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FX weekly Out Look GBP, EURJPY , USDJPY

After reaching the highs of GBPUSD 1.66659 the GBP / USD has hesitated and is now pulling back

With a bearish engulfing on the daily chart and a pullback test the GBPUSD falls further at the 

beginning of the week on worst number out from the Manufacturing Purchasing Managers Index

56.7 Actual Consensus 57.0 Previous 57.2

MONDAY: The Manufacturing Purchasing Managers Index (PMI)

Tuesday: Halifax HPI: Tuesday, 4th-7th. This housing inflation indicator is an important gauge of activity in the UK housing industry. 

Wednesday : The British Retail Consortium (BRC) Shop Price Index measures price changes in the popular retail outlets in the UK.

Markit Service PMI captures an overview of the condition of sales and employment.

Thursday : BoE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the GBP. 

Friday: The Industrial Production released by the National Statistics measures outputs of the UK factories and mines. 

EURJPY

Monday:  The Monetary Base

PMI Germany Actual ... Cons: 56.3 Previous 54.3

Tuesday: 10.00 The Producer Price Index (PPI) released by the Eurostat

Wednesday: Jap labour cash Earnings : shows the average income, before taxes, per regular employee. 

Euro : The Retail Sales released by the Eurostat is a measure of changes in sales of the Euro zone retail sector.

USDJPY:

1.      

       Monetary Base: Monday, 23:50. Monetary Base dropped in December to 46.6%, short of the estimate of 55.2%. No significant change is expected in the upcoming reading, as the Bank of Japan maintains its aggressive monetary policy. The estimate for the January release stands at 47.2%.

2.      The Construction Spending released by the US Census Bureau is an indicator that measures the total amount of spending in the US on all types of construction.

3.      Actual... Cons: 0.2% Previous 1.0%

4.      The Institute for Supply Management (ISM) Manufacturing Index shows business conditions in the US manufacturing sector It is a significant indicator of the overall economic condition in US. Actual ... Cons 56 Previous 57

5.      10-year Bond Auction: Tuesday, 3:45. The average yield on 10-year bonds continues to creep upwards, with the previous yield rising to 0.72%. No change is expected in the January release.

6.      The Factory orders released by the US Census Bureau is a measure of the total orders of durable and non durable goods  Actual... ONs -1.9%  Previous 1.8%

7.      Average Cash Earnings: Wednesday, 1:30. This indicator is an important gauge of consumer spending. The indicator jumped to 0.5% last month, its biggest gain in almost a year. The markets are expecting the upward trend to continue, with the January estimate standing at 0.7%.

8.      The ISM Non-Manufacturing Index released by the15.00  Institute for Supply Management (ISM) shows business conditions in the US non-manufacturing sector. 

9.      Actual ... Cons 53.8 Previous 53.0

10.    30-year Bond Auction: Thursday, 3:45.  The average yield on 30-year bonds has been quite steady, with a yield of 1.67% in December. No change is expected in the upcoming release.

11.    13.00 The Counting Jobless Claims released by the US Department of Labor measure the number of individuals who are unemployed and are currently receiving unemployment benefits. actual cons - Previous 2.991M

12.    Friday: 13.00pm : The Unemployment Rate released by the US Department of Labor is the number of unemployed workers divided by the total civilian labor force.

13.    Actua; ... cons:6.7% Previous 6.7%

14.    Leading Indicators: Friday, 5:00. Leading indicators is based on 11 economic indicators. Still, it is considered a minor event since most of the data has been previously released. The indicator has been steadily improving and reached 110.8% last month. Further improvement is expected in the January reading, with the estimate standing at 111.9%.

gbpusd

·         Possible Double Top Currently @ 1.6605 and the Dec 30 2013

·         We may see a short term correction to 1.6505 and 1.6464 before a continued raise in the £/$

Sharp Fall in unemployment towards the policy 7% threshold

IMF warning global growth upgrade and more in 2014 expectation to 0.1% the forecast to 3.7% expansion in the global economy.

The financial system is slowly healing uncertainty  is decreasing

IMF has reiterated the long standing concerns  about frailty of the recovery and warned central banks not to withdraw monetary stimulus " Prematurely" if they it could get complex

Data out from the US 23/01/2014

·         The Initial Jobless Claims released by the US Department of Labor is a measure of the number of people filing first-time claims for state unemployment 

·                               Actual ........ Consensus 326k Previous 326K

·         The Counting Jobless Claims con:2.93  Pre 3.03

·         Existing Home sales (MoM) Con 0.4% Pre -4.3

Risk Management

 FX trading the ratio refers to the number of pips we expect to gain in profit on a trade relative to what we are risking in the event of a loss. applying this function is key in our analysis and planning of every trade this makes it easier to control risk easy because our traders will intuitively identify places to exit their trade. 

The key we have found is to find a positive ratio for our in house  scalping to swing  strategy and implementation take time  every time we are considering a position in an asset . 

A positive  2:1 / 3:1 Risk/Reward ratio is our preferred approach and collecting profits as soon as we are 20 to 30 pips in profit while reducing our risk by bring our risk exposure down to break-even.we have also considered hedging our exposure in the options market as a type of insurance against our long term position one of the fundamental and mistakes traders make in which we avoid is risking more on losing positions than the amount gained from a winner. This comes from traders using a negative risk/reward ratio and needing a much higher winning percentage to compensate for their losses.Our traders  are savvy and aware of this and understand that a positive risk reward ratio ultimately will put probability of success in their favour and are also equipped on  how to avoid the number one mistake that Forex Traders Make.
 

Above the graph depicts a sample channel trade on the GBPUSD. Traders looking to trade a Swing would expect to enter the market on a failure of resistance and bearish engulfing at 1.6447 pull back and possible end of a nested fifth wave see www.Timelessfx.blogspot.com. When setting exits on such a trade we have set minimum target stops should always be set outside a level of support or resistance. In this example we have a tight stop loss stops because of the trade line break to the upside and the good retail sales that came out that week for the Pound, jusy above the previous candle highs  at 1.6428. In the event price declines through this level, we would be expecting to gain initially 39 pips. To create a 1:3 Risk/Reward ratio and a extension of this as it heads to the lower target of  1.6313. or better. Now that we know a little about risk reward ratios
in the event that the trade does not go according to plan and reverser to the upside we will have to handle a small loss of 13pips. if we have not already brought out stop loss to breakeven which we eradicate complete exposure Article written by Mr Kasim Ijelu Director of Trading