Which Forex System?: July 2012

Monday, 16 July 2012

Simon Denham's Daily Market Comment

Another week another Libor scandal as further details of other banks partaking in fixing are revealed, but this time it’s the usually squeaky clean Lloyds bank that’s at the heart of the accusations. This is not news we didn’t know about and we can expect this to run and run as more fines will be handed out. The headlines will remain full of bad banking practices and poor judgement of a select few as the vote winning and populist bash a banker theme continues. There’s no question that the rules need to be tightened and the actions taken by people to fix rates in order to line their pockets are completely wrong, but there comes a point when the chastisement is enough and we are in danger of driving these major employers and huge tax contributors away from the UK.

The last few years has seen banks having to increase their capital buffers, adopt more regulations, suffer a seriously negative public perception and at the same time politicians have been screaming at them to lend more to businesses and individuals in a climate that is hardly conducive to investment. Some of these banks, if not all of them, will having already been weighing up their options and with the world of global finance so interlinked it wouldn’t take too much for a HSBC or a Barclays to say we’re off. There are plenty of places that would welcome them with open arms like Shanghai, Dubai or New York and whilst many people might say good riddance to them, we have to remember that our services based economy is heavily reliant on finance. Banking certainly needs a good clean up, but our major industries ought to be encouraged as opposed to continually berated.

The markets ended last week on a high and the Dow put in a very decent gain whilst sustaining its highs as well. After China's GDP came in on expectations and avoided the much rumoured collapse investors were encouraged that it hadn't fallen off a cliff whilst at the same time had dipped enough to keep the prospects of more stimulus very much alive. Also adding to the tide of positive sentiment were the earnings results from JP Morgan which sparked a strong recovery in financial shares. The buying frenzy spread to other sectors and the Dow rallied 204 points to close at 12,777.

This morning the FTSE is trading flat after an exciting first 5 minutes where futures opened lower than where we had expected before bringing the index back to around the 5660 level. After Friday’s strength we’re back towards the resistance levels of 5700/25, although still a little way off, but this remains the major hurdle for the index. To the downside 5600 is pegged in as the major near term support.

Once again the euro put in another 2 year low on Friday at 1.2163 but the bears were quickly swept aside and afternoon bounce saw earlier losses pared in moving into positive territory to close at 1.2247. The reversal in sentiment was triggered by a successful Italian bond auction but the general risk on mood added to the upward momentum. This morning EUR/USD is at 1.2235 not showing a huge indication that it wants to carry on higher, but Friday’s rally could just be the start of a bigger bear squeeze.

Gold rose on Friday, gaining $20 to close at $1588.1, as a general risk on mood descended on markets and weakened the demand for the dollar. Despite its gains however, gold posted its second weekly loss as the likelihood of a third round of quantitative easing from the Federal Reserve looks ever more distant.

Crude oil futures gained on Friday as the US’s sanctions on Iran continue to press the supply disruption trade. Also adding to the gains was the general weakness in the dollar as other markets experience a strong risk on appetite. Missile tests by Iran have also added to the upward pressure on crude prices, but this morning things are just a little softer with Brent trading at 101.25.

http://www.capitalspreads.com/simon-denhams-daily-market-comment

Friday, 13 July 2012

Hi and welcome to the 'Which Forex System?' blog.

I'll be posting regular market updates from well respected Forex experts and showcasing the best Forex advice and systems, so you don't have to waste fruitless hours searching for it yourself!

Add me to your 'Favourites' now and as a special thank you, I'd like to give you 4 fantastic FREE gifts by simply entering your details on the right of this page >>>

You'll receive my 3 Part Ebook series 'The Forex Decoder' which covers everything from the history of Forex, to revealing the most consistently profitable indicators you'll need in your Forex arsenal. I've sorted the 'wheat' from the 'chaff' so you don't have to make the same mistakes as I did when I first started.

You'll also receive a copy of Mark Nelson's famous '7 Habits Of A Highly Successful Trader' which will prove an indispensible aid in your Forex career, as it has done in mine.

Just enter your details on the right and get these 4 fantastic gifts absolutely for FREE >>>

Yours 'Forexly',

Cliff

Are You Trading to Win?

