly after breaching parity.

The one-to-one “Big Figure” is not only a historical level but a significant psychological barrier. Human conditioning has taught us to round everything off with the 0 figure, and in our everyday lives, we use the 00 literally. It’s common to say, “ I wish to spend $1000 on that repair – we don’t usually say, I’m going to spend $984.22 on that repair. The 00 terminology is just the day-to-day conditioning that entices us to round things off with the big 00 or little 50 figure, as is often referred to as Forex traders. The parity 000 figure is a level carefully watched throughout trading history.

So How Did Parity Get Reached So Quickly?

The simple answer; is economics. European economies are currently struggling with an energy and inflation crisis, and market sentiment indicates the movement toward the USD and away from the Euro. We can see the most simple chart to know where the money flows. It is rapidly flowing out of the Euro as the European economies fight bravely to avoid a further sell-off.

A Short–Term Bounce Is Expected

The sell-off these last few weeks has been profound and long, as price action has shown. The previous few hundred pips towards parity crumbled with the onslaught of sellers. The bounce, as mentioned earlier, is a combination of profit takers and bargain hunters. Eventually, one side will win.

I believe selling momentum is too strong for buyers to hold back the onslaught. 

Recession Predictions Have Replaced Confidence

The culprits: Higher-forecast energy prices and record inflation. As the summer ends, the demand for heating oil and gas will surge. Russia continues to cut back on natural gas supplies to the European Union as retaliation for Ukraine’s weapons deliveries and ongoing Russian sanctions. Euro area inflation has risen to 8.6%, and experts are touting 10% before year-end. The pressure intensifies on the EU as a recession becomes more and more likely. 

It will be interesting to see how much of a Euro bounce we can expect in the next few days. So trading may be intense as we continue watching the energy saga unfold with Russia in a commanding position.

As always, ForexSignal members can expect live trading signals as they unfold. 

Economic Events

Economic events and news announcements impact Forex prices and activity. So stay tuned to the latest Forex events that can affect your trading.

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In anticipation of last Friday’s NFP announcement (Non-Farm Payroll), many traders were sidelined for most of the week. Many were holding back just in case of a surprise of another whipsaw like we experienced last month.

The NFP Announcement Outcome 

It was a damp squib, not much reaction, and volatility was almost nonexistent. The total of anticipated new jobs for May was missed by a few thousand. A run-up in the futures market ahead of the open was reversed, ending in the negative column for the Dow Jones, S& P, and Nasdaq. Unfortunately, it seems there was nothing dramatic enough in the news for the Fed to change any of its previous statements.

Other Market Factors

Interest rate direction is one of the significant factors economists look to for Forex market direction. As a result, many pundits call the Forex market majors an interest rate-driven market resource.

 However, having been involved in the Forex market for over two decades, we know there is much more to it than just one factor. For example, interest rate direction indicators gathered from the NFP announcement and the FOMC (Federal Reserve ) announcements drive the market one way or the other. 

Volatile NFP Announcement = Great News!

Many may find this statement bizarre, but truthfully, it is tough to make money consistently without volatility. Hence, when trading Forex, the key is to get the correct direction more often than not.

Forex is also known as an evergreen market, and it’s always providing opportunities. However, let’s not be naïve; this opportunity comes with its fair share of risk – you can make a lot of money and lose a lot of money; they both go hand in hand. 

It’s not for everyone – millions of traders worldwide trade Forex and take their chances in the world’s largest financial marketplace.

It seems strange. – We don’t care too much about the market’s direction as we can buy and sell without penalty of the direction just so long as our decision of direction is accurate. But you knew this already!

If you’re like most people, the phrase “bear market” can leave you stuck and in fear of your next move. However, Forex does not have a “bear market, nor a bull market”; it has both, depending on your choice. 

Okay – I know it’s easier said than done but let that be our job!

Our Job At ForexSignal.com 

At ForexSignal.com – we monitor the market daily and determine which direction, long or short, has the most significant possibility. But do we always get this correct? No, of course not. Nobody alive can predict the financial markets on a day-to-day basis with 100% accuracy over a long period.  

We have been providing Forex Services for over 24 years, so I’m glad to say we are significantly more correct than incorrect. 

Check for yourself; we have every trade sent to our clients since 2000.   

The Good and the Bad. 

Forex Signal Trading Performance Since 2000 | View Results   

See you in the week!

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Will Forex volatility continue – this is the question many traders ask these days. But, over the past 24 years, when we first started providing Forex services, one thing has always been consistent: Forex volatility swings.

