U.S. New home sales remain strong in the US, figures show, suggesting that successive interest rate rises have yet to subdue the property market.

Experts believe the impact of months of consecutive rate rises will soon affect the market, with some even forecasting a double-digit fall in sales of new homes this year. The Federal Reserve is expected to raise rates to 5.25% on Thursday.

Effect: If Feds are going to rise rates then, it might hurt the U.S. Economy this time. Usually currency trned to be strong while central banks rise rates but too much pressure on economy is bad for the long run as well.

Oil production in Iraq has hit its highest level since former leader Saddam Hussein was ousted in 2003. Production has risen to 2.5 million barrels per day (bpd) from a steady 2 million bpd during the US-led invasion, Iraq’s new oil minister said.Hussain al-Shahristani added that production was expected to rise to 2.7 million bpd by the end of the year.

“We have been able to break records,” he said of the government, which has been in place for just over a month.

Effect: US CPI will fall due to falling Oil price if the Iraqi supply keep increasing. Which is a good sign as this news says

The ultra discounter said steep gasoline prices prompted customers to make fewer shopping trips, but they stocked up while there, spending nearly 5 percent more per trip. Family Dollar caters to lower-income shoppers who are most sensitive to rising energy costs.

Effect: If the oil keep falling consumer will have more cash on hand to spend which means consumer confidence index will go up and thats a dollar positive sign. I’m going to look south on X/USD pairs such as EUR/USD and AUD/USD this week.

The Bank of England’s interest rate-setting body voted 7-1 in favour of keeping rates at 4.5% in June, minutes show. The Bank of England’s rate-setting body voted 7-1 to hold UK interest rates at 4.5% in June, minutes have shown. The one member of the Bank’s Monetary Policy Committee (MPC) to vote against the freeze was David Walton, who favoured raising rates to 4.75%. It was the second month in a row that Mr Walton had voted for a rise, because of worries over the risk of inflation.

Analysts said the minutes appeared to rule out the chance of a rise in UK rates during the short term.

Effect: I’m hoping that GBP/X pairs will go south as well, mostly against Yen, GBP/JPY might hit 209 this week as

Japanese stocks fell on speculation interest rates will keep climbing in the U.S. as the Federal Reserve attempts to quell inflation, curbing spending in Japan’s largest overseas market.

And this news just hit the stores,

China’s economy will expand faster this year than in 2005 as investment and exports continue to grow, the central bank’s research bureau said. Gross domestic product will probably rise 10.3 percent in the first six months before slowing in the second half for full-year growth of 10 percent, the People’s Bank of China said in a report, published today in the state-owned China Securities Journal. China’s economy grew 9.9 percent in 2005, overtaking the U.K. as the world’s fourth largest.

This will be a fixed week, I’ll be very sensetive to technical indicators as there is no certain trend on dollar unless Feds rise rates. Good luck and happy trading.

GEAR RATIO is a good way to understand leverage. If you have a car in 10th gear it will go much faster than if its in 1st gear. The higher the leverage or gear the faster the speed and the less time to react. It is the same thing with Forex, the more lots, the faster the speed; each lot increases leverage or gear ratio.

Caution: Leverage used correctly is your greatest tool, but used incorrectly it becomes a weapon of destruction and WILL blow you up.

2. LACK OF TRADING PLAN- means that traders do not know what to do if they are wrong nor what to do if they are right. The large floating profit they make may often turn into a large loss, because they did not when know to get out. Trade Defensively and always know your downside and what you are at risk of losing.

3.LACK OF MONEY MANAGEMENT- Trading Forex is a question of what  the odds are of being right. This is known as RISK/REWARD RATIO. Good money management means you know your profit objective and the odds of being right or wrong and know how to control your risks with stops.

4. FAILURE TO USE A STOP- Rejection of Ego is perhaps the toughest of all to handle trading. Not only does the market tell you your wrong, which no one wants to be told, but it also takes your money. Stops are a good thing, because of this ever trending market, it cuts your losses and gets you out before you allow your account to be ruined.  The stronger your entry the less likely of being stopped out, identifying strong support and resistance lines, will keep you in the position longer and when stopped out be happy you out because you were wrong. Never change your plan, once you move your stop, you have no plan, you lose more.

5. ACCEPT A LOSING TRADE – Many traders lose confidence after a couple of losing trades and reduce their ability to become an efficient trader.  This market requires a gradual learning curve so only persistence, trial, and mistakes will help enhance your ability to trade. As a trader your emotional cycles will be like none other, total failure and total rewards almost everyday which make traders unique. If you cannot ACCEPT A LOSING TRADE and realize it will happen more often than not while learning than don’t waste your time starting. Rome wasn’t built in a day and traders aren’t made in a day.

6. HOPE- Lack of proper discipline, is HOPE. Hope is the most devastating of all feelings in trading, because it can lull you in to becoming complacent. You know in most cases when you find yourself hoping, you are wrong, and just get out of market. This requires the most self discipline of all. You were wrong. NEVER HOPE, JUST MANAGE DOUBT!

7. CAPITAL PRESERVATION- Profits are there for the making, but the real key to trading is not making money; it is keeping it. Hold profitable trades and cut losses quickly. It is easier to bask in the elation of a winner than to hope on a loser.