By Dr. Woody Johnson

Have you ever experienced doubt…or worry, or fear, or any of the other negative emotions that can sideswipe your results? Of course you have…you are human; and as a human you are an emotional being. Now, as an emotional being, you cannot take emotions out of the trading equation. Yes, it is possible to distance yourself from negative emotions that can distort your judgment and distract your thinking through training and consistent work at it; but to think you will ever be “totally” in control and/or devoid of emotions is an exercise in futility. It is far more effective to learn to “manage” emotions in order to maintain focus when you are in the trader trenches. Managing emotions is not easy, it means that when you get to that fork in the road and you have a choice between going left (falling off the cliff and essentially giving in to ego-driven tendencies while reaching for temporary relief) or choosing right ( doing what is in the highest and best interests of your A-Game). When you are trading from this proactive position and you are engaging in a mindset that is fiercely focused on what matters most in the trade, you are “trading to win.” The alternative is to “trade not to lose.” Let’s examine the differences in these two concepts a little more closely.

Larry Wilson in his book Play to Win asks whether your orientation to life is a play to win strategy or playing not to lose. A playing not to lose strategy is based on the need to remain in your comfort zone and constantly look for temporary emotional relief by giving in to impulsive behavior and hoping you get the results you want. Things must come easily when playing not to lose. People with this strategy are constantly looking for the magic bullet or the quick fix that will create results out of thin air with no regard for their development. The philosophy of playing to win on the other hand is about the notion that life is growth, that courage and meeting the challenge are the harbingers of success. It is about commitment to excellence and a belief that learning (both about the market and your unconscious faulty ego driven beliefs) is critical for both professional and personal effectiveness. The core maps (your mental models and paradigms that filter perceptions) of playing not to lose are driven by fear, greed and other negative emotions. These emotions are attached to deep seated limiting beliefs about yourself and out of these limiting beliefs come thoughts. Thoughts similar to the following; “…I must make this trade, I can’t possibly allow any trades to slip by, that is money lost; and losses are for losers. Conversely, the core maps of a person playing to win which is trading to win when in the markets reflect a belief that there is an abundance of opportunities, that they don’t have to chase every trade impulsively because there will be another, and another after that – she knows that there is power in patience and stalking the high-probability trade like a hungry lion. When you are playing not to lose you are trading not to lose and it also means that you are tentative and unwilling to “put it on the line” so-to-speak; making your effort your best effort.

Trading to win also entails the search for objective reality and, holding on as you would a life jacket in a stormy sea. A trading not to lose strategy is closed with limited alternatives; it blames others or outside influences first and seldom looks inside to identify issues that are negatively affecting results; this strategy promotes irrational thinking. The trade to win strategy owns all results by using techniques like journaling to find out what is and is not working. The trade to win trader is prepared to use protocols and effective routines in order to ensure sustainable success. This strategy is intellectually and emotionally honest along with garnering the enthusiasm and energy necessary to vigorously address trading weaknesses, but you can’t address a weakness that you either don’t know or don’t understand. Trading not to lose encourages erratic and illogical behaviors while looking for the easy win, often putting large positions at risk thereby simply gambling, and by reneging on commitments to established rules – if they have rules at all. The trade to win strategy recognizes that trading necessitates losses and that effective long-term winning means managing risk, having an iron clad commitment to rules, goal-setting, planning and methodical, smart trading. The trade to win strategy is winning the psychological war one battle at a time – “going as far as I can with all that I’ve got” in a growth oriented, fun, honest and healthy way.

Your issues, obstacles, and problems that plague your trading must be treated like an infestation in your home, you want to know that the cockroaches are there so you can weed them out and get rid of them. That’s why documenting your trades and incorporating a feedback loop by using a “Thought Journal” and a trade log are critically important parts of your tool box. Most of you already know that smart trading means tracking and documenting your trades in order to get data on how well your trade plan is working. Similarly, you must also gain data on what you are thinking and feeling because this is how you uncover the unconscious issues that act as drivers to bad behaviors that bring on unwanted results. You’ve got to be willing to dig deeply to find out; you must pull back the layers of the mental onion and face your issues so that with the right mental and emotional tools you can successfully resolve them. A “don’t bring me no bad news” outlook is going to turn you into a Sisyphus, the Greek mythological character that was doomed to roll a boulder up a mountain only to never reach the top. You’ll never reach the top of your trading goals but will be doomed to push that boulder (your issues) until you run out of either energy or money and it’s usually the latter first; that is if you are unwilling to look at your ego driven unconscious faulty beliefs. The smart trader accepts the challenge and realizes that trading to win is about the long haul.

So, you must decide which life strategy you are willing to undertake in the service of your trading. Will it be the courageous and comfort-zone expanding trading to win, where you are committed to growth and excellence? Or, will you reach for the easy button with a strategy based on not wanting to get outside of your comfort zone; avoiding challenging yourself and living by default with blinders on. The choice is always yours. Remember, trading to win is where you are going as far as you can with all that you’ve got!

