Author: Reddy Shyam Shankar

I am a professional Price Action retail trader and Speculator with expertise in Risk Management, Trade Management, and Hedging.

Categories
Forex Fundamental Analysis

What Should You Know About ‘Mortgage Market Index’ Macro Economic Indicator

Introduction

Introduction

Introduction

In the recent past, the real estate market has been a critical indicator of economic performance. As with any other aspect of the financial market that intertwines with consumer demand, the significance of the mortgage market cannot be overstated. Knowing if mortgage applications have increased or reduced can tell a lot about the demand in the housing market and households’ welfare. This index can be a leading indicator of demand in the economy.

Understanding the Mortgage Market Index

Primarily, the mortgage market index tracks the number of mortgage applications over a specific period. In the US, for example, the mortgage market index is compiled by the US Mortgage Bankers Association (MBA). The MBA mortgage market index is released weekly. MBA has an association of about 2200 members encompassing the entire real estate financing industry. The companies included in the association are deal originators, compliance officers, deal underwriters, servicers, and information technology personnel. These companies are active in residential, multi-family, and commercial real estate.

Owing to its vast network of real estate companies across the country, MBA is in the best position to provide comprehensive coverage of the mortgage applications made. The published data shows both seasonally adjusted and unadjusted changes in the US’s number of mortgage applications. Furthermore, the report also includes the Refinance Index,  which shows the number of applications made by households wishing to refinance their mortgages. The report also includes seasonally adjusted and unadjusted ‘Purchase Index,’ which shows the number of outright purchases in the real estate sector during that week.

Furthermore, this weekly report analyses the change in the Adjustable-Rate Mortgage (ARM) applications. As the name suggests, the ARM is a mortgage in which the interest rate payable on the balance varies throughout its life. The number of the Federal Housing Administration (FHA) loans are also included in the report. It further analyses the average contract interest rate for 30-year fixed-rate mortgages with Jumbo loan balances and conforming loan balances. Jumbo loan balances are those above $510,400 while conforming loan balances are less than this amount. Finally, the MBA mortgage market weekly report analyses the change in the average contract interest rate for 15-year fixed-rate mortgages.

Using the Mortgage Market Index in Analysis

The change in the number of mortgages in an economy tells a lot about the prevailing economic conditions. These conditions range from demand in real estate to prevailing monetary policies. Both of these aspects are integral in the growth of an economy.

When the mortgage market index is rising, it means that the number of mortgage applications has increased. The increase in mortgage applications could imply that there is a growing demand for real estate. One thing you have to know, when people decide to invest in the housing market, it normally means that they have increased disposable income and have thus fulfilled all other intermediate needs.

An increase in disposable income in the economy means that more people are gainfully employed or that wages have increased. In both these circumstances, we can deduce that the economy is expanding. The reason for this deduction is because when demand in the real estate market expands, it means that demand in the consumer discretionary industry has also increased. Thus, the output in the economy is higher.

More so, when the mortgage market index rises, it could mean that households and investors in the economy have access to cheap finance. Either they are creditworthiness has improved, or the market interest rates are lower. When the interest rate is lower in the market, it is usually due to the central banks’ expansionary monetary policy.

Such expansionary policies are adopted when the central banks aim to stimulate the growth of the economy. It means that people have access to cheap money and can borrow more. When there is a growing money supply in the economy, households can increase their consumption, and investors can scale up their operations. Overall, the economy will experience an increase in output, thus in the GDP.

Furthermore, it could also mean that households who previously could not afford to service a mortgage can now be able to afford mortgages due to low-interest rates. This scenario played out towards the end of the first quarter of 2020 when the US Federal Reserve made a series of interest rate cuts. The MBA mortgage market index is seen to have hiked. This hike can be taken as a sign that households and investors were taking advantage of the expansionary policies by increasing their holding in the real estate sector.

Source: Investing.com

On the other hand, a drop in the MBA mortgage index means that the demand for demand in the housing market is waning. The decrease in demand could be synonymous with an overall contraction of demand in the economy. The contraction of aggregate demand can be taken as a sign that the overall economy is also contracting. Similarly, it can also be taken as a sign that the public has lost confidence in the housing market as during the 2007 – 2008 housing market crash.

Source: Investing.com

Impact of the Mortgage Market Index on Currency

In theory, the domestic currency should be susceptible to fluctuations in the mortgage market index.

When the index increases, it can be taken as a sign that there is an increased money supply in the economy. Under such circumstances, contractionary monetary and fiscal policies might be implemented, such as hiking the interest rates. When such policies are adopted, the domestic currency tends to increase in value compared to other currencies in the forex market.

Conversely, when the index is continually dropping, it can be taken as an indicator of overall economic contraction. In this instance, expansionary policies might be implemented, like lowering interest rates to encourage consumption and prevent the economy from slipping into a recession. These policies make domestic currency depreciate.

Sources of Data

In the US, the mortgage market index is compiled and published weekly by the Mortgage Bankers Association. A historical time series of the data is available at Investing.com.

How the US Mortgage Market Index Affects The Forex Price Charts

The latest publication by the MBA was on October 21, 2020, at 7.00 AM EST. As seen in the screengrab below, a low impact on the USD is expected when the index is published.

For the one week to October 21, 2020, the mortgage market index was 794.2 compared to 798.9 in the previous publication.

Let’s see how this publication impacted the USD.

GBP/USD: Before US Mortgage Market Index Release on October 21, 2020, 
just before 7.00 AM EST

Before the publication of the US Mortgage Market Index, the EUR/USD pair was trading in a weak uptrend. In the above 5-minute chart, the 20-period MA is almost flattened with candles forming slightly above it.

GBP/USD: After US Mortgage Market Index Release on October 21, 2020, 
at 7.00 AM EST

The pair formed a 5-minute bearish candle after the release of the index. It later traded in a neutral trend as the 20-period MA flattened, and candles formed around it.

Bottom Line

This article has shown that the US MBA Mortgage Market Index plays an essential role as an indicator of demand in the housing market. But as shown by the above analyses, this economic indicator has no significant impact on price action in the forex market.

Categories
Forex Assets

Understanding The Fundamentals Of AUD/KES Forex Currency Pair

Introduction

Introduction

Introduction

In the AUD/KES pair, the AUD represents the Australian Dollar while the KES is the Kenyan Shilling. When buying and selling this exotic currency pair, forex traders should expect instances of high volatility. In the AUD/KES pair, AUD is the base currency, and KES is the quote currency. The price attached to this pair is the amount of KES that 1 AUD can buy. For example, if the price of AUD/KES is 76.399, it means that if you have 1 Australian Dollar, you can buy 76.399 Kenyan Shillings.

AUD/KES Specification

Spread

When you want to buy a currency pair in forex trading, you buy it from the broker. If you sell the pair, you sell it to the broker. The difference between these two prices is the spread. The spread for the AUD/KES pair is – ECN: 25 pips | STP: 30 pips

Fees

Most brokers charge a commission when you open a position. This commission varies from broker to broker and also depends on the size of your position. STP accounts are usually commission-free.

Slippage

In times of high volatility, or when your broker delays executing a trade, you will notice that the price at which you open a position is different from the exertion price. This is slippage in forex trading.

Trading Range in the AUD/KES Pair

In forex trading, trading range refers to the fluctuation in a currency pair’s price across different timeframes. Analysis of the trading range provides a powerful tool for deriving the volatility of a currency pair.

The Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine a larger period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

AUD/KES Cost as a Percentage of the Trading Range

The total trading cost involved in buying and selling a currency pair includes the spread, slippage costs, and brokers’ fees. Using the total trading costs, we can establish the percentage costs of a currency pair in pips.

ECN Model Account Cost

Spread = 25 | Slippage = 2 | Trading fee = 1 | Total = 28

STP Model Account Cost

Spread = 30 | Slippage = 2 | Trading fee = 0 | Total cost = 32

The Ideal Timeframe to Trade the AUD/KES

These analyses show that trading the AUD/KES pair on larger timeframes carries lower costs than smaller timeframes. Notice that on longer timeframes, volatility is higher. We can thus say that higher volatility corresponds to lower costs. For both the ECN and the STP accounts, costs are highest when volatility is at four pips and lowest when volatility is 737.1 pips.

To determine the ideal trading will depend on your trading style. Generally, longer-term traders enjoy low costs for both types of accounts. For the shorter-term traders, waiting for when volatility is at the ‘maximum’ will help lower the costs. Traders can also use forex limit orders to lower trading costs since using such orders eliminates slippage. Here’s one example using the ECN account.

Total cost = Slippage + Spread + Trading fee = 0 + 25+ 1 = 26

With no slippage costs, notice how costs have significantly dropped. The highest cost for the AUD/KES pair has dropped from 474.58% to 440.68%.

Categories
Forex Course

170. Why Consider Analysing Multiple Timeframes When Trading Forex?

Introduction 

Introduction 

Introduction 

Our previous lessons have covered trading multiple timeframes in forex and which timeframes are suitable for your trading style. To some forex traders, trading multiple forex timeframes can seem tedious and time-consuming. Here are some of the most important reasons why you should look at multiple timeframes when trading forex.

1. To easily identify trends and their momentum

Depending on the type of forex trader you are, multiple timeframes will enable you to see the prevailing market trends at a glance by filtering out periodic price spikes. It is easier to identify the direction of the market trends and consolidations, whether in the short- or long-term.

For the long-term market trend, you can use the weekly and the monthly timeframes, while the intermediate market trend can best be identified by the 4-hour to daily timeframes. Timeframes of between five minutes and one hour can be used to determine the short-term market position.

The longer timeframes filter out the short-term price fluctuations, which might otherwise result in trend inconsistencies when viewed alone. The periodic fluctuations in the short-term add up in the long-term. With multiple timeframe analysis, the strength and consistency of the short-term trend can be compared to that in the long-term. This comparison is made by observing whether the prevailing long-term trend was dominant in the short-term as well.

2. To establish the significance of fundamental indicators

Using multiple trend analysis, you can easily establish the magnitude that news release of economic indicators has on a given currency pair. To determine the significance of the economic indicators, you can use different timeframes to establish how long the news release affected price action. The effects of high-impact fundamental indicators can be traced from the shorter timeframe to the longer timeframes. Low-impact indicators only affect price action on the shorter timeframe.

3. Identifying the support and resistance levels

Based on the forex trading style you choose, you can use the more extended timeframe within your category to establish the support and resistance levels in the market trend. Shorter timeframes can then be used to trigger entry and exit points for a trade.

These support and resistance levels are crucial in deciding the forex order type you want to execute. Say, for example, you want to use a buy limit order. You will use the support level as your trigger price. Similarly, the support level can be used as the trigger price for a sell stop order. You can use the resistance level as the trigger price for the sell limit and buy stop orders.

4. To avoid the lagging effects of technical indicators

Technical forex indicators are lagging since they derive their properties from the price action of a forex pair. Therefore, the forecasting significance of multiple timeframe analysis in the forex market can be said to be leading that of the technical indicators. Furthermore, some technical forex indicators can produce conflicting signals. Thus, trading with multiple timeframes improves your forex analysis.

We hope you understood why it is crucial to consider analyzing various timeframes while analyzing the Forex market. Please take the below quiz to know if you got the concepts correctly. Cheers!

[wp_quiz id=”89156″]
Categories
Forex Signals

AUDNZD Breakout Retest BUY

Flow Assessment

  • Price is in an overall uptrend, thus giving a buy bias. The sellers in the pullback have come in multiple pushes, suggesting profit-taking not a swing reversal

Location Assessment

  • Price has come back to the level where strong buyers pushed up to create a higher high (HH) for the first time, thus making this a good location to buy as there are likely to be more buy orders waiting at these levels

Momentum Assessment

  • We waited for evidence of strong buyers emerging from the level for our entry trigger
Categories
Forex Signals

GBPNZD Breakout Retest SELL

Flow Assessment

  • The strong buy swing on the daily has failed to achieve anything and has been halted by sellers building up positions and beginning the downward move, thus giving us a sell swing bias

Location Assessment

  • Price has recently broken out of a daily buildup range (around the aqua line in the picture) and the next set of buy liquidity is likely to be at the origin of the daily buy swing upwards emerging from 1.91530

Momentum Assessment

  • As the breakout below the aqua line looked strong on the H1, the sell entry is based on a breakout retest idea of that level
Categories
Forex Signals

EURCAD Breakout Retest BUY

Flow Assessment

  • Price has reached a key H4 sellers area (pink line) so we anticipate down-flow to continue, however the sellers so far have not shown much strength relative to buyers, hence we anticipate intermediate buys

Location Assessment

  • Price is reacting at a key high volatility buyers area, where there are some signs that they are defending the level

Momentum Assessment

  • Price has had a SL hunt, where some sellers have been trapped. This gives us our entry trigger.
Categories
Forex Signals

USDJPY Swing Failure BUY

Flow Assessment

  • Sellers have tried with high volatility to create a lower low and failed, suggesting that a higher price may be needed

Location Assessment

  • Next set of liquidity for H1 sellers (aqua line) are still higher up, thus giving space for the buys, especially after buyers have halted seller progress in this swing

Momentum Assessment

  • On M15, price has initiated an up-flow with higher high and higher low. We look to trade the buys after the 1st sign of a strong buyer
Categories
Forex Signals

AUDCAD Breakout Retest BUY

Flow Assessment

  • Price is in a strong up-flow and the seller pullback is coming in with weaker volatility and strength

Location Assessment

  • We look to trade near the key buyer area, where there was a high volatility reaction previously

Momentum Assessment

  • Allow the sellers to try 1 more time since the sellers approached the key buyer area in a sharp way, but after signs of buyers holding the level even after the seller’s 2nd try, this is a sign for taking the buy
Categories
Forex Signals

EURGBP Breakout Retest SELL

This is a position add to the existing EURGBP SELL trade here.

