KEEP DISCIPLINE AND PATIENCE

When you have clearly find your trading methodology, then you must have the discipline to follow your system. A Lack of Discipline in this regard is the main fatal flaw because most of the time the markets are not trending in one clear direction.

The formula for success is to consistently apply a proven methodology. So the best advice I can give you to overcome a lack of discipline is to define a trading methodology that works best for you and follow it religiously.

Trading sure is inherently exciting and anything involving money usually is exciting, it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.

If the way you begin to over-trade, then you have either not identified your methodology or you lack the discipline to follow the methodology you have identified.

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Natural gas futures - Weekly outlook: May 27 - 31

Natural gas futures ended Friday’s session lower, as investors sold contracts to lock in gains from an impressive rally that took prices to the highest level in more than three weeks.

On the New York Mercantile Exchange, natural gas futures for delivery in July shed 0.6% on Friday to settle the week at USD4.284 per million British thermal units.

Earlier in the session, Nymex gas prices rose to a session high of USD4.291 per million British thermal units, the strongest level since May 2.

The July contract rallied 5.25% on the week, the second consecutive weekly gain.

Natural gas futures have been well-supported in recent sessions, climbing almost 9% over the past two weeks, as updated weather forecasting models pointed to a wider swath of above-normal temperatures across most parts of the U.S., boosting near-term cooling demand expectations. 

Demand for natural gas tends to rise in the summer months as warmer temperatures increase the need for gas-fired electricity to power air conditioning.  

On Thursday, a report from the U.S. Energy Information Administration showed natural gas supplies rose less-than-expected last week.

The EIA data showed that natural gas storage in the U.S. rose by 89 billion cubic feet, below expectations for an increase of 91 billion cubic feet.

Inventories rose by 75 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a rise of 90 billion cubic feet.

Total U.S. natural gas storage stood at 2.053 trillion cubic feet as of last week, 3.9% below the five-year average for this time of year. 

Early injection estimates for this week’s storage data range from 80 billion cubic feet to 103 billion cubic feet, compared to a 72 billion cubic feet increase during the same week a year earlier.

The five-year average for the week is a build of 92 billion cubic feet.

Elsewhere in the energy complex, light sweet crude oil futures for July delivery settled at USD93.84 a barrel by close of trade on Friday, falling 2.55% on the week. 

Meanwhile, heating oil for July delivery declined 2.8% over the week to settle at USD2.854 per gallon by close of trade Friday.

Nymex floor trading will remain closed on Monday, May 27 because of the Memorial Day holiday. All electronic transactions will be booked with May 28 trades for settlement.

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USD/JPY Outlook May 27-31

To call the past week in USD/JPY “volatile” would certainly be an understatement. The pair reached new highs only to crash in erratic moves. Speeches by the governor of the BOJ, retail sales and inflation data are the main events this week. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.

The 7.32% crash in the Japanese stock markets send USD/JPY from the new multi-year highs to much lower ground. Also the rising bond yields, despite massive QE, are the first test for “Abenomics”. Some fear that Japan might lose control. Also the  possibility of tapering QE in the US weighed on the pair. Following the extraordinary QE program on April 4th, the Bank of Japan made no policy changes for the second time in a row. The central bank is looking to expand the size of the monetary base raising its economic assessment in light of recent improvements. 

USD/JPY daily chart with support and resistance lines on it. Click to enlarge:

