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Forex Daily Topic Forex Fundamental Analysis

GBP/AUD Global Macro Analysis – Part 3

GBP/AUD Exogenous Analysis

GBP/AUD Exogenous Analysis

GBP/AUD Exogenous Analysis

  1. The UK and Australia Current Account Differential

In this case, the current account differential is derived by subtracting Australia’s current account balance from that of the UK. The current account shows the net value of a country’s exports. Remember that the value of a currency is determined by its demand. Theoretically, the country’s domestic currency with a higher current account balance will have a higher demand. Therefore, its value will be higher in the forex market than in currencies with lower current account balances.

In this case, if the current account differential is positive, it means that the GBP is in higher demand than the AUD, hence a bullish trend for the GBP/AUD pair. Conversely, if the differential is negative, the GBP/AUD pair will have a bearish trend.

Australia had a $7.5 billion current account surplus in Q3 2020, while the UK had a $20.97 billion deficit. The current account differential is -$28.47 billion. Consequently, the current account differential between the UK and Australia has a score of -4.

  1. The interest rate differential between the UK and Australia

This interest rate differential is the difference between the interest rate in the UK and Australia. Typically, investors prefer to buy currencies with a higher interest rate. Therefore, if the interest rate differential for the GBP/AUD pair is positive, it means that the UK offers higher interest rates than Australia. Traders would then sell AUD and buy the GBP, which implies that the GBP/AUD pair will have a bullish trend. Conversely, if the interest rate differential is negative, Australia offers a higher interest rate. Thus, traders would sell the GBP and buy the AUD, which will force the GBP/AUD pair into a downtrend.

In 2020, the Reserve Bank of Australia cut interest rates from 0.75% to 0.25% and finally to 0.1% in December. The BOE cut interest rates from 0.75% to 0.1%. As of December 2020, the interest rate differential for the GBP/AUD pair is 0%. Thus, we assign a score of -1.

  1. The differential in GDP growth rate between the UK and Australia

The differential in GDP growth rate measures the difference in domestic economic growth in the UK and Australia. It is expected that the domestic currency of the country whose GDP is expanding at a faster pace will appreciate faster. Therefore, if the GDP growth differential between the UK and Australia is positive, we should expect a bullish trend for the GBP/AUD pair. Conversely, we should expect a downtrend in the pair if the differential is negative.

The Australian economy has contracted by 4% in the first three quarters of 2020, while the UK has contracted by 5.8%. Thus, the GDP growth rate differential is -1.8%. Hence, the score of -3.

Conclusion

Indicator Score Total State Comment
The UK and Australia Current Account Differential -4 10 A differential of – $28.47 Australia has a current account surplus while the UK is running a deficit. The differential is expected to increase as COVID-19 restrictions ease
The interest rate differential between the UK and Australia -1 10 0.00% Neither the RBA nor the BOE intends to change the interest rate policy in the near term. The differential of 0% is expected to persist in the near term
The differential in GDP growth rate between the UK and Australia -3 10 -1.80% The Australian economy contracted slower than the UK’s
TOTAL SCORE -8

Since the cumulative exogenous score for the GBP/AUD pair is -8, we can expect the pair to continue a bearish trend.

According to the above picture’s technical analysis, this pair is trading below the 200-period MA and attempting to breach the lower Bollinger band, supporting our fundamental analysis. Cheers.

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Forex Daily Topic Forex Fundamental Analysis

GBP/AUD Global Macro Analysis – Part 1 & 2

Introduction

Introduction

Introduction

This analysis will look into endogenous factors that influence economic growth both in the UK and Australia. We will also analyze the exogenous factors that impact the exchange rate of the GBP/AUD pair.

Ranking Scale

We will conduct correlation analysis, which we will use to rank the endogenous and exogenous factors on a scale of -10 to 10.

In ranking the endogenous factors, we will conduct a correlation analysis against the GDP growth rate. If the score is negative, the endogenous factor has resulted in depreciation of either the GBP of the AUD. Conversely, if the score is positive, then the factor has resulted in an appreciation of the local currency.

When the exogenous analysis is negative, the factor has resulted in a decline of the GBP/AUD exchange rate. If the score is positive, then the factor has led to an increase in the exchange rate.

Summary – GBP Endogenous Analysis

A -15 score indicates that the Pound has depreciated since the starting of 2020.

Summary – AUD Endogenous Analysis

A score of -8 indicates that the Australian dollar has depreciated as well since the beginning of 2020.

Indicator Score Total State Comment
Australia Employment Rate -3 10 61.2% in October The employment rate hit 20-year lows during the pandemic. It’s expected to continue recovery as the economy recovers
Australia Core Consumer Prices 2 10 117.49 in Q3 2020 The inflation rate still lower than Q1, but the demand is increasing in the economy
Australia Manufacturing Production -3 10 Q3 projected to drop by 3.5% Q2 dropped by 6.2%. Production expected to improve in Q3 as business operation resume some normalcy
Australia Business Confidence 6 10 NAB business confidence was 12 in November It’s the highest level since April 2018. This shows that businesses are highly optimistic about their future operations
Australia Consumer Spending -3 10 Was 253.648 billion AUD in Q3 2020 Q3 levels still lower than Q1 domestic expenditure. Expected to increase further when the economy recovers to pre-pandemic levels
Australia Construction Output -3 10 Q3 output dropped by 2.6% Q3 drop caused by a reduction in residential and non-residential construction, engineering, and building works
Australia Government Budget Value -4 10 a budget deficit of 10.974 billion AUD in October The government budget deficit is improving. This shows that the revenue stream is improving as businesses resume operations
TOTAL SCORE -8
  1. Australia Employment Rate

This indicator shows the number of working-age Australians who are employed during a particular period. As an indicator of growth in the labor market, the employment rate shows if the economy is adding or shedding jobs. Thus, it is used to show periods of economic growth and contractions.

The Australian labor market has been recovering from the coronavirus pandemic shocks when the employment rate hit a 20-year low of 58.2%. In October 2020, Australia had an employment rate of 61.2%, up from 60.4% in September. However, it is still lower than January’s 62.6%. Australia’s employment rate has a score of -3.

  1. Australia Trimmed Mean Consumer Prices

This indicator is also called core consumer prices. It measures the price changes of goods and services that are frequently purchased by Australian households. The computation of the trimmed mean consumer prices excludes goods and services whose prices are volatile.

