The truth about Forex and Futures Trading

Introduction:
I’m not a self confessed market guru, nor am I an expert when it comes to written communication and education. I am however quite the expert at understanding price action and devising trading systems and methods. I am successful, not only at trading money, but at helping people improve their trading. The sole reason I succeed in the markets is because I am patient and I trade setups that repeat themselves over and over. Trading is a sport, like chess, billiards and poker, trading is a game of skill and strategy.
My analysis and approach is typically very simple. I use nothing more than daily and weekly price charts, not a bunch of fancy indicators, no fancy bells and whistles. Basic Maths and Price Charts are all one needs to make money in today’s markets.
It’s my aim to empower you with simple strategies, and hopefully make a difference to your future trading endeavors. I ask you to open your eyes and see what the market can realistically offer you. If you have $100 in a trading account, you’re not going to make it, $2000 and you have a fighting chance, $10,000, and your chances increase because you have the ability to handle inevitable losses.
I will not be filling these pages with useless trading content, and bore you to tears with basic market theory which is available for free on Google searches. I’m going to go straight into the meat, and divulge to you, not only a successful trading method, but help you understand what will help make you successful in the market.
The Realities of directional trading.
If there’s one thing I’ve learned in the last 5 years, when it comes the topic of wealth creation , weather it be trading share market, the currency market, real estate or even simple business, I find that failure in these fields is mainly due to a lack of discipline or planning. A trader can be given a method to enter traders but the question is, can they stick to the plan and manage the trade properly? Does successful trading depend on your personality or your approach? The short answer is both!
If you’re failing, you are a victim of subconscious inhibitions and mental in-capabilities, which all result in “fear” and “lack of personal discipline”. There’s a reason Ex Marines, Army and Navy personal make money trading, I know 2 ex military personnel that succeed in trading, and they both have the same personalities. They are trained in the art of war and discipline. Based on this information, a novice trader, or failing trader should then revert back to practicing a mechanical method which induces discipline and a step by step plan. Even is that method breaks even, you are starting good habits.
The reason the owner of a McDonalds Franchise makes money is purely because he follows a proven system with rules and restrictions. Successful trading and investing is no doubt similar to franchise in itself. If you use a method to trade with, and stick to it, manage your money correctly whilst maintaining constant discipline in your approach, the chances of your survival is increased 100 fold.
What you really need to know.
I want you to understand that before you trade or use this information, that any trading strategy should be just one part of your trading arsenal. My systems work for many, and can work for you, but you must be realistic. All methods lose money, as well as win money, the best approaches are often conservative and trade less often. You are not going to build Rome overnight with this method, but your most likely going to improve your results significantly over time, if not your discipline alone. As I continue to reiterate, a trading plan and disciplined approach is the true grail of trading.
I have often found that traders are obsessed with getting on “every move”, when all they really should be doing is mastering an approach to make “some of the moves”. My success can be attributed to the understanding that trading is a conservative game of patience and strategy. It’s a game no doubt, with many players, all whom are usually much smarter than the retail trader. As “small fish”, we must develop skills to jump on the back of the ‘larger fish’ (banks), and ride the tide for as long as possible. That in itself is precisely how trading works.

Understanding the Forex Market

With a host of different market makers, rather than a few specific specialist, and no centralized market, there still exists both and identifiable structure and specific hierarchy within the Forex market.

At the top of the pyramid the InterBank market, made up primarily of the currencies of G8 countries representing around 65 percent of the global economy, has the highest volume of trading. Within this InterBank market the major banks trade among each other using lines of credit between individual member banks.

The banks use InterBank brokers and electronic trading systems to facilitate trading transactions among one another with all applicable rate information available in real-time to all parties.

While the major banks trade within the InterBank market many smaller players like corporations or smaller banks use commercial banks to facilitate their trading activities. Without established lines of credit between members as in the InterBank structure these smaller players typically use a single bank for all their transactions and usually trade at higher less competitive rates.

Until recently the domination of the major banks and the closed nature of the market members acted s a barrier to entry for those individuals wishing to trade foreign currency. However, the advent of internet-based information and trading systems coupled with less restrictive regulations have opened up this multi-billion dollar market to the average investor.