1. Haruhiko Kuroda speaks: Sunday, 4:50, Wednesday 00:00. BOJ Governor Haruhiko Kuroda is scheduled to speak in Tokyo. He may speak about the positive developments in Japan’s economy and may share some important information concerning future monetary policy and interest rates. His words may cause volatility in the market. It will be interesting to see if tried to strengthen the yen, like the economy minister did, or rather weaken it with pledges to buy as many bonds as needed.
2. Monetary Policy Meeting Minutes: Monday, 0:50. Bank of Japan policymakers decided on their April 3 to 4 policy meeting that the central bank needs to introduce a new phase of monetary easing to convince manufacturers of their earnest intentions of changing terms of scale, in order to reach the goal of the 2% inflation. However, some members stressed the possible effects of the drastic easing policy, such as restrained investment of institutional investors, as well as a rise in speculation that the BOJ was engaged in financing the government’s debt.
3. CSPI: Tuesday, 0:50. An index measuring corporate service prices in Japan dropped 0.2% in March from the previous year, following a flat growth in February. Economists expected a 0.4% decline in March. On a monthly basis, the corporate service price index climbed 0.7%, which was better than the 0.3% rise registered in February. Another fall of 0.2% is forecasted now.
4. Retail Sales: Wednesday, 0:50. Japan’s retail sales fell 0.3% in March, declining for the third straight month. Consumer spending is showing signs of recovery but retail sales remain weak compared with a year before. A substantial recovery from deflation needs higher wages and more job creation, which will boost demand for automobiles and consumer electronics. The downside effect from the termination of car subsidies is likely to continue until August or September. A further decline of 0.4% is likely.
5. Manufacturing PMI: Friday, 0:15. Japanese manufacturing activity expanded in April rising above the 50.4 reading registered in March, to a seasonally adjusted 51.1. This is an encouraging sign that overseas demand is stabilizing. The output component of the PMI index climbed to 52.1 in April from 51.3 in the previous month. The Japanese government’s new monetary policy helped to reduce the yen to a four-year low, supporting economic activity.
6. Household Spending: Friday, 0:30. Japan’s household spending edged up in March at the fastest pace in nine years, rising 5.2% form a 0.8% growth in the previous month. The reading topped forecast of a 1.8% gain. The positive increase occurred due to Prime Minister Shinzo Abe’s bold monetary policy, aiming to end two decades of stagnation. Another climb of 3.1% is expected this time.
7. Tokyo Core CPI: Friday, 0:30. Japan’s core consumer price index, declined 0.5% in March from a year earlier, a bit worse than the 0.4% fall expected. Meanwhile, The April core CPI for metropolitan Tokyo, registered a 0.3% yearly drop, but was better than the 0.5% drop registered in March. Tokyo Core CPI  is predicted to decline 0.2%, while the National Core CPI is expected to drop 0.4%.
8. Industrial Production: Friday, 0:50. Japan’s industrial output increased 0.2% rising for the fourth straight month in March in light of an improvement in foreign demand and the effects of the weaker yen on exports. The reading followed a 0.6% climb in February. Overseas demand for Japanese automobiles and general machinery is also improving. The recent encouraging figures in the industrial sector prove that industrial output “has bottomed out and shows some signs of picking up. Another 0.8% gain is forecasted.
9. Housing Starts: Friday, 6:00. Housing starts in Japan humped 7.3% in March from a year earlier, rising for the seventh straight month, following a 3.0% gain in February. The reading was higher than the 5.1% climb anticipated by analysts. A rise of 4.3% is anticipated.

*All times are GMT.

USD/JPY Technical Analysis

Dollar/¥ started the week with a drop to 102, a line that didn’t appear last week. It then traded in a limited range before surging to a new multi-year high of 103.73. From there, it was a sharp fall of nearly 300 pips. A seoncd rise sent the pair to 102.60 before it fell again to close at 101.30.

Live chart of USD/JPY:

Technical lines from top to bottom

108.60 capped the pair in 2008 and worked as support during 2006. 107.16 provided support in 2007 and later worked as resistance in 2008.

105.50 is above the round number of 105 and worked as resistance during 2008. It worked as support later in the year. Below, 104.60 slowed the pair’s rise in early 2008.

103.73 is the new multi-year high and is now the key line to a fresh upside move. 102.80 capped the pair in May 2013, and could work as the immediate pullback line.

The round number of 102 provided support for the pair towards the end of May 2013 and is minor resistance now.. The 101.44 line, which was the post crisis high seen in April 2009, is now critical support.

