Technical Analysis USDJPY

This pair did rebound by resistance level which initiated further downside movement. While resistance level and support line holds, waiting is better option with selling possibilities.

Trend Support Resistance

Long Term Negative 89.55 90.57

forex trading and working with statistics

Producer Price Index

The (PPI) Producer Price Index is a measure of the average level of prices of a fixed basket of goods received in primary markets by producers. The monthly PPI reports are widely followed as an indication of commodity inflation. 

The every PPI is monitored or considered important because it accounts for price changes throughout the manufacturing sector. 

The PPI is often followed but excludes the food and energy components as these items are normally much more volatile than the rest of the PPI and can therefore obscure the more important underlying trend.

Studying the PPI allows consideration of inflationary pressures that may be accumulating or receding, but have not yet filtered through to the finished goods prices.

A rising PPI is normally expected to lead to higher consumer price inflation and thereby to potentially higher short-term interest rates. Higher rates will often have a short term positive impact on a currency, although significant inflationary pressure will often lead to an undermining of the confidence in the currency involved.

Trade Balance

the trade balance is a measure of the difference between imports and exports of tangible goods and services. The level of the trade balance and changes in exports and imports are widely followed by foreign exchange markets.

The trade balance is a major indicator of foreign exchange trends. Seen in isolation, measures of imports and exports are important indicators of overall economic activity in the economy.

It is often of interest to examine the trend growth rates for exports and imports separately. Trends in export activities reflect the competitive position of the country in question, but also the strength of economic activity abroad. Trends in import activity reflect the strength of domestic economic activity.

Typically, a nation that runs a substantial trade balance deficit has a weak currency due to the continued commercial selling of the currency. This can, however, be offset by financial investment flows for extended periods of time.

Housing Starts

Housing Starts are a measure of the number of residential units on which construction is begun each month and the level of housing starts is widely followed as an indicator of residential construction activity.

The indicator is followed to assess the commitment of builders to new construction activity. High construction activity is usually associated with increased economic activity and confidence, and is therefore considered a harbinger of higher short-term interest rates that can be supportive of the involved currency at least in the short term.

Fundamental & Technical Forex Trading

Forex trading system is a set of parameters that predicts the price movement of a currency. Most experienced traders will use a trading system because it helps to determine when to enter a trade, how long to hold it, and when to sell and take a profit or accept a loss. These are decisions that traders make every day in every trade. Using a good trading system will not protect against a losing trade. However, it will help to keep losses to a minimum. It can also maximize the profits on each trade. In short, a trading system takes much of the guesswork out of trading.

Choosing a trading system is not an easy task. When selecting a system, the basic question to determine is what kind of trader you are. Are you a technical trader or a fundamental trader? Do you rely on charts and technical indicators or do you rely on economic data and reports? The answers to these questions are critical because it will help you to determine what type of trading system to adopt.

Many beginning traders reject using a trading system because they believe that trading systems are too restrictive or that they will miss out on good trades because they didn’t fit into the parameters of the system. But experienced traders know that trading systems will discover good quality trades. Of course, no trading system will find every profitable price movement. But it will make the most of their trading funds.

Two Types of Trading Systems

Like Forex traders, there are basically two types of online forex trading systems: Technical and Fundamental. There is another group emerging called the Intermarket trading system, but this type is not yet fully developed or employed by any definable group of traders. Back to the basics, the two types of trading systems are technical systems and fundamental systems. Let’s briefly review each type.

i- Fundamental Trading Systems

A fundamental forex trading system relies on the release of economic reports and the data found in those reports as parameters for entering a forex trade. This type of system is much more dependent on demand factors than technical trading systems. The parameters are the economic reports and their ability to affect the demand for a currency. 

A fundamental trading system can have the parameters such as the release of the nonfarm payrolls with the expectation that the payrolls figure will be high, which would create more demand for the USD. Another parameter could be the release of the FOMC minutes in which the Fed makes a decision on interest rates. Any economic report can affect the demand for a currency and fundamental trading systems predict how and when this will happen. 

Fundamental trading systems do not usually combine more than one report at one time, but will use only report and its analysts’ expectations to determine if demand will be increased or decreased. Charts are not considered or used by fundamental trading systems.

Technical Trading Systems

Technical online trading systems rely on technical indicators and charting techniques. The parameters for the system are determined solely by certain price movements on charts and the data from technical indicators. For example, a technical trading system could employ a parameter that the currency price must be within five percent of the 20-period moving average line. Another example is that a trading system looking for a strong trending currency could require that the ADX level is above 40. 

Technical trading systems often combine technical indicators to determine the parameters. For example, a trading system could require that the currency is moving within the Bollinger Bands and that the ADX is above 40. Alternatively, a trading system looking for an explosive price movement could require that the Bollinger Bands are squeezing the currency pair and that the ADX is below ten. 

Technical trading systems are used by both range traders and trend traders. There is so much technical data available that the indicators can be used for a wide variety of price movements.