Happy Trading

http://lessons.tradingacademy.com/article/are-you-trading-to-win/

Wednesday, 11 July 2012

Hi and welcome to the 'Which Forex System?' blog.

I'll be posting regular market updates from well respected Forex experts and showcasing the best Forex advice and systems, so you don't have to waste fruitless hours searching for it yourself!

Add me to your 'Favourites' now and as a special thank you, I'd like to give you 4 fantastic FREE gifts by simply entering your details on the right of this page >>>

You'll receive my 3 Part Ebook series 'The Forex Decoder' which covers everything from the history of Forex, to revealing the most consistently profitable indicators you'll need in your Forex arsenal. I've sorted the 'wheat' from the 'chaff' so you don't have to make the same mistakes as I did when I first started.

You'll also receive a copy of Mark Nelson's famous '7 Habits Of A Highly Successful Trader' which will prove an indispensible aid in your Forex career, as it has done in mine.

Just enter your details on the right and get these 4 fantastic gifts absolutely for FREE >>>

Yours 'Forexly',
Cliff

Are You Getting to First Base?

By Rick Wright

Hello traders! In honor of the baseball season, this week’s newsletter will reference America’s favorite pastime. The main point of this letter is setting realistic expectations on your trades and managing your winners properly. After speaking to several students over the years, there has been a relatively consistent topic that comes up, which sounds something like this: “I get into a trade and it goes my direction, but after a while it goes against me and I get stopped out.” My next question is always “How far does it go your direction?” Usually the answer is something like “20 pips” or “the distance of my stop loss” or some other metric that they are using.

Guess how far these traders are getting on the diamond in baseball? That would be “first base”! In trading, very often experienced traders will have multiple targets for their trade. If you are trading 3 lots, basically you could have three potential targets to exit this trade, perhaps 20 pips for one lot, 50 pips for the second, and 100 pips on the third. If you are consistently hitting your first target before price retraces, you are hitting consistent “singles” in baseball, getting you to first base! Many new traders only want to hit the “home runs” with their trades, making dozens if not hundreds of pips on a trade. In our current market volatility, not everyone is good at hitting these home runs. You would be surprised how many traders I’ve spoken to who stubbornly watch a 20-50 pip winner turn into a losing trade, by letting it retrace all the way back to their stop loss! Instead of going for only the home run, if these traders would take part of their trade off at a smaller first target (a single) and moved their stop to break even, there would be many more dollars in their account today!

Have you seen the movie “Moneyball”? Brad Pitt and Jonah Hill played the general manager and “consultant” to the Oakland Athletics baseball team in this film. They took the uncommon view that hitting percentages were less important than on base percentages. This means that instead of looking at big name, expensive players who hit a lot of homeruns, they looked at players who got to first base consistently. If you are a fan of baseball, you know these numbers can be wildly different! When a team is trying to score runs, having people on base is a lot better than waiting around for some slugger to hit a home run every other inning! The point is, getting to first base consistently is more important than trying to hit big home runs every time you are at the plate!

So how can we relate this to becoming a better trader? When you find a trading style that you like, be it scalping, momentum, swing, or position trading, you will probably find that you are going to be “in the money” a few pips on most of your trades after a period of time. For example, if you find yourself as an intraday momentum trader, you may be going for 20, 50, and 70 pips on your trades. Should you stubbornly hold on to your entire position until it hits your 70 pip target? In my opinion, no. This would be considered a home run! First things first, let’s lock in the “single”-perhaps take one lot off at the 20 pip target and move your stop loss to break even. If price retraces, you still made a few pips. If not, then perhaps you will get a double (getting to second base)at your 50 pip target! One way that people move their stop is to wait for the price action to move in their direction the distance of the stop loss-with a 10 pip stop, when in the money 10 pips the stop is moved to break even. My personal preference is to wait until my first target is hit. Try both techniques and see which works better for you.

Imagine a batter who hits the ball, and doesn’t start immediately running to first base. Instead he stands there at home plate, waiting for the ball to drop before he starts running. As far as I’m concerned, this is like letting the trade work without moving your stop and locking in profits! Everyone in the ballpark would be screaming at this batter to start running if he just stood there, waiting for the ball to land! Doing that, it had better be a home run! Otherwise, he will get thrown out not even getting his single. Trading is the same way. Take those singles, then doubles, even triples, and if a homerun shows up, congratulations! There is a reason that homers are not hit at every at bat by every player. They aren’t very easy to do! Let’s concentrate on getting on base and managing our winning trades by moving our stops when price goes our direction. If you consider yourself the general manager of the baseball team, moving your stop is like managing your players properly. Four singles by four batters in a row will add up to a home run!