Changes in the nature of the Forex market itself have also opened up opportunities. Whereas foreign currency trading was once primarily considered an aspect of international trade activity to facilitate a country's import export activity, today's market sees a broader range of capital flowing between players such as mutual funds, insurance companies, institutions, and even private individual investors.

It is the massive market size and diversity of participants which give the Forex it's superior liquidity and transparency that make it an ideal opportunity for the active investor. Higher leverage, and online trading capabilities means just about anyone with a few thousand dollars to invest can get started.

New traders or people that are considering a move into the Forex market are often discouraged from hearing over and over that the Forex market is difficult to make money in. Quite simply it isn't. You just have to go into it with right attitude or mindset.

Experienced traders often refer to this as your trading psychology. Part of a healthy and successful trading psychology will definitely include the following three attitudes or concepts.

First, know when to get in and out of a trade. That means setting your goals in advance and not just winging it once you opened a position. Plan you trade and trade your plan.

Failing to plan will ensure that you are surprised by the market more often than not and will hesitate and watch helplessly as a positive trade becomes a loss.

Successful traders watch the basic and proven indicators to determines the viability of there trades. Of all the indicators used in Forex trading price is the most accurate and useful in the long run. Complexity can kill your trading success so always keep it simple.

10% Of Traders Go Bankrupt

I was thinking about an article I read some time ago that 90% of traders who ever trade lose their account and that 10% actually go bankrupt. If the first number doesn't scare you then the second definitely should.

Why is it then that there is such a large number of traders failing? It is not because they are stupid; in fact most traders have an above average IQ and are above average in most categories such as education and income. So why do they fail?

Lack of trading education!

By education I don't just mean learning how RSI works or drawing lines on a chart. I mean thoroughly educating yourself in all aspects of your chosen profession. Educating yourself on the correct psychological approach to the market! Educating yourself in the correct risk management techniques relative to your account size. Educating yourself in the correct entry and exit
methods for the trading style that suits you.

This, my friend, is where I hope to be of some help. I don't have all the answers nor do I profess to be some kind of guru but I will do my best to point you in the right direction.

Common Misconceptions Of New Traders

They think they can trade consistently with an 80% accuracy.
They think they can turn $1000 into $100,000 in six months.
They think they can predict turning points in their given
markets to within minutes.
They think they can buy a system that is 100% accurate.
They think they will quit their jobs and make a living full
time after a few months of trading.
What's the reason that so many new traders believe that trading is an easy way to make big profits? Propaganda!

We are continually bombarded in magazines, emails and the general media with claims of making astronomical amounts, just by applying the vendor's latest method or system.

Don't get me wrong, there is good stuff out there but the vast majority is not worth the price you pay. At www.surefire-trading.com I also recommend products but I have at least read the ebooks or courses and think they have some value to my subscribers and they all have a refund guarantee.

Fundamentals Of Trading

The way you approach the market psychologically has as much to do with your success as any trading plan.

Risk management is crucial if you want to have any hope of becoming a successful trader.

Matching a method of trading with your personality is the only way you will ever feel comfortable in the markets.

An adequately funded account is necessary - not only to be able to take the trades you want, but also so you don't feel every trade is a live or die situation.

The journey to the road of successful trading will make you confront your deepest fears. Your armor on this journey will be confidence, knowledge and belief in yourself that you can achieve your dreams.

Never, equate your success or failure in the markets with who you are as a person!

The Flaw In Our Emotions

As humans we have a natural tendency to try and influence our surroundings and events we take part in. This is one reason we, as a species, have succeeded but it is also one of the fundamental flaws we all have when trying to achieve success as a traders.

As traders we have to realize we have no control over the market and if we accept that then we have to accept that we can not influence the direction of the market.

The problem of course is we have a tendency to try and succeed and when inevitable losses come, it is easy to let those losses effect us emotionally. Becoming euphoric when you hit a winning streak is almost as detrimental as becoming depressed when you have a string of losses.

