USDJPY Forecast:
The USDJPY was indecisive yesterday. On h1 chart below we can see that price still trapped in 90.50 – 89.00 area. A boring pair which shows no significant direction and momentum. The bias remains neutral in nearest term but still in a bearish context after violated the major trendline support. We need a break below 89.00 area to continue the bearish scenario testing 88.23. Break above 90.50 could lead us into no trading zone as direction would become unclear.
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Doubts about sovereign credit are forcing reductions in budget deficits at a time that the banks and the economy may not be strong enough to permit the pursuit of fiscal rectitude-George Soros
In English, what Mr. Soros is saying is that (European) austerity programs are coming at the exact worst time, because governments which implement them are likely to double-dip into recessions.
He also said the current economic situation is “eerily” similar to what happened during the Great Depression of the 1930’s. Then, as now, governments came under pressure to reign in deficit spending before their economies had fully recovered.
By 1936, much of the economy in the U.S. had regained the levels of the late 1920s, except for unemployment, which remained high at 11%. But pressure from conservative, deficit hawk politicians grew and in June 1937, the Roosevelt administration cut spending and increased taxes in an attempt to balance the budget. As a result, economy again went into a recession through most of 1938, with unemployment increasing from 5 million to more than 12 million.
Now, there’s no indication as of yet that the Obama administration intends to cut the deficit, but the conservative political winds are growing stronger and if a wave of tea-partiers get elected in the mid-term elections, the President’s thinking on this could change even though now would be the absolute worst time to do this because the economy has not returned to pre-recession levels. For example, in real (inflation adjusted) terms, Q1 2010 GDP was 1.24% below the last high from Q2 2008 while the real gross added value of non-farm businesses remained 2.4% below where it was in Q4 2007.
However, a potential reduction in deficit spending is not the only concern which no doubt will begin to weigh heavily on equity markets before too long.
As Arthur Laffer pointed out in an opinion piece in the Wall Street Journal last week, tax hikes will be taking effect as of January 1, 2011 which he believes will lead to “a severe double dip recession.” He also made the point that income and demand is being shifted from 2011 into 2010, a “major reason that the economy in 2010 has appeared as strong as it has.”
We could be starting to see the effects of this happening already. Last Friday’s report on May’s Retail Sales was surprisingly weak, especially if you look at sales excluding auto, gas stations and hardware stores, which is what the government uses in calculating GDP. This core measure rose just 0.1% in nominal terms after a 0.2% gain the previous month (CPI for May will be released on June 17, so we’ll be able to calculate the real number). As a result, expect to see economists revise down their Q2 GDP forecasts as personal consumption figures to make a smaller contribution to the economy than previously estimated.
Doubts about sovereign credit are forcing reductions in budget deficits at a time that the banks and the economy may not be strong enough to permit the pursuit of fiscal rectitude-George Soros
In English, what Mr. Soros is saying is that (European) austerity programs are coming at the exact worst time, because governments which implement them are likely to double-dip into recessions.
He also said the current economic situation is “eerily” similar to what happened during the Great Depression of the 1930’s. Then, as now, governments came under pressure to reign in deficit spending before their economies had fully recovered.
By 1936, much of the economy in the U.S. had regained the levels of the late 1920s, except for unemployment, which remained high at 11%. But pressure from conservative, deficit hawk politicians grew and in June 1937, the Roosevelt administration cut spending and increased taxes in an attempt to balance the budget. As a result, economy again went into a recession through most of 1938, with unemployment increasing from 5 million to more than 12 million.
Now, there’s no indication as of yet that the Obama administration intends to cut the deficit, but the conservative political winds are growing stronger and if a wave of tea-partiers get elected in the mid-term elections, the President’s thinking on this could change even though now would be the absolute worst time to do this because the economy has not returned to pre-recession levels. For example, in real (inflation adjusted) terms, Q1 2010 GDP was 1.24% below the last high from Q2 2008 while the real gross added value of non-farm businesses remained 2.4% below where it was in Q4 2007.
However, a potential reduction in deficit spending is not the only concern which no doubt will begin to weigh heavily on equity markets before too long.