The crash low of 100.66 provides support before 100. The obvious number below is the very round number of 100 and would be closely watched on any drop. 98.90 capped the pair in June 2009 and serves as minor resistance.

A stronger line is the 97.80 line, which was a peak back in 2009 and was reached in April 2013. The pair stumbled below this line, which is getting weaker. The round 97 line worked as important support in May 2013.

The March 2013 peak of 96.71 is the next line, which now switches to support. 95.88 provided a temporary stop on the way up and was also the swing low on a fall during April. The round number of 95 is also watched by many and will remain critical support on a reversal.

I turn from neutral to bullish on USD/JPY

The recent shocks probably served as a consolidation and correction phase before the next move higher. The extreme policies of the government and the central bank are likely to drive the yen lower. The BOJ will probably do whatever it can to lower bond yields, and this in turn will likely turn into yen weakness. Whilethese policies might be dangerous,  it seems that the Japanese authorities are more likely to double the bet than to retreat and make the early success a permanent one,  especially if deflation continues

In the US, the Fed is more likely to taper bond buys than increase them. This will probably come later rather than sooner, giving stock markets and the economy more space to rise, but it doesn’t seem likely that the Fed will increase QE, especially in light of the recent signs of improvement.

More: An end to QE and what it means for Forex - by Justin Pugsley, about which currencies are set to gain and which to lose.

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GBP/USD Outlook May 27-31

The pound showed some movement in both directions, but ended the week with very modest losses, as GBP/USD close at 1.5122. The upcoming week is very quiet, with just four releases on the schedule. Here is an outlook of the events and an updated technical analysis for GBP/USD.

British inflation numbers, including CPI, missed their estimates, and Retail Sales looked awful. GDP salvaged the week, gaining 0.3%, which matched the forecast.

GBP/USD graph with support and resistance lines on it. Click to enlarge: 

1. CBI Realized Sales: Wednesday, 10:00. CBI Realized Sales is an important leading indicator of consumer spending. The indicator has slid  badly in 2013, and dropped to -1 point in the April reading. This was its lowest reading since August 2012. The markets will be hoping that the indicator can climb back into positive territory in the upcoming reading.
2. Nationwide HPI: Thursday, 6:00. The UK housing market continues to struggle. This housing inflation indicator declined 0.1% in the May release, matching its lowest level in 2013. Will the indicator surprise the markets  with a strong reading this time around?
3. GfK Consumer Confidence: Thursday, 23:01. Consumer confidence is vital for the economy, as a confident consumer means a spending consumer. The indicator has been mired in deep negative territory, indicative of deep pessimism in consumer confidence. The indicator came in at -27 points in the previous reading, and little change is expected in the upcoming release.
4. Net Lending to Individuals: Friday, 8:30. This indicator provides a snapshot of consumer confidence and spending, as consumers will increase their borrowing if they are comfortable in spending more. The indicator dropped sharply to 0.9 billion pounds in April, which matched the forecast. The markets will be hoping for better news from the May release.

GBP/USD Technical Analysis

GBP/USD opened the week at 1.5175. The pair touched a high of 1.5281, but was unable to maintain this move. The pair dropped as low as 1.5092, but the support line of 1.5061 (discussed last week) held firm. GBP/USD closed the week at 1.5122.

Technical lines from top to bottom:

We start with strong resistance at 1.5648. This line has held firm since mid-February. We next encounter resistance at 1.5560. This line was providing support at the start of the month, but fell as the GBP/USD went on a sharp slide which continues. Next there is resistance at 1.5484. This is followed by 1.5416. This line was providing support, but the pair broke through early last week. We next encounter support at 1.5258. This line was active last week, and has strengthened in resistance as the pair trades at lower levels. Next, 1.5189 is providing weak resistance. It could see more action early this week.

GBP/USD continues to receive support at 1.5061. This line held firm as the pair pushed downwards and broke through the 1.51 line. This is followed by 1.5010, protecting the all important 1.50 level. Below is 1.4896, just below the round number of 1.49. It has held fast since mid-March. The final support line for now is 1.4648, which was last tested in June 2010.