In Q3 2020, the core consumer prices in Australia rose to 117.49 from 117.04 in Q2. Q3 levels are also higher than the 117.17 points recorded in Q1. This shows that the economy is recovering since an increase in prices implies an increase in domestic demand for goods and services. We assign a score of 2.

  1. Australia Manufacturing Production

This indicator shows the YoY change in the value of output from the manufacturing sector. The Australian economy is heavily dependent on industrial production; hence, manufacturing production changes provides invaluable insights into the domestic economic growth. It also shows how the economy is recovering from the impact of COVID-19.

In Q2 2020, the YoY manufacturing production in Australia dropped by 6.2%, compared to 2.7% growth in Q1. Q3 YoY manufacturing production is expected to drop by 3.5%. Consequently, Australian manufacturing production has a score of -3.

  1. Australia Business Confidence

Business confidence in Australia is measured by conducting a monthly survey of about 600 businesses. They include small, medium, and large companies operating in non-agricultural sectors. The survey gauges the businesses’ expectations in terms of profitability, trading volume, and employees. The index is derived by considering the percentage of respondents who have good and very good expectations and those who have a bad and very bad outlook.

In November 2020, the NAB business confidence increased to 12 from 3 in October, which has been the highest since April 2018. Australia’s business confidence has a score of 6.

  1. Australia Consumer Spending

The indicator records the quarterly change in the value of goods and services consumed by domestic households. It includes expenditure by non-profit organizations that provide goods and services to Australian households and the value of backyard productions.

In Q3 of 2020, consumer spending in Australia rose to AUD 253.648 billion from AUD 235.131 billion in Q2. Although it’s lower than Q1 expenditure, domestic demand in the economy is rebounding from the slump of COVID-19. Consequently, Australian consumer spending has a score of -3.

  1. Australia Construction Output

This indicator shows the quarterly change in the value of construction work in Australia. The total value involves both private and public sector building and engineering work.

In the third quarter of 2020, Australia’s construction output dropped by 2.6% from a 0.5% growth in Q2. This drop was caused by output drop in residential and non-residential construction, engineering, and building works. Thus, we assign a score of -3.

  1. Australia Government Budget Value

The government budget value measures whether the Australian government has a budget surplus or deficit. A budget surplus implies that the government’s expenditure is less than its revenue. Similarly, a budget deficit means that the government spends more than it collects in terms of revenue.

In October 2020, Australia had a budget deficit of AUD 10.974 billion, up from a deficit of 33.613 billion in September. We assign a score of -4.

In the next article, you can find the Exogenous analysis of the GBP/AUD currency pair and also our forecast on its price movement in the near future. Cheers.

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Forex Assets

Fundamentals of the Australian Dollar (AUD) and the New Zealand Dollar (NZD)

The two currencies, the Australian Dollar and the New Zealand Dollar are quite highly correlated, which is why this article will deal with them both at the same time. Here, we’ll cover their historical backgrounds, economic impacts, correlation, recent market activity, and much more.  Historical Background Australia was populated by the British in an attempt […]

The two currencies, the Australian Dollar and the New Zealand Dollar are quite highly correlated, which is why this article will deal with them both at the same time. Here, we’ll cover their historical backgrounds, economic impacts, correlation, recent market activity, and much more.  Historical Background Australia was populated by the British in an attempt […]

The two currencies, the Australian Dollar and the New Zealand Dollar are quite highly correlated, which is why this article will deal with them both at the same time. Here, we’ll cover their historical backgrounds, economic impacts, correlation, recent market activity, and much more. 

Historical Background

Australia was populated by the British in an attempt to alleviate the overcrowded capacity of British prisons and grow the British Empire. The new colony grew to the extent that they created their own government in the end. The Australian Dollar, which is also known under the ISO symbol of AUD, is one of the top 10 currencies in the world. When compared to the country’s size, as well as that of its population and economy, the official currency of Australia is truly impressively ranked among other world currencies. This currency replaced the Australian pound in 1966 and is now considered a proxy for some vital strategies in the currency market. As opposed to the EUR/USD or USD/JPY crosses, which entail a number of goods and services trades that get intertwined with currency trades, the AUD’s privileged position mostly stems from forex trading alone.

Apart from the name and the symbol, the currency is nowadays also referred to as $A, $AU, or Aussie. Similar to the AUD, the New Zealand Dollar (ISO symbol: NZD) is one of the most traded currencies worldwide, which is again an interesting fact considering the quantity of goods and services exchange between New Zealand and the rest of the world. Another manner in which the NZD resembles the AUD is the impact of forex trading on currency strength. The other terms the NZD is also known by are NZ dollar, kiwi, or $NZ.

Most Traded Pairs

The most traded pairs are the two currencies against other major currencies, in particular against the USD, JPY, EUR, and GBP. Most liquidity of these two currencies and their most common pairs is generated from trading. Compared to the EUR/CHF cross, which is influenced by the goods and services (money) exchange between Europe and Switzerland, the liquidity in AUD and NZD pairs is an important difference. Currency pairs such as AUD/CAD or NZD/CHF involve very few trades of goods and services, so the money exchange mostly comes from traders, who are also not so great in numbers when it comes to these crosses.

Whenever liquidity is low, traders are faced with wide spreads and increased volatility especially with regard to news events. News announcements greatly impact the currency market’s trades of NZD and AUD, which is why crosses such as AUD/CHF and NZD/CHF are considered dangerous around the time any news comes out. Therefore, the most important question in terms of trading these two currencies is liquidity, which is why professional traders mostly focus on the crosses including the USD, JPY, EUR, and GBP.

Central Banks

Before the establishment of Australia’s central bank, the Reserve Bank of Australia (RBA), in 1960, the country relied on the Commonwealth Bank of Australia to issue the currency for the country. This task was moved away from the private bank into the government, which is responsible for the monetary policy at present. The RBA numbers nine employees who are all appointed by the government. The current Chair of the RBA is Mr. Philip Lowe, who took over the position from Mr. Glenn Stevens in 2016. The RBA holds 11 meetings per year on the first Tuesday of the month (all except January) when traders can expect announcements will be issued. The bank has a trifold mandate, with the stability of the currency, i.e. price stability and fighting inflation, being their primary goal. Their second aim is to maintain employment across the country, whereas the last one is the economic prosperity and welfare of people in Australia.