We as traders have to try and achieve the state of impartiality. We have to accept that we will have losses as readily as we will have wins. Reaching the stage where you can comfortably accept loss in the knowledge that your method of trading will produce profits in the longer term is the state we have to aspire to.

Risk Management

Whenever I think of risk management I always think of an article I read on 925 CTA programs between 1974-1995. It essentially confirmed what I have long held to be true. To summarize the report, of all the CTA's who managed funds, the most consistently profitable were the ones with the best risk management systems.

To trade successfully you have to take a long look at yourself. Ask and answer the following questions.

How much equity do I need to start? How much should I risk on any one trade? Am I undercapitalized?

During the course of these lessons I will do my best to help answer these and other questions.

Entry And Exit

As a trader you will probably fall into two main categories, traders who like to trade the breakout and traders who like to join the trend once established. We could also add congestion traders, reversal type traders and mechanical signal traders but for the vast majority of traders you are going to fall into one of the two categories.

If you are a trend trader, you like to define a trend and then find a way in. This may be with the aid of fibonacci retracement levels, moving averages, Gann or one of the other many indicators available today. Your goal is to enter the trend as early as possible with the least amount of risk.

Breakout traders like to enter the market on the breakout of a previously identified range. This may be support/resistance areas, rectangles, triangles or one of the many other chart patterns. The secret to this type of trading is to determine a valid break.

In future lessons we shall begin to look at the more technical side of trading and how you can apply technical analysis to the markets to increase your probability of success.

Conclusion

During this lesson I have tried to give you a glimpse into the world of trading. I have also taken a slightly negative stance, as I don't want you to get unrealistic expectations of what to expect.

On the more positive side, trading is a fascinating world, which will allow you to really exercise your brain. There is no other arena where you get to play with some of the best minds in the world on a level playing field.

Once mastered, if you can ever use that term then the possibilities are endless. Hopefully I can help you achieve your goals

Short-Term Forex Trading - Is It Profitable?

Forex traders use a variety of different strategies and time frames to trade the markets, and one of the most popular tactics is to adopt a short-term forex trading strategy. However, with so much volatility every day, can you really make consistent profits this way?

Well I've traded the markets for many years and in my opinion, although you can make profits short-term trading, it's a very difficult (and stressful) way of making a living.

So why is it so difficult?

Well it's generally the case that financial markets, and currencies in particular, move in trends. However while this is true of medium and long-term charts, ie 30 minute up to weekly and monthly charts, when you get down to 1 and 5 minute charts, you're basically just looking at noise.

Prices will whipsaw all over the place and it's very difficult to trade with any confidence. While you will sometimes get breakouts that can result in a fair few pips profit, you will also get a lot of false breakouts and will be constantly stopped out of positions when your stop loss gets triggered.

Basically it's a very difficult way of trading and a very difficult skill to master. Yet so many people new to forex trading are seduced into short-term trading excited by the fact that they can grab say 20-50 points in a matter of minutes.

However, you can also lose a lot of points very quickly and instantly be whipsawed out of a position, especially if you are trading through news announcements. The end result of this is that a lot of short-term traders eventually find out how difficult it is to consistently make money this way and will often give up forex trading altogether.

So should you forget about short-term trading or scalping altogether?

Well not necessarily. There are definitely people who make consistent profits this way, and there are times when you may have a larger longer term position and you see an intraday opportunity to get in and grab a few points.

For instance, you may be 100 points in profit thanks to a long-term long position, but confident of a continued move upwards, you think the price has gone too high in the short-term, and you decide to go short to catch a short-term retracement. This is one example of where short-term trading may be appropriate.

Another instance may be where you notice that a currency is strongly trending upwards on the 30 minute and 4 hour charts, yet is oversold on the 5 minute chart after a brief retracement. In these instances it can be very profitable to use the shorter term charts to look for opportunities to take a value position in the same direction as the longer term trend.

So you can use short-term charts to look for positions, but it's always important that you look at the longer term picture before doing so. My own personal opinion is that just trading 1 and 5 minute charts without looking at say the 15 or 30 minute charts, at least, is suicidal.

So much of the price movements on a minute-by-minute basis is just noise, and will move all over the place, which is why it is so difficult.