Please be aware that I am not going against the idea that you should have at least a 3:1 reward to risk ratio on your trades, or to ignore our previously discussed supply and demand zones. These should be the cornerstones to your trading plan! I am only suggesting that because of these volatile times, managing your trades in a slightly different fashion may put more pips in your account.

http://lessons.tradingacademy.com/article/are-you-getting-first-base/

Monday, 9 July 2012

Simon Denham's Daily Market Comment

As the US earnings season gets underway and ahead of companies in Europe who commence shortly investors will have a chance to reflect back on a quarter that has disappointed on many a macro economic data front. With all the major economies slowing more than many had predicted those firms that had been gearing up to take advantage of the predicted recovery will have reined in projects and investments and will also be looking at other ways to reduce costs. The biggest cost to firms of course are its people and whilst we’ve seen unemployment in the UK peak and even in the US it has declined in the last few months the chances of more people losing their jobs is becoming ever more possible.

Expectations for the up and coming earnings season had already been reduced and so far in the US a few disappointments have emerged which have already contributed to a couple of poor sessions for the Dow. Yesterday’s figures from M & S also didn’t make for good reading and highlighted not only the effect that the dire weather is having on retailers but it is adding to yet another headwind that consumers are facing.

Despite the surprise jump in UK industrial production yesterday it’s unlikely that we will see the UK return to growth again in the second quarter. Across the pond growth is slowing and the labour market stalling and whilst over there another recession may not be quite on the cards yet, it’s touch and go. All this makes the possibility of further QE more likely as central banks become addicted to the idea that further stimulus is the solution to our economic woes and at some point they will really completely run our of fire power at which point the short termism is likely to result in an even worse and prolonged downturn in economic activity.

So tonight’s FOMC minutes will be interesting to read following their extension of Operation Twist and their willingness to let the markets know that they are keeping the door very much open in terms of more QE. With their remit being focused on the labour market it’s clear to all that things there are not as rosy as they would like and so it’s seen as only a matter of time before they pull the trigger again and tonight might shed more light on just when that could be.

Due to the weakness in US markets overnight the FTSE is in the process of erasing yesterday’s gains and is trading at 5630 at the time of writing. With little in the way of economic data ahead of tonight’s FOMC minutes we could see yet another dull trading session and narrow trading ranges.

The euro made a new 2 year low yesterday, touching 1.2234 against the dollar, as concerns over the reports that the ESM fund may have hit a road block in the German courts has thrown already agreed upon bailouts into doubt. Although making back some ground since the 2 year low, little likelihood of any positive cues leaves sentiment remaining heavily bearish. This morning however a little bit of opportunistic buyers are trying to pick the bottom with EUR/USD up a little at 1.2275.

Gold eased as a bearish outlook on equity markets and a stronger US dollar sapped appetite for the precious metal. After touching $1,600.9 earlier in the session, gold did an about face and plummeted $34 to touch $1565.9 before recovering modestly and this morning that recovery looks to be continuing taking the yellow brink to 1578.

Crude oil prices declined over 2% as the expected supply disruptions from a strike at a Norwegian oil field didn’t materialise and sentiment surrounding the global economy looks set to deteriorate, further reducing demand. Despite the negative trajectory, traders are likely to be on the sidelines until today’s crude oil inventories shed more light on the supply situation.

http://www.capitalspreads.com/simon-denhams-daily-market-comment

Friday, 6 July 2012

Hi and welcome to the 'Which Forex System?' blog.

Yours 'Forexly',

Cliff

How to Treat Forex Trading Like a Business

By Johnathon Fox

Many people come to Forex trading looking for the ultimate lifestyle of wealth and freedom. Whilst this level is by no means unattainable it is these exact thoughts that tend to bring the trader undone. Instead of treating their trading like a business the trader is too busy committing all the errors that will lead to money being lost rather than money being made consistently.

What does treating your trading like a business mean?

Trading like any other sort of business is designed to yield a profit at the end of the month and year. Setting up and treating your trading as a business is all about doing the things that will give you the best chance to make a profit.
Whilst most traders would like to think they treat trading as a business they are still committing critical errors such as outdated equipment, not following a business plan and continuing to search for a holy grail instead of perfecting just one method.