Unlike the ECB, whose mandate is more singular (inflation), the mandate of the RBA is quite wide. This comprehensive list of goals and tasks enables them to be rather flexible with regard to monetary policy. Australia and New Zealand are generally likely to show similarities in terms of economic policy. New Zealand’s central bank, the Reserve Bank of New Zealand (RBNZ), was established in 1934. The RBNZ comprises 10 members/governors who meet eight times a year. As of 2016, Professor Neil Quigley has been working at the position of Chair of the bank. The bank has a single mandate – price stability, yet unlike the ECB, the RBNZ seems to be more flexible. 

Economies

Australia, the 10th largest economy in the world, is strong in mining and agriculture, which make more than half of the country’s exports. Australia is a major commodities (iron, gold, etc.) exporter to Asian countries. Australia’s largest trading partner is China, which is an important fact for the currency market traders. The Chinese yuan (CNY) is, like the Indian rupee (INR), not allowed outside the country, which is why Australia and New Zealand are the means to get to this currency. This is why there is so much volume in these currencies despite the fact that they are not the largest economies in the world. Traders interested in the AUD are always advised to think of the strength of mining in Australia, commodity prices, and China. New Zealand’s economy is slightly behind Australia, ranked 16th in the world. Their economy is mostly focused on agriculture, which is why the country largely exports food and textile. New Zealand’s largest trading partner is China as well.

Economic Reports

The reports traders should focus on are rather similar to those of the United States: quarterly GDP reports, monthly Employment Report, Retail Sales, and Producer and Consumer Price Index (CPI and PPI) for both the AUD and the NZD, including Westpac Consumer Sentiment for New Zealand. 

The AUD/SPX Correlation

Australia is not the biggest economy, but the AUD is used extensively in the currency market as a proxy for growth. If economies are growing, there will be a demand for natural resources, causing the Australian exports to be strong and the country’s relationship with China, as one of the greatest economies in the world, comes into place here as well. Some of the greatest correlations we can see are found between the AUD and the USD as well as AUD and the S&P 500. Since the AUD is perceived as a proxy for growth, if traders assume that economies are going to grow, this will be bullish for the equities market and the currencies such as the AUD. As we can see from the chart below, the nature of this correlation has changed, but it is still quite high, exceeding 50%. Correlations can in general vary in strength during different periods; however, the AUD/SPX correlation can allow traders to draw some conclusions and expect changes in the prices of the AUD should the price of equities increase.

Another important AUD/USD correlation concern is gold, which has historically been one of the most prominent correlations. Therefore, the increase in the price of gold has traditionally been bullish for the AUD. Any decrease in the price of gold is then bearish for the AUD.

With regard to the NZD, one of the strongest correlations exist between the AUD and the NZD, which is why many young traders make the mistake of going short on one and long on the other. Although the two tend to move in different directions at times, these currencies are still highly correlated. Therefore, due to their strong correlation, the insight into what is happening with the NZD should provide information on what is happening with the AUD and vice versa. 

Owing to the similarities described above, if equities prices start to move up, this change will likely be bullish both for the AUD and the NZD. Should you come to the conclusion that a change in the price of gold is going to be bearish for the price of the AUD, the same conclusion can be applied to the NZD as well. 

Trading the NZD and the AUD

Both currencies require traders to take liquidity, proper selection of crosses, and avoiding news events into consideration. Currency pairs such as GBP/NZD can be great for traders, but they tend to get really volatile around the news announcements, leading to unpredictable moves and wide spreads. It is also important to remember that both New Zealand and Australian economies are focused on commodities and Asian countries. Concerning interest rates, both Australia and New Zealand keep their rates at 0.25%, which places them right in the middle among all major currencies’ central banks. Inflation in both countries tends to vary according to CPI and PPI reports. The two countries typically do not have any challenges with the trade deficit, as they are large exporters that typically carry a surplus. What is more, as these two currencies are tightly connected with global growth, commodity prices are important factors that determine what is happening to the AUD and the NZD. 

As a proxy for global growth, the NZD and AUD pairs will reflect any global panic. The 2008 AUD/JPY chart below reflects a large drop (a 50% loss) in the midst of the crisis that was affecting the entire world. Traders use these currencies to trade growth as well as to short and sell when there is a recession.

Recent Market Activity

The AUD has been quite resilient lately with the price action slowly building up towards the end of the chart. While the chart did give a few breakouts in several places, they would simply fall. What is more, as we can see from the chart below, the past three months the price has been consolidating and this consolidation is likely to break out sometime soon. However, the CAD for example has shown how the breakdown itself is not as relevant, since the price of the Canadian dollar did break down for it to go up the very next day. The near future of the AUD may reveal similar tendencies, with the price either going straight up and growing even more or, on the other hand, going up and then pulling back in the opposite direction.

The longer the consolidation, the more difficult for the trader to assess the chart’s future movement as much resistance has been building up. Likewise, the shorter distances do allow the price to break out more easily, and the break-out and pull-back tendencies are generally much more often in such cases. The chart below shows how the currency has been doing well lately in 2020 from the technical point of view, with its strength supported by the equities and gold markets experiencing all-time highs, strong risk-on sentiments, and a weak USD. The end of the August 2020 chart reveals how the current trend should be bullish, but it is not, so it is a sign that something is wrong at the moment and that the currency should be handled with care. 

As the chart below reveals, the volatility seems to be on the low when it comes to the NZD lately. Compared to March, for example, the volatility level is much lower now. The NZD lost its momentum going upwards and in August 2020 started moving steadily in the opposite direction. The big move down may easily reach the bottom end, i.e. the support line, which would require a change in the overall outlook on behalf of traders.

Traders have been able to see some divergence with the AUD/NZD pair in the last few weeks. If traders are thinking of whether to go short on one or the other currency, the NZD is currently a much better pick. The AUD and the NZD are similar, but if they break the level they have been approaching for a while now, traders might be able to witness a more significant divergence happening. Should traders encounter a slowdown, the AUD may turn out to be a better choice after all. Owing to the current progressions, traders are advised to pay close attention to this currency pair in the time coming.

So, what does the future hold for these two currencies? It’s tough to know, the same as with any currency pair, as there are simply too many factors that determine how the market moves. What we can say with certainty is that at this time the pair is delivering some excellent trade opportunities if you only know where to look.