I remain bearish on the GBP/USD.

Although the pound had a decent week, it has lost about four cents against the US dollar in May, and the British economy continues to look weak. The pair tested the 1.51 line , and their is more room for the pair  to fall.

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EUR/USD Forecast May 27-31

Eur/Usd managed to recover an remain resilient in a week that saw a lot of turbulence. Can the euro remain stable or will the talk about the next moves of the ECB weigh on the euro? German retail sales, inflation  and employment data in Germany and the Eurozone are the main events this week . Here is an outlook on the main market-movers and an updated technical analysis for EUR/USD.

Germany, the largest economy in the euro-zone, produced mixed signals: on one hand, it printed less than satisfactory services PMI, while manufacturing PMI also failed to reach the 50 point line. It seems that Europe’s locomotive is stuck due to its neighbors’ recession. However, the IFO business climate showed better prospects for the future. The euro rocked on Bernanke: at first, the prepared statement showed that the Fed is worried about a premature withdrawal of QE, and EUR/USD tried reaching 1.30. However, when asked about an exit strategy,Bernanke opened the door for QE tapering in one of the “next few meetings” and the pair dropped. The focus could shift back to the ECB, with the talk about a negaitve interest rate, especially if inflation falls again. Let’s Start:

EUR/USD daily graph with support and resistance lines on it. Click to enlarge:

1. German Import Prices: Monday. German Import Price Index dropped 0.1% in March, following a 0.3% expansion in February, while economists expected no change. On an annual basis the Import Price Index fell 2.3% in March, down from the 1.6% decline in February and slightly above expectations of -2.4%. Another fall of 0.2% is forecast.
2. German CPI: Wednesday. Consumer prices declined 0.5% in April, following a 0.5% gain in March, dropping the annual inflation rate to 0.9% from 1.4% in March. The reading was worse than the 0.2% fall predicted by analysts. Inflation pressure in Germany is expected to remain moderate in the near future and the government projects only 0.5% GDP growth this year due to the weak global economy. A rise of 0.2% is expected this time.
3. German Unemployment Change: Wednesday, 7:55. German unemployment edged up slightly in April by 4,000 due to cold winter weather keeping people out of work. The reading was worse than the 2,000 addition expected by analysts following a 12,000 increase in March. However, unemployment rate remained low at 6.9%. The same increase of 4,000 is expected now.
4. M3 Money Supply: Wednesday, 8:00. The annual expansion rate of the total currency in circulation in the euro area fell to 2.6% in March, from 3.1% in February. Economists expected a 3.1% increase. The reduction of deposit from banks within the euro area was due to the huge bailout deal reached between the Troika and Cyprus. In March, Cypriot deposits reached €44.2 billion. The annual growth rate of short-term deposits had dipped to 0.5% in March, from 0.8% in the previous month. Another increase of 2.9% is anticipated.
5. Retail PMI: Thursday, 8:10. Eurozone purchasing managers index continued to show weakness in retail sales during April, reaching 44.2 , from 43.7 in March, still below the 50 point line, indicating contraction. Italian retail PMI fell to a four month low of 37.2 and Germany to a two month low at 49.7. Both France and the Eurozone as a whole saw a two month high, of 43.7 and 44.2 respectively.
6. German Retail Sales: Friday, 6:00. German retail sales declined for a second month in March, down 0.3% following 0.6% fall in February, further evidence to the struggle of Europe’s largest economy. The reading was slightly below forecasts of a 0.2% decline. Business confidence also declined for a second month in April due to slower growth. A rise of 0.3% is forecast.
7. French Consumer Spending: Friday, 6:45. French consumer spending edged up more than expected in March, rising 1.2% amid soaring food sales and increased energy consumption. The reading followed a 0.2% fall in the previous month, beating market predictions for a minor rise of 0.2%. The figures suggest that domestic demand supports the economy despite high levels of unemployment. A decline of 0.5% is projected.
8. Italian Monthly Unemployment Rate: Friday, 8:00. Italian unemployment rate remained unchanged in March at 11.5% amid a political standstill and the prolonged economic recession. Economists expected a worse reading of 11.7%. Italian economy is expected to contract by 1.8% this year amid rising unemployment and low consumer and investor confidence. A rise to 11.6% is expected.
9. CPI Flash Estimate: Friday 9:00. Inflation in the euro zone weakened to a three-year low of 1.2% in April, following 1.7% increase in March, amid high unemployment rate diminishing hopes for an interest rate cut by the European Central Bank. Economists expected a higher reading of 1.6%. An increase of 1.4% is forecast this time.
10. Unemployment Rate: Friday, 9:00. Unemployment in the euro currency bloc reached a record high of 12.1%, driven by soaring youth joblessness. Eurozone unemployment rose to 12.1% in March, following 12% in February. The reading indicates that the Eurozone continues to struggle amid major growth headwinds and is still buried in recession. A rise to 125.2% is expected.