8.TAKING QUICK PROFITS AND LETTING LOSSES RUN – Very common among traders, this is normally a result of no trading plan. After one or two losing trades, you are likely to take a small profit, even though that trade could have been a huge profit maker. This mistake is overcome by using a pre-determined stop to prevent losses from running. Entry in a stalled market allows you to get away with tight stops, reducing your losses.

9. OVERSTAYING YOUR POSITION – Simply failing to take profits at a pre-determined level. If the market meets your price target, adjust your stop above entry, to be in a riskless position and not be at risk of losing profit. Remember, currencies trend a trend means once it breaks it keeps going. Use a trailing stop to maximize profit while enjoying riskless trade.

10. AVERAGING A LOSS – Works with stocks NOT forex. Justifying averaging down by figuring you will have a lower entry price and require a smaller move to break even. Currencies trend and normally you will lose twice as much if the market moves against you, and it usually does.

11. OVER CONFIDENCE – Increasing your commitment, with success, usually leads to disaster. When you are right more often it leads to larger trade sizes, which end up ruining your account. This ruins more trades that a series of small losses. Never try to make back all losses on one trade!

12. OVER TRADING YOUR ACCOUNT – When you are certain that the next move will be a really big one and you risk too much. To prevent this you must have a hard and fast rule that you will not risk a certain percentage of equity regardless of how strong the trade looks. Only trade overweighed with a profitable account will provide the largest gain!

13. CHANGING YOUR PLAN DURING TRADE - when you are most exposed to emotion and greed, you are much more likely to change your plan. If you lift your stop or change your target, you have no plan.

14. TRADING FOR EXCITEMENT, NOT PROFIT(LACK OF PATIENCE) Some traders do not trade for money, they just like the action. Think about it, must you have a trade a day or just an opportunity to make money, regardless of the time frame. The market will dictate NOT you.

Certainly the market will do the unexpected and at times you will lose more than you expected; but if you steadfastly avoid making these mistakes, you must make money. Don’t expect to run a marathon, day one. Rule of thumb; you lose three trades in a row, get up and get away!

Source: First National 4X

Entry: 211.83
SL : 212.18
TP 1: 211.62
TP 2: 211.18

Status: TP 2 hits. Total: + 65 pips

Effect: USD/JPY eye on 116.00, the yen will keep falling against all majors next week as well as China’s yuan goes down against dollar. Yuan is considered to be a proxy currency for Yen due to the huge trade exchange Japan and China has between them.

Before end of this week, USD/JPY hits 116 mark no problem what-so-ever! Well, I’m just showing off but it always feels good to be right when you get to make 100+ pips with fundamental analysis with the aid of technical indicators.

Who missed it? :)

Entry: 144.43
SL: 144.28
TP 1: 144.76
TP 2: 145.30

Status: Closed at +23 pips due to ADX +DI divergence (see that orange line on ADX curved back to bar 20 below)

policy makers need to adjust interest rates from near zero percent “without delay.”

 Inflation-adjusted interest rates are extremely low and could risk stimulating growth excessively, Fukui said today in a speech at the Japan National Press Club in Tokyo. The yen later pared its advance after Fukui said he hadn’t intended to give a specific timeframe for lifting borrowing costs.

Yen, there was not much major rally of Yen against majors due to the fact that Bank of Japan has been “rising” interest from near zero for last few months now and so far their money wasn’t seen where there mouth were.

Funny yet good chance to make some money out of it.

The yen declined against the dollar, euro and British pound after the Chinese central bank ordered banks to set aside more money. Japan’s currency has declined this week as the Bank of Japan left its benchmark interest rate near zero percent, while Federal Reserve officials hinted at further rate increases.

Effect: USD/JPY eye on 116.00, the yen will keep falling against all majors next week as well as China’s yuan goes down against dollar. Yuan is considered to be a proxy currency for Yen due to the huge trade exchange Japan and China has between them.

The University of Michigan’s preliminary index of consumer sentiment increased to 82.4 this month from a final reading in May of 79.1. The measure has averaged 88.1 since monthly data were first compiled in 1978.The rebound in confidence may help stem a slowdown in consumer spending that’s forecast to pare economic growth this quarter. The survey also showed that Americans expect inflation will be less of a problem than they previously thought, which may help alleviate pressure on Federal Reserve policy makers to raise interest rates after this month’s meeting.  “It is encouraging that sentiment firmed up a bit after a plunge in May that was undoubtedly related to the spike in gasoline prices,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York.

Effect: Dollar possitive means more pressure on the feds to rise interest rate but until they do, it will go down against majors beside yen. EUR/USD and AUD/USD looks north this week. As well as against Gold One of another reason for gold to rise next week would be the Iran issue.

Iran has reduced cooperation with United Nations atomic agency inspectors since the announcement of a U.S.-backed offer of incentives tied to the shutdown of nuclear-fuel production, European Union diplomats said today. “Cooperation with the agency has been reduced to almost nothing,” said Francois-Xavier Deniau, the French ambassador to the UN’s International Atomic Energy Agency in Vienna. He was delivering a statement on behalf of the EU.Effect: This is a strong sign that capital investors will move their hedge fund behind gold once again due to Iran concern after it seemed that it has cooled down.

We will be posting more interesting news and analysis as the week progress. Thank you for being with eTalkForex.com