Forex Volatility Swings

Experienced Forex traders are well aware of the Forex volatility swings up and down the Forex market provides during major economic announcements and significant world news events. 

Typically these announcements and developments have a relatively short life cycle – granted, they may set up a new trend direction. Still, this is often short-lived, and a few days later, the markets either lose focus or spend day after day sideways with no clear path whatsoever. What created a considerable spike initially often loses its momentum, and a few days later, it’s like nothing hardly happened. It all goes into our trading memory, and we move on to the next trade possibility.

Forex Volatility Likely To Continue

Like the seasons come and go, Forex brokers and traders have accepted that high periods of Forex volatility last relatively short. What made Forex so popular, especially with online speculators and day traders, was the ability to capitalize on significant moves and some of the big swings using leverage. Like any market speculation, traders look to the risk/reward situation to evaluate a trade opportunity. It’s challenging to bank a worthwhile profit when market swings are relatively small with no follow-through—those high-paying moves more than make up for the losses. 

Our trading history has shown us that when we have moves that allow us to hit our Target objective consistently, profits earned are compounded. Of course, a trader needs the capital and the ability to take risks required to speculate and make money. It’s not for the faint of heart, but I believe that “nothing ventured, nothing gained.” 

Any successful business person will tell you that there is no gain without risk. This attitude either works for you or it does not. Either way, it drains the emotions (often the bank account), but the upside can be extremely attractive, and that seems to be the drawcard for most speculators and day traders.

The Stock Market 

We have all witnessed a considerable stock market sell-off across the board and worldwide in the last few weeks. The three main catalysts igniting the sell-off are:

1. The Ukraine war
2. Soaring oil and energy costs. 
3. Inflation and its cure; interest rate hikes.  

Forex has significantly reacted to these critical components, and we have seen swings and trade volumes not witnessed in many years. In addition, the arrival of new traders previously attracted to stocks and crypto trading are flocking to Forex in the droves. This adds up to more activity, larger volumes, and larger and deeper moves.

USD

I’ve been saying it for weeks; the USD has ignited the path forward, and pullbacks have been nothing short of a great opportunity. Our sincere belief is that this latest occurrence will continue for many more months and open up substantial trade possibilities.

As stressed in our mentoring sessions – seasoned traders learn how to resist chasing the market even if we have missed out on trading opportunities. It’s like swimming in the ocean. If we don’t catch that decent wave, the next one will be arriving shortly.  

We consistently generate our Forex signals in line with this thinking from day one: We trade to win. We don’t ever trade just for the sake of trading!

YES – WE DO EXPECT THE FOREX VOLATILITY TO CONTINUE!

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As we plunge into May, the (DXY) US Dollar Index continued to surge to its highest level since May 2020. We are now at the highest level against all other major currency pairs in the last five years.

Remarkably, during April, the DXY surged as if there was no gravitational pull, leaving most analysts speechless, especially considering the stock market had some of its worst days since the arrival of Covid in early 2020. 

The 103.82 (DXY) level previously reached in early 2017 seems to have been a reasonably strong resistance level as it ended just below that point. In fact, as of this writing, it is at 103. 65 and knocking at the door going higher.

The million-dollar question we’re all asking – will the USD surge continue? What signs should we be looking to for confirmation either way?

What To Expect in May 2022

A few indications provide us with a more unambiguous articulation of what to expect.

1. Lack of Resilience Against the USD in the Majors

• Euro – 57.6% weight
• Japanese Yen – 13.6% weight
• GBP (Pound Sterling) – 11.9% weight
• CAD Canadian Dollar – 9.1% weight
• CHF Swiss Franc – 3.6% weight
• Others – Balance 

It appears not one of the above pairs has shown any resilience against the USD as of late.  The ForexSignal Trend Meters shown below have confirmed this as well.

2. The Fed (Federal Reserve)

All attention will be on Wednesday’s FOMC policy meeting. The current consensus is towards a 50 basis point hike as the Fed looks towards a much-needed reduction of the current balance sheet. The Index usually the first to react is the Nasdaq 100, which has had its worst month in April since 2008. Confirming our thought

3. Fridays FOMC – Jobs Report

The end of the week will be closed out by April’s Nonfarm Payrolls job report. So the FED is the common denominator in providing direction.

Policy meetings from the Bank of England and the Reserve Bank of Australia add to the mix.

Bottom Line

My sentiment – possibly a day or two of pullbacks, but then look to a  resurgence of the USD back to its stratosphere.

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