Forex Blog - Following the Path of Least Resistance in Forex Trading
The â€śpath of least resistanceâ€ť is not a term you will
find in a forex trading book. It is a term I coined to describe how the forex
market tends to seek the easiest path and will avoid obstacles whenever
possible. It is like a river finding its way around the rocks rather than trying
to go over them. This is even more relevant in a global economy where cross
currency moves tend to play an increasing role. This is generally easiest to
identify when there is a clear cross trend and one of the currency pairs lags,
leaving the burden on the other pair to absorb the offsets.
In the â€śold daysâ€ť the forex market used to talk in terms
of US dollar trends. In current times, there rarely seems to be a uniform
dollar trend as crosses play a key role. As an example, take a look at a
usd/jpy chart and compare it with any other currency chart during the financial
crisis that shook the global economy during 2008-2009. For example, on September 1, 2008 eur/usd closed at
1.4605 (coincidentally around the same level it is trading at today) and
usd/jpy at 108.l7. On March 2, 2009
eur/usd closed at 1.2572 and usd/jpy 97.72. These pairs moved in opposite
directions as both the US dollar and Japanese yen firmed on safe haven demand
and the market pushed the path of least resistance, which in this case was to
buy both US dollar and JPY via its crosses.
How does this impact forex trading? A good way to explain
this is by showing an example. Today is September 15 and the currency trading focus
of the day was on sterling, which came under selling pressure following
comments from the Bank of England (BOE) Governor. The EUR/USD came into the day
in a strong uptrend but had run into resistance around the 1.4650 level. It had
paused just below this level overnight at 1.4647 after setting yet another new
2009 high yesterday at 1.4652. GBP/USD was also in an uptrend but lagging the
EUR/USD as EUR/GBP was also trending higher. GBP fell both vs. the dollar and
on its crosses following the BOE Governorâ€™s comments.
This is where the path of least resistance kicked in.
With EUR/GBP headed higher and EUR/USD reluctant to challenge 1.4650, the path
of least resistance was the GBP/USD downside. This saw a two-week GBP/USD
trendline broken as EUR/GBP broke out above .8840, sending sterling tumbling
vs. the dollar to a low of 1.6400 (vs. a 1.6660 intra-day high). EUR/USD, by
contrast, consolidated in a range with support coming from offsets from a
firmer EUR/GBP. It wasnâ€™t until GBP/USD found support that it was no longer a path
of least resistance. At that point EUR/USD moved higher and broke the 1.4650
level as EUR/GBP stayed bid.
Another way to look at it is simple algebra. In the above
example, A/B = C, where A = EUR/USD, B = GBP/USD and C = EUR/GBP. Assuming A (EUR/USD)
is more or less a constant (e.g. limited within a range), for C (EUR/GBP) to
rise, B (GBP/USD) needs to fall. Another way to look at the forex market is as
a pressure cooker. In the above example, for EUR/GBP pressures to prevent the
top from boiling over, GBP/USD had to move lower if the EUR/USD obstacle on the
upside (e.g. 1.4650) was too difficult for the market to overcome at this time.
Most times one or the other currency pair will lag in the same direction but
there are times (as with the financial crisis example described above) when
currency pairs will move in opposite directions.
Of course, there are more variables to consider, such as
the prevailing dollar trends as this path of least resistance will more often
than not lie with the trends as the market has more trouble absorbing flows in
that direction. Even if you do not trade crosses, an awareness of when they
drive spot movements is important to be aware of for forex trading. This
discussion only scratches the surface of this topic but identifying the path of
least resistance can provide some good risk vs. reward trades. Note the path of
least resistance is easier to identify when one currency stays â€śconstantâ€ť and a
trend is clear on a specific cross.
Jay Meisler is a
co-founder of Global-View.com, the leading forex discussion site for more than
a decade and where traders from around the globe come for the latest breaking
news, flows, rumors and trading ideas =>http://www.global-view.com
Forex Trading News
Daily Forex Market News Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Forex News Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."
Elevate Your Trading With The Amazing Trader!
The Amazing Trader includes:
Actionable trading levels delivered to YOUR charts in real-time.
Mon 26 Feb 2018 A 15:00 US- New Homes Sales Tue 27 Feb 2018 A 08:55 DE- Jobless B 13:30 US- Durable Goods A 15:00 US- CB Consumer Confidence A 15:00 US- Pending Homes Sales AA 15:00 US- Powell House Testimony Wed 28 Feb 2018 A 10:00 EZ- flash HICP AA 13:30 US- GDP A 15:30 US- EIA Crude Thu 1 Mar 2018 A All Day final Mfg PMIs A 13:30 US- Weekly Jobless AA 13:30 US- Core PCE Deflator AA 15:00 US- Powell Senate Testimony A 15:30 US- EIA Crude Fri 2 Mar 2018 AA 15:00 US- final Univ of Mich
John M. Bland, MBA co-founding Partner, Global-View.com
Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.
looking for your first broker or do you need of a new one? There are
more critical things to consider than you might have thought.
We were trading long before there were online brokers. Global-View
has been directly involved with the industry since its infancy. We've
seen everything and are up-to-data with recent regulatory changes.
The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.
The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.
Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.
The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.
Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.
Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.
Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.
WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES
CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN
EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE
PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE
INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC
REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL
SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR
SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.