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Forex Fundamental Analysis

EUR/AUD Global Macro Analysis – Part 3

EUR/AUD Exogenous Analysis

EUR/AUD Exogenous Analysis

EUR/AUD Exogenous Analysis

  • The EU and Australia Current Account to GDP differential

The current account to GDP shows the percentage of a country’s international trade that makes up the GDP. Countries with higher current account surplus have a higher current account to GDP ratio while those running deficits have a negative current account to GDP ratio.

In this case, if the GDP differential is positive, it means that the exchange rate for the EUR/AUD pair will increase. But if the differential is negative, then the exchange rate for the pair will drop.

In 2020, the current account to GDP ratio in the EU is expected to hit 3.4% and -1.5% in Australia. Thus, the current account to GDP differential is 4.9%. We assign a score of 3.

Typically, investors put their money into financial instruments that offer higher interest rates. Therefore, the country with a higher interest rate should be expected to have more inflow of funds than that with a lower interest rate. Note that when foreign investors invest in the local economy, they have to convert their money into the domestic currency. This conversion increases the demand for the domestic currency in the forex market hence increasing its value.

In forex trading, if the EUR/AUD pair has a positive interest rate differential, it means that the exchange rate of the pair will increase. Conversely, a negative interest rate differential implies that the pair has a bearish outlook.

In 2020, the Reserve Bank of Australia cut the cash rate from 0.75% to 0.1%, while the ECB has maintained interest rates at 0%. Therefore, the interest rate differential for the EUR/AUD pair is -0.1%. We assign a score of -3.

  • The EU and Australia Growth Rate differential

In any economy, the value of the domestic currency is mostly determined by the growth of the local economy. Therefore, a country whose economy is growing faster will see its domestic currency appreciate faster.

If the growth rate differential is negative for the EUR/AUD pair, we can expect a bearish outlook. If it is positive, it implies that the exchange rate for the pair will rise.

For the first three quarters of 2020, the Australian economy contracted by 4% and the EU economy by 2.9%. The GDP growth differential is 1.1%. We assign a score of 2.

Conclusion

The EUR/AUD exogenous factors have a score of 2. If the conditions observed in the exogenous factors persist, we can expect that the pair will adopt a bullish trend in the short-term.

The technical analysis of the EUR/AUD shows the weekly price chart bouncing off the oversold region of the lower Bollinger bands. More so, the pair is still trading above the 200-period MA. All the best.

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Forex Fundamental Analysis

EUR/AUD Global Macro Analysis – Part 1 & 2

Introduction

Introduction

Introduction

Global macro analysis of the EUR/AUD pair will focus on the endogenous analysis of fundamental factors driving economic growth in the EU and Australia. It will also involve exogenous analysis that will focus on factors that influence the EUR/AUD pair’s exchange rate.

Ranking Scale

This analysis will assign a score between -10 and +10, depending on the endogenous and exogenous factors’ impact.

A negative score for the endogenous factors means that the local currency shed some value. When positive, it means that the domestic currency has appreciated. The endogenous score is determined through correlation analysis between the endogenous factors and the GDP growth rate.

On the other hand, when the exogenous factors have a negative score, it means that the exchange rate between the EUR and the AUD will drop. A positive score means that the exchange rate will rise. The exogenous score is determined via a correlation analysis between the exogenous factors and the EUR/AUD pair’s exchange rate.

EUR Endogenous Analysis – Summary

The endogenous analysis of the EUR has an overall score of -3. Based on the factors we have analyzed, we can expect that the Euro has marginally depreciated in 2020.

AUD Endogenous Analysis – Summary

As you can see in the below image, according to the Endogenous Indicators of AUD, we can conclude that this currency has depreciated as well in 2020.

The employment change in Australia tracks the monthly number of people who are gainfully employed or engaged in unpaid work. The fluctuation in the number of those employed on a full-time or parttime basis helps to show economic growth.

Between September and October 2020, the number of those employed in Australia increased by 178,800. This shows that the economy is recovering and adding more jobs to the labor market. However, from January to October, the Australian labor market has lost about 190,100 jobs. Hence, we assign a score of -6.

  • Australia GDP Deflator

The GDP deflator measures the overall inflation for the economy. It is a comprehensive measure of inflation rate compared to other measures since it accounts for the changes in the prices of all goods and services produced within Australia. Changes in the prices often correspond to changes in economic growth.

In the third quarter of 2020, the Australia GDP deflator rose to 102.03 points from 101.64 in Q2. Up to Q3, the GDP deflator in Australia has dropped by 0.07 points. We assign a score of -2.

  • Australia Industrial Production

Industrial production measures the quarterly changes in output from the manufacturing sector, utilities, and mining. Note that the Australian economy is heavily dependent on commodity exports, which means that industrial production changes significantly impact economic growth.

In Q2, the industrial production in Australia dropped by 3.3%, while the YoY Q3 industrial production dropped by 2.02%. The drop in Q2 is the largest quarterly drop in over 25 years. We assign a score of -6.

  • Australia Manufacturing PMI

This PMI is from a survey of companies operating in the industrial sector. The index shows whether the manufacturing sector in Australia is expanding or contracting. In Australia, the Ai Group surveys the changes in new orders, employment, inventory, output prices, and production levels. When the index is above 50, it means that the manufacturing sector is expanding and contracting when it’s below 50.

In November 2020, the AIG Australian manufacturing PMI dropped to 52.1 from 56.3 in October. Despite the drop, the Australian manufacturing PMI points to growth in the industrial sector. Hence, we assign a score of 6.

  • Australia Retail Sales

The retail sales data in Australia tracks the monthly change of the consumer expenditure on goods and services. Consumer goods include items of clothing and footwear, food, and household items. Purchases made in restaurants, departmental stores, and hotel services and deliveries are also included as retail sales.

In October 2020, the MoM retail sales increased by 1.4% from a 1.1% drop in September. In 2020, the average MoM retail sales have grown by 0.97%. We assign a score of 2.

  • Australia Consumer Confidence

The Melbourne Institute and Westpac Bank survey about 1200 households in Australia and constructs the consumer confidence index. The index is based on households’ evaluation of their financial condition for the preceding year and in the next 12 months. It also includes their economic expectations in the next one and five years. When the index is above 100, it shows that households are optimistic and pessimistic if the index is below 100. Note that consumer confidence about their finances and the economy determines their level of expenditure; hence, it drives the rate of GDP growth.

In December 2020, consumer confidence in Australia rose to 112 from 107.7 in November, which is the highest in over ten years. We assign a score of 5.