*All times are GMT

EUR/USD Technical Analysis

Euro/dollar started the week with a gradual climb, settling above the 1.2840 line (mentioned last week). It then continued higher, but couldn’t break 1.30 and collapsed. Another gradual climb saw another attempt on 1.30, but the pair eventually dropped and closed at 1.2934.

Live EUR/USD chart:

Technical lines from top to bottom:

1.3290 served as resistance before the pair collapsed in 2012, After many failures to break higher, the euro finally pushed through. 1.3255 provided support during January 2013 and also beforehand. A recovery attempt failed to reconquer this line.

1.32 is a clear top after capping the pair twice in April 2012 and then in May. This is a round number as well. 1.3160, which separated ranges in May 2013 is a critical line..

1.3100 is a minor line after working as temporary resistance in December 2012. It is followed by 1.3050, which proved be strong support in May 2013, defending the round number in more than one occasion, and also working as resistance.

The very round 1.30 line was a tough line of resistance and is becoming stronger after serving as a double top in May 2013. In addition to being a round number, it also served as strong support and recently worked as a pivot line. 1.2960 provided some support at the beginning of the year and also in September and October – the line is now weaker and is just a stepping stone.

Lower, 1.2890 worked in both directions during 2012 and was the beginning of the uptrend support line. It is somewhat weaker now. 1.2840 worked as a cushion for the pair during May 2013 and is a pivotal line at the moment.

Lower, the round number of 1.28 was the bottom of a long term wide range in 2012 and its breach in May 2013 was not confirmed. Below, 1.2750 worked as a separator of ranges during November, and stopped the pair’s drop in March. This is a key line on the downside, as clearly shown in the first week of April. This is followed by the round number of 1.27, which is a minor line.

1.2624 was a swing low in January 2012 and remains important on any break to the downside. It is followed by the veteran line of 1.2587.

I remain bearish on EUR/USD

The attention moved away from the euro-zone to the tapering question in the US and the crash of the Japanese stock market. The focus could now return to the weak GDP numbers, the talk about negative rates and even the call for the ECB to “manage the euro lower“. The thought that Japanese money is going to flood into Europe pushed yields lower. However, fresh data from Japan showed that this is not the case. We could have a rapid return of the debt issues if yields rise. The deep issues in Italy and Spain were never resolved.

In the US, it’s important to remember that figures have improved: better than expected new home sales, a drop in jobless claims and a rise in durable goods orders provide support for tapering QE sooner than later. While the timing remains open, it seems more probable that the next move of the Fed will be to reduce bond buys rather than to increase them.

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Forex - Weekly outlook: May 27 - 31

The dollar ended the week mixed against the other major currencies on Friday, falling to lows of 100.67 against the yen amid speculation over an earlier-than-expected end to the Federal Reserve’s asset purchase program.

On Wednesday, Fed Chairman Ben Bernanke said a decision to scale back the U.S. central bank’s USD85 billion-dollar-a-month asset purchase program could be taken in the "next few meetings" depending on economic data.

