Essence of technical forex analysis.

Technical forex analysis can be generally defined as a method of forecasting prices, based on mathematical rather than economic computations. This method was created for purely industrial purposes, namely income while playing at first in the securities markets, and later in the futures. All methods of technical analysis created separately from each other and only in the 70s were integrated into a single theory with the general philosophy, axioms and basic principles.

Technical analysis - a method of forecasting prices with the graphs of market movements in the previous periods.

The practical use of technical analysis implies the existence of axioms.

Axiom 1. Movement of the market account for all (or rates account for all).

Any factor that affects the price (for example, the market price of the goods), - economic, political, psychological - is taken into account in advance and is reflected in its schedule.

Axiom 2. Prices move directionally.

This assumption is the basis for all methods of technical analysis. The main task of technical analysis is to determine the price trends (or tendencies or trends) for use in the trade.

Identify trends that gives the Dow, is as follows: when the rising trend (bullish trend) of each successive peak and each subsequent decline over the previous one. By other words, the bullish trend should be consistently with the outline of the curve rising peaks and troughs. Accordingly, the downward trend (bearish), each successive peak and decline will be lower than the previous one. Such definition is a fundamental trends and serves as a starting point in the analysis of trends.

There are three types of trends - bullish (upward price movement), bearish (downward price movement) and side (the price is almost not moving). All three types of trends are not in pure form, as the movement of "straight" on a price chart can be found very rarely.

The trend is valid as long as the files a clear signal that it has changed.

Axiom 3. History repeats itself.

Analysts have suggested that if a certain type of analysis worked in the past, it will work in the future, as It is built on a sustainable human psychology.

Technical analysis classified into two methods:

- Graphic

- Math - computer analysis.

Inflation indicators

The Consumer Price Index (Consumer Price Index - CPI) - that's the retail price index.
The index of producer prices (Producer Price Index - PPI) - the index of wholesale prices.
The more of these indices, the more expensive the national currency. Considered acceptable to the growth of these indices to 3% per year.

The monetary aggregates:
M1, M2, M3, M4 - MONEY SUPPLY - monetary support.
M1 - cash in circulation, bank notes and coins;
M2 = M1 + funds for the settlement and current accounts in banks, traveler's checks;
M3 = M2 + time deposits in banks;
M4 = M3 + valuable state documents.
The accelerated growth of the money supply, both in cash and non-cash, provide downward pressure on the currency.

Gross domestic product (Gross Domestic Product - GDP)
The higher the GDP, the better the condition of economy. Optimal change - up to 3% a year, if higher - the reverse reaction. Have to enter the higher rates, which will cause the appreciation of the national currency.
CPI and PPI are considered once a month, M / M.
GDP - Quarterly Q / Q and converted to year Y / Y.
Financial performance report (Treasure Statement)

1. Revenues and expenses of citizens
Personal income (Personal Income)
Feeling the consumer's willingness to spend money (Consumer Sentiment)
2. Construction Spending (Construction Spending)
Start of construction (Hosing Starts)
Appeal at resolving (Building Permits)
New home prices (New Houses Sales)
Current prices (Existing Houses Sales).
The unemployment rate (Unemployment Rate) - is once a month. With increase in national currency depreciates.

Initial jobless claims (Imital Claims).
Ongoing treatment (Continuing Claims).
Increase in these parameters results in a cheaper currency.
Retailing (Retail Sales) - the better the trade, the stronger currency.
Dealer orders durable goods (Durable Goods).
All of this information is Moscow time at 16:30 and 18:30 (Reuters, CQG)

JAPAN
Japan's fiscal year ends on March 31. By the end of the year, as a rule, to take stock of balances transferred to a large amount foreign exchange in the yen, which tends to rise in price. Numerous insurance companies in Japan are the largest players in the market: USD / JPI, USD / DEM, DEM / JPI, CHF / JPI, GBP / JPI. The big problem in Japan is an aging population. Hold on for many years a small interest rate has caused distortion in the banking industry, but, nevertheless, Japan's banks remain the world's major banks. Strengthening South-East economy in the long term will give a chance to the yen to become the main currency for the Asian region.

GERMANY
In Germany a very costly annexation of East Germany (larger transfers from the pension fund, five undeveloped land and unemployment). Under Gorbachev, and later under Yeltsin, Germany issued a lot of credit to Russia ($ 30mlrd), so that any adverse political events in Russia cause a dramatic change in the course of the brand in relation to other currencies. Reports on the state of health of Yeltsin dramatically reduces the cost of DEM versus $.

The Role of Central Banks in Forex Trading

Central Bank monitors the level of inflation in the country, the rate of the national currency and tries to adjust with three key interest rates:

1. Discount rate - Discount rate. The interest rate under which the Central Bank lends to commercial banks.
USA -6,50%
Switz. - 3,75%
UK - 6,00%
EU - 3,75%
Japan - 0,5%

American and British rates are quite high, therefore they are showing great interest of foreign investors.