Flow Assessment

  • Structural down flow with LLs and LHs

Location Assessment

  • Price has come back to a critical level where previous volatile reactions happened around, making it a good area to look for sells

Momentum Assessment

  • Buyers suddenly shot up right into the key level with high volatility. But this is suspicious because the original buyers did not show this much strength or volatility.
  • This makes us suspect that it is a trap, specifically a liquidity and stop hunt to accumulate more sell orders, making it a fantastic entry trigger
Categories
Forex Signals

EURGBP Swing Failure SELL

Flow Assessment

  • Price has reacted off a monthly sellers area and has been grinding down slowly.
  • The sellers have been maintaining market structure as there has been no higher high by the buyers.
  • The sellers have been making progress by making lower lows

Location Assessment

  • Price has reacted of a H1 sellers area
  • We are trading based on the buyers’ continued inability to make a higher high

Momentum Assessment

  • We waited for a 2nd attempt of buyers to see if they can push and make a higher high
  • When this 2nd attempt too failed; instead sellers made a lower high, this confirmed to us that the sellers are firmly in control, hence we can join them to trade down to the daily lows
  • In some cases, profit targets may be extended to the weekly lows
Categories
Forex Fundamental Analysis

Foreign Securities Purchases Impact on Forex Currencies

Introduction

Introduction

Introduction

For the longest time, the performance of a country’s financial and capital markets has been touted as an indicator of economic health. On the other hand, foreign investors’ participation in the local financial and capital market can be taken as a sign of confidence in the local economy. Therefore, monitoring foreign securities purchases can be used as a gauge of investors’ confidence in the local economy.

Understanding Foreign Securities Purchases

Foreign securities purchases measure the involvement of foreigners in the domestic financial and capital markets. It includes the value of local bonds, stocks, and money-market assets bought by foreigners over a particular period.

The financial market is considered the backbone of any economy. Every sector of the economy is interconnected with the financial market, not just by transactions. Companies, businesses, and governments use the financial and capital markets as a source of funds. Through IPOs, companies can raise funds that will be used for business expansions. Governments issue bonds and treasury bills in the money markets, which are used to fund government expenditures. In the secondary markets, however, these financial assets’ prices tend to reflect investors’ sentiments.

Therefore, foreign investors’ level of participation in the local financial markets can be used as a leading indicator of economic sentiment.

Using Foreign Securities Purchases in Analysis

Primarily, the data of foreign securities purchases shows foreign interest in the domestic economy. This data has various applications to government agencies, investors, and even forex traders.

The stock and money markets are driven by sentiment. The basics of how the financial market works is that; you buy a financial asset when prices are low and sell when prices are high. For example, in the stock markets, the price of a company’s stock is tied to its financial performance. So, when its performance is well, the share price will rise, and when the performance is deteriorating, the share price will fall. Another critical factor that drives the fluctuation in share price is a sentiment about the company’s performance.

When traders anticipate that the company will have a windfall – either increased demand for its core products or the launch of a new product line – the share price will rise. The rise in the share price is driven by the fundamental laws of demand and supply. The price will rise when there is an increased demand from investors to buy the shares, which means that those buying exceed the number of those selling. The price will fall when investors are selling the shares, which increases its supply relative to those demanding to purchase it.

Using this aspect of the stock markets, when foreign investors flood the domestic market to purchase shares, it means that they anticipate that the companies will perform better soon. As we have explained, a better financial performance by a company could result from increased demand for its products or expansion in business operations.

Since the stock market is forward-looking, increased buying activity can be interpreted as a vote of confidence that economic conditions are going to improve. Let’s take the example of the S&P 500. On October 19, 2020, the index closed just above 3400 from lows of 2237 on March 23, 2020, at the height of the Coronavirus pandemic.

Therefore, a rebound in the stock markets can be taken as a sign that investor confidence is increasing and improving economic conditions.

Source: St. Louis FRED

However, note that there is a disconnect between the GDP and the performance of the stock market. Most people tend to make the mistake of assuming that the growth of the stock market is synonymous to an increase in the GDP. While this might be true in some cases, it is purely coincidental, because the stock market is only one component of the economy. While the economy’s growth tends to encompass all aspects ranging from the growth of the labor market to household consumption, the stock market is majorly a reflection of corporate profits. For example, while the S&P 500 recovered from March to October 2020, the GDP was on a steady fall.

Source: St. Louis FRED

The other way foreign securities purchases can be used for analysis is through the purchases in the money markets, especially government bonds and treasury bills. When foreigners swam the domestic market to purchase government securities, it can be taken as a sign that the domestic economy is offering better returns compared to other international economies.

Furthermore, increased foreigner participation in the domestic money markets can be taken as a sign that the local economy is regarded as a safe heaven. It is a vote of confidence that the domestic economy is stable and comparatively less volatile, which means that their investments will receive a steady return and no chances of an outright loss of capital.

Impact on Currency

As a leading indicator of economic sentiment, foreign securities purchase data can show what investors think about economic recoveries. When the foreign securities purchases increase in times of economic recessions or slump, it can be taken as a vote of confidence by the investors that the economy will rebound in the near term. The logic behind this is that no one would want to invest in an economy bound to fall or one that has no signs of recovery. In such an instance, the currency will appreciate.

Similarly, the local currency will appreciate relative to others since an increase in foreign securities purchases implies that the domestic economy offers better returns. These higher returns could be a direct result of higher interest rates. Higher interest rates mean that the local currency will appreciate.

Conversely, when the foreign securities purchases data is on a decline, it shows that investors are fleeing the domestic economy. They can either get better returns on investment in other economies or believe that the local economy is headed for rough times. In this case, the local currency will depreciate relative to others.

Sources of Data

Statistics Canada collates and publishes foreign securities purchases data in Canada. The data published is of the prior two months. A more in-depth and historical review of the foreign securities purchases in Canada is available at Trading Economics.

How Foreign Securities Purchases Data Release Affects Forex Price Charts

For this analysis, we will focus on the August 17, 2020, release of the foreign securities purchases data at 8.30 AM EST. The data can be accessed from Investing.com. Moderate volatility is expected when the data is released.

In June 2020, Canada’s net foreign securities purchases were -13.52 billion compared to 22.39 billion in May 2020.

Let’s see what impact this release had on the CAD.

GBP/CAD: Before Foreign Securities Purchases Release on October 17, 2020, 
Just Before 8.30 AM EST

From the above 5-minute GBP/CAD chart, the pair was trading in a steady downtrend before the release of the data. The 20-period MA was steeply falling with candles forming further below it. This trend shows that the CAD was strong during this period.

GBP/CAD: After Foreign Securities Purchases Release on October 17, 2020, 
at 8.30 AM EST

The pair formed a long 5-minute candle upon the release of the data. As expected, the negative net foreign securities purchases in Canada resulted in the weakening of the CAD. Subsequently, the pair traded adopted a subdued uptrend with the 20-period MA slightly rising and candles forming just above it.

Bottom Line

The foreign securities purchases data is a moderate-impact economic indicator. Since it only serves to show investor confidence in the economy, it does not result in high volatility when released. Cheers!

Categories
Forex Signals

NZDCAD Breakout Retest BUY

Flow Assessment

  • Price has created a fresh higher high and the buy swings look strong and aggressive, suggesting bullish order flow

Location Assessment

  • Price has recently broken through and retested a major level at 0.88170, which has acted as a support and resistance for high volatility swings multiple times before
  • Hence, given our bullish bias, it is logical to look for buys at this key area

Momentum Assessment

  • Price retested the key 0.88170 level and showed sharp signs of rejection
  • Due to the high relevance of the level and the bullish bias, this is sufficient for us to take a buy
Categories
Forex Signals

USDJPY Breakout Retest SELL

Flow Assessment

  • There has been a very large trap on daily in terms of an SL hunt. The strong force of buyers would have enticed people on the wrong side of the market, providing lots of liquidity for sellers to build up positions at good, high prices to prepare for a big move

Location Assessment

  • Price has broken down below the weekly support, which is stale, having been tested 4 times already without any buy swing making even an equal high
  • This indicates that the weekly support is weak and is about to break

Momentum Assessment

  • The sellers have created a lower-low, showing that they are in control
  • We enter upon signs of rejection at the logical breakout retest area that coincides with the lower high.
Categories
Crypto Guides

What Should You Know About The ‘Concordium’ Blockchain Platform

Introduction

Introduction

Introduction

Business payments have to be made secure and transparent. It is true that blockchain and its products have always helped businesses in providing the right efficiency. Yet again, a blockchain-powered product has made its inception into the industry, offering better privacy and accountability of the payments. Concordium platform is a reformed open-source and permissionless blockchain product made with business applications. In this article, we are going to talk about the Concordium articles and everything you need to know about it.

What is Concordium?

It is a proof-of-stake blockchain that has been created with business applications. Concordium is also the first blockchain that comes with identification embedded in the protocol that helps in meeting the requirements facilitating a user-friendly platform. It is primarily designed to be cost-effective, secure, and fast. The identity layer offers on-chain identity compliance centric payments and better privacy for the users.

What About Its Structure?

The two-layer consensus protocol comprises Nakamoto-style blockchain, and the finality layer is meant for faster transaction confirmation. The sharing design facilitates high transaction throughput and enhanced privacy for the business’s sensitive data. Another feather in the cap is designing two new languages for the smart contract code, making the development much easier. The platform also has a transparent incentive structure with predictable fees and cost-effective transactions.

What Are The Best Features of Concordium?

Now that you have understood the platform, let’s take a peek into the feature that will give you a better understanding.

Regulatory Compliance By Design: It is primarily designed to make business transactions faster, secure, and cost-effective. Concordium is designed in a way to integrate the financial system with the user’s identity. It helps the developers, businesses, and individuals to build blockchain products that comply with regulations.

Privacy and Verification of Users: The identity layer of Concordium offers a compliance-centric balance in accountability and anonymity. The user’s identity will remain anonymous, but it can be revoked against a valid request from the government or legal channels.

Fast Transactions: The most important takeaway of this platform is its fast transactions. It has set a benchmark by making the transactions fast enough in accordance with transactions per second. Concordium is made to meet the ever-evolving needs of businesses on a global scale. The platform has taken a major leap compared to other blockchain technology.

Consistent Uptime: The platform is designed for dynamic business use cases with a focus on the uptime requirements. The two-layer consensus is designed to ensure that the platform is secure and available for the changing conditions. So far, the platform has achieved speedups and efficiency.

The Bottom Line

Concordium is created to bring innovation and efficiency to the business transaction. The platform vision to unlock blockchain’s potential and put it to best use for the future economy. The community of Concordium currently involves developers, investors, business leaders, and technologists who are advocating it throughout the world. If you are also willing to enter the arena, you can connect via attending the event, joining the online communities, or entering the ambassador program.

Categories
Forex Fundamental Analysis

The Impact of ‘Gross Domestic Product Estimate’ Economic Indicator On The Forex Market

Introduction

Introduction

Introduction

In most economies globally, the GDP data is published by governments or government agencies quarterly. This would mean that analysts, economists, and households would have to wait for a full quarter to know how the economy is performing. Naturally, this long wait can be frustrating and, in some cases, inconveniencing. Therefore, having some form of estimate as to what the GDP might be can be quite useful.

Understanding Gross Domestic Product Estimate

As the name suggests, the GDP estimate serves to estimate an economy’s GDP before the release of the official government-published GDP report.

These estimates are arrived at by surveying the industries within the country. In the UK, for example, the following industries are surveyed; production, manufacturing, mining and quarrying, agriculture, construction, private services, and public services. Most estimates adopted globally use the bottom-up methodology.