Have the correct equipment

To give yourself the best chance to succeed you must use the best equipment available to you at the time. This includes;

A solid trading platform that has minimal slippage

A broker with a long standing good record

A good computer to carry out your trading

A back up platform such as a Tablet, Ipad or Mobile Phone with the correct charting equipment

The great thing about Forex is you don’t have to spend a massive amount of money to purchase the equipment you’ll need - but skimping on the essentials will put you behind all the other traders trading the same markets.

Find a method that gives you an edge over the market

When traders have the basic equipment for their business set up they need to decide on the method they are going to use to trade with. Changing from strategy to strategy will only take attention away from becoming profitable at the method of choice.

Make a business plan

A business plan is essential to any viable business and this is no different to trading Forex. Most traders don’t use a business plan but it is also true that most traders do not treat their trading like a business and most traders don’t make money.

Just a few things your trading plan should have are;

What you look for to enter the market and take a trade

The money management technique you use. Ex – how much money or % of your account you risk per trade

How you manage your trades

How you exit your trade or trail your stop

Ongoing Education

Like any other business once you become profitable the education does not stop there. The markets are changing and evolving all the time and like all good businesses you must move with the times. Continually seeking further education and market knowledge will help you stay abreast of any changes to the market.

http://www.dailyforex.com/forex-articles/2012/02/How-to-Treat-Forex-Trading-Like-a-Business/11048

Wednesday, 4 July 2012

Hi and welcome to the 'Which Forex System?' blog.

I'll be posting regular market updates from well respected Forex experts and showcasing the best Forex advice and systems, so you don't have to waste fruitless hours searching for it yourself!

Add me to your 'Favourites' now and as a special thank you, I'd like to give you 4 fantastic FREE gifts by simply entering your details on the right of this page >>>

You'll receive my 3 Part Ebook series 'The Forex Decoder' which covers everything from the history of Forex, to revealing the most consistently profitable indicators you'll need in your Forex arsenal. I've sorted the 'wheat' from the 'chaff' so you don't have to make the same mistakes as I did when I first started.

You'll also receive a copy of Mark Nelson's famous '7 Habits Of A Highly Successful Trader' which will prove an indispensible aid in your Forex career, as it has done in mine.

Just enter your details on the right and get these 4 fantastic gifts absolutely for FREE >>>

Yours 'Forexly',
Cliff

Forex Trading Can Be Simple (If You Let)

By Christopher Lewis

One of the biggest issues that can rear its ugly head in the world of the newbie trader is over complication. In fact, making things much more difficult than necessary is a staple of every budding trader’s early career it seems.

The biggest catalyst for this is twofold. The first issue is a lack of self-confidence. This makes sense, because by being new to the trading world it is easy to feel that you know almost nothing. The average new trader is constantly looking for “hints”, “tips”, and “tricks” when it comes to trading. This is easily understandable as they will know little about currency trading. After all, sound trading decisions are the result of experience, and they will have very little of that. What many people don’t understand is that experience is often the result of bad decisions!

The lack of confidence will lead to system-hopping, and the constant switching of indicators and timeframes. The thing that is risky at this point is the trader very rarely understands how an indicator works. They just simply know that you “buy when this line crosses the other one”, or something like that. The understanding of the mathematics involved makes using these indicators more effective in theory, because at least the trader knows what they are seeing. Of course, at this point in time, they may have several indicators on their charts and this can lead to what is known as “paralysis by analysis”, which leads me to the other catalyst.

The other catalyst is simply a fear or losing money. Most traders go into the Forex markets looking to get rich, and not understanding that you can’t always win. Yes, they understand that a 100% win ratio is a bit much to ask for, but they don’t emotionally understand that. It is one thing to understand something from an intellectual level, and quite a different one to understand it from a gut level. Taking a loss isn’t fun, but it is something we all do.

The “paralysis by analysis” syndrome comes about because of this. There is a point in the new trader’s career that they will pile on the indicators in order to “read the markets.” They may start with a moving average, and add an M.A.C.D. indicator as time goes on. Perhaps they have attended a webinar that featured the trader using the ADX and Keltner Channels. At this point in time, they are starting to add the indicators to the chart, and not seeing the most important thing: where price is going!

With a ton of indicators, it isn’t easy to understand where to go. You could have three indicators saying sell, while another two are saying buy. It is at this point the trader understands how difficult this is getting for them. They have made it overly complicated, and now it is getting to be frustrating – and that can lead to really stupid trading decisions over time.