2. Rate - Repo rate. The interest rate applied by the Central Bank in transactions with commercial banks and other lenders when buying a (registered) government treasury bills. CB thereby regulates the loan market. Fed Funds (Rate Repo USA)

3. Lombard rate - Lombard rate. The interest rate applied by the Central Bank on the security of real estate, gold values for loans to commercial banks.

With a decrease in interest rates increased business activity and increased inflation. Lower interest rates leads to a cheaper currency. An increase in interest rates leads to a reduction in business activity, lower inflation and appreciation of the currency. In modern conditions the method of influence on the currency continues to be the practice of buying and selling of foreign currency by central banks, known as currency intervention.

Central banks:

USA:
• FED - Federal Reseve System;
The decision to change the rates adopted FOMC-Federal Open Market Committee, which meets every six weeks for two days: Monday and Tuesday.
• Chairman of the Board - Alan Greenspan
The federal funds rate (refinancing) = 6.50%
Discount Rate = 6.0%.

Germany:
• Bundesbank (BBK, Buba) - The Central Bank of Germany
• Buba cooncil meeting - meeting Buba - every 2 weeks on Thursdays;
• Chairman of the Board - Ernst Welteke

Great Britain:
• Bank of England - BOE;
• Session 1 once a month;
• Chairman of the Board - Eddie George
Discount rate = 6.00%

Switzerland:
• Swiss National Bank (SNB);
• meeting - every Thursday;
• Chairman of the Board - Hans Meyer
rate of LIBOR = 3.25%

Japan:
• Bank of Japan (BOJ);
• meeting 24 hours a day;
• Chairman of the Board - Masaru Hayami
Discount rate = 0.50%

EU:
• Europian Central Bank (ECB);
• Chairman of the Board - Willem F. Duisenberg, President of the ECB
Discount rate = 3.75%.

Along with the central banks operate in the foreign exchange market, brokerage firms, who, working with a particular bank, acting as intermediary between the seller and the buyer of the currency. For certain advantages of working through a broker can be attributed anonymity in transactions, continuity of quotes, and the ability to offer their own prices.

In recent decades, the forex market has changed the nature of trade with the transfer of the urgency to change the focus of trade: there has been a significant increase in transactions, the execution of which takes place in the future. All this resulted, on the one hand, to increased susceptibility to opportunistic currency market change and a significant increase in currency fluctuations, and on the other hand, to increase capacity for a high investment. In many markets, along with widespread operations on purchase and sale of foreign currency received into derivative financial instruments - currency and financial futures and options. Examples of such exchanges have long been recognized as the world's centers of currency trading can serve as the London International Financial Futures Exchange (London International Financial Futures Exchange - LIFFE), the European Options Exchange in Amsterdam (European Options Exchange - EOE), the German Stock Exchange in Frankfurt Express (Deutsche Terminboerse - DTB), Singapore Exchange (Singapore International Monetary Exchange - SIMEX) (Sydney Futures Exchange - SFE) and the Stock Exchange Derivatives Trading in Sydney.

FOREX FUNDAMENTAL ANALYSIS

The exchange rate impact factors reflecting the state of the economy of the country:
• Economic growth (gross domestic product, industrial production, etc.);
• The state of the balance of trade, the degree of dependence on external sources of raw materials
• Growth in the money supply in the domestic market
• The rate of inflation and inflation expectations
• The interest rate
• The solvency of the country and confidence in the national currency on the world market
• Speculation in the foreign exchange market
• The development of other sectors of the global financial market, such as the securities market, competing with the foreign exchange market.

Interest rates differential (difference procentnyh Rates)
JPI - 0.5% GBP - 6.00%
In view cennyh BUMAG:
T-bills (paper Treasuries)
USA - UK Bonds - Gilts
Germany - Bunds Japan - JGB
USA - Budget deficit negative
Japan - the budget deficit of positive
In Japan this razmeŝaet core assets in bonds USA around 60% to both Market.
Central Bank Rossii razmeŝaet approximately 80% MEDIUM FF rezervnyh also in bonds USA.

indexes
DJIA-USA Nikkey - 225 - Japan
FTSE - 100 - UK CAC - 40 - France
DAX - 30 - Hang Seng Germany - HK (Gong Kong)

The Dow Jones (DJI)
There are 4 of the Dow Jones.
The Dow Jones (The Dow Jones Industrial Average - DJIA) - a simple average of the movement of share prices of 30 largest industrial corporations. The Dow Jones is the oldest and most common among all indicators of the stock market. Its composition is not the same: its components may vary depending on the positions of the largest industrial corporations in the U.S. economy and the market, but in the present conditions, such cases are rare. In principle, it has to make up 15 to 20% of the market value of the shares quoted on the New York Stock Exchange. This index is calculated by adding up the prices of the included stocks and dividing this sum by a certain denominator (which is adjusted for stock splits and dividends in the form of shares representing more than 10% of the market value of the issue, as well as the replacement of components, and mergers and acquisitions). Dow Jones quoted in points. More recently, he appeared on futures contracts in Chicago.