  • Australia Government Debt to GDP

The government debt to GDP determines the ability of the economy to service its debts. It also impacts the ability of the government to take on more debt to advance an economic agenda. A debt level of below 60% of the GDP is preferable since it ensures that the government can take on more debt without over-leveraging the economy.

In 2019, the Australian government debt to GDP rose to 45.1% from 41.5% in 2018. In 2020, it is expected to reach 50% on account of increased government expenditure during the coronavirus pandemic. We assign a score of -3.

Please check our following article where we discuss the Exogenous analysis of the EUR/AUD Forex pair. Cheers.

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Forex Fundamental Analysis

AUD/USD Global Macro Analysis – Part 3

AUD/USD Exogenous Analysis

AUD/USD Exogenous Analysis

AUD/USD Exogenous Analysis

In the exogenous analysis, we will compare the differentials in the US and the Australian economies at an international level. We will use:

  • The differential in GDP growth in the US and Australia
  • The US and Australian interest rate differential
  • The differential in the US and Australian balance of trade

The differential in GDP growth in the US and Australia

Domestically, the value of USD and AUD are pushed by the changes in the macroeconomic factors that drive GDP growth. The dynamic of the AUD/USD exchange rate is affected by the difference in the GDP growth rate. The country with a faster GDP growth will see its currency appreciate more than the one with slower growth.

In Q3 of 2020, the Australian GDP increased by 3.3% compared to the 7% drop in Q2. The US economy expanded by 33.1% in Q3 2020 compared to a 31.4% drop in Q2. In the first three quarters, the US economy has contracted by 3.3% while the Australian economy has contracted by 4%. Therefore, the GDP growth differential between Australia and the US is -0.7%. Based on the correlation analysis with the AUD/USD pair, we assign a score of -2.

The US and Australian interest rate differential

This measures the difference between the interest rate set by the Reserve Bank of Australia (RBA) and the US Federal Reserve. In the forex market, carry traders tend to be bullish when a currency pair has a positive interest rate differential and bearish when it is negative. That is because more investor funds flow towards the country with a higher interest rate.

At the onset of the COVID-19 pandemic, the RBA cut interest rates from 0.75% to 0.1%, while the Federal Reserve cut interest rates from 1.75% to 0.25%. That makes the interest rate differential for the AUD/USD pair -0.15%. Based on correlation analysis with the exchange rate for the AUD/USD pair, we assign a score of -2.

The differential in the US and Australian balance of trade

The difference between the balance of trade for Australia and the US will help determine which currency is in higher demand in international trade. Note that increased demand in the forex market also increases the value of that currency.

In October 2020, Australia’s trade surplus increased to AUD 7.46 billion compared to 5.82 billion in September. However, it is still lower than the highest recorded AUD 9.62 billion surpluses in March. The US had a trade deficit of $63.1 billion in October, which has been expanding since January. The balance of trade differential is $68.633 billion between Australia and the US. Based on the correlation with the AUD/USD exchange rate, we assign a score of 6.

Conclusion

The exogenous score for the AUD/USD pair is 2. It means that we can expect that the pair will be on a bullish trend in the short-term.

In technical analysis, the short-term bullish trend is supported by the fact that the pair is trading above the 200-period MA and breaching the upper Bollinger Band. Cheers!

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Forex Fundamental Analysis

AUD/USD Global Macro Analysis – Part 1 & 2

Introduction

Introduction

Introduction

In the global macro analysis of the AUD/USD pair, we will look at the endogenous economic factors that drive GDP growth in both Australia and the US. We’ll also analyze the exogenous factors that affect the exchange rate dynamic between the AUD and the USD.

Ranking Scale

We will use a sliding scale from -10 to +10 to rank the impact of the endogenous and exogenous factors. When the endogenous factors are negative, it means that they resulted in the depreciation of either the USD or the AUD. When positive, it implies they resulted in the appreciation of the individual currencies. Similarly, negative endogenous factors result in a bearish trend for the AUD/USD and a bullish trend for when they are positive.

USD Endogenous Analysis – Summary

A -19.1 score on Endogenous analysis on USD implies a deflationary effect on this currency. It means that the US Dollar has lost its value since the starting of 2020.

You can find the complete USD Endogenous Analysis here.

AUD Endogenous Analysis – Summary

The endogenous factors have an overall score of 3, implying that the AUD has appreciated in 2020.

  1. Australia Inflation Rate

The consumer price index in Australia is calculated quarterly. Housing accounts for 22.3% of the total CPI weight, food and non–alcoholic drinks 16.8%, recreation 12.6%, transportation 11.6%, household goods and services 9.1%, alcohol and tobacco 7.1%, healthcare 5.3%, financial service 5.1%, clothing, education and communication 10.2%.

In Q3 of 2020, the YoY Australian CPI increased by 0.7% from a drop of 0.3% in Q2. The QoQ CPI rose by 1.6% compared to 1.9$ in Q2. Note that the Q3 CPI is marginally lower than in the pre-pandemic levels in Q1. Based on inflation’s correlation with GDP growth, we assign a score of -1.

  1. Australia Unemployment Rate

The unemployment rate is the percentage of the labor force that is actively looking for employment opportunities. The unemployment rate can be used to show the state of the economy. When high, it means that the economy is shedding jobs faster and can be said to be contracting.

In October 2020, the Australian unemployment rate was 7% up from 6.9% in September. The increase in the Australian unemployment rate can be attributed to the prolonged COVID-19 crisis. Note that during the period, the employment rate increased to 61.2% from 60.4% in September. This was mainly driven by the surge in full-time, part-time job numbers coupled with a drop in the underemployment rate to 10.4% from 11.4% in September.

From January to date, the unemployment rate has increased by 1.7% while the employment rate has dropped by 1.4%. Based on its correlation with GDP, we assign a score of -5.

  1. Australia Mining Production

The Australian economy significantly relies on mining, which accounts for up to 11% of the GDP. Australia is among the top producers of precious metals in the world. Therefore, a significant portion of the labor market is dependent on the mining sector.

The YoY mining production increased by 1.2% in the second quarter of 2020, down from a 5.1% increase in Q1. In Q3, it is projected to increase by at least 2.5% and 5% by the end of 2020. This would mean that the end of year levels would be equivalent to the pre-pandemic levels.

Based on our correlation analysis, we assign Australia mining production a score of -3.