Hopefully, they reach the point where one day they look at a chart and say something like, “Wow, if I only had sold USD/CHF over the last few years. It has gone straight down over that time.” While there are pullbacks, the trader sees that in general, they could have made a fortune selling this pair over the last several years. This is where the idea of trading with the trend comes into play. There are traders out there that will only trade in the direction of the overall trend, and refuse to take set ups in the other direction. Of course, this takes a bit of patience when the pullbacks come – but it does work in the end. While there are many different ways to trade, those who choose this method simplify a lot of the decisions they are forced to make as they already know what direction they want to be in. Their entries may vary from trader to trader, but they all tend to sleep a little easier at night as well.

There are those who will debate the whole “the trend is up on the 15 minute, down on the hourly, but also up on the weekly timeframes.” Nonsense. Currency pairs only have one trend, and that is the major one. The rest is noise, and if you focus on that – you can avoid a lot of trouble. If you are trying to figure out the trend, simply look at a weekly chart and see if the market is going from lower left to upper right. If it is, you are in an uptrend. If it is going from the upper left to the lower right, you are in a downtrend. Anything that isn’t easily identified isn’t worth bothering with, as there are plenty of pairs to trade.

By approaching the markets in this manner, trading really can be as simple as you let it be.

http://www.dailyforex.com/forex-articles/2011/09/Trading-Can-Be-Simple/8738

Monday, 2 July 2012

Simon Denham's Daily Market Comment

Markets are in much better shape following the EU summit at the end of last week but there is unquestionably still some scepticism regarding the viability of what was agreed and whether it will be enough to pull the eurozone back from the brink. For starters, even though the Dow put on an impressive near 300 point gain on Friday, US investors’ confidence dropped to the lowest level for 2012 despite ongoing improvements in the housing sector. The last session of the month culminated in the index posting its best monthly gains for the year, and so certainly across the pond investors seem to be more confident that this European sticky plaster is going to work. Not only is confidence still taking a dent but Spanish borrowing costs remain well above the 6% level and so have barely improved things for the country. Finally, the risk on trade from the last couple of sessions has been rather muted to say the least. Many of the riskier stocks like the miners have simply not joined in the party and continue to remain a drag on the indices, in particular the FTSE due to its heavy weighting in the sector.

So as the doubts remain it will be interesting to see how things pan out through the summer months. With July underway we look back at how the month has panned out for the FTSE since the mid 1980s and see that there have been as many up months as down months, so there isn’t any clear bias for the bulls or the bears. But the months that have seen gains are on average much stronger than the months where losses have occurred. The month has also been quite a volatile one in the past so maybe we’ll get more of the same this time round, but with the Olympics only a few days away volumes could suffer.

The FTSE is adding to Friday’s gains this morning but with no real great conviction. At the time of writing we are higher by 15 points to 5586 just below the resistance seen at 5600 and 5640. This has attracted some sellers who think that the resistance will win over and we could head back down again, but a break above here might see a test of 5715 and 5760. To the downside 5530, 5470 and 5430 are all seen as support levels.

Economic data comes in the form of lots of manufacturing numbers. PMI surveys from the US, Europe and UK will all be watched to see how the sector is getting on as it continues to perform significantly under par. There’s also the EU unemployment figure which is expected to tick higher this morning and then for the rest of the week we gear up for the BOE and ECB rate decisions on Thursday and the non-farm payroll on Friday.

The euro rebounded 226 pips against the US dollar to 1.2666 as the deal by the EU officials managed to calm the markets, easing fears of an escalation in the sovereign debt crisis. Expectations of an interest rate cut by the ECB at its meeting this Thursday also might have supported the shared currency. Usually a rate cut is a bearish feature but this time it could be seen as an indication the so far reluctant European leaders are ready to take action. This morning the single currency is at 1.2635.

The global markets cheered the EU decision to ease the bailout rules for banks and the feel good factor also sparked a sharp recovery in precious metals. As the risk appetite made a comeback gold prices gained $46 to $1597, even breaking above the $1600 mark briefly.

A commitment by Europe to use funds for bailing out banks directly was met with a sigh of relief by energy investors who pushed the WTI crude prices $6.50 higher to $84.96. Crude prices were the best performers in the commodities class; nevertheless, the climb in WTI prices was accentuated by returning fears over Iran’s threats to close the Strait of Hormuz.

http://www.capitalspreads.com/simon-denhams-daily-market-comment