Readymix Dow-Jones index (the Dow Jones Transportation Average - DJTA) - average component, harakterizuûŝij traffic prices of shares 20 transportnyh corporations (airlines, rail companies and avtodorožnyh).

Communal Dow-Jones index (the Dow Jones Utility Average - đưa) - Medium component motion Kursov shares of 15 companies, zanimaûŝihsâ gas - and Electricity supply.

Composite Index Dow-Jones (The Dow Jones Composite Average - DJCA) - component, sostavlâûŝijsâ the industrial base, transportation and kommunalʹnogo Indeksovo Dow-Jones.

The index of "Standard & pauerz" (S & P)
This index is published by an independent company, "Standard & pauerz." It is made in two versions - the shares of 500 corporations and 100 shares of corporations.

S & P - 500 is a market value weighted index of 500 stocks of corporations that are present in it in the following proportions: 400 industrial companies, 20 transportation, 40 utility and 40 financial companies. It includes mainly the shares of companies listed on the New York Stock Exchange, but there are also some stocks of corporations that are listed on the American Stock Exchange and over the counter in the back. The index represents about 80% of the market value of all issues listed on the New York Stock Exchange. This index is more complex compared to the Dow Jones, but it is also more accurate in view of the fact that there are a larger number of shares of corporations and the shares of each corporation are weighted by the value of all the shares in the hands of shareholders. Futures and options on it are sold on the Chicago Mercantile Exchange.

S & P - 100. The index is calculated on the same basis as the index for shares of 500 corporations, but is comprised of stocks of corporations for which there is a registered options on the Chicago Board Options Exchange. This is mainly industrial corporations.

Exchange Rates Definition

Exchange rate - is the price of the currency of one country expressed in the currency of another country, with sales transactions. Such a price can be established on the basis of supply and demand for a particular currency in the free market, or to be strictly regulated decision of the government or its main financial body, usually the central bank.

Types of exchange rates
Direct quotation - the number of national currency per unit of foreign.
In most countries, foreign currency exchange rates are expressed in national currency. This is the so-called system of direct quotations. For example, in Germany, the U.S. dollar ($) will be equated to a certain amount of DM (DM), and in New York, one German mark will be equal to a certain number of cents (or dollars if the course grade is quite high).
Reciprocal rate - the number of foreign currency per unit of domestic.

Cross Rates
This relationship between the two currencies, which stems from their course in relation to the rate of the third currency. In operations on the world market are often used cross-rate with the U.S. dollar, as the U.S. dollar is not only a major reserve currency, but the currency of the transaction in most foreign exchange transactions.
DEM / CHF, GBP / DEM
All calculations on cross-rates associated dollar, determined by dividing the
DEM / CHF = USD / CHF: USD / DEM
All calculations on cross rates associated with pound sterling, determined by multiplying the
GBP / DEM = GBP / USD  USD / DEM

Spot rate
Price of the currency of one country expressed in the currency of another country, established at the time of the transaction, subject to exchange currency counterparty banks on the second business day following the date of the transaction. Spot rate reflects how highly regarded the national currency at the time of surgery outside the country.
FOREX (Foreign Exchange) - the international exchange. The abbreviation FX
USD - U.S. Dollar

Currencies (majors)
EUR = ECU - European Currency international-euro (ECU)
USD - (U.S. Dollar)
GBP = STG (sterling)
CHF = SWF (Swiss franc, swissie)
JPY = YEN (JPY)

The finance ministers of the European Union announced currency conversion rates of 11 countries in the new common currency - the euro.
Starting with 0.00 in the European time 1 January 1999 the euro became the official currency of 11 EU countries, although banknotes and coins in circulation will not appear until 2002.
United Kingdom, Sweden, Denmark and Greece did not participate in the conversion.
The ministers announced the following conversion rates:
DEM - 1.95583
French franc - 6.55957
Italian Lira - 1936.21
The Spanish peseta - 166.386
Portuguese escudo - 200.482
Finnish mark - 5.94573
Irish pound - 0.787564
Belgian / Luxembourg franc - 40.3399
Dutch guilder - 2.20371
Austrian schilling - 13.7603


USD / CHF = 1,7050 / 60
This means that a trader can buy dollars for Swiss francs at the exchange rate of 1.7060, while the dollar sold for Swiss francs at the exchange rate of 1.7050.
1.7050 - bid (bid); 1,7060 - the ask (ask).
Point (point) - this is the minimum price change (pips) - 1,7055 - 5 pips.
Spread (spread) - the difference between the purchase price and the selling price: 1.7060 - 1.7050 = 10 pts points (standard bank spread from 5 to 10 pts).
1,7060 - 1,70 - big figure (big figure).
Hedge (fence) - insurance against currency risks.