  1. Australia Business Confidence

The National Australia Bank (NAB) surveys about 350 leading companies in Australia to establish the prevailing business conditions. Typically, the present business sentiment can be used as a leading indicator of future business activities such as hiring, spending, and investments. We can say that business confidence is a leading indicator of GDP change.

Reading above 0 shows that business conditions are improving, while below 0 shows that business conditions are worsening.

In October 2020, Australian business conditions improved to 5 from -4 in September. The October reading is the highest since August 2019. The increase was primarily driven by improvement in sentiment profitability and employment in the mining and transportation sectors.

Based on correlation with GDP, we assign a score of 8.

  1. Australia Consumer Confidence

The Melbourne Institute and Westpac Bank aggregate consumer confidence in Australia. The survey 1200 households representative of the entire households in Australia. The index is based on the five year average of these components: anticipated economic conditions, personal finances, and purchase of essential household goods. Consumer confidence is a leading indicator of consumer expenditure, which is a significant driver of the GDP.

In November 2020, the Australian consumer confidence increased to 107.7 from 105 in October. This is the highest level in 7 years, indicating that consumers are highly optimistic about the future despite the COVID-19 challenges.

Based on correlation analysis with the Australian GDP, we assign it a score of 5.

  1. Australia Government Debt to GDP

This measures the levels of indebtedness of the Australian government. Domestic and foreign lenders use this ratio to estimate the ability of the government to service its debts without straining the growth of the economy. Generally, a ratio of below 60% is considered to be ideal.

In 2019, the government debt to GDP in Australia jumped to 45.1% from 41.5% in 2018. In 2020, it is projected to reach 50%. Therefore, we assign a score of -3.

  1. Australia Retail Sales

The change in retail sales shows the trend in household expenditure on final goods and services in the economy. An increased expenditure corresponds to an increase in GDP levels.

In October 2020, the MoM retail sales increased by 1.4% compared to a 1.1% drop in September. Based on the correlation with the GDP growth rate, we assign a score of 2.

Now we know that USD has depreciated and AUD has appreciated according to their respective endogenous indicators. In the very next article, let’s see if this pair is bullish or bearish according to the exogenous indicators.

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Forex Assets

Analysing The Costs Involved While Trading The AUD/MXN Exotic Pair

Introduction

Introduction

Introduction

In this exotic forex pair, the AUD represents the Australian dollar, while the MXN – the Mexican Peso. Exotic currency pairs have higher volatility in the forex market when compared to the other major pairs. Here, AUD is the base currency, where MXN is the quote currency. It means that the AUD/MXN exchange rate shows the amount that 1 AUD can buy in terms of MXN. Let’s say that the exchange rate for the AUD/MXN is 15.0346; it means that 1 AUD can be exchanged for 15.0346 MXN.

AUD/HUF Specification

Spread

When you go long in the forex market, you buy the currency pair from your broker at a higher price than when you sell it. The spread in forex is the difference between these two. The spread for the AUD/MXN pair is – ECN: 2 pips | STP: 7 pips

Fees

Some forex brokers charge a commission for every trade on ECN type accounts, depending on the value of the trade. STP accounts do not incur any trading fees.

Slippage

Sometimes when you place a market order, your broker will fill it in with a different price. This is slippage in forex trading; it is caused by increased volatility and the speed at which your broker executes the trade.

Trading Range in the AUD/MXN Pair

The trading range analyzes the spread between the highest and the lowest price movements across multiple timeframes. The trading range analysis ranges from the minimum, average, to the maximum volatility across all timeframes. It is used to assess the potential profitability of a currency pair across all 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/MXN Cost as a Percentage of the Trading Range

Further analysis of profitability can be aided by analyzing the percentage of the total cost to the volatility. These costs are put in terms of percentages of the volatility on all timeframes.

ECN Model Account costs

Spread = 2 | Slippage = 2 | Trading fee = 1 | Total cost = 5

STP Model Account

Spread = 7 | Slippage = 2 | Trading fee = 0 | Total cost = 9

The Ideal Timeframe to Trade  AUD/MXN Pair

For the AUD/MXN pair, the ideal trading timeframe appears to be the longer timeframes since trading costs are at their lowest here. We notice that the trading costs for the AUD/MXN pair decrease as the timeframes become longer. Also, note that at longer timeframes, the volatility is higher.

For traders wishing to trade the AUD/MXN pair for the shorter-term, timing their trades with when the volatility increases towards the maximum can help. More so, adopting the use of forex limit orders will lower the trading costs by ensuring there are no slippages.

ECN Account Using Limit Model Account

Total cost = Slippage + Spread + Trading fee = 0 + 2 + 1 = 3

Notice how using the forex limit order types reduces the overall trading costs across all timeframes. The maximum trading cost of the AUD/MXN pair, for instance, decreased from 84.75% of the trading range to 50.85%.

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Forex Assets

Trading The AUD/TRY Forex Exotic Currency Pair and Analysing The Costs Involved

Introduction

Introduction

Introduction

AUD/TRY is an exotic currency pair in the forex market. The AUD is the short form of the Australian Dollar and the TRY for Turkish Lira. Forex traders interested in such exotic pairs should be aware that trading them comes with high volatility compared to trading major forex pairs. In this exotic currency pair, the AUD is the base currency, while the TRY is the quote currency. Thus, the AUD/TRY price represents the amount of TRY that 1 AUD can buy. For instance, if the AUD/TRY pair’s price is 5.8362, it means that 1 AUD can buy 5.8362 TRY.

AUD/TRY Specification

Spread

In the forex market, your broker sells a currency pair to you at a higher price and buys it from you at a lower price. The value difference between these two prices is the spread. It is the primary way in which forex brokers earn their revenue.

The spread for the AUD/TRY pair is – ECN: 3 pips | STP: 8 pips

Fees

Forex traders with ECN account normally pay a trading fee to their broker whenever they open a position. This commission depends on the size of the trade, and not all forex brokers levy it. STP accounts do not have commissions.

Slippage

In forex trading, slippage refers to the price you expect your market order to be filled at and the price at which it is executed. The difference is a result of delays by your forex broker or high volatility.

Trading Range in the AUD/TRY Pair

The trading range refers to the analysis of the price fluctuation of a currency pair across various timeframes. The trading range shows the volatility in pips for a currency pair throughout the trading period ranging from minimum to maximum.