Source: National Institute of Economic and Social Research

In the UK, the National Institute of Economic and Social Research (NIESR) publishes a rolling monthly estimate of the GDP growth using the bottom-up methodology. Hence, its GDP estimate covers the preceding three months. Since the GDP estimates are published monthly, it means that NIESR releases at least four GDP estimates before the government’s publication. Using the bottom-up analysis to estimate the GDP, NIESR uses statistical models to aggregate the most recent trends observed within the GDP subcomponents. The statistical models are fed the latest trends, and they forecast the most probable outcome in these subcomponents. Note that these forecasts are only short-term.

While the GDP estimates are not always accurate to the exact decimal percentage, they provide an accurate GDP representation.

Using the Gross Domestic Product Estimate in Analysis

The GDP estimate data can be used in the timely analysis of economic performance. Here is how this data can be used.

In many countries, the macroeconomics policies are usually set more frequently than quarterly. However, since the economic performance is the centerpiece in any macroeconomic policy-making, it is vital to know the most recent GDP data. By tracking the trends of the top components of the GDP, the GDP estimates can provide the most recent data. Therefore, this will help the policymakers to implement more informed policies. Let’s see how the contrast between the GDP estimate and the actual GDP can make a difference in policy implementation.

For example, during the second quarter of 2020, governments and central banks wanted to implement expansionary fiscal and monetary policies. At this point, the only GDP data available to them is the actual GDP for the first quarter of 2020. But for most economies, the 2020 Q1 GDP showed economic growth. On the other hand, the more recent GDP estimates could show that contractions were already visible in the economy.

In this scenario, if policymakers were to use the actual data available to then – the Q1 GDP – they would have made undesirable policies. These policies would have further harmed the economy. On the other hand, if the GDP estimates would have been used to aid the policy implementation, chances are, the most suitable and appropriate monetary and fiscal policies would have been adopted. Here, the GDP estimate would have helped them make relevant policies and ensuring that these policies are implemented timely.

Furthermore, the GDP estimates can also be used to establish whether the policies implemented are working as expected. If expansionary policies are implemented, their primary goal is to spur demand and stimulate economic growth. Using the GDP estimate, policymakers can track to see if there are any changes experienced in the economy. Some aspects like inflation take a long time to adjust, but demand generated by households is almost instantaneous. Therefore, the GDP estimate can be used to gauge the effectiveness of the implemented policies. Take the stimulus packages adopted in Q2 2020 after the pandemic; they were meant to stimulate demand by households, which would lead to economic recovery. With the GDP estimate, we could tell whether the stimulus package worked or not.

When accurate, the advance GDP estimate can be a leading indicator of the actual GDP. Therefore, the GDP estimate data can be used to show the prevailing trends in the economy. For instance, it can be used to show looming periods of recession and any upcoming recoveries. Say that the trailing three months captured by the GDP estimate shows that the economy’s major subcomponents are struggling with demand and contracting. This data can be taken to mean that for that quarter, there is a higher probability that the overall economy would contract. Conversely, when the subcomponents being tracked show growth, it can be expected that the overall economy would have expanded in that quarter.

It’s not just the governments that can benefit from the GDP estimate data. The private sector as well can use the data to plan their economic activity. Take the example that the GDP estimate shows that a particular sector in the economy has been contracting for the previous three months. Investors in this sector can presume that the demand for goods or services from the sector is depressed. In this instance, to avoid venturing into loss-making businesses, investors can make informed decisions about where and when to invest their money.

Impact on Currency

When the GDP estimate shows that the short-term economy is expanding, the domestic currency will appreciate relative to others. A short-term expansion indicates that demand levels in the economy are higher, which implies that unemployment levels are low and households’ welfare is improving.

The domestic currency will depreciate if the GDP estimate shows that the economy is contracting. The primary driver of a contracting economy is decreased expenditure by households contributing almost 70% of the GDP. The decline in demand can be taken as a sign of higher unemployment levels.

Sources of Data

In the UK, the National Institute of Economic and Social Research publishes the monthly and quarterly UK GDP estimate.

How GDP Estimate Release Affects The Forex Price Charts

The most recent UK GDP estimate published by NIESR was on October 9, 2020, at 11.10 AM GMT and accessed at Investng.com. Moderate volatility on the GBP can be expected when the NIESR GDP estimate is published.

During this period, the UK GDP is estimated to have grown by 15.2% compared to 8.0% in the previous reading.

Let’s see how this release impacted the GBP.

EUR/GBP: Before NIESR GDP Estimate Release on October 9, 2020, 
just before 11.10 AM GMT

Before the release of the NIESR GDP Estimate, the EUR/GBP pair was trading in a subdued uptrend. The 20-period MA transitioned from a steep rise to an almost flattened trend with candles forming just above it.

EUR/GBP: After NIESR GDP Estimate Release on October 9, 2020, 
at 11.10 AM GMT

After the GDP estimate release, the EUR/GBP pair formed a 5-minute bullish ‘inverted hammer’ candles with a long wick. This candle represents a period of volatility in the pair as the market absorbed the data. Subsequently, the pair traded in a neutral trend before adopting a steady downtrend with the 20-period MA steeply falling.

Bottom Line

The GDP estimate is not just relevant to investors and policymakers; as shown by the above analyses, it can result in periods of increased volatility in the forex market when it is published. Cheers!

Categories
Forex Assets

Costs Involved While Trading The AUD/RUB Forex Exotic Pair

Introduction

Introduction

Introduction

AUD is the Australian Dollar, and RUB is the Russian Ruble; AUD/RUB is thus an exotic currency pair. When trading this pair, forex traders should expect relatively high volatility due to its exotic nature.

In this pair, the AUD is the base currency, and the RUB is the quote currency. It means that the AUD/RUB pair’s price represents the amount of Russian Ruble that one Australian Dollar. If the AUD/RUB price is 55.813, it means that you can buy 55.813 Russian Rubles using 1 Australian Dollar.

AUD/RUB Specification

Spread

For the AUD/RUB pair, the spread is the difference between the price at which you can buy the pair from a broker and the price at which you can sell it to the broker.

The spread for the AUD/RUB pair is:

ECN: 10 pips | STP: 15 pips

Fees

If you have an ECN account, different brokers will charge you varying fees per trade, depending on the size of your position. For most STP accounts, however, there are no fees levied whenever you open a position.

Slippage

In the forex market, slippage occurs when you open a position, but it is executed at a price different than the one you requested. The primary determinants of slippage are market volatility and your broker’s speed of execution.

Trading Range in the AUD/RUB Pair

Throughout the day, the price of a currency pair fluctuates. This fluctuation, as observed from different timeframes, is known as the trading range. In forex, the trading range can help a trader determine the volatility of a currency pair, hence assess the risks it carries.

The Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine a larger period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

AUD/RUB Cost as a Percentage of the Trading Range

We can combine volatility, slippage, and trading fees to determine the cost of trading a currency pair across different timeframes.

Below are cost percentages for both the ECN and the STP forex accounts. These percentages are in terms of pips.

ECN Model Account

Spread = 10 | Slippage = 2 | Trading fee = 1

Total cost = 13

STP Model Account

Spread = 15 | Slippage = 2 | Trading fee = 0

Total cost = 17

The Ideal Timeframe to Trade the AUD/RUB

In the analyses above, we notice that lower timeframes have low volatility, accompanied by higher trading costs for the AUD/RUB pair. With either the ECN or the STP account, costs are highest when volatility is at the lowest, 3.1 pips. The lowest costs are incurred when volatility is the highest at 802.2 pips.

We can observe that longer-term traders generally enjoy lower trading costs. However, shorter-term traders can reduce their trading costs by trading the AUD/RUB pair when volatility is above average; since costs are lower.

If traders use pending orders, they can eliminate slippage, which lowers the trading costs. Here’s an example with the ECN account.

Total cost = Slippage + Spread + Trading fee

= 0 + 10 + 1 = 11

You can notice that there is a significant reduction in trading costs. For example, the highest trading cost for the ECN account has reduced from 220.34% to 186.44%.

Categories
Forex Course

169. Which Trading Timeframe Should I Choose?

Introduction 

Introduction 

Introduction 

In the previous lesson, we covered how to trade multiple timeframes in the forex market. So, what timeframe should you choose to trade?

The timeframe you chose to trade will be entirely determined by the type of forex trader you are. Therefore, in this lesson, we will cover the timeframe to trade depending on the type of forex trader you are, i.e., position trader, swing trader, day trader, or a forex scalper. It is worth noting that you should consider trading three timeframes in Forex.

Timeframes for a Forex Position Trader

If you are a forex position trader, it means you intend to have your trading position open for several months to years. Therefore, you should trade the monthly and weekly timeframes. These frames give you a long-term perspective of the market trend while filtering out the hourly and daily “noises” of the price spikes.

Timeframes for Forex Swing Trader

For a forex swing trader, your goal is to have your positions open overnight to just a few weeks. With such a strategy, while performing your multiple timeframe analysis, you should start with the daily timeframe to establish your selected currency pair’s dominant trend.

On the chart, the daily timeframe will cover several weeks, which will help you establish the support and resistance levels over this period. With this perspective, you will quickly identify the high and low extremes. Narrow down to a 12-hour timeframe to see if this timeframe lines up with the observed trend, then finally use the 4-hour timeframe to find the entry point for your trade.

Timeframes for Forex Day Traders

If you are a forex day trader, that means you enter and exit all your trades within 24 hours. In this case, you should trade the 4-hour, 1-hour, and 15-minute timeframes. With the 4-hour timeframe, you will be able to establish the support and resistance levels for the past few days for your selected currency pair. The 1-hour timeframe will help you identify if the intra-day price trend aligns with the observed dominant trend. Finally, the 15-minute timeframe will enable you to narrow down the best entry and exit points for your trades, depending on the current price trend.

Timeframes for Forex Scalpers

For the forex scalpers, the smallest minute-by-minute price spikes count. Therefore, you should trade the 30-minute, 15-minute, and 5-minute timeframes. With the 30-minute timeframe, you get to identify the prevailing short-term trend with the selected currency pair. The 5-minute timeframe narrows down the tend to show how the most current price spikes build-up to the short-term trend. This timeframe also serves as your trigger timeframe for entry and exit.

[wp_quiz id=”89150″]
Categories
Forex Signals

NZDUSD Breakout Anticipation BUY

Flow Assessment

  • Price is in a daily range and showing a grind upwards with higher highs and higher lows
  • We anticipate price to get to the top of the daily range

Location Assessment

  • On the H4, price has been holding just before a historical seller’s area, supported by a strong buy push, suggesting a possible buildup area before the breakout to the upside

Momentum Assessment

  • A strong force of buyers showed themselves, breaking out of the mini-congestion from 0.6687 to 0.67100, suggesting the buyers are ready to move up
  • It is unlikely to be a trap because the origin of the buy swing push on the H4 is still very strong
Categories
Forex Signals

EURNZD Breakout Retest BUY

Location Assessment

  • Price has reacted at the higher low (HL) area which coincided with where there were previously sharp buyers in the L to HH swing in the first picture

Flow Assessment

  • On the H1, price is showing the first signs of bullish market structure, having made a higher high (HH) and signs of buyers defending a HL level
  • Hence we are interested to join the buyers

Momentum Assessment

  • Currently, price is at an area where previous sharp rejections have occurred by the sellers however we note 2 points:
    • Those seller reactions failed to achieve an equal low. The fact that the buyers defended a HL level shows that the sellers do not have much power at this area of 1.7532
    • On the M5, price is holding at this key level for the first time, not showing immediate sharp reactions. This indicates that a breakout to the upside is building up.
Categories
Crypto Guides

An Introductory Guide To NEAR Protocol

Introduction

Introduction

Introduction

NEAR Protocol is a smart contract compatible cryptocurrency, a highly scalable and low-cost platform for developers, allowing them to create dApps or decentralized apps for various purposes. In the cryptocurrency space, the competition can turn out to be vicious. Nevertheless, cooperation is also widespread in the crypto space, particularly because it is a new asset class.

Crypto creators and experts have understood that it is highly beneficial to cooperate rather than to compete for the time being. And you will struggle to find any crypto project better than NEAR Protocol when it comes to cooperation in the cryptocurrency space. If you are interested in understanding what NEAR Protocol actually is, including its elements and features, this post will explain everything you need to know about it. Let’s get started.

What is NEAR Protocol?

NEAR or NEAR Protocol is a cryptocurrency blockchain that features smart contract functionality. NEAR Protocol is designed and developed to facilitate the creation of decentralized applications. It is also developer-friendly and is interoperable with Ethereum as well.

Coming down to its functionality, NEAR Protocol uses a block generation mechanism known as ‘Doomslug’ that processes over 100,000 transactions per second and a Sharding mechanism known as ‘Nightshade’ that splits the entire cryptocurrency network into multiple portions. The transaction fees on NEAR Protocol are so low that it requires a special unit of measurement for quantification called ‘yocto.’

Furthermore, the developers at NEAR Protocol are working to make the platform secure enough to handle valuable assets like identity or money. And with the likes of proof of stake, combined with sharding, the platform can prove useful for everyday customers.

How does it work?

NEAR Protocol is a dedicated proof of stake blockchain, which, to optimize performance, uses sharding. Sharding is quite different in NEAR Protocol as compared to other cryptocurrencies. That is, all shards on NEAR Protocol are considered a part of the same network. Using Nightshade, the cryptocurrency is interoperable with ETH using Rainbow Bridge. The Nightshade works to add a single snapshot of each shard’s existing state on the NEAR Protocol blockchain. Each shard has its own set of validator nodes that broadcast the shard’s existing state each time a block is produced.

Elements and Features of NEAR Protocol

NEAR Protocol comes with numerous functionalities that cater to the validators, end-users, and developers differently.

  • NEAR Protocol allows the developers to prepay and sign the transactions in the end-users’ best interest, significantly reducing the need for the users to know about how the decentralized application works and other technical anomalies.
  • It boasts a ‘Progressive UX,’ which is specifically designed for users so that they can use the platform without requiring to use tokens or wallets.
  • When we talk about the validators, NEAR Protocol allows them to create an assortment of offerings for the users.

Conclusion

It is still too early to say whether people will accept NEAR Protocol or will it dethrone Ethereum. But it is certainly not impossible. Given the features and functionalities of the cryptocurrency, it can be said that NEAR Protocol is the future of the cryptocurrency market, especially because it can help create state-of-the-art decentralized applications.

Categories
Forex Fundamental Analysis

The ‘Sentix Investor Confidence’: Revealing Market Sentiment

Introduction

Introduction

Introduction

The economy, financial, and forex markets are mainly driven by sentiment. Abstract aspects of demand and supply primarily drive these markets. A financial asset’s value will appreciate if a majority of investors believe that its future cash flows will increase. Conversely, the value of the asset will lower if these investors have a negative outlook on it. Therefore, knowing how most investors feel about the outlook of the economy can help you plan your future investments properly.

Understanding Sentix Investor Confidence

Investor confidence indexes are usually estimated by conducting surveys on investors and analysts throughout the economy.

In the EU, for example, the investors’ confidence is gauged using the ‘EU Sentix Investor Confidence’ index. Sentix is a German marketing and research firm predominantly dealing with behavioral finance. This index is compiled through a survey of about 2800 investors and analysts from across the 17-EU member countries. The primary role of the index is to obtain the confidence of the business people about the current economic climate and their anticipation about the future economy.

Sentix Investor Confidence Methodology

The Euro area Sentix economic report is categorized into the current situation and Expectations.

Current situation: This part of the report polls how the investors and analysts feel about the prevailing economic conditions. Ongoing geopolitical aspects inform the current economic conditions to the prevailing market conditions.

Source: Sentix

Expectations: As the name suggests, this part of the report concerns the future. Investors and analysts are polled to see what they think the future economic conditions will be. Do they expect the current conditions to improve, remain the same or deteriorate?

Both these parts of the report accommodate various economic indicators about the economy. The investors and analysts are asked their sentiments on various aspects of the economy, from the ease of doing business, labor conditions, interest rates to geopolitics.

As mentioned, Sentix surveys up to 2800 people who are mostly employees and investors in the private sector. The survey is conducted to ensure inclusivity of all economic sectors, thus obtaining a representative perspective about the state of the economy.

The results from the questionnaires are collated and indexed on a scale of -100 to 100. Readings of below 0 indicate that investors and analysts are pessimistic about the economy, with the severity of their pessimism increasing as the index approaches -100. On the other hand, a reading of above 0 shows optimism. The higher the index, the more optimistic the investors are about the economy.

Source: Sentix

Using Sentix Investor Confidence for Analysis

Keep in mind that the polled people for this index are experts – presumably authoritative in their various fields. Therefore, by following

Sentix

level of confidence in the economy can be incredibly helpful in making predictions about the economy at large.

Investments, in any economy, forms a major part of economic growth. When investors have a positive outlook about the economy, current, and future, we can expect them to make more investments in various sectors of the economy. Naturally, these investments create more jobs in the economy, increasing economic output, improving households’ welfare, and growing the GDP.

On the other hand, when the investors hold a negative outlook about the economy, they will halt any further investment plans. Some may go as far as cutting back on their investments. In this scenario, the industries in which they have invested in will be forced to scale down their operations. Consequently, the economy can expect a higher unemployment rate, depressed demand in the economy, reduced output, and a general contraction in the GDP.

Note that the current and the expectations of investor confidence aren’t always aligned. Policymakers can use this knowledge to make informed decisions on monetary and fiscal policies. When investors are confident about the current economic conditions but pessimists about the future, theoretically, governments and central banks could implement expansionary policies. Such policies will stimulate the economy and prevent any job losses, or adverse contractions of the economy in case investors shy away from further investing.

Furthermore, Sentix investor confidence is a vital indicator of recessions and recoveries. Let’s take the example of the ongoing coronavirus-induced recession. Towards the end of the first quarter of the year, investors were pessimistic about the future. They anticipated that the ravaging effects of the coronavirus would severely affect the economy. And true, as anticipated, the economy was ravaged. New investments during the months following the outbreak were at historic lows, and the unemployment levels globally were the highest ever witnessed. The Sentix investor confidence forestalls the current recession.

Similarly, the Sentix investor confidence index can be used to show signs of economic recoveries. Let’s still consider the example of the recent coronavirus pandemic; the Sentix investor confidence has been accurately used to show economic recovery signs. After governments and the European Central Bank (ECB) put in place economic expansionary measures, the Sentix investor confidence became less and less pessimistic. This showed that investors anticipated that the economy would recover.

Source: Sentix

Impact of Sentix Investor Confidence on Currency

As we mentioned earlier, sentiment is one of the major drivers of currency fluctuations. When the investor confidence is highly optimistic or improving from extreme pessimism, the domestic currency will appreciate. This appreciation is because investor confidence signals improvement in the economic condition, followed by lower unemployment levels, better living standards, and higher GDP levels.

Conversely, dropping levels in the Sentix investor confidence leads to the depreciation of the domestic currency relative to others. The depreciation is because forex traders will anticipate that adverse economic conditions will follow.

Sources of Data

Sentix conducts the surveys and publishes the Sentix Investor Confidence index for the Euro area.

How Sentix Investor Confidence Index Release Affects The Forex Price Charts

Sentix released the latest EU investor confidence index on October 5, 2020, at 8.30 AM GMT. The release of the index can be accessed at Investing.com. Since the investor confidence index is a low-impact indicator, low volatility is expected on the EUR.

In October 2020, the Sentix Investor Confidence index was -8.3 compared to -8.0 in September 2020. However, the October reading was better than the expected  -9.5.

Let’s find out how the October 2020 Sentix Investor Confidence index’s release impacted the ERU/USD price action.

EUR/USD: Before the Sentix Investor Confidence Index Release on October 5, 2020, 
just before 8.30 AM GMT

Before the release of the Sentix Investor Confidence Index, the EUR/USD pair was trading in a steady uptrend. The above 5-minute chart shows candles crossing above the 20-period MA and forming further above it.

EUR/USD: After the Sentix Investor Confidence Index Release on October 5, 2020, 
at 8.30 AM GMT 

After the release of the index, the EUR/USD pair formed a 5-minute bearish candle. However, the pair subsequently adopted a strong uptrend. The 20-period MA rose steeply with candles forming further above it. This trend shows that the EUR became stronger after the release.

Bottom Line

In the forex market, the Sentix Investor Confidence index is a low-impact indicator. In the current economic climate, however, this index can prove invaluable in predicting the directions of the economy – to show whether the Euro area economy is bouncing back from the effects of the coronavirus pandemic.

Categories
Forex Assets

Trading The AUD/INR Forex Exotic Pair & Analysing The Costs Involved

Introduction

Introduction

Introduction

AUD/INR is an exotic currency pair in the forex market, with the AUD representing the Australian Dollar and the INR representing the Indian Rupee. Here, the AUD is the base currency, and the INR is the quote currency. That means that the AUD/INR price represents the amount of INR which 1AUD can buy. For example, let’s say that the price of the AUD/INR is 52.2654. It means that 1 AUD can buy 52.2654 INR.

AUD/INR Specification

Spread

When you go long in forex trading, you have to buy the currency pair from your forex broker. Now, if you decide to sell back the pair to the broker, they will buy it at a lower price than they sold to you. The difference between these two prices – also known as “bid” and “ask” – is the spread.

The spread for the AUD/INR pair is:

ECN: 20 pips | STP: 25 pips

Fees

Some brokers charge a commission for positions opened using ECN accounts. They vary depending on the size of the trade. STP accounts are rarely charged any trading fees.

Slippage

Slippage in Forex is the difference between the execution price of a market order and the price at which that order was placed. The slippage comes about due to increased market volatility or inefficiency on the part of your broker.

Trading Range in the AUD/INR Pair

When a currency pair fluctuates, its volatility varies across different timeframes. The analysis of this volatility in different timeframes is done using the trading range. It can help the trader identify the most suitable timeframes for a particular currency pair.

The trading range is expressed in pips. It shows the value of pips you stand to gain or lose on various timeframes.

The Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart.
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine a larger period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

AUD/INR Cost as a Percentage of the Trading Range

Expressing the total trading costs of a currency pair as a percentage of the trading range helps to understand the trading costs that pair on multiple timeframes. It shows how the trading costs change with volatility.

Below are the trading costs for the AUD/INR  pair on ECN and STP accounts.

ECN Model Account Costs

Spread = 20 | Slippage = 2 | Trading fee = 1

Total cost = 23

STP Model Account

Spread = 25 | Slippage = 2 | Trading fee = 0

Total cost = 27

The Ideal Timeframe to Trade AUD/INR Pair

From the above analyses, we can observe that the lowest trading costs of the AUD/INR pair are on longer timeframes. The lowest trading costs for both the ECN and the STP accounts are when the AUD/INR volatility is at the highest – 518.3 pips. While the shorter timeframes have higher trading costs, intraday traders can take advantage of the maximum volatility periods during these timeframes.

Furthermore, traders can reduce the trading costs by implementing forex limit orders instead of market orders, which are prone to slippages. Here is an example of how the limit orders remove the slippage costs.

ECN Account Using Limit Model Account

Total cost = Slippage + Spread + Trading fee

= 0 + 20 + 1 = 21

You can notice that the forex limit orders lowers the overall costs by making the slippage cost 0. In this scenario, the highest trading cost has been reduced from 389.83% to 355.93%.

Categories
Forex Course

168. Learning To Trade Multiple Timeframes In The Forex Market

Introduction 

Introduction 

Introduction 

In our previous lesson, we discussed multiple timeframe analysis in forex means. Now, let’s find out what forex trading with multiple timeframes means. In case you are wondering, trading multiple timeframes in forex does not mean that a trader is opening several positions using different timeframes. We are not saying you can’t do this, you if you have the money; but that is not what trading with multiple timeframes in forex means.

Trading multiple timeframes in Forex means using different timeframes to establish the trend and support and resistance levels of a currency pair to determine the best point of entry and exit of a trade. Let’s use a few examples to show how trading with multiple timeframes in forex occurs.

As we had mentioned in our previous lesson, the timeframes you use for your analysis depends on which type of forex trader you are. The best way of trading multiple timeframes in the forex market is by using the top-down technique. With this approach, you first observe the longer timeframes for the general market trend, then use the smaller timeframes to establish more current trends.

Let’s take the example of a forex day trader. You will start by using the 1-hour timeframe to establish the primary market trend. Say, a day trader wants to open a position on September 9, 2020, at 11.00 AM GMT, using the 4-hour timeframe, the market shows an uptrend.

4-hour timeframe for EUR/USD

1-hour timeframe for EUR/USD

The 1-hour timeframe confirms that the pair’s intermediate trend is consistent with the uptrend observed in the 4-hour timeframe.

15-minute timeframe for EUR/USD

The 15-minute timeframe can then be used to select the best entry point.

Determining the market limits: the longer timeframes will enable you to determine the support and resistance levels of a currency pair. The resistance levels help you set your exit points while the support levels will help you timing your market entry.

Establish the trend momentum: While the larger timeframe gives you the overall market trend, the smaller timeframes will help you establish the spikes in the price of the currency pair. These spikes will help you to establish the short-term strength of the trend compared to the longer-term trend.

Helps avoid the lagging effect of some technical forex indicators: Most technical Forex indicators are lagging, meaning trend changes signaled by the indicators lags the real change in the price of the currency pair. Therefore, price-action can be said to be leading the technical indicators in the forex market.

We will cover these three reasons in detail in our subsequent lessons.

[wp_quiz id=”89146″]
Categories
Forex Signals

USDJPY Swing Failure SELL

Location Assessment

  • Price has reached the H4 seller’s area for the first time and the overall daily flow (purple line in picture) is downwards
  • This makes us interested for sells

Flow Assessment

  • The overall daily flow is downwards and importantly, the move back up to the H4 sellers area is coming in multiple pushes, indicating that this is not a fresh trend swing
  • Hence, we maintain our overall sell bias

Momentum Assessment

  • We wait for signs of sellers showing interest at the H4 seller area via evidence of lower highs (LHs)
  • To be able to have smaller SL and better risk-reward, we wait for more confirmation via 2LHs first, then enter the trade with SL above the last LH
  • For targets, we simply look at the equal low marked by the weekly support (in yellow)
Categories
Crypto Guides

Looking For Easy Crypto Payment? Switch To NOWPayments!

Introduction

Introduction

Introduction

Digital payment has undoubtedly blessed the financial industry by offering a seamless transaction mode. With the inclusion of blockchain, things have become even more efficient. More and more blockchain platforms have been introducing their tokens and coins to facilitate blockchain-based transactions. Crypto holders are making use of their crypto coins to conduct everyday financial transactions.

Owing to the increasing demand for crypto payments, blockchain platforms are designing their currency. ChangNow has also been working to introduce NOWPayments to offer a convenient blockchain payment service that will accept crypto coins all over the globe. In this article, we are going to talk about NOWPayment and everything that has to be discovered regarding this revolutionized payment service.

What is NOWPayments?

NOWPayments is powered by ChangeNOW and has been operating in the industry since 2019. It is also tied up worth Ledger, Binance, and Atomic Wallet to increase its services’ efficiency. NOWPayments has been designed to primarily offer a crypto payment gateway for both customers and merchants and make transactions seamless. It allows merchants to accept crypto payment on their online stores, social media accounts, and website. Being a non-custodial service, NOWPayments will not store funds in any means. It supports more than 50 cryptocurrencies and facilitates transactions at lower fees.

What Are The Benefits of Choosing NOWPayments?

As online/offline merchants and crypto coin holders are increasing at a staggering rate, it has become essential to introduce a hassle-free payment gateway. NOWPayment is that one-stop destination where you can conduct crypto transactions without any hassle. It has partnered with all the popular crypto exchanges to strengthen its potential and meet customers’ needs. Here are a few crucial benefits of using NOWPayments-:

Faster Payments: NOWPayments is known for its lightning-fast payments. Unlike other gateways, NOWPayments will complete the transaction within minutes.

Non-Custodial Services: There are no intermediaries involved in the transactions except holding the fees. So, the payments are directly forwarded to the merchants.

Comprehensive Support: Complete guidance and inclusive support is another major takeaway of this payment gateway. From installing plugins to integrating API, you can get all answers to your queries via a 24/7 support team.

Transparency Compliance: NOWPayment prioritizes the safety of the clients and partners. The legal team dedicatedly works to ensure compliance. It secures all the transactions and safeguards it from illegal acts, and protects the users’ rights.

How To Integrate NOWPayments?

NOWPayment claims to be the easiest and best way to accept crypto payments. The easy-to-use interface makes NOWPayments offers hassle-free, secure, and simple API that you can integrate into any platform. Follow the below steps-:

  • Sign up for NOWPayment with email and set up your account
  • Access the Dashboard after signing up
  • Go to Add New Key and save the API
  • Visit the Outcome Wallet page to access your digital wallet
  • Use the API to send and accept crypto payments

The Bottom Line

NOWPayments has established a safer, reliable, and faster crypto payment gateway that everyone needed. It can be embedded in online stores and websites to make payment easier for customers and merchants. The above mentioned were all the vital information you need to know about this amazing payment gateway.

Categories
Forex Assets

Exploring The Costs Involved While Trading The AUD/KRW Exotic Pair

Introduction

Introduction

Introduction

The AUD/KRW is an exotic currency pair where AUD is the Australian Dollar, and KRW is the South Korean Won. This article will cover some of the essential elements of the AUD/KRW pair that you should know before you start trading this exotic pair.

The AUD is the base currency, and the KRW is the quote currency in this pair. Hence, the pair’s price represents the amount of KRW that can be bought using 1 AUD. For example, say the price of AUD/KRW is 795.89, it means that for every 1 AUD, you can buy 795.89 KRW.

AUD/KRW Specification

Spread

In forex trading, your broker will sell a currency pair to you at a higher price than the one they will buy from you if you sold it back to them. These prices are “bid” and “ask,” and the difference between them is the spread. The spread for the AUD/KRW pair is:

ECN: 21 pips | STP: 26 pips

Fees

STP type accounts incur no trade commissions. For the ECN accounts, the fees charged depend on your broker and the size of your position.

Slippage

When placing a forex market order with your broker, that order might be executed at a different price. The difference is slippage and is due to higher volatilities or execution delays by the broker.

Trading Range in the AUD/KRW Pair

The trading in forex aims to show the trader how a currency pair fluctuates across multiple timeframes. This analysis is used to determine volatility associated with the pair.

If. For example, the trading range of the AUD/KRW across the 4H timeframe is ten pips; it means that a trader can expect to gain or lose  AUD 12.6; since the value of 1 pip is AUD 1.26.

Here’s the trading range of the AUD/KRW  across multiple timeframes.

The Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart.
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator.
  4. Shrink the chart so you can determine a larger period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

AUD/KRW Cost as a Percentage of the Trading Range

Here, we calculate the total trading costs that a trader can incur trading the AUD/KRW across different timeframes under different volatility.

The trading cost is expressed as a percentage of the volatility, which is in pips.

ECN Model Account Costs

Spread = 21 | Slippage = 2 | Trading fee = 1

Total cost = 24

STP Model Account

Spread = 26 | Slippage = 2 | Trading fee = 0

Total cost = 28

The Ideal Timeframe to Trade AUD/KRW Pair

From the above analyses, we can observe that the highest costs in both the ECN and the STP accounts are incurred at the 1H timeframe when volatility is at the minimum 58 pips. Although the trading costs decline as the timeframe becomes longer, you can notice that the costs are lower when volatility is at the maximum across all timeframes. Therefore, for intraday traders trading the AUD/KRW pair when volatility approaches, the maximum will help lower the costs.

Using the forex limit order types can also help to reduce the overall costs since it eliminates the risks of slippage encountered in market orders. Here’s an example.

ECN Account Using Limit Model Account

Total cost = Slippage + Spread + Trading fee

= 0 + 21 + 1 = 22

Notice how the overall trading costs have been lowered in all timeframes. When volatility is at the minimum at the 1H timeframe, the highest trading cost has declined from 406.78% to 372.88%.

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Forex Course

167. Multiple Timeframe Analysis – Key to your Success

Before defining what multiple timeframe analysis is, we first need to understand what timeframe in forex means.

Before defining what multiple timeframe analysis is, we first need to understand what timeframe in forex means.

Before defining what multiple timeframe analysis is, we first need to understand what timeframe in forex means.

What is Timeframe in Forex?

In the forex market, the timeframe shows the change in a currency pair’s price over a given period. For example, a 1-minute timeframe shows how the price of a given currency pair changes minute by minute, while a 1-month timeframe shows monthly changes in the pair’s price.

No matter which trading platform you use when trading forex, there are several timeframes provided. For example, the screengrab below of an MT5 platform shows the different timeframes provided to forex traders.

Therefore, in the forex market, multiple timeframe analysis is a chart analysis technique that involves observing a currency pair’s trend under different timeframes.

Importance of Multiple Timeframe Analysis in Forex

Another type of forex trader would employ a different timeframe analysis to determine their trade entry and exit positions. Any forex trader knows that the price of a currency fluctuates continuously. Thus, the trend observed in a 1-minute timeframe will be different from the 5-minute timeframe and so forth. The table below shows different timeframes for different types of forex traders.

In timeframe analysis for forex markets, it is advisable to adopt a top-down technique. This technique involves beginning your analysis with a larger timeframe, depending on your trading style, to establish the overall price trend. Subsequent smaller timeframes then follow to show how the observed trend can be broken down to find preferable entry points.

Let’s take a forex day trader, for example. Such traders do not hold an open position overnight. Thus, for their timeframe analysis, they would start with the 8-hour timeframe, then to 4-hour the 1-hour timeframe.

With multiple timeframe analysis in forex, the larger timeframes, like the 1-month timeframes, are used to show a longer-term trend of a currency pair. In a single glance, you can see how the pair has been trading for years.

GBP/USD 1-Month Timeframe Analysis

From the above 1-month chart of the GBP/USD, you can notice the pair’s longer-term downtrend from August 2014 to August 2020. Short timeframes are ideal for showing the more recent changes in the price of a pair. Most forex traders use shorter timeframes to find opportunities to enter a trade and identify ideal exit points.

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Forex Signals

NZDUSD Swing Failure SELL

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Forex Basic Strategies Forex Daily Topic

Trade Ranges Like A Pro with this Effective Forex Trading Strategy

Introduction

Introduction

Introduction

The market does not move in random directions. It either trends or consolidates. As many would not know, the market is like a closed circle, and the same states keep repeating over and over again. Thus, in trading, one must learn how to become pro at reading these market states.

On that same note, we shall be going over an effective strategy when the market is in a consolidation/ranging state. However, before jumping right into the strategy, it is important to understand the basics and related concepts.

What is a consolidation phase in a market?

There are several ways to comprehend the consolidation phase of the market. There is logical reasoning behind the occurrence of this state, and is not simply a random pattern that shows up quite often.

The consolidation state is that phase of the market when the market moves in a sideways direction. This state is also referred to as a range. The reason for its occurrence is related to the strength between bulls and bears.

Comprehending a Range

There are two parties in the market – the bulls and the bears. Their strength is what describes the state of the market. In a trending market, either of the parties is powerful. For instance, if the market is going up, it simply means that the bulls control the market. In a consolidation state, both bulls and bears show equal strength. The bulls show strength by pushing the market higher, while the bears show power by taking the price right back down. As a result, the prices in both directions – which we refer to as a range.

How to draw a range?

To trade this range strategy, it is vital to understand how a range is drawn. A range is made up of two levels:

  • Support
  • Resistance

Thus, drawing the correct support and resistance levels will result in a perfect range.

Another point considered is the size of the range. The larger the range, the better. The other small consolidations in the market are ignored. Following is an example of how we pick an ideal range.

In the above example, both are ranges as the market is moving in a sideways direction. However, we do not consider range-1 as a range for our strategy. This is because a single line going up and down fails to depict the market’s price action.

Supply and Demand Range Strategy

What is the usual approach to trading a range? It is to buy at the support and sell at the resistance. But we’re going to step the game a little bit. The supply and demand range strategy uses the same principles of a typical range, in addition to other factors.

Step by step procedure to trade the Supply and Demand Range Strategy:

  1. Find a legitimate range in the market. Mark the Support and Resistance levels appropriately.
  2. Determine the direction of the market prior to the range.
  3. Find a potential supply/demand level.
  4. Get in when the market breaks through the range and reaches the supply/demand zone.

Buy Example

Consider the below chart of GBPCHF on the 4H timeframe. We see that the market has been ranging between 1.1902 and 1.1800. Observe that the support and resistance levels have been marked by cutting off the false market breakouts.

To trade this market, our job is not simply to hit the buy at the support and sell at the resistance. As mentioned, we take into account the preceding direction and the supply and demand levels around it.

The direction of the market prior to the range was an upside, indicating that the bulls were in control previously. A point to note is that, despite the market being in a range, it does not change the fact that the bulls are still powerful. Thus, we rather look for buying opportunities than shorting signals.

To do so, we wait for the price to drop below the bottom of the range and hold at any one of the demand zones. Once the market begins to reverse its direction from south to north around the demand zone, we can go long. The same scenario has been illustrated in the chart below.

Placements

Stop Loss – Well below the demand zone would be decent.

Take Profit – Top of the range would be an ideal spot to take profits.

Sell Example

Consider the chart of CAD/JPY on the 15min timeframe shown below. The recent market price action depicts that the market is moving sideways. The market’s overall trend is down, indicating that the bears are in control of the market.

Since the scenario is opposite to the previous example, we wait for the market to break through the resistance and reach any potential supply level. In the below example, we can see that the price broke through the resistance twice reacted off from the supply, as shown. Thus, we can look for entries when the market begins to switch direction to the downside.

Placements

Stop Loss – Above the supply zone

Take Profit – Bottom of the range

Conclusion

The only way to trade a range is not by buying and selling from the top and bottom of the range. It can be professionally traded with the application of other factors. And this range strategy particularly dealt with the strength of the bulls and bears and the concept of supply/demand.

We hope you were able to comprehend our Supply and Demand Range strategy. Do test them out for yourself and let us know your results in the comments below. Happy trading!

Categories
Forex Signals

GBPUSD Swing Failure BUY

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Forex Course

166. Introduction To Obscure Currency Crosses & Why It Is Very Risky To Trade Them?

Introduction

Introduction

Introduction

Trading currency crosses an excellent way to make money from forex trading when major currency pairs do not make a good move due to the US economy’s corrective momentum. However, the US dollar is a global reserve currency of every country. Therefore, it can provide enough liquidity to make money where the obscure currency crosses have some risks due to insufficient liquidity.

What is Obscure Currency Cross?

We can find currency crosses when we eliminate the US dollar from major and commodity currencies. However, among the cross currencies, the Euro and the Japanese Yen are mostly traded. Therefore, if you trade any Euro and Yen related cross pair, you might see the price to have adequate liquidity. But, what happens if the currency cross does not have Yen or Euro?

Any cross currency pairs that do not have Japanese Yen or Euro as a first or second currency is called an Obscure currency cross. Examples of obscure currency crosses are GBPCHF, NZDCAD, AUDCHF, CADCHF, NZDCHF, NZDCAD, etc.

Why are Trading Obscure Currency Crosses Risky?

The forex market is run through a decentralized network where no one can dominate any market. Therefore, the movement of a currency pair depends on the supply and demand of that currency pair. When the supply or demand increases, the currency pair starts to move. On the other hand, when there is less volume, the currency pair may move within a correction.

The liquidity remains lower in the obscure currency pair than major, commodity, and EUR/YEN related currency pairs. Therefore, there is a risk of market volatility and correction. In some cases, obscure currency pairs consolidate for a long time, and if we take any trade on that pair, we might have to hold the trade for a considerable time.

Conclusion

In conclusion, we can say that trading obscure currency pairs have some reason to worry due to not having enough liquidity to provide a decent movement. However, it is a great way to make money from obscure currency pairs if we can read the price action well and identify the price is moving within a trend. Overall, maintaining a profitable and robust trading strategy is the key to make a consistent profit from the forex market.

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Forex Signals

EURAUD Breakout Retest BUY

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Forex Course

165. Knowing More About Trading The Euro & Yen Crosses

Introduction

Introduction

Introduction

In cross-currency trading, the Euro and Japanese Yen are the most traded currency. Therefore, after major currencies, EUR and JPY has the highest liquidity in the forex market. Overall, trading in the Euro and Yen crosses are secure compared to the other cross currencies.

Understand the European Economy

When trying to trade in any Euro cross pairs, we should understand the European economy even if we only follow technical analysis. In technical analysis, traders can make decisions based on previous price movements. Therefore, many traders think that there is no need for fundamental analysis.

However, in trading, we aim to increase the probability of our analysis. Therefore, when we add Europe’s economic condition, we will have a better outlook of trading Euro crosses like- EURCHF, EURAUD, EURNZD, etc.

The European economy consists of several countries, including France, Italy, Germany, etc. Therefore, trading in the Euro cross requires to know interest rate decisions, retail sales, employment export-import, GDP, and other economic releases of these countries.

Moreover, in Euro cross trading, we should focus on other currencies that combine with the Euro. For example, if we want to trade in the EURCHF pair, we should focus on Switzerland’s economic condition.

Understand the Japanese Economy

In Yen cross trading, we should have extensive knowledge of the Japanese economy. Japan is an export-oriented country. Therefore, it tries to depreciate its value against other major currencies by keeping the interest rate lower.

Overall, any increase in interest rate, retail sales, employment, and GDP are suitable for the Japanese economy.

Besides the Japanese economy, we need to understand the economic condition of the Japanese Yen combination. For example, trading in the CADJPY pair requires a fundamental analysis of both the Japanese and Canadian economies.

Conclusion

Overall, the Euro and Japanese Yen cross are mostly traded currency in currency crosses. Therefore, to trade Euro and Yen crosses, we should know these two countries’ economic conditions. Even if we don’t trade based on fundamental analysis, having good knowledge is essential to have an overall outlook of the economy. Cheers.

[wp_quiz id=”86515″]
Categories
Crypto Guides

Secure Trades using Safex- A Decentralised, Open-Source Crypto Marketplace

Introduction

Introduction

Introduction

If you are frequently updated with the blockchain trend, then you must have come across Safex. Unlike most blockchain technologies used for security and transactional purposes, Safex is focused on e-commerce. Even since Bitcoin emerged as a P2P electronic cash system (peer-to-peer), the idea of a decentralized system on which people could easily trade with each other without requiring a centralized governing body has been at the forefront of every technological leap in the blockchain industry.

Living up to crypto enthusiasts and professionals’ expectations of wanting a truly borderless and open P2P trading system that helps both sellers and buyers. Safex is a community and a decentralized protocol built and designed on the original concepts of the individual rights to control, security, and privacy over transactions.

Let’s understand why Safex is the real attraction for crypto investors all across the globe.

What is Safex?

Safex is a privacy-based, decentralized, and open-source e-commerce marketplace designed to help both sellers and buyers and make transactions hassle-free. It allows you to create powerful web stores that are powered by blockchain. Safex has been using the heavily modified blockchain technology called cryptonote that leads to a world-class marketplace. What’s interesting about Safex is that the platform boasts a unique type of commerce-focused smart contract function.

Since data breach is the major vulnerability suffered by most centralized commerce platforms, Safex primarily focuses on privacy, addressing issues like opaque and unfair system for visibility of listings and trades, snooping on online behavior, unwarranted collection of personal data, and arbitrarily large and non-transparent commissions.

Industry experts claim that Safex has revolutionized the e-commerce sector by streamlining the processes and providing the e-commerce ecosystem with sheer privacy, which was previously not there.

More than 10,000 individuals have already invested in Safex Token and Cash after recognizing the project’s potential.

Why Safex?

Credit card fraud, privacy issues, and unfairness to small to medium-scale sellers are a few of the many problems affecting everyday users. With Safex, users get a solution in the form of secure online payment, an embedded privacy coin for free, and a marketplace on a blockchain. Safex combines Shopify, Upwork, and Amazon’s functionalities into a single platform, creating a new future for online shopping that eliminates the difficulties and challenges that users have to deal with every day.

Safex Features and Functionalities

With Safex, small sellers from across the world will have access to a global client base.

Engine for E-Commerce – Safex offers a decentralized database and an integrated global payment engine, which adds security and a privacy layer to online stores.

Safex Marketplace – Safex is a decentralized marketplace on a privacy blockchain, allowing sellers to gain exposure to the wide network of Safex users.

Privacy Blockchain -Safex uses functionalities like One-Time Address and Ring Signatures to maintain the senders’ anonymity and recipients of transactions.

Conclusion

Safex has already developed a strong community of users who believe in the project. Since blockchain is the future of online payment, Safex can prove to be a game-changer in how people carry out online transactions.

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Forex Course

164. Do You Know What A Synthetic Currency Pair Is?

Introduction

Introduction

Introduction

In institutional trading, traders usually take trades with a more significant volume, which often makes trading impossible in some currency pairs due to not having enough liquidity. Therefore, institutional traders create synthetic currency pairs to take trades on those pairs.

What is a Synthetic Currency Pair?

If an institutional trader finds a possibility of a decent upward movement of AUDJPY pair, but due to not having enough liquidity, they might be unable to take a buy trade. However, the alternative option to take the trade is to buy both AUDUSD and USDJPY as there is enough liquidity in these pairs. As a retail forex trader, we can take similar action as institutional traders. If we perform AUDUSD and USDJPY trades at the same time, we are trading in synthetic currency pairs.

In our current world, Internet connectivity makes trading easy; therefore, many brokers offer to trade currency pairs like CHFJPY or GBPNZD. However, these pairs have some issues regarding the spread and overnight fee. In some cases, cross-currency pairs like AUDCHF, GBPNZD, and CHFJPY move within a consolidation for a specified period. Therefore, trading in these pairs is costly, even if the broker allows.

How to Create Synthetic Currency Pairs?

Creating synthetic currency pairs need to open two trading entries with its margin. In synthetic currency trading, there is a common currency bought in one currency pair and sold in another currency pair. Overall, we will eliminate the common currency by buying and selling; therefore, the ultimate currency pair will remain that we are expecting to buy.

Is Synthetic Currency Pair Trading Profitable?

Trading in synthetic currency pair requires an additional margin, which is not wise to use. Moreover, in the present world, most brokers allow maximum currency pairs that reduce the hassle of trading two currency pairs at a time. Therefore, it is not recommended that traders trade in synthetic currency pairs if the broker has an option to take trades on the main currency pair.

Conclusion

Synthetic currency pair is a combination of the currency pairs where a single currency is bought in one pair and sold in another pair. In the present world, most Forex brokers allow trading cross and exotic currency pairs that eliminate the need for synthetic currency pairs. However, if any broker does not allow trading in a specific pair, we can use this method.

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Forex Course

163. Trading Currency Crosses Using Fundamentals

Introduction

Introduction

Introduction

In fundamental analysis, we can interpret two countries’ economic data of a cross-currency to predict the upcoming price movement. On the other hand, even if we ignore the US dollar, it has some shadow effect on a currency cross.

How to Trade Fundamentals with Currency Crosses

Let’s say Australia’s economic condition is good, and the Reserve Bank of Australia increased the interest rate. As a result, the primary expectation is that the AUD will be stronger against other currencies. On the other hand, we can find other currencies that are facing economic difficulties. Let’s say Eurozone is struggling, and ECB provided some dovish tone to provide an outlook of the current economic condition.

In this situation, we can evaluate the Eurozone’s economic condition and Australia to determine which country is doing well. If Australia shows a better than expected employment report, our first aim would be to buy AUDUSD. However, what happens if the USA showed a strong employment report?

Yes, AUDUSD might consolidate, and the difference between supply and demand would not change. In this situation, it is better to find other currencies that are weaker than in Australia.

Is Fundamental Trading Profitable for Currency Crosses?

In Forex trading, we predict a currency pair’s upcoming movement based on the technical and fundamental analysis. When we see that one currency has reason to become stronger than other currencies, we anticipate the price towards the stronger currency. The fundamental analysis is a process to find a stronger or weaker currency in a currency pair.

Due to having a lot of equity and market participants’ involvement, any fundamental news works well in USD related currency pairs. However, it does not mean trading currency crosses with fundamental analysis is not profitable.

We can quickly evaluate the UK and Japan’s economic conditions to identify the price direction of GBPJPY. Therefore, we can apply the same theory to every currency cross, like AUDJPY, AUDCHF, NZDCAD, or AUDNZD.

Concussion

Fundamental analysis is a process to anticipate the movement of a currency pair based on the two countries’ economic conditions. However, making an analysis ideally is the primary tool to make a profit from the forex market. Therefore, we should focus on money management, risk management, and trade management to get the ultimate trading result.

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Categories
Forex Signals

USDCAD Swing Failure BUY

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Forex Signals

EURAUD Breakout Retest BUY

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Forex Signals

EURAUD Breakout Anticipation BUY

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Forex Signals

GBPUSD Breakout Retest SELL

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Forex Course

162. Currency Crosses Are Trendier Than You Think

Introduction

Introduction

Introduction

Currency crosses are a combination of major and commodity currencies without the US Dollar. Therefore, it is an exciting source of earning money when the US dollar moves within a correction. However, the global economic activity has been increasing day by day, and many business activities are happening without the intervention of the US dollar that might make the cross-currency trading trendy.

Is Cross Currency Trading Profitable?

In every international transaction, the US dollar plays a vital role as it is the reserve currency of every country. Moreover, the valuation of commodities and agricultural products are made through the US dollar. Therefore, most of the trading volume in the forex market comes through the US dollar only. As a result, many traders think it is often hard to profit in trading currency pairs where there is no US dollar.

However, the real scenario is not the same. Currency crosses are an extensive way of earning money from the forex market. If the US dollar remains corrective, most US dollar-related pairs will make less movement, which would be difficult to anticipate the price for traders.

On the other hand, if the Eurozone and Australia’s economic activity moves well, the EURAUD pair will provide a decent movement without the intervention of the US dollar. Nowadays, as the businesses are expanding, cross-currency trading became profitable day by day.

Cross Currencies are Trendy

In financial market trading, portfolio diversification is an essential way to ensure maximum safety of the investment. If one trading instrument does not perform well, there are other instruments to make a profit from. It is the best way to keep the investment active even if some trading instrument is moving within a correction. Therefore, it is best to trade in cross currency pairs when the US dollar is moving within the correction.

On the other hand, cross pairs do not require the US trading session every time. If our technical and fundamental analysis allows, we can profit from London and Asian trading session by any cross pairs like GBPJPY, EURAUD, etc.

Summary

In the above section, we have seen how trading in a cross pair can be profitable. Moreover, every currency pair has some unique characteristics that a trader should understand. A trading strategy’s profitability depends on how a trader is implementing the strategy with strong money management.

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Categories
Crypto Guides

An Introductory Guide To ‘Yield Farming’ In The World of Cryptocurrencies

Introduction

Introduction

Introduction

Lately, the topic of Decentralized Finance or DeFi in the cryptocurrency space has been the most talked-about concept among crypto enthusiasts. While the general populous has been hunkering down on the economic uncertainty, people in the field of cryptocurrency have been excited about decentralized finance’s one of the latest, riskiest, and dynamic investment strategies – Yield Farming.

The concept is quite new, even for the crypto nerds. But it has the potential to change the dynamics of how people deal with cryptocurrencies. Some people may confuse it with liquidity farming, but Yield Farming is a different concept. Simply put, it is the process of finding the best returns (yields) that the cryptocurrency world has to offer.

One of the great things about Decentralised Finance is that they are permissionless. That is, anyone with an internet connection and a supported crypto wallet can interact with them, even a smart contract. This has given rise to Yield Farming. So, what is it? How does it work? Who can use it? We will answer all these questions and more in this post. Keep on reading.

What is Yield Farming?

Yield Farming is a process of generating rewards with crypto holdings using permissionless liquidity protocols. Simply put, Yield Farming means holding and locking cryptocurrencies and getting rewards. According to experts, Yield Farming bears a resemblance to staking. Nevertheless, it is a lot more sophisticated than you can think. In most cases, Yield Farming works with users known as liquidity providers (LP) who add capital to liquidity pools.

A liquidity pool is a smart contract containing funds; when liquidity providers provide liquidity to the pool, they get a reward. The reward received by the liquidity provider will be either generated from the fees of the underlying Decentralized Finance platform or some other sources. In some cases, liquidity pools use multiple tokens to pay their rewards. These tokens can be deposited to other liquidity pools to earn more rewards. This means that as a liquidity provider, you will contribute to the liquidity pools and earn rewards in return.

Yield Farming is done using Ethereum (ERC-20 tokens), and the reward generated is also some kind of ERC-20 token. Yield farmers move their funds quite often between different protocols, looking for higher yields. Experts believe that Decentralized Finance platforms may provide providers with other economic incentives to attract more capital.

How Does it Work?

Yield Farming is based on the Automated Marker Maker (AMM) principle that includes liquidity pools and liquidity providers. Suppose you are a liquidity provider. You deposit funds into a liquidity pool. This liquidity pool of yours is a whole marketplace where users can exchange, borrow, or lend tokens. As the user uses these tokens, they will have to pay a certain fee to the liquidity provider, that is, to you. This is how AMM works.

Conclusion

As simple as it sounds, Yield Farming is a complex phenomenon. The strategies involved are highly complex and are suitable for only advanced users. Also, experts suggest that it should be deployed by those who have a lot of capital.

Categories
Forex Fundamental Analysis

Everything You Should Know About ‘Home Loans’ Macro Economic Indicator

Introduction

Introduction

Introduction

The real estate market has always been an integral part of the economy – any economy. Where the real estate sector flourishes, economic development follows. It can be argued that entire economies, from the pre-renaissance period, have been built on the back of a thriving real estate. The strategic economic importance of the real estate market is that, where houses are built, other infrastructure developments follow, social amenities, and market places. In the current age, the flourishing of the real estate sector can be taken as a leading indicator of household demand; and this is why monitoring home loans is essential.

Understanding Home Loans

A home loan is also known as an owner-occupier home loan. These loans are given to people who fully own their current home outright or have a mortgage on their existing primary residence. The home loans are usually meant to either fund the purchase of a second home or conduct renovations and improvements on the current home.

Therefore, home loans can be categorized into two; home equity loan or a mortgage.

Home mortgage: In this type of home loan, a financial institution lends money to an existing homeowner to fund the purchase of another home or to make renovations on the existing one. In this case, you transfer the deed on your current house to the banks, which is used as collateral. The financial institution can fund up to 80% of the value of your home. i.e., if your home is worth $100000, you can receive up to $80000 in the loan. Note that you will only get this type of mortgage if you outright own the home. In case you have an existing mortgage, you can opt for a home equity loan.

Home equity loan: If a mortgage funded your primary residence, you could take a second mortgage if you have enough equity on the current home. Whenever you pay down the first mortgage on your home, the value of your home equity increases. Let’s say your current home is worth $300,000, and you have an outstanding mortgage worth $100,000; this means you have equity of $200,000. Here, the equity represents the value you will remain with if you were to sell the home. Therefore, when you take a home equity loan, you will receive a lump sum amount equivalent to the equity you have on your current home.

In both types of home loans, your primary residence is the collateral. The lender is entitled to foreclose on these homes if you default on the repayment.

Using Home Loans for Analysis

As a significant indicator in the real estate market, home loans data can be used as an indicator of the overall demand in the economy. Let’s take an example of an increase in home loans.

When home loans are growing, it can be taken to mean that households have increased demand in the real estate market. Home loans are primarily used to conduct renovations on existing homes or fund the purchase of second homes. Since both these activities are not essential needs for a household, an increase in home loans can only mean that households have satisfactorily taken care of their primary and intermediate needs. Therefore, the welfare of households can be said to be improving when home loans are increasing.

Furthermore, since one is required to make a predetermined repayment on home loans or risk foreclosure, it would imply that households have a steady stream of income when they take these loans. On a macroeconomic level, an increase in the home loans would imply that unemployment levels are down or that households receive higher wages. Lower levels of unemployment and increased wages tend to increase disposable income.

In such cases, an increase in aggregate demand is expected hence overall economic growth. Note that in most economies, households’ demand for goods and services account for almost 70% of the GDP. Therefore, an increase in the demand for houses implies that almost every other sector has also experienced increased demand. These sectors range from those providing essential to intermediate goods and services to households.

The home loans data can also be used to show the economic cycles recessions to recoveries. If the economy has gone through a period of recession, an increase in home loans can sign that money is flowing through the economy. Low economic activities characterize the economic cycles of recessions and depressions; therefore, an increase in home loans can be taken as a sign of increased economic activities. This increase can be an indicator that the economy is going through periods of recovery.

Source: ABC News Australia

Impact on currency

The forex market is forward-looking. This attribute means that for every economic indicator released, the forex market tends to anticipate how these indicators would influence the future interest rate.

When home loans are increasing, it could mean two things. Either household has access to cheaper financing, or the economic growth has increased the flow of money. In the forex market, a continuous increase in home loans can be seen as a potential trigger for contractionary monetary policies like increasing the interest rate. Such policies result in the appreciation of the currency relative to others.

Conversely, a continuous drop in the home loans leads to depreciation of the currency relative to others. In this case, governments and central banks could view the drop in home loans as a sign of the economy slowing down. Expansionary monetary and fiscal policies could be implemented to prevent the economy from going into recession.

Sources of Data

In Australia, the Australian Bureau of Statistics (ABS) is responsible for the publication of the home loans data. Trading Economics has a historical review of the Australian home loans and a global comparison with other countries.

How Home Loans Data Release Affects the Forex Price Charts

The latest publication of the home loans data by the ABS was on October 9, 2020, at 1.30 AM GMT. The release can be accessed at Investing.com. From the screengrab below, the AUD’s moderate volatility should be expected when the home loans data is released.

The home loans MoM change for August 2020 was 13.6%, an increase from 10.7% in July 2020.

Let’s see what impact this release had on the AUD.

AUD/JPY: Before Home Loans Data Release on October 17, 2020, 
Just Before 1.30 AM GMT

The AUD/JPY pair was trading a mild downtrend before the release of the Australian home loans data. From the above 5-minute chart, the 20-period MA is slightly falling with candles forming just below it.

AUD/JPY: After Home Loans Data Release on October 17, 2020, at 1.30 AM GMT

The pair formed a 5-minute inverted bearish ‘hammer’ candles immediately after releasing the home loans data. Subsequently, the AUD/JPY adopted a subdued bullish trend as the 20-period MA began rising, and the candles crossing over it. As expected, this trend showed that the AUD became stronger after the increase in home loans.

Bottom Line

From the above analyses, we can conclude that although the home loans data is a moderate-impact economic indicator, it significantly impacts the forex price charts. This indicator’s impact can be said to have been amplified since it signals the rebounding of the real estate sector from the coronavirus-induced recessions.

Categories
Forex Assets

What Should You Know Before Trading The CAD/EGP Forex Exotic Pair

Introduction

Introduction

Introduction

The CAD/EGP is an exotic currency pair with the CAD representing the Canadian Dollar, and EGP – the Egyptian Pound. Forex trading in such an exotic currency pair is accompanied by higher volatility. The CAD is the base currency, while the EGP is the quote currency in this pair. Therefore, the price attached to this pair shows the amount of EGP that 1 CAD can buy. Let’s say that the price of CAD/EGP is 11.7692. This price means that for every 1 CAD, you can buy 11.7692 EGP.

Spread

In the forex market, the difference between the buying and selling prices of a currency pair is called the spread. The spread for CAD/EGP is: ECN: 3.7 pips | STP: 8.7 pips

Fees

There are no broker fees associated with the STP accounts. For the ECN account, however, the trading fee is determined by your broker.

Slippage

Slippage in forex is the difference between the price that a trader requests the broker to complete a trade and the price that the broker executes the trade. This difference is determined by the brokers’ speed of execution and market volatility.

Trading Range in the CAD/EGP Pair

Forex traders endeavor to know the average number of pips that a particular currency pair moves within a given timeframe. The trading range represents the volatility of a currency pair within a particular timeframe. The knowledge of a pair’s trading range makes for a useful risk management tool.

If, for example, during the 1-hour timeframe, the CAD/EGP pair has a trading range of 10 pips, then someone trading this pair can expect to gain or lose $8.5 within this period. Below is a table showing the minimum, average, and maximum volatility of CAD/EGP across different timeframes.

The Procedure to assess Pip Ranges

  1. Add the ATR indicator to your chart
  2. Set the period to 1
  3. Add a 200-period SMA to this indicator
  4. Shrink the chart so you can determine a larger period
  5. Select your desired timeframe
  6. Measure the floor level and set this value as the min
  7. Measure the level of the 200-period SMA and set this as the average
  8. Measure the peak levels and set this as Max.

CAD/EGP Cost as a Percentage of the Trading Range

In the forex market, trading costs include brokers’ fees, slippage, and spread. i.e.

Total cost = Slippage + Spread + Trading Fee

Below are analyses of percentage costs (in pips) to be expected when trading the CAD/EGP pair using either the ECN or the STP account.

ECN Model Account

Spread = 3.7 | Slippage = 2 | Trading fee = 1

Total cost = 6.7

STP Model Account

Spread = 8.7 | Slippage = 2 | Trading fee = 0

Total cost = 10.7

The Ideal Timeframe to Trade CAD/EGP

As can be seen from the tables above, trading the 1-hour timeframe with either the ECN or the STP account carries the highest trading costs. We can deduce that during times of low volatility, the trading costs are higher. However, for short term traders, timing their trades when volatility is above average during the 1H, 2H, 4H, and the 1D timeframes ensure they incur lower trading costs with the CAD/EGP pair.

The higher timeframes provide the longer-term traders of the CAD/EGP pair lower trading costs. Forex traders can reduce the trading costs by using limit order types, which removes the risks of slippage. Here’s a demonstration of how this works in the ECN account.

Total cost = Slippage + Spread + Trading fee

= 0 + 3.7 + 1 =4.7

Notice that when the slippage cost is eliminated by using limit orders, the total costs are significantly reduced. The highest cost, for example, reduces from 113.56% to 79.66%.

Categories
Forex Course

161. Learning To Trade Interest Rate Differentials

Introduction In forex trading, every trader anticipates the upcoming price of a currency pair in several ways. Traders and analysts use market analysis tools like capital flows or price action to predict the currency pair’s future direction. However, some use interest rate differentials to predict the upcoming price movement of a currency pair. What is […]

Introduction In forex trading, every trader anticipates the upcoming price of a currency pair in several ways. Traders and analysts use market analysis tools like capital flows or price action to predict the currency pair’s future direction. However, some use interest rate differentials to predict the upcoming price movement of a currency pair. What is […]

Introduction

In forex trading, every trader anticipates the upcoming price of a currency pair in several ways. Traders and analysts use market analysis tools like capital flows or price action to predict the currency pair’s future direction. However, some use interest rate differentials to predict the upcoming price movement of a currency pair.

What is the Interest Rate Differential?

In trading a currency pair, buying towards the currency with a higher interest rate and selling the currency with a lower interest rate is a way to make money from the forex market, which is known as interest rate differential or price appreciation.

The interest rate differential makes the forward point that makes up a forward currency rate. The forward rate is created by adding or subtracting the current exchange rate and making a new rate. At that rate, traders can buy or sell a currency pair in the future. Let’s have a look at the example of interest rate differential.

If we want to sell the USDJPY 10 year in the future, we have to make a payment to the buyer. The amount should be based on the difference between the US interest rate and the Japanese interest rate. Later on, we will make payment to the buyer at the current spot rate plus interest rate differential between the US interest rate and the Japanese interest rate.

How to Make Profit from Interest Rate Differential

The higher interest rate of a country has a higher demand for holding currencies than the country with a lower interest rate. The main reason behind the differential is that it costs a trader to hold on to a currency that has a lower interest rate.

Using this concept, we can predict the future price of a currency pair. If the US interest rate goes higher or the Japanese interest rate goes lower, the USDJPY price will move towards the direction of interest rate differential. Similarly, if the US interest rate goes lower or the Japanese interest rate increases, the USDJPY price will likely move lower.

Conclusion

In forex trading, we take trading decisions based on probabilities, and interest rate differential is one of these probabilities. Traders can take the ultimate trading decision by considering this element besides the fundamental and technical analysis.

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Categories
Forex Signals

EURCAD Swing Failure BUY

Categories
Forex Signals

GBP/AUD Trend Pullback

Categories
Forex Course Forex Daily Topic

160. What are Currency Crosses and Why Should You Trade Them?

Introduction

Introduction

Introduction

Currency crosses are currency pairs from major and commodity currencies eliminating the US Dollar. Trading cross currency pairs require knowledge of the two countries’ economic conditions, which is not related to the USA.

Major Vs. Cross Currencies

More than 80% of the forex market transactions happen through the US Dollar as it is the reserve currency in the world. Most of the commodities and agricultural products are valued in US dollars.

Therefore, if we want to buy something from a country, we should exchange the currency into the US Dollar to make the transaction. As a result, most of the countries keep the US Dollar as the reserve currency. In particular, China, Japan, and Australia are the largest importer of oil; therefore, they keep a vast number of US Dollars in their central banks.

Because of the massive demand for the US dollar, major currency pairs have a higher trading volume, allowing it to have a decent movement. On the other hand, if we eliminate the US dollar from the major currencies, we will find cross pairs, which is also profitable.

Why Trade Currency Crosses?

Instead of trading at major Dollar based currency pairs, we can profit from trading cross pairs. The most significant features of cross currency pairs are that they are not bound to US Dollars and can make a decent move without any intervention of the US economy.

As a result, many traders trade in currency crosses to diversify their portfolio. Cross pairs can make a decent movement, while dollar-based pairs remain corrective. At that time, it is better to go with the moving market than sit back and watch the corrective price.

Moreover, trading cross pairs might be profitable if the trading session is favorable. For example, we can profit from the GBPJPY pair at Asian and London sessions rather than trading in the US session.

Summary

Based on the above discussion, let’s point the core parts of cross-currency trading:

  • Cross currency trading is similar to major currency trading.
  • There is no US dollar in cross currency pairs.
  • Cross currencies are from major and commodity currencies.
  • Cross currency pair can make a decent move without US session.
[wp_quiz id=”86453″]
Categories
Crypto Guides

How DeFi Is Solving The Problem That Bitcoin Always Wanted To?

Introduction 

Introduction 

Introduction 

When you hear the word ‘cryptocurrency,’ Bitcoin is the first thing that pops into your mind. For the longest time, bitcoin has been synonymous with cryptocurrency and regarded as the future currency. In the recent past, bitcoin’s monopoly has been diluted by the entrance of thousands of other cryptocurrencies.

The cryptocurrencies’ primary objective was to serve as an alternative, and down the line, a replacement to the global fiat financial system. This objective has failed to take off. This failure can be attributed to the skepticism cryptocurrencies have faced, which has slowed their role as a legitimate alternative to fiat currencies. DeFi has helped address some of these challenges and help make cryptocurrencies mainstream.

What is DeFi?

DeFi is the short form for Decentralised Finance.  At its core, decentralized finance is the provision of conventional financial services on platforms built on the public blockchain. Specifically, DeFi is based on the Ethereum blockchain platform.

DeFi is heralded as the most suitable alternative to the global financial system. This new enthusiasm about the decentralization of finance is owed to the fact that DeFi is seen as being able to solve the problems that bitcoin failed to solve.

Advancements Made by DeFi

Here are some of the advancements made DeFi, which bitcoin failed to achieve.

Creation of issuance and investing platform

These platforms operate like an ordinary stock exchange. DeFi has made it possible so that cryptocurrencies can be issued and traded like conventional financial securities. The platform brings together broker-dealers, legal advisors, and custodians, who will advise issuers through the process. Furthermore, the platform also makes it possible for asset and investment managers’ proliferation for crypto-based financial assets.

Establishment of a decentralized prediction market

A prediction market is one where individuals can bet on any future occurrences. With decentralized prediction markets, there is no form of censorship whatsoever. Therefore, it offers an incredible opportunity to hedge against future risks financially and speculate on all forms of social events globally.

Growth of open lending protocols

Decentralized open lending championed by DeFi involves the following: collateralization of cryptocurrencies; elimination of credit checks among borrowers; lending and borrowing of cryptocurrencies for trading purposes; and real-time settlement of transactions. The financial inclusion resulting from open lending is unparalleled.

Facilitated the issuance of stablecoins

DeFi made it possible for the issuance of stablecoins by facilitating the auditing of crypto reserves and ensuring manageable volatility of such cryptocurrencies. With DeFi, stablecoins can be pegged on another asset. Categories of stable coins that have been spurred by DeFi include crypto-collateralized stablecoins, fiat-collateralized stable coins, and non-collateralized stablecoins whose stability depends on an algorithm controlling the expansion and contraction of its supply.

Bottom Line

DeFi undoubtedly offers a higher potential for financial inclusion, censorship-free transactions, and improved privacy. Although DeFi is offered as an alternative to the centralized financial system, it is almost impossible to envision an economy where the centralized financial system ceases to exist. Thus, it is prudent to co-mingle the two systems to ensure complementarity, which will tone down the inherent risks associated with either system.

Categories
Forex Fundamental Analysis

Everything You Should Know About ‘Job Cuts’ As A Forex Fundamental Indicator

Introduction

Introduction

Introduction

The labor market plays play a crucial role in determining the strength of the economy. Perhaps one of the most closely watched fundamental economic indicator is the unemployment rate since it is one of the leading indicators of demand. The growth of any economy is entirely dependent on the forces of demand and supply. Entire industries have been built by surging demand and crippled by lack of it.

Understanding Job Cuts

Job cuts represent the number of corporate employees who have been laid off over a given period. The job cuts report shows the national number of people who were laid off. This number is further broken down by industry, ranking those with the most job cuts to the least. The job cuts are compared monthly, quarter-on-quarter, yearly, and year-to-date. The report goes further to include the hiring plans announced by the various sectors, thus showing the potential number of job vacancies.

Therefore, we notice that the job cuts report serves to show job losses and future openings. Thus, it is a powerful indicator in the labor market and the economy since it can be used to predict whether recessions are coming, the state of economic recovery, and show the sentiment about the economy from employers’ perspective.

Using Job Cuts Report for Analysis

As an indicator of economic health, job cuts can signal the following.

An increasing number of job cuts is a precursor to higher unemployment levels and signals a shrinking economy. It is considered a leading indicator of unemployment. With more and more people losing their jobs, households’ disposable income will be on a decline. Consequently, the aggregate demand in the economy will decline, and with it, the aggregate supply. These declines imply that producers are scaling down their operations, matching the lowering demand to avoid market price distortion.

Source: St. Louis FRED

Since the job cuts report is categorized by industry, it serves to show which sectors of the economy are performing poorly. Job cuts are a result of the general challenging operating environment. It shows that companies are attempting to reduce operating costs as a result of a decline in demand. With this report, we can analyze which sectors are hard hit by tough economic times and which sectors are resilient. For investors, this analysis is instrumental in deciding which sector to invest in. the report can also be used to show which industries are worse affected by economic recessions.

It will be useful for policymakers to implement sector-specific policies to help cushion the labor market in the future. The job cuts report can be used to establish which economic sectors are susceptible to business cycles by analyzing which sectors have the most cuts in times of recessions. During a recession, the aggregate demand is falling, and when the economy is recovering, the aggregate demand increases. Thus, it is expected for job cuts to reduce in time of recovery and economic expansion.

Similarly, investors can use historical figures to help pinpoint the peak and trough levels of the business cycle. Typically, the economy has the most job cuts when the recession is at its worst. This point can be considered the trough – and it precedes a recovery. Here would be the optimal point of investing for investors who would want to capitalize on the effects of recovery. When the economic recovery is at its peak and unemployment levels are their lowest, it signifies that the economy might overheat.

Source: St. Louis FRED

Together with the analysis of business cycles, the job cuts report can provide a clear picture of the number of temporary workers in the labor market. It goes to reason that in times of recovery, businesses tend to hire more workers. However, businesses most impacted by the economic cycles would opt to engage temporary labor instead. In times of recession, most of these jobs are lost. Therefore, the job cuts report can be used to identify which industries hire the most temporary workers.

Job cuts could also be a result of automation, not entirely because of a decrease in the aggregate demand. It is worth noting that the automation of business processes results in improved efficiency, higher output, and possibly higher quality of goods and services. While all these might be good for the businesses and possibly the economy, the effects of the jobs lost will still be reflected in the economy.

Impact on Currency

When analyzing the labor market, most forex traders concentrate their attention on the employment report. However, job cuts report is released ahead of the employment situation report; it can provide leading insights. Here are some of the ways job cuts can impact the forex market. The job cuts are used to forestall recessions and recoveries.

When the job cuts are increasing, it signals that the aggregate demand in the economy will decline. Businesses scaling down operations implies low investor confidence in the economy, which could mean there is a net outflow of capital. Increasing unemployment levels, a shrinking economy, and more households relying on the government social security programs signal a recession. Expansionary fiscal and monetary policies will be implemented. One such policy includes lowering interest rates, which make the currency depreciate relative to others.

A reduction in the job cuts signals economic recovery, making the currency increase in value relative to others. When job cuts are steadily reducing, businesses are retaining more of their employees as time goes by. This retention is a sign of improving economic fundamentals.

Sources of Data

Challenger, Gray & Christmas publishes the US job cuts data. Challenger, Gray & Christmas is a global outplacement and career transitioning firm. Comprehensive historical coverage of the US job cuts is accessed at Trading Economics.

How Job Cuts Data Release Affects Forex Price Charts?

The most recent release of the US Challenger job cuts was on October 1, 2020, at 7.30 AM ET and accessed at Investing.com. The screengrab below is of the monthly Challenger job cuts.

Low volatility is to be expected when the job cuts report is released.

In September 2020, the number of US job cuts was 118.804K compared to 115.762K in August. In terms of the YoY change, the September job cuts represented a 185.9% change compared to a 116.5% change in August.

Now, let’s see how this release made an impact on the Forex price charts.

EUR/USD: Before the Challenger Job Cuts Release on October 1, 2020, 
Just Before 7.30 AM ET

Before the new release, the EUR/USD pair was trading in a general uptrend. As shown in the above 5-minute chart, the candles were forming above a rising 20-period MA.

EUR/USD: After the Challenger Job Cuts Release on October 1, 2020, 
at 7.30 AM ET

After the US job cuts report release, the pair formed a bullish 5-minute candle as expected, due to the weakening of the USD. Subsequently, the pair continued trading in a subdued uptrend with the 20-period MA flattening.

Bottom Line

The job cuts report plays a vital role in the economy, especially now, by showing the state of economic recovery from the coronavirus-induced recession. However, in the forex market, the job cuts report is a low-impact indicator since most traders and analysts pay the most attention to the employment situation report. The low impact nature can be seen as the release of the Challenger job cuts report failed to advance the bullish momentum of the EUR/USD pair.