As Arthur Laffer pointed out in an opinion piece in the Wall Street Journal last week, tax hikes will be taking effect as of January 1, 2011 which he believes will lead to “a severe double dip recession.” He also made the point that income and demand is being shifted from 2011 into 2010, a “major reason that the economy in 2010 has appeared as strong as it has.”
We could be starting to see the effects of this happening already. Last Friday’s report on May’s Retail Sales was surprisingly weak, especially if you look at sales excluding auto, gas stations and hardware stores, which is what the government uses in calculating GDP. This core measure rose just 0.1% in nominal terms after a 0.2% gain the previous month (CPI for May will be released on June 17, so we’ll be able to calculate the real number). As a result, expect to see economists revise down their Q2 GDP forecasts as personal consumption figures to make a smaller contribution to the economy than previously estimated.
GBPUSD Forecast:
The GBPUSD had a bullish momentum yesterday, but still unable to move consistently above 1.4527 region so far. On h4 chart below we can see that price is now struggling around to bullish channel lower line indicating critical technical point. A clear break below the bullish channel could trigger further bearish momentum towards 1.4350 before re-testing 1.4240 region. On the other hand, as long as price able to move inside the bullish channel, the upside correction scenario remains intact with 1.4608 and 1.4715 as technical target.
[...] EUR/USD Daily 07 Jan 10 [...]
GBPUSD Forecast:
The GBPUSD attempted to push lower yesterday, slipped below the bullish channel but whipsawed to the upside, topped at 1.4721 and closed at 1.4648 in a high volatile market. On h4 chart below we can see that price had a strong bullish momentum after produced a false breakdown. The bias is bullish in nearest term especially if price able to move consistently above 1.4720 area targeting 1.4865 before testing 1.5000 – 1.5050 area. A failure to do so could lead us into a new range area between 1.4720 – 1.4527 but as long as price move inside the bullish channel the main outlook in nearest – medium term remains bullish.
[...] EUR/USD Daily 07 Jan 10 [...]
Once you understand why in the long term the casino is a guaranteed winner, you’ll see it has nothing to do with gamblers having “bad luck” and everything to do with simple arithmetic. The idea then becomes to apply this arithmetic to your everyday trading so that you can become the casino and guarantee yourself longer term success.
The casino’s advantage over the gambler comes from always paying less than the true odds for a given occurrence. For example, in the game of dice there are 36 different number combinations and 6 ways to roll a 7, which means that the odds of hitting a 7 on any one roll of the dice are 6 to 1. However, when you make this bet and win, the casino will only pay you 4 to 1 odds. Let’s see what this means.
If the casino collects $10 per roll of the dice on this bet it will collect $60 for every 6 rolls. But it will only pay out $40 for the 1 time in 6 that the gambler wins, which means that for every 6 rolls of the dice (at $10 per roll), the casino is guaranteed to win $20 because it collects $60 and only pays out $40. Casinos love these kinds of “sucker bets” because over the long term, there’s a guaranteed profit built into them (which in this case is 33.3%).
Of course, a gambler could get lucky and hit several 7’s in a row. But over the long term, the casino is the guaranteed winner because it has this built in edge. Every game (and bets within a game) in the casino has a certain amount of built in “edge.”
If you think of forex trading, excluding breaking out even, there are only 2 outcomes; a currency goes up or it goes down. The random odds of winning a trade, in the long term, are 50% which means that over the longer term, you as a trader are going to average somewhere between 45% and 55% winners.
The bottom line here is that you have to find a way to make money at this level of winning percentage. You have to turn the odds in your favor so that you can be the casino and have a built in “edge” that’s guaranteed to make you a winner over the longer term.
What you have to do as a trader is to find a way to get paid MORE than the true odds of a “heads or tails”, 50/50 forex bet. In other words, using our dice game as an example, you have to find a way to get paid 8 to 1 odds (or more) for an occurrence whose odds are 6 to 1. You have to find a way to get paid $80 for every $60 you bet, not $40 for every $60.
The good news is that there way to do this is and it’s something I stress in my room constantly. And because you have to see this work in the longer term, I want to give you a free month in my trade room.
The regular cost of joining is my room is $99 per month but if you join now, you will receive the second month for free. This 60 day period is essential for seeing how I apply these concepts in the longer term.
So, I hope that you will join my room and learn how to turn your forex broker into your own personal “sucker.”