To sum up, I would say that people should always look to take longer-term positions as they are a lot less stressful and are more prone to follow trends, therefore making them potentially a lot more profitable. Plus you can potentially grab movements of 1000+ pips rather than sitting at your computer all day looking for 5-20 point movements.

Be Careful, Someone Wants Your Money

The United States Commodity Futures Trading Commission (“CFTC”) warns consumers to take special care to protect themselves from the many types of commodities fraud being perpetrated in today’s financial markets. The CFTC is the federal agency that regulates commodity futures and options markets in the United States. We have seen a great increase in the number of scams that falsely promise high profits with low risks. Many of these scams are targeted at ethnic communities in their language, from New York to South Florida and from the Southwest to California, among other areas.

The public should be wary of any firm that offers to sell commodities or commodity futures or options. They might be selling precious metals, such as silver or gold, or on foreign currency, such as Euros, Yen or Deutschmarks. They might be selling futures or options on precious metals or foreign currency, or on other commodities such as crude oil, heating oil, unleaded gas, or agricultural products such as corn, soybeans, or cattle. The firm might be offering to manage your money for you to trade in commodity futures or options, or to pool your money with other customers. If a firm offers any of these investments, and promises high profits and low risks, or claims that they have made profits for all of their customers, you should not believe them without proof. The commodities and futures markets are very risky, and you can lose your entire investment very quickly. Anyone who claims otherwise might be breaking the law.

Foreign currency trading scams often attract customers through advertisements in local newspapers, radio promotions or attractive Internet sites. These advertisements may tout high-return, low-risk investment opportunities in foreign currency trading, or even highly-paid currency-trading employment opportunities. The CFTC urges you to be skeptical when promoters of foreign currency trading claim that their services or account management will earn high profits with minimal risks, or that employment as a currency trader will make you wealthy quickly. Precious metals scams often work the same way.

Commodity pool operators often solicit investments from friends, neighbors, co-workers and fellow religious or social group members by using their reputations in the community or their personal relationships. In many cases, however, the investment schemes turn out to be fraudulent, and investors lose their entire investment, in many cases as a result of outright theft. Individuals and firms that fraudulently solicit funds from investors for commodity futures and options trading are usually not registered with the CFTC. They may operate “Ponzi” schemes in which little or none of the money sent in by investors is ever invested as promised – in the commodity markets. Instead, the operator of the scam steals the funds, and creates the illusion of a successful business by using some of the money put in by later investors to pay phony “profits" to
earlier investors. This tactic makes it appear to investors that the investment is actually making money, which in turn attracts additional investors. Be wary of such payouts if you do not fully understand the source of any purported profits.

Introducing Brokers often use advertisements on radio and television, as well as infomercials – program-length television commercials – to promote commodity futures and options. These advertisements may claim that seasonal trends in the demand for certain commodities or well-known current events create an opportunity to make big money by trading in commodity futures and options. The advertisements and infomercials promise quick riches – such as turning $5,000 into $20,000 in just a few months – with predetermined risk. The CFTC has brought actions against wrongdoers who lured customers by claims that one could earn large profits with little risk based on predictable seasonal demands, published reports, or well-known current events.

Warning Signs of Fraud

1. Stay Away From Opportunities That Sound Too Good to Be True

Get-rich-quick schemes, including those involving foreign currency trading, tend to be frauds.

Always remember that there is no such thing as a "free lunch." Be especially cautious if you have acquired a large sum of cash recently and are looking for a safe investment vehicle. In particular, retirees with access to their retirement funds may be attractive targets for fraudulent operators. Getting your money back once it is gone can be difficult or impossible.

2. Avoid Any Company that Predicts or Guarantees Large Profits

Be extremely wary of companies that guarantee profits, or that tout extremely high performance. In many cases, those claims are false.

Be sure you get all the information about the company and its track record and verify the data. If you can, before you invest with any company, check the company's materials with someone whose financial advice you trust

3. Stay Away From Companies That Promise Little or No Financial Risk

Be suspicious of companies that downplay risks or state that written risk disclosure statements are routine formalities imposed by the government.