Meanwhile, Wednesday’s minutes from the U.S. central bank’s May meeting showed a "number" of policymakers were prepared to taper bonds purchases as soon as June.

The dollar extended losses against the yen on Friday after official data showed that U.S. durable goods orders rose 3.3% in April, outstripping expectations for a 1.5% increase.

USD/JPY hit session lows of 100.67, before paring back losses to settle at 101.29, down 0.71% for the day and extending the week’s losses to 1.43%.

The dollar was also sharply lower against the traditional safe haven Swiss franc, with USD/CHF settling at 0.9612, down 0.79% for the day and 1.11% lower for the week.

The euro was little changed against the dollar on Friday after data earlier in the session showed that Germany’s Ifo index of business climate rose to 105.7 from 104.4 in April, fuelling optimism over the outlook for the euro zone’s largest economy. Analysts had expected the index to tick up to 104.5.

EUR/USD hit session highs of 1.2994 following the data, before settling at 1.2936, just 0.02% higher for the day, rising 0.67% for the week.

The pound was slightly higher against the dollar on Friday, withGBP/USD settling at 1.5124, 0.10% higher for the day, but down 0.43% for the week.

The Australian dollar ended the week close to one-year lows as concerns over a slowdown in China and fears over an earlier-than-expected exit from the Fed’s easing program pressured the currency lower.

AUD/USD hit session lows of 0.9636 on Friday, before settling at 0.9652, dropping 0.98% for the day and extending the week’s losses to 1.09%.

In the week ahead, volumes look likely to remain thin on Monday, with public holidays in the U.K. and the U.S. 

Investors will be looking ahead to data on gross domestic product from Canada and Switzerland, as well as a rate decision by the Bank of Canada. The U.S. is to release data on the housing sector, consumer confidence and initial jobless claims.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, May 27

The Bank of Japan is to release the minutes of its most recent monetary policy meeting. The minutes contain valuable insights into economic conditions from the bank’s perspective.

Markets in the U.K. are to remain closed for the May bank holiday. 

Meanwhile, U.S. markets are to remain closed for the Memorial Day holiday.

Tuesday, May 28

Switzerland is to release official data on jobs creation and the trade balance.

In the euro zone, Italy is to hold an auction of 10-year government bonds.

The U.S. is to produce private sector data on house price inflation, in addition to data on consumer confidence, a leading economic indicator.

Wednesday, May 29

Japan is to release government data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

Australia is to publish official data on completed construction work, an important economic indicator.

In the euro zone, Germany is to release preliminary data on consumer price inflation, which accounts for the majority of overall inflation, as well as data on unemployment change. Elsewhere, Spain is to hold an auction of 10-year government bonds.

The U.K. is to release industry data on retail sales, an important economic indicator.

The Bank of Canada is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.

Thursday, May 30

Australia is to release official data on building approvals and private capital expenditure.

Switzerland is to release data on first quarter GDP, the broadest indicator of economic activity and the leading measure of the economy’s health.

Canada is to produce government data on raw material price inflation, a leading indicator of consumer inflation.

The U.S. is to release revised data on first quarter economic growth, in addition to the weekly report on initial jobless claims and data on pending home sales.

Friday, May 31

Japan is to produce official data on household spending and inflation as well as preliminary data on industrial production, a leading economic indicator.

New Zealand is to release private sector data on business confidence, a leading indicator of economic health. Australia is to release official data on private sector credit.

Switzerland is to publish the KOF economic barometer, which is designed to predict the future direction of the economy.

The U.K. is to release official data on net lending to individuals and mortgage approvals.

The euro zone is to publish preliminary data on consumer price inflation as well as data on the unemployment rate, a leading economic indicator.

Canada is to publish its monthly report on GDP, the broadest indicator of economic activity and the leading measure of the economy’s health.

The U.S. is to round up the week with revised data on consumer sentiment from the University of Michigan, as well as data on personal income and expenditure and a report on manufacturing activity in Chicago.

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