|
ShadowTrader FX Weekly is a your weekly scoop on all things Forex, with fresh content catering to both the experienced F/X trader and those just starting to get their feet wet.
Every Sunday, the FX Weekly provides you with three unique and important pieces of information in an easy to read, newspaper type format. ShadowTrader Pip Academy is a weekly online lesson where traders will learn the basics of the Forex market, technical analysis, and fundamental analysis as it applies to trading currency.
ShadowTraderPro FX Trader Live Call of the Week will highlight an actual trade taken in the newsletter over the past week and recap the setup and successful execution of the trade from start to finish.
Things You Should Give a Pip About is a look at ahead at news and markets that you should be paying attention to in the coming week to improve your chances of success.
We hope you will enjoy and benefit from this free, weekly newsletter. If you are not yet subscribed to our daily report, the ShadowTraderPro FX Trader, you may subscribe here for $20 per month.
|
ShadowTrader Pip Academy
Economics of Forex (II) - CPI, The Only Fundamental You Need.
OK, I will admit it is overly simplistic to say that CPI is the only fundamental you need, but CPI is intertwined with many economic principles.
Consumer Price Index is a measure of how much a basket of goods costs. Each country has different items in their basket based on common purchases in the country. The key here is the percentage shift. At the risk of sounding ultra cliché, the U.S. CPI may include McDonalds hamburgers and the French CPI may included wine and baguettes. And although the items may be different, if the items are common purchases in the country then the percentage changes in overall CPI are equally relevant.
Why is CPI so important? CPI is the measure of percentage change in how far the average joe's money will stretch for their common purchases. CPI can be affected by an increase in costs of goods, a decrease in purchasing power of the domestic currency, or a combination or both. No matter the reason for the shift, the changes reflect inflation and economic health. A healthy inflation and economic growth rate occurs when annual CPI numbers are between 0% and 5%. Negative levels are demonstrative of deflation and serious economic slowing. Annual rates over 5% indicate high inflation. When inflation is not accompanied by growth in production (normally measured by GDP), this creates stagflation.
If CPI rates are between the 0% and 5%, a positive shift in CPI for one country when compared to another will generally benefit the country with the larger CPI meaning the value of the faster rising CPI country will go up. This may seem a little contrary to what would be expected but it has been consistent. Higher CPI means higher inflation which means that central banks usually will raise the key interest rates in the hopes of slowing inflation and growth. Higher interest rates is an incentive for other central banks, large banks and institutions to invest in the higher yielding currencies. This increases demand for the currency and also decreases supply (higher interest rates means less lending) and provides a double boost to the currency.
See you at the Pip Academy next week for Economics of Forex (III) where we will discuss Interest Rates and the Carry Trade.
All FX Weekly Pip Academy lessons are always archived here.
|
ShadowTraderPro FX Live Call of the Week
The only thing we could have had work out better in this AUD/JPY trade would have been a break of the 74.25 resistance level.
We called the entry as a pull back when the pair was trading near 74.00. We placed a buy limit at 72.55, the day before price dipped to trigger our trade.
We only went past our entry by 4 pips, nearly flawless in the entry price. As of today we are testing resistance near 74.25. If the pair can break 74.25, we will be watching for a move higher to near 78.50 as our exit target.
|
SHADOWTRADERPRO FX TRADER
Daily newsletter including email alerts
Currency setups with defined entry, defined stop and defined target
$20 per month
|
|
|
Things You Should Give a Pip About
The dollar has sold off consistently for over a month now. As the dollar falls against the world currencies it losing it's purchasing power in general. A weaker dollar means that everything you have to buy or want to buy is becoming more and more expensive. As can be seen here on the U.S. Dollar index, we are reaching multiple month lows in the index and strong support as well. A break of this support could see a dollar drop of 15% or more in a very short period of time.
The strongest currencies in the past few weeks have been the commodity currencies. This is only a confirmation to both the dollar weakness and the costs of goods going up relative to the dollar. Looking at the GBP/USD you can see price has broken resistance numerous times in the past 2 weeks alone and over the past 2 months the dollar has lost over 16% against the pound.
If you don't think this will affect you much, ask yourself the question, “How would I feel about taking a 15% pay cut now and possibly another 15% pay cut within a year?” If these trends continue, this will be the net effect of the past 3 months and the next 6 months...ouch!
|
|
|