If in doubt, don't invest. If you can't get solid information about the company and the investment, you may not want to risk your money

4. Question Firms That Claim To Trade in the "Interbank Market"

Be wary of firms that claim that you can or should trade foreign currency in the "interbank market," or that they will do so on your behalf. Firms that trade currencies in the interbank market, however, are most likely to be banks, investment banks and large corporations, since the term "interbank market" refers simply to a loose network of currency transactions negotiated between financial institutions and other large companies.

5. Be Wary of High-Pressure Efforts to Convince You to Send or Transfer Cash Immediately to the Firm, via Overnight Shipping Companies, the Internet, by Mail, or Otherwise

6. Be Skeptical about Unsolicited Phone Calls about Investments, Especially Those from Out-of-State Salespersons or Companies with Which You Are Unfamiliar

Forex Trading

So what is is Forex trading you may ask? Forex is the exchange you can buy and sell currencies. For example, you might buy British pounds (by exchanging them to the dollars you had), then, after pounds / dollar ratio goes up, you sell pounds and buy dollars again. At the end of this operation you are going to have more dollars, then you had at the beginning.

The Forex market has much higher liquidity, then the stock market, as much more money is being exchanged. Forex is spread between banks all over the planet and as a result it means 24 hour trading.

Unlike stocks, Forex trades are performed with high leverage, usually it is 100. It means that by investing $1000 you can control $100,000, and increase potential profits accordingly. Some brokers provide also so called mini-Forex, where the size of minimum deposit equals $100. It makes possible for individuals to enter this market easily.

The name convention. In Forex, the name of a "symbol" is composed of two parts - one for first currency, and another for the second currency. For example, the symbol usdjpy stands for US dollars (usd) to Japanese yen (jpy).

As with stocks, you can apply tools of the technical analysis to Forex charts. Trader's indexes can be optimized for Forex "symbols", allowing you to find winning strategy.

Example Forex transaction

Assume you have a trading account of $25,000 and you are trading with a 1% margin requirement. The current quote for EUR/USD is 1.3225/28 and you place a market order to buy 1 lot of 100,000 Euros at 1.3228, expecting the euro to rise against the dollar. At the same time you place a stop-loss order at 1.3178 representing a maximum loss of 2% of your account equity if the trade goes against you, 50 pips below your order price, and a limit order at 1.3378, 150 pips above your order price. For this trade, you are risking 50 pips to gain 150 pips, giving you a risk/reward ratio of 1 part risk to 3 parts reward. This means that you only need to be right one third of the time to remain profitable.

The notional value of this trade is $132,280 (100,000 * 1.3228). Your required margin deposit is 1% of the total, which is equal to $1322.80 ($132,280 * 0.01).

As you expected, the Euro strengthens against the dollar and your limit order is reached at 1.3378. The position is closed. Your total profit for this trade is $1500, each pip being worth $10.

Investing in Forex

Investing in foreign currencies is a relatively new avenue of investing. There are considerably fewer people are aware of this market than there are people aware of several other avenues of investing. Trading foreign currency, also known as forex, is the most lucrative investment market that exists. There are several factors that make this true among which, successful forex traders earn realistic profits of one hundred plus percent each month. Compared to some of the better known investment markets such as corporate stocks, this is an unheard of return on investment. It's very necessary to mention here that a person who invests in forex must, without exception, make it a point to learn the detailed, but simple strategies and information surrounding the market. This very fact is what makes the difference between successful forex traders and other traders.

