Forex Crunch British Employment Continues Improving

British Employment Continues Improving
3 Psychological Tendencies That Cripple Traders And How To Avoid Them
Forex Daily Outlook – June 16 2010

Posted: 16 Jun 2010 01:32 AM PDT

Claimant Count Change, which shows the number of people claiming unemployment benefits in Britian, dropped by 30,900 people. This is the fourth month in a row that such an improvement in employment is seen. Also the unemployment rate fell. GBP/USD is on the rise.

Early expectations stood on a drop of about 23,000 people, and this is a significant surprise. Note that all the drops in the Claimant Count Change in the past four months were stronger than expected. This figure relates to the month of May. And there was another good surprise:

The unemployment rate, which is a lagging figure in the UK (relates to April) finally dropped as well. It unexpectedly dropped from 8% to 7.9%. It was expected to remain unchanged for a third month in a row.

While an improvement in employment wasn’t always Pound-friendly, this time it is: GBP/USD is making a fresh attempt to break the 1.4780 resistance line, after a 30 pip jump after the release.

GBP/USD managed to break the 1.4780 line yesterday, riding on risk appetitive trading all over the world. GBP/USD reached 1.4836 but then fell back down and traded at 1.4760 before the release of the employment figures.

Earlier this week, inflation figures were slightly weaker than expected, easing the pressures to raise the rates to tackle inflation. CPI rose by an annual rate of 3.4%, lower than last month’s 3.7% rise, and lower than 3.5% that was expected. Also Core CPI fell short of early expectations, rising at a rate of 2.9%.

It’s important to note the third release – RPI. The Retail Price Index is still high – 5.1%, showing that consumer inflation is still untamed. The new British Prime Minister, David Cameron, urged the central bank to tackle the rising inflation, and said that the CPI must go down. Mervyn King dismissed it up to now, but unless CPI goes under 3%, which is the government’s target, a chance of a rate hike is still possible.

GBP/USD Lines

Another attempt to break above 1.4780 will meet resistance at 1.5050, a line that the pair reached after the recent European turmoil at the beginning of May. Above, 1.5130 was a support line when the Pound was trading higher, and now serves as resistance. It’s followed by 1.5350, which was a pivotal line at the higher range, and then by 1.5530, the highest level in recent months.

Below, 1.4610 provides immediate support. It capped the Pound a few times in recent weeks. It’s followed by 1.45 and 1.44, which was also a line of support in the past. The year-to-date low of 1.4227 is quite far at the moment.

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3 Psychological Tendencies That Cripple Traders And How To Avoid Them

Posted: 15 Jun 2010 10:39 PM PDT

Guest post by Jason Madison of beatwallstreetnow.com

In the world of trading we often spend too much time worrying about signals and news releases that we often overlook the most important aspect of being a successful trader which is to develop the proper mindset. This is more important than what methods you choose to use in your trading because without the proper mindset you will lose regardless of how good your system may be. What follows some common mind traps that traders fall into and how to avoid letting them derail your trading.

1. Holding on to trades too long

So often a trader will open a trade and watch as it moves into profit and then never exit the trade and end up taking a loss. This is one of the worst mistakes a trader can make and is the result of greed and fear. Greed in the form of the trader thinking it can go further and so not taking profit and also fear of missing out on any extra pips by getting out of the move too early. This type of thinking more often than not leaves the trader with nothing more than a loss and hurt feelings as they beat themselves up over not taking profit when they had the chance.

In order to combat this you need to realize that it is more important to take sure profits than lose them all waiting for a big move. When you are given a trade signal you have no way of knowing how long the move is going to go on for. So you need to set hard exit points and get out at the first sign of trouble, instead of clinging to hope of a continuation. If your need to be in on the move is so great that you can't bear the thought of missing out on extra pips then take profit on half of the position and then move your stop to break even. That way you will have profits guaranteed while simultaneously allowing your self to profit if the move continues.

