Euro Rises Despite Worsening Outlook

Last week saw some of the strongest gains in recent weeks for the EURUSD with the pair testing key psychological resistance at 1.300 intraday before closing the week in touching distance at 1.2933.

So does this mark a change in direction for the Euro or have recent gains come simply from a brief surge in risk appetite and the unwinding of the dollar index as it takes a respite from its recent strong gains?

Clearly the fundamental picture for the Euro is yet to pick up. Most recent figures for the current account figures show the deficit increasing to -€5.8 from the previous readings of €5.6 billion Euros. Similarly construction output figures have also disappointed registering -1.0% compared to the previous reading of 0.3%.

While it takes more than just one poor economic report to dictate the longer term direction of a currency it will equally take more than one member state to prop up its fortunes. Germany’s contribution to the Euro zone figures maybe strong but it is unfeasible that one member state can continue to prop up the remaining 15.

However the Euro is not seeing ‘just one poor’ economic report but rather a stream of consistently weak economic figures. These are weighing heavily on the European Central Banks ability to move interest rates and deal with the prospect of Inflation/ Deflation. Couple this with the increasingly negative news flow from the member states and the foundations on which the Euro is built start to look very shaky.

Last week saw the downgrade of Portugal’s Sovereign debt rating by credit ratings agency Moody’s from Aa2 to A1. This has been quickly followed by the downgrade of Ireland’s debt rating by one notch to Aa2. Add these to the already downgraded ratings of Spain and Greece and all is not looking rosy in Euro land.

For anyone thinking that things cannot get worse, attention is next likely to turn to  Italy. The kicking boot of Europe will be the next under the scrutiny of the credit rating agencies and all bets are off as to how far its downgrade will extend. Even ‘peripheral’ European states are starting to creek. Talks ended this weekend with Hungary following a failure to reconcile its budget plan. The country will not have access to the remaining Euro credit line which does not bode well for it economic future.

So against this backdrop last weeks gains look little more than a blip. A small bounce on the back of increasing global risk appetite. Maybe the psychologists are right and a bit of good weather helps us shift our focus to the glass being half full rather than half empty.

However small blips do not make convincing trends. 1.31-32 could well prove the limit of any recent short enthusiasm for the currency. Ultimately jumping aboard the short term recovery is increasingly risky. Sidestepping this bus and buying a pass for the long term trend will probably prove not only more comfortable but a more profitable ride.

Trend OSOB Expert Advisor Week 5 Live Test

Wow! A great week on Trend OSB which collected us an impressive +75 pips this week!

Certainly not bad for an automated system which required us to just start up Metatrader and leave running for the week! Performance since testing began is now running at +161 pips.

This week the trades were evenly split between the EURUSD pair and the GBPUSD. Six trades in total. We are still running the extended profit target of 15 pips on the GBPUSD pair as opposed to the shorter 10 pip target on the EURUSD. Interestingly though we have not yet hit a loss on the GBPUSD pair since including this in our test.

This may have something to do with the tweak made to the GBPUSD settings (commented on in our previous post). This tightens up the entry criteria a bit and therefore, going forward, we are going to implement these changes to the EURUSD pair, while at the same time increasing the profit target to 15 pips on the back of the GBPUSD success.

So here are the live results from last week as shown on our account:

Why we like the Trend OSOB Expert Advisor

What we like is not only that the EA is free but also that performs without the hype surrounding most automated trading systems. We also like the strategy behind the system. It is easy to understand and above all it is simple in its execution.

We have long been advocates of simple techincal trading systems. There is always a big temptation to overload charts with indicators and seek out the most complicated algortihms for trade entries when carrying out any form of  trading. This is especially true of many automated commercial systems which use this next 'big thing' approapurchasing ch to marketing their systems. The reality is that most of these systems are simply 'dressing up' simple trend following stratagies to entice unsuspecting buyers into making a purchase, in the belief that they are buying into something unique.

The trend following system used by Trend OSOB is however easy to understand. It uses an hourly trend following sytem and enters trades on overbought or oversold readings on the 5 minute charts. Simple and yet effective in our books.

You can find out more about the Trend OSOB expert advisor on the Donna Forex Forum boards, where you can also download the EA for free.

Trend OSOB Expert Advisor Week 4 Live Test

As we mentioned in our previous post we are now running the EA on both the EURUSD and GBPUSD pairs on the 5 minute chart.

Trading on the additional pair has certainly helped our results this week. Three trades on the GBPUSD, all pocketing +15 pips helping to counteract a loss we picked up on the EURUSD earlier in the week. The net result for all trades this week was +23 pips.

Our running 4 week total is now up +86 pips which is certainly encouraging performance.

We have been running a slightly modded version of the settings on the GBPUSD pair. Instead of just running the default osciallator overbought and oversold settings, these have been 'tweaked' ever so slightly to try to improve the accuracy of entries.

The RSI_OB_Level has been moved out to 73, while both the StocOS_level and StocOB_Level have been moved to 30 and 70 respectively. Take profit has also been moved out to 15 pips while the stop loss remains at the default 72. We don't take creadit for identifying these settings but thank the member of Donna Forex forums who recommended them following a backtest of the EA.

It's difficult to know exactly as to whether these changes will have a made a material difference to performance after only two weeks. However with all five trades taken on the GBPUSD having won far, we are more than happy to continue with them for the time being.

And of course if the performance holds up on the GBPUSD pair we may also considering adopting them on the EURUSD. TAQNGZNK3TME

Phoenix Rising?

A profitable week when there seemed to be no stopping the Phoenix Forex Code with 7 winning trades !

These results put the EA back on track and move us into positive territory at the end of Week 3 of our test. Again we chose to trade only Mon-Thurs switching the EA off on Friday. 

A 63 pip profit over three weeks is not to be sniffed at and provides a realistic indication of what this EA could achieve given less volatile markets. In fact compared with how some EA's have been performing of late this could be considered positively impressive! 

Given our general positive review on this EA so far our next sentence may seem somewhat confusing. While we have been impressed by the Phoenix EA we have taken the decision to stop testing it. Why? Well our time spent in the internet trading rooms has uncovered a similar, more configurable EA... and it's FREE!

The Trend OSB EA uses the same algorithms to calculate trade entries and exits and was developed as a free alternative to the ever increasingly available commercial EA's which simply tweaked core strategies.

The EA contains a number of settings which can be used to emulate several commercial EA's including the Forex Phoenix Code and Forex Zappa. Certainly our simulatenous trial tests reveal that the Forex Code is emulated at pretty much default settings, as we got exactly the same trade entries and exits over the last few days trading

Because of this we are new switching to using Trend OSB for the remainder of our testing.

The Trend OSB EA allows several settings to be tweaked under the hood. Not only does this mean that the strategy criteria can be refined for the EURUSD pair, it also allows the EA to be used across other pairs. We will post more on these settings in later posts.

Initial tests on the GBPUSD has so far yielding 3 winning trades. Ok so this is really too early to start getting excited, but nevertheless it perhaps shows the potential to run this EA across multiple pairs.

Anyway here are the latest results for the EURUSD

Week 1

+9 +9 -72 +9 = -45

Week 2

+9 +9 +9 +9 = +36

Week 3

+9 +9 +9 +9 +9 +9 +9 = +63

In our next post we will be taking a look at the indicator settings to see if we can eek out some more performance from this EA and of course providing an update on how our EURUSD and GBPUSD trades are perfoming.

In the meantime hop on over to the FREE indicator section on www.donnaforex/forum to take a look at the EA for yourself.