A few additional points, which create such powerful leverage for investors within the forex market are: The amount of capital required to begin investing in the market is only three hundred dollars. For the most part, any other investment market is going to demand thousands of dollars of the investor in the beginning. Also, the market offers opportunities to profit regardless what the direction of the market may be; In most commonly known markets investors sit and wait for the market to begin an up trend before entering a trade. Even then, investors, as a rule must sit and wait some more to be able to exit the trade with a nice profit. Given that the forex market produces several up, down, and sideways trends in a single day, it can easily be seen that forex stands head and shoulders above other markets. Additionally there are trading strategies, which are taught that provide for compounded profits; these are profits on top of profits. In addition, free demo accounts are available within the industry of forex trading, which facilitate the sharpening of skills without the risk losing any capital. And the advantage regarding the time factor in trading foreign currency is a very attractive point for any investor. Compared to one of the most sought after avenues of investing, which often requires forty or more hours each week, namely in the real-estate market, the forex market requires a much smaller demand on the investor's time. Forex trading requires approximately ten to fifteen hours each week to earn a full time income. It's easy to see that the advantages and great leverage that exist in the forex market, make it among the most lucrative, time liberating, and easy to enter by far.

I hope this information gives you a clear understanding of how you can turn your investing into a true method of making your money work harder for you.

RSI (Relative Strength Index)

This popular technical indicator has been described as relative strength index. The value of RSI is that it represents top and borders of the range trade in currency or so called forex market in day or swing trading.

Values of RSI are ranged from 0 to 100. Indicatior value higher than 70 are considered as overbought. Indications are lower 30 are considered oversold on the trading charts. Application of these two borders to any forex currency pair market very strongly simplifies search of the markets which have reached dangerous or extreme positions. Value of average item 50 can serve that purposes as a zero line in forex market for the moment, and crossing Above and below this value create signals of a trend.

WHAT TIME PERIODS TO USE FOR RSI

Two values most frequently used for an RSI are 14 and 9. The majority of trading (day or swing) softwares offerOne of these numbers as value by default. Day time RSI will be based on the price data covering last of 9 or 14 days.The week schedule will include the last 9 or 14 weeks. As the computer does forYou accounting, are not present necessity to remember the formula.
That fact, that 9 or 14 are used more often, does not limit You to only these these values. You can experiment to find the ones which suit your style a lot. The majority of software packages allow you to optimize values for all indicators the best time period used.

GBPCHF - Hedging Strategy of the Week (Profit Potential: 600 pips)

Currency Pair: GBPCHF

Entry Zone: Go both long and short at the market if the price is at any level within the 2.42-2.48 range

Protective Stop: Long stop below 2.3750 and short stop above 2.5250

Profit Target: Long Target at 2.48 and Short Target at 2.42

Profit Potential: 600 pips (excluding transaction costs and slippage)

For more information on FXCM hedging strategies please visit http://www.fxcm.com/hedging.jsp

The most effective way to capitalize on currencies pairs that are trapped in tight ranges is through the use of hedging. The hedging feature is currently available on all accounts using FXCM’s No Dealing Desk service. The GBPCHF is our primary target for hedging in the week ahead, with clear range-bound trade and concrete support and resistance levels. To hedge, go both long and short at the market if price stays within the above Hedging Zone. Take profits at R1 for longs and at S1 for shorts, covering losses above R2 or below S2.

HEDGING RADAR – Find More Hedging Opportunities

· Entry Zone -> Go both long and short at the market if the currency is at any level within the Hedging Zone.

· Profit Taking ->Target for the long order is the top of the entry zone, for the short order is the bottom of the entry zone.

· Stop Levels are Key Support and Resistance Points -> Place the actual stops a few pips above the higher level and a few pips below the lower level. The break of these levels signals that the ranges have been broken and the hedging strategy should no longer be implemented.

· The lower the Average True Range, the Less Risky the Currency is for Hedging.

More Low Risk Hedging Opportunities
Currency	% ATR Rank	Stop for Long	Hedging Zone		Stop for Short	Profit Range
EURCHF	|||||| 0.35%	1.6289	1.6420	1.6686	1.6817	266 pips
EURGBP	||||||||| 0.40%	0.6550	0.6670	0.6870	0.7020	200 pips
GBPCHF	|||||||||||| 0.50%	2.3750	2.4200	2.4800	2.5250	600 pips
Medium Risk Hedging Opportunities
Currency	% ATR Rank	Stop for Long	Hedging Zone		Stop for Short	Profit Range
EURUSD	|||||||||||| 0.53%	1.3450	1.3650	1.3850	1.4050	200 pips
CHFJPY	|||||||||||| 0.63%	95.00	98.00	101.00	104.00	300 pips
USDCAD	||||||||||||| 0.74%	1.0000	1.0300	1.0600	1.0900	300 pips

ECB Rate Decision Could Drive EUR/USD To Break Down To 1.3600

AUG 2	ECB Announces Interest Rates (07:45 EST; 11:45 GMT)
	Expected: 4.00%
	Previous: 4.00%

How Will The Markets React?

