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The U.S. dollar is mostly lower in forex trading on the currency market today. Right now, the U.S. dollar is down against the Japanese yen, Aussie, and sterling. The euro, which had surged higher, is falling back a bit.

U.S. consumer confidence data, showing that the economy is still sluggish, is part of the reason that the things aren’t going so well for the U.S. dollar. It’s also not helping that gold prices have reached new highs.

With pressure on the U.S. dollar, it is surprising that the euro is down. However, the recent concerns about Ireland, re-opening sovereign debt wounds, could be one reason for the euro’s pull back in forex trading.

The yen is heading higher in forex trading on the currency market, thanks to the latest news out of Japan. Naoto Kan has survived a challenge to his position as Prime Minister, and many are taking this as an indication that the Japanese government will take its time about intervening to keep the yen weak.

Naoto’s challenger had been in favor of more direct government action to weaken the yen against other currencies, since the Japanese economy — which relies heavily on exports — likes a weak yen.

However, Naoto won the day, and forex traders are taking that as a sign that the yen is likely to remain somewhat strong for a while. As a result, the Japanese yen is gaining against the U.S. dollar and other major currencies.

SYSTEM TRADING IS NO BETTER THAN THE TRADER

“Having worked on developing automated trading products in the past, I know from experience that robots do not work long term.” – Kathy Lien

Hello:

I said in the Part 1 of this topic that automated trading has come to stay. New programmed EAs are being made everyday and marketed aggressively to traders. Usually these programs are black box so that you really need to trust in God before using them. The idea of making money automatically without lifting one’s fingers sounds fantastic, but many people have suffered serious financial damage without lifting their fingers as well. Whatever people say about an issue, it’s prudent to base our final decision on reality-based statistics.

When it comes to trading, majority of traders are under strong illusion. When they fail manually they start looking for robots with which they can entrust their financial fate. How many of us have enough patience to test EAs thoroughly until we can be sure they can survive the markets? We want to buy and apply them straight.

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The euro is maintaining its gains in forex trading on the currency market today. The ECB announced that it is keeping interest rates steady for now, and forex traders expect Jean Claude Trichet to announce that liquidity measures will remain in effect through the end of the year.

U.S. dollar weakness is as much to blame as euro strength, though. Economic news out of the U.S. recently has not been of the kind to help strengthen the greenback on the currency market, and forex traders have been anxious to go elsewhere.

It will be interesting to see how EUR/USD does after the release of more U.S. data, and after Trichet’s policy announcement later today.

Quote of the day: Earth provides enough to satisfy every man’s need, but not every man’s greed — Mahatma Gandhi

EURUSD

Trading strategy: small short at 1.2880, stop at 1.2960(0.5% risk), objective at 1.2730

Euro’s recovery on Friday was again limited by 1.2900 and the 3 weeks gains were cut in a single week as the euro lost 570 points in the last 5 days. Support was found at 1.2730 — level which provided support on July 21. Short-term sentiment is slightly bearish and a break above 1.3000 is what the bulls should look for, to confirm uptrend continuation. Meanwhile, selling into rallies or on a break down below 1.2730 are probably the safer strategies.

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