Posted: 27 May 2010 04:35 PM PDT

Guest post by Jason Madison of beatwallstreetnow.com

Hello All,

I hope the forex markets have been treating you well and also that the techniques I have showed you have helped in your trading.

Today I am going to be showing you a new technique that will surely help you in your quest to become an elite trader.

It is called an Engulfing Candle

An Engulfing candle is a candle whose length completely encompasses the previous candle with a close above the high or below the low candle. If the close is above the high of the previous candle then it is a bullish engulfing candle and that signals a buy, while if the close is below the low it is a bearish engulfing candle that's signals a sell:

The arrow is pointing to a bullish engulfing candle that if bought would have produced a winning trade.

Engulfing candles are the result of a sharp turn in the direction of price as compared to the previous bar. So in the case of a bearish engulfing candle price was previously moving up, and at the open of the next bar price tries to continue its upward movement but cannot not sustain it and it quickly moves down and closes below the low of the previous bar signaling a trade.

Now to see this pattern in action let's look at a hourly chart of Eur/Usd

At each of the numbered points on the chart we see a bearish engulfing candle followed by a hard move down. This is a very reliable pattern that is central to my own trading. Incorporating this into your trading will only serve to increase your profits.

A special note about the third trade:

If you notice the first two bearish engulfing candles followed bullish candles, but the third one followed another bearish candle. This is common and is still a valid trading signal.

Well that's all for today. I hope you all take this technique and increase your profits. Until next time.

Happy Trading

If you would like to learn about more patterns like these and how you can discover how you can learn the secrets to trading for a living then visit beatwallstreetnow.com

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Forex Daily Outlook – May 28 2010

Posted: 27 May 2010 02:00 PM PDT

US Core PCE is expected to remain 0.1%, US, Personal Income is about to grow by 0.2%, Revised UoM Consumer Sentiment is expected to rise and Canada’s Current Account deficit is expected to shrink this quarter. Let us see what awaits us today:

In the US, Core Personal Consumption Expenditures Price Index released monthly, representing the change in consumers spending excluding seasonally volatile products such as food and energy is expected to remain 0.1%.

Later in the US, Personal Income is about to grow by 0.2% from 0.3% in April while Personal Spending is expected to drop from 0.6% to 0.3% this month.

More in the US, Chicago Purchasing Managers’ Index is expected to decrease by 1.6 points compared to 63.8 points in April.

Finally in the US, Revised UoM Consumer Sentiment is expected to rise by 0.1 points compared to 73.3 points in the previous month which continues the overall improvement in the US economy and their Revised UoM Inflation Expectations is likely to stay around 3.1%.

In Canada, Current Account deficit is expected to shrink this quarter by C$ 0.8B which is the lowest quarter since May 2009.

For more on USD/CAD, read the Canadian dollar forecast.

In Europe, German Import Prices are expected to drop this month by 0.2% compared to 1.7% in April keeping low inflation rates.

For more on the Euro, read the EUR/USD forecast and Casey Stubbs' latest analysis.

In Switzerland, Swiss KOF Economic Barometer released monthly, is intending to continue its climb by 0.05 points reaching 2.04 points indicating economic growth.

More in Switzerland, An increase of 0.16B CHF in the balance of trade surplus this month, from April’s 2.01B, giving boost to Swiss economy.

That’s it for today. Happy forex trading!

Want to see what other traders are doing in real accounts? Check out Currensee. It's free.

List of Top 10 Blogs Refreshed

Posted: 27 May 2010 10:28 AM PDT

About a year ago, I made a list of top 10 forex blogs. I’ve now updated the list again with 8 blogs that already appeared there, and 2 new ones. I’ve also slightly modified the description of the blogs on the list.

After seeing my top forex blogs, please read the important notes that I’ve added 6 months, and I’m repeating here:

Only blogs are in this list. While there are lots of definitions for blogs, and there’s a fine line between a blog or a site, I stick with two definitions: chronologically ordered in reverse (last post first), and the option to comment. There are lots of good forex sites out there. I listed here only blogs.
I listed here only blogs that are to my liking.
No one paid me for this including him in this list
The order in the list doesn’t represent an internal ranking.

I hope you enjoy Forex Crunch.You’re welcome to subscribe via email or by RSS.

Dollar Rides on Bad US Figures

Posted: 27 May 2010 06:15 AM PDT

Risk aversion is the name of the game these days: US GDP was revised to the downside and jobless claims were higher than expected – the result from these bad numbers – another rise in the dollar across the board. Could this start a fall of the Euro to new lows?

Gross domestic product for the first quarter of 2010 was revised from 3.2% to 3%. Economists had expected an upwards revision to 3.5%. While this figure relates to a time period that ended almost two months ago, this release is quite disappointing for the American economy.

In Q4, the economy grew at a stellar rate of 5.6%. Q1’s number is very far from it, and Q2 will definitely be worse.

The second number for today – jobless claims, dropped from 470K to 460K. While this drop is always a blessing, it fell short of early expectations – 450K. This slight disappointment adds to the GDP.

This weekly indicator struggled with breaking below the 430-440K region. The current numbers still indicate a rise in Non-Farm Payrolls next week, but no ground-breaking change.

Forex reaction

The dollar reacted with a rise across the board. EUR/USD dropped from 1.2280 to 1.2240 immediately after the releases. GBP/USD made a move upwards before the releases, but this move stopped immediately after the release. AUD/USD was making a similar move, and this halted as well. Other currencies had the same behavior. Gold, that was falling before the release, came back up.

The risk factor is working extra hours since the escalation of the European debt crisis at the beginning of May. Since December, when American Non-Farm Payrolls showed positive signs, the risk factor was rather muted. The market usually behaved “normally”, meaning that good American figures meant a rise in the dollar, and bad American figures meant a drop in the dollar.

Since the beginning of May, the dollar returned to the position of a “safe haven” currency, meaning that bad figures sent it up, even if the bad figures were in the US, and that good figures sent it down.

EUR/USD focus

The heavy debt of PIIGS countries took stock markets and the Euro down in the past weeks. This week saw some stability, with no new multi-year lows for the common currency. EUR/USD is trading in a range throughout the week – above the record 1.2142 low and under 1.24. All in all, the trend is down.

Will these figures turn into new record lows before the end of the week? Tomorrow’s American figures are mostly second tier numbers, nothing major like GDP or jobless claims. There are no important European releases. So, the edgy markets are awaiting more news concerning the European debt crisis, and the chances of something major coming out now are slim. The Euro will probably continue trading at the low part of the range, but not make a breakout.

But next week is loaded with economic releases, including the Non-Farm Payrolls and many European events is expected to be more decisive for the long term direction of the Euro.

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