On Thursday, the European Central Bank is expected to announce that they are leaving their benchmark overnight lending rate at 4.00 percent for the second consecutive month. Indeed, a steady hand is warranted, as June inflation reports showed CPI holding below the ECB’s 2.0 percent target at 1.9 percent while estimates for the July reading show the potential for an easing to 1.8 percent. Nevertheless, the central bank is likely to remain concerned that their previous policy actions (two hikes since the beginning of the year) have had little impact on the Euro-zone economy. Though investor confidence has taken a hit, consumer sentiment went unchanged in July while the unemployment rate was revised down to 6.9 percent – the best reading since 1993. Moreover, the manufacturing and services sectors remain resilient, as domestic and foreign demand support the industries. Money supply growth is likely to keep the ECB hawkish as well, with M3 surprisingly jumping 10.9 percent in June from a year earlier. While the merits of money supply figures as an inflation gauge are mixed, the data will remain of concern to the ECB. As a result, bond markets are pricing in a 25 basis point hike in September to 4.25 percent. However, with no physical meeting being held this month, there will only be a press release which will likely contain only a neutral, non-policy statement. Furthermore, without ECB President Jean-Claude Trichet’s regularly scheduled press conference, the central bank may not have the opportunity to articulate their hawkish bias with the phrase “strong vigilance”, which will create the potential for a cut back in policy tightening expectations.

Bonds – 10-Year German Bund Futures

Bond futures have shown significant strength through the past two months, with the recent anti-carry shakeout leading the 10-year future to its highest since early May. However, the contracts pulled back sharply today after an attempt to take out the 112.97 level. This price action is somewhat bearish for bunds, and a break of 112.53 would confirm the end of the recent uptrend, with declines targeting 111.70. However, if the ECB fails to signal an overtly hawkish bias in their press release on Thursday, Bunds could take out resistance to take aim on 113.90, especially if risk aversion trends prevail. However, the mere mention of the term “strong vigilance” will set the stage for September rate hike, and could propagate the aforementioned break lower for bunds.

10-Year German Bund Futures (Daily Chart)


FX – EUR/USD

Indecisive EURUSD price consolidation leaves ample room for a move in either direction on tomorrow’s ECB rate decision, with recent declines leaving a euro-bearish bias through the near term. The central bank is widely expected to leave rates steady at 4.00 percent, but ECB President Jean-Claude Trichet’s press conference commentary is typically the bigger driver of price action for EUR/USD. However, this time around, the meeting will be conducted via teleconference and only a press release will be issued following the rate announcement. This release is likely to contain only a neutral, non-policy statement, which will leave the markets wondering what the ECB’s next move will be, especially as fixed income markets are pricing in a September hike to 4.25 percent. As a result, EUR/USD could break down to the 1.3600 level, as the lack of the term “strong vigilance” may leave traders speculating that another round of policy tightening will be delayed until later in the year. On the other hand, the insertion of the hawkish phrase could lead EUR/USD to surge higher.

EUR/USD (Daily Chart)

Equities – Xetra DAX 100 Index

Equities around the world have tumbled over the past two weeks, and the German Xetra DAX index is no exception. The past few days have found the benchmark index consolidating in a nearly 200 point range, but if the European Central Bank manages to find a way to convey that they will hike in September, the DAX could tumble to the May 11 low and Fibonacci support near the 7,300 level. However, since the ECB policy meeting will be conducted via teleconference and will not conclude with ECB President Jean-Claude Trichet’s regularly scheduled press conference, there will be limited opportunity for the bank’s hawkish bias to be made clear. As a result, global equity market trends will likely prevail, but nevertheless, traders should be aware of the event risk presented by the ECB meeting on Thursday.