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/TRY Cost as a Percentage of the Trading Range

After determining the trading range, we can then determine the trading costs associated with these trading ranges. The total trading cost is expressed as a percentage of the pip volatility. Here are the trading costs for the AUD/TRY pair on both ECN and STP accounts.

ECN Model Account costs

Spread = 3 | Slippage = 2 | Trading fee = 1

Total cost = 6

STP Model Account

Spread = 8 | Slippage = 2 | Trading fee = 0

Total cost = 10

The Ideal Timeframe to Trade  AUD/TRY Pair

From these analyses, we have established that longer timeframes have lower trading costs while the shorter timeframes attract higher trading costs. Note that the highest trading costs coincide with periods of lower volatility.

Therefore, the ideal timeframe to trade the AUD/TRY pair would be on longer timeframes when volatility is the highest. For shorter-term traders, opening positions when volatility is above the average can potentially lower the trading costs. Furthermore, traders across all timeframes can lower their trading costs by using the forex limit order types. With these types of orders, the cost of slippage is removed.

Below is an example using the ECN account.

ECN Account Using Limit Model Account

Total cost = Slippage + Spread + Trading fee

= 0 + 3 + 1 = 4

Using the forex limit order types has lowered the trading costs across all timeframes. You can notice that the highest cost has reduced from 101.69% to 67.8%.

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Forex Assets

Exploring The Costs Involved While Trading The AUD/HUF Forex Exotic Pair

Introduction

Introduction

Introduction

The AUD/HUF pair is an exotic forex pair with the AUD representing the Australian Dollar and the HUF representing the Hungarian Forint. When trading in such an exotic currency pair, forex traders should anticipate higher volatility. The base currency in this pair is the AUD, while the HUF is the quote currency. Hence, the exchange rate of the AUD/HUF represents the amount of HUF that a single AUD can purchase. If the exchange rate of AUD/HUF is 221.51, it means that you can buy 221.51 HUF using 1 AUD.

AUD/HUF Specification

Spread

One of the ways forex brokers earn their revenue is through the spread. This is the difference in value between the price they sell a currency pair to you and the price at which they buy the same pair from you.

The spread for the AUD/HUF pair is – ECN: 22 pips | STP: 27 pips

Fees

For traders with the ECN account, they get charged a fee for opening positions. Note that not all brokers charge this commission. Forex brokers do not charge a fee on STP accounts.

Slippage

Every forex broker has different execution speeds. In times of high volatility, your order may be executed at a price other than the one you requested. This difference is slippage.

Trading Range in the AUD/HUF Pair

The trading range in forex trading is used to analyse the fluctuation in the price of a currency pair across multiple timeframes. The volatility, as measured with the trading range, is pips from the minimum, average, to the maximum for all timeframes. With this information, you can deduce the most profitable timeframes to trade.

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/HUF Cost as a Percentage of the Trading Range

Now that we’ve established the volatility,  we can proceed to calculate the trading costs incurred when trading these timeframes. The trading cost is expressed as a percentage of total costs to the volatility.

Below are the trading costs of the AUD/HUF pair for both ECN and STP accounts.

ECN Model Account costs

Spread = 22 | Slippage = 2 | Trading fee = 1

Total cost = 25

STP Model Account

Spread = 27 | Slippage = 2 | Trading fee = 0

Total cost = 29

The Ideal Timeframe to Trade  AUD/HUF Pair

From the above analyses, we can see that the trading cost of the AUD/HUF pair decreases with an increase in volatility. Since the volatility also increases with the timeframe, trading the AUD/HUF over longer timeframes incurs lower costs.

Although the lower timeframes have higher trading costs, these costs can be reduced by timing trades when volatility approaches the maximum. Furthermore, slippage costs can be avoided if traders use forex limit order types. With the forex limit orders, trades are executed at precise price points, avoiding the impact of slippage. Let’s look at an example of this using the ECN account.

ECN Account Using Limit Model Account

Total cost = Slippage + Spread + Trading fee

= 0 + 22 + 1 = 23

Notice that the trading costs have been reduced in all timeframes. For example, the highest cost has been lowered from 423.73% to 389.83%.

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Forex Assets

Costs Involved While Trading The AUD/PHP Forex Exotic Pair

Introduction

Introduction

Introduction

In this exotic forex pair, the AUD is the Australian Dollar, and the PHP is the Philippine Peso. Note that trading with such exotic pairs is accompanied by periods of high volatility compared to major forex pairs. The AUD is the base currency, while the PHP is the quote currency. Therefore, in forex trading, the price of the AUD/PHP represents the amount of PHP you can purchase using 1AUD. Say that the price of AUD/PHP is 34.057. It means that with 1 AUD, you can buy 34.057 PHP.

AUD/PHP Specification

Spread

In the forex market, when going long, you buy a currency pair from the broker at a “bid” price. When you go short, you sell the currency pair to the broker at the “ask” price. The difference between the two prices is the spread.

The spread for the AUD/PHP pair is – ECN: 10 pips | STP: 15 pips

Fees

Forex traders using ECN type accounts get charged a trading fee by their brokers depending on the size of their position. STP type accounts rarely attract any trading fees from the brokers.

Slippage

If you have ever opened a trade during periods of increased volatility, you will notice that your order price differs from the execution price. This difference is slippage. It can also be caused when your broker is slow to execute your order.

Trading Range in the AUD/PHP Pair

The trading range refers to the analysis of the fluctuation of a currency pair over various timeframes. With the trading range, we can determine volatilities from minimum to the maximum across all timeframes. This information will be useful in deciding profitability across these 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/PHP Cost as a Percentage of the Trading Range

The percentage of the trading range is when we take the total costs associated with trading a particular pair and express it as a percentage of the volatility. Below are the percentage of the trading range for ECN and STP accounts.

ECN Model Account costs

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  AUD/PHP Pair

We can observe from the above analyses that longer timeframes produce higher volatilities. More so, as the volatility increases, the trading costs decrease. Therefore, shorter-term traders of the AUD/PHP pair experience higher trading costs than longer-term traders.

However, trading costs can be reduced if traders were to open their positions when the volatility is approaching the maximum. Notice that across all timeframes, the trading costs are lower when volatility changes towards the maximum. Furthermore, using forex limit order types can be used to lower trading costs. Such order types eliminate the slippage costs. Here’s a demonstration.