2. Moving your stops

This is another very common mistake made by new traders which can decimate trading accounts. Traders often will watch as a trade moves against them and as it gets closer to hitting their stop they will move it back because they "just know that price is going to turn around". So, instead of just taking their loss and moving on they move their stop back and continue to do so until either they finally accept the fact that they are wrong or they receive a margin call.

This is a simple trap to avoid because all you have to do is realize that your stop is there for a reason to protect you from losing more that you are willing to. You need to view your stops as if they are set in stone because they are your lift rafts in the violent sea of forex trading. Moving them can only hurt you because more often than not moving your stop back will do nothing but leave you with a larger loss.

3. Trying to be perfect

So many traders come into this business believing that they will never take a loss and thinking that every loss is the end of the world. So when they do lose they punish themselves mentally and end up making more mistakes as they carry that fear of loss into the next trade with them which causes them to make horrible trading decision like the one mentioned above. In order to combat this you need to learn to accept loss as a part of trading.

No one is ever right 100% of the time no matter how good they are at what they do. Michael Jordan didn't make all of his shots and Christiano Ronaldo does score every time he takes a free kick so there is no reason for you to think that in order to be a successful trader that you need to win on every single trader. The best traders in the world take losses, but what makes them the best is that they shake off the loss and move on without a second thought and they don't allow the fear of loss to hamper their trading. So, if you want to count yourself among their numbers then I suggest you do the same.

These are just some of the more common psychological errors that end trading careers before the ever have the chance to blossom. If you want to be successful then you need to make sure that you look out for these as well as other negative psychological tendencies.

Until next time. Happy Trading.

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Forex Daily Outlook – June 16 2010

Posted: 15 Jun 2010 02:00 PM PDT

US Building Permits and PPI are released, Federal Reserve Chairman Ben Bernanke speaks in New York and Capacity Utilization Rate is expected to grow. Let's see what's awaiting us today.

In the US, Building Permits expected to rise this month by 20,000 units following the unpredicted drop to 0.61M in the previous month while Housing Starts anticipated to drop by 20,000 reaching 0.65M.

Later in the US, Producer Price Index predicted to decrease from -0.1% to -0.5% and Core PPI also expected to drop from 0.2% to 0.1% ensuring low inflation rates.

More in the US, Federal Reserve Chairman Ben Bernanke speaks about “Financial Reform” at the Conference on the “The Squam Lake Report: Fixing the Financial System,” in New York. This can affect the currency.

Finally in the US, Capacity Utilization Rate expected to continue its consistent growth reaching 74.6% which may affect inflation rates in case of additional increase, Industrial Production is also expected to climb to 0.9% following the positive rise from previous month and Crude Oil Inventories predicted to increase by 0.3M from -1.8M in May.

In Canada, BOC Governor Mark Carney speaks at the Area Chamber of Commerce, in Charlottetown.

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

In Europe, Consumer Price Index is expected to remain 1.6% as in May and the Core CPI is also anticipated to maintain 0.8%.

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

In Great Britain, BOE Governor Mervyn King speaks at the Mansion House, in London and may affect the currency.

More in Great Britain, Claimant Count Change measuring the change in the number of people claiming unemployment-related benefits during the previous month is expected to drop -23.2K which is 3,900 higher than the previous month.

Later in Great Britain, Average Earnings Index representing 3-month moving average expected to rise by 0.4% since May 4.0% indicating a rise in consumer inflation.

Read more about the Pound in the GBP/USD forecast.

In Switzerland, ZEW Economic Expectations a survey rating relative 6-month economic outlook for Switzerland is expected to remain around 40.5 points.

In Australia, MI Leading Index is hoped to maintain the rating of 0.9% as in the previous month.

For more on the Aussie, read the AUD/USD forecast.

In Japan, Bank of Japan Monthly Report is issued may affect interest rates and provide information regarding future monetary policy.

That’s it for today. Happy forex trading!

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