A recent article demonstrate the relationship of the Eur/Jpy to the Dow. This proved to be accurate and timely during the recent Dow correction.

Yet, at many times during the day this relationship is disconnected as the pair reacts to the Euro's movement.

Even more confusing to me is the daily view of the pair's chart - this seems to indicate a substantial topping pattern pointing to a decline to the 159 handle. The daily chart seems to correlate with a potential significant future US equity bear market - seems rational to me.

At the same time, traders here and others keep promoting long trades in the pair with targets as high as 167. Wow - talk about confusing.

Also, please comment on a trading position strategy if the US enters a recession or stagflation. On one hand this might point to a USD decline but against which currency? On the other hand, this might cause a rush out of other currencies as the downturn goes global (after all, when US consumers stop shopping at WalMart China will quickly feel the pinch) and a flight to safety of the USD.

How to play this?

Thanks

Here are the responses to this week's questions! Keep on posting. Next week's Q&A is on the usual Friday, so make sure all of your questions are posted by 9am EST Friday.

Kathy and Boris' Q&A 06-14-07 Responses

Just a reminder everyone: you have until 9am EST tomorrow to ask Kathy and Boris your questions and they will post their answers later that day!

Lately, I have often read that a central bank rate hike is already priced in. How can you determine that the current interest rates or exchange rates, are indeed reflecting a future move from a central bank ?

Dear BK,
i enjoyed read all your books.. but the last one, High Probability Trading Setup, is quite confusing for beginners like me, which one to use and when ?..

do you have any additional tips for using those setup ?
for example, the 5 minutes momo trade is good setup on trending market with confirmation of Bollinger bands... or the Rollercoaster RSI good on range-bound with specification like a, b, c....

i think traders would need more detail on how and when to use the high probability trading setup.

Question no. 2, why trade on friday have more volatility ?

Best Regards,
Victor

Hello Kathy and Boris,

I like the articles on Dailyfx website. For many time I see the charts of bonds and DowJones index (or S&P500 index) inside to show the trend for dollar. I knew that DowJones index is related to carry trade. But how about bond? How does it affect DowJones index and carry trade? I think increasing interest rate on bond has negative effect on DowJones, but it seems both bond and DJ show positive on carry trade. Pretty confusing! Could you give some comments on this question? Thank you.

Tim Jia

If trading a cross like EURJPY, should I also be watching the constituents' dollar pairings? I am afraid this is a distraction as it has caused me to close too early, but I worry about not seeing the majors. What is your advice?

Dear Kathy and Boris,

I would like to know two things in forex trading,
1.The first one is about consensus number at news trading. Since a lot of people trade after some news release, they will place buy or sell after the news release. For example, if the US non farm payroll release 180.000 (April released) >>135.000 (consensus / forecast ) then people buy usd (sell gbp/usd) .
What i would like to know is : the number 135.000 (consensus / forecast) came from, since us non farm payroll at april released 2006 was 211.000. Or the previous march released 2007 was 97.000.
This consensus, although at few websites are different (but not much), but people believe those consensus as benchmark for the news release. So, after the release, they compare the result with the consensus number.
I would really like to know where it comes from, because these forecasts do influence the currency.

2.The second one is about :Interbank, leverage, monitoring.
I do believe that there is no central for forex trading (such as NYSE in stock). So currencies are traded between interbank, hedge funds, etc.
Those big players trade against each other. Am i right?
What i would like to know are :
a.do they use leverage against each other ?
b.who monitors the up and down price, so all of players in the world know the exact price, while they are trading each other. I believe that the price should be influenced by supply and demand. But who knows the total demand, so the price goes up or down? There should be someone.
c.If all of the players buy gbp/usd , then the price will go up. But what if there is no one that wants to take the order? I mean, no one wants to place a sell order. What will happen?
d.Who pays for the swap? Is it the government?

Thanks a lot.
PS: If you answer this in voice recording, would you mind set it , so i can save first? ( my internet connection here is very bad, so it buffer all the time)

Here are the responses to this week's questions! Keep on posting. Next week's Q&A is on the usual Friday, so make sure all of your questions are posted by 9am EST Friday.

Kathy and Boris' Q&A 06-22-07 Responses

Some friends of mine introduced me to forex. Their method of trading was to get in and get out as quickly as you can while only banking 1-2 pips. Another friend said to go long and just collect interest regardless the direction the market went. Another friend said find something major like an interest rate hike, and ride it for 1-2 weeks.

With stocks, I don't mind buying something and checking it a month later. Is there any rule of thumb for forex trading concerning the length of time your invested?

Hi,

Just wondering what the title of your books are. I think I may have missed it in this thread. Please let me know. Thanks.

Jamie reckons that cable might be bullish but EUR/USD offers a better opportunity.
John reckons that EUR/GBP is the pair to range trade but only short, a long trade is not recommended.
I find it difficult to reconcile these two pieces of advice.

Euro and GBP tend to mirror each other in their movements with probably more volatility with GBP. If Euro is a better long opportunity than GBP v USD surely we would expect the Euro to appreciate against GBP. Yet we are advised to go short.

Put another way, if the long trade on EUR/USD plays the way it is expected and EUR/GBP plays the way it is expected, then cable will out perform EUR/USD. So why are we being advised to go long on the Euro?

Regards

Cliff

Dear Kathy and Boris,

I recently received an email from a third party that got hold of my email addresss because I subscribe to your bulletin (He confessed). The said third party is a guy who calls himself "the whisleblower (Mac X)"
Basically he claims to have the insider code. Please is this for real and genuine. Does anyone know for sure if his strategies work?

dear kathy and boris,

i am a new trader who still lacks alot of things to be learned. i am confident enough that your team will be able help me understand more about currency trading, and to clear up my confusions. so, to start with, i am trading the currency: NZDUSD and NZDJPY. i would like to know the characteristics of these two currency pairs, since as much as i have tried my best to observe their characteristics, nothing would probably better if i will hear and know it from people who are experts or shall i say more experienced ones. this includes the information about its average daily range, if there would be chances of big fluctuations and what are the factors/data that would make make these currencies move. additionally, i would like to know how far shall these currencies stay in there current trends.
as of the moment, these are few of my make questions. your response to my query is very much appreciated. thank you and more power!

majoie

May EUR/JPY reach 166 resistance level? Thanks.