ECN Account Using Limit Model Account

Total cost = Slippage + Spread + Trading fee

= 0 + 10 + 1 = 11

By getting rid of the slippage costs, we have effectively lowered trading costs across all timeframes.

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Forex Assets

AUD/TWD – What Should You Know Before Trading This Exotic Pair

Introduction

Introduction

Introduction

The AUD/TWD is an exotic currency pair with the AUD representing the Australian Dollar, and the TWD is the Taiwan Dollar. Such exotic pairs experience high volatility in the forex market. In this pair, the AUD is the base currency, while the TWD is the quote currency. That means that the exchange rate of the AUD/TWD is the amount of TWD that can be bought by 1 AUD. If the exchange rate of the AUD/TWD pair is 20.091, it means that you can exchange 20.091 TWD for 1 AUD.

AUD/TWD Specification

Spread

The spread in forex trading represents the difference between the price at which you can buy a currency pair when going long and the price at which you can sell the pair when going short. The spread for the AUD/TWD pair is – ECN: 24 pips | STP: 29 pips

Fees

Holders of ECN type accounts are typically charged a fee for every position they open. This fee depends on the size of the positions and the broker. Traders with STP accounts usually don’t get charged trading fees.

Slippage

If your broker delays executing your trade or if the market is highly volatile, you will notice a difference between the price you placed on your order and the execution price. This difference is slippage.

Trading Range in the AUD/TWD Pair

When trading forex, you will notice that a currency pair fluctuates over time. The trading range shows the minimum, average, and maximum variation in pips over different timeframes. By analysis of the trading range, we can determine the potential profit from trading a particular pair across 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/TWD Cost as a Percentage of the Trading Range

To establish the Percentage of the trading range for CAD/TWD, we will express the total trading costs for both ECN and STP accounts as a percentage of the trading range above. This analysis will show us the true costs of trading the AUD/TWD pair across different timeframes, which will aid in determining the best timeframe to trade.

ECN Model Account costs

Spread = 24 | Slippage = 2 | Trading fee = 1 | Total cost = 27

STP Model Account

Spread = 29 | Slippage = 2 | Trading fee = 0 | Total cost = 31

The Ideal Timeframe to Trade  AUD/TWD Pair

From this analysis, we can tell that as the timeframe becomes longer, the trading costs become lower. For both accounts, the highest trading costs are at the 1H timeframe, which coincides with the lowest volatility of 2.7 pips. The lowest trading costs are at the 1-month timeframe coinciding with when volatility is highest at 256.8 pips.

Overall, we can also notice that the trading costs reduce when volatility changes from minimum to maximum across all timeframes. Therefore, traders of the AUD/TWD pair can reduce their trading costs by trading longer timeframes or trading when volatility approaches maximum. Furthermore, using forex limit order types can remove slippage costs.

Here’s an example.

ECN Account Using Limit Model Account

Total cost = Slippage + Spread + Trading fee

= 0 + 24 + 1 = 25

When the slippage costs are eliminated, the trading costs for the AUD/TWD pair drop. In this case, the highest cost dropped from 457.63% to 423.73%.

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Forex Assets

AUD/ZAR – Analysing The Costs Involved While Trading This Forex Exotic Pair

Introduction

Introduction

Introduction

The AUD/ZAR is an exotic currency pair in the forex market. AUD is the Australian Dollar while ZAR is the South African Rand. Trading the AUD/ZAR pair is expected to attract higher volatility than trading major forex currency pairs.

The AUD is the base currency in this exotic pair, while the ZAR is the quote currency. It means that the price associated with the AUD/ZAR pair represents the amount of ZAR that you can buy with 1 AUD. Let’s say that the price of AUD/ZAR is 11.5077; it means that with 1 AUD, you can buy 11.5077 ZAR.

AUD/ZAR Specification

Spread

At any given moment, forex brokers display the “bid” and “ask” price, which represents the price at which you can buy or sell a currency pair. The spread is the difference between these two. The spread for the AUD/ZAR pair is – ECN: 7 pips | STP: 12 pips

Fees

Forex traders with ECN type accounts can sometimes be charged commissions by their forex brokers whenever they open a position. The fees vary with the broker and the size of the position. STP accounts are typically not charged commissions.

Slippage

The price at which we place our trades isn’t always the price at which the broker executes these trades. The difference between the two prices is called slippage in forex trading. It can be because of extreme market volatility or broker inefficiency.

Trading Range in the AUD/ZAR Pair

The trading range refers to the pip movement of a currency pair throughout a trading day. The pip movement can be analyzed across different timeframes to determine the volatility of the 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/ZAR Cost as a Percentage of the Trading Range

We can compare the total cost of trading a particular currency pair alongside the volatility of that pair. This will help us determine the total trading costs of the pair across different timeframes and find out the optimal trading periods.

ECN Model Account Cost

Spread = 7 | Slippage = 2 | Trading fee = 1 | Total = 10

STP Model Account Cost

Spread = 12 | Slippage = 2 | Trading fee = 0 | Total cost = 14

The Ideal Timeframe to Trade the AUD/ZAR

From the analysis of the trading range and the costs in terms of Percentage, we notice that low volatilities attract the highest costs. Since lower timeframes have the least volatilities, it means that trading costs are higher in lower timeframes.

We can say that the ideal timeframe to trade the AUD/ZAR pair is when the volatility is approaching the ‘Maximum”. Traders interested in this pair can also choose to use forex pending orders instead of market orders. With pending orders, you get to eliminate the costs associated with slippage.

Here’s an example with the ECN account when slippage is 0.

Total cost = Slippage + Spread + Trading fee = 0 + 7 + 1 = 8

Eliminating the slippage cost has helped reduce the trading costs of the AUD/ZAR pair across all timeframes. The highest cost in the ECN type account has been reduced from 169.49% to 135.59%.

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Forex Assets

Trading Costs Involved While Trading The AUD/PKR Forex Exotic Pair

Introduction

Introduction

Introduction

In this exotic, AUD is the Australian Dollar, and PKR is the Pakistani Rupee. Trading exotic currency pairs can be highly volatile compared to major currency pairs. The AUD is the base currency, and the PKR is the quote currency. That implies that the exchange rate of the AUD/PKR is the number of Pakistani Rupees that a single Australian Dollar can buy. Thus, if the exchange of AUD/PKR is 112.584, it means that with 1 AUD, you can buy 112.584 PKR.

AUD/PKR Specification

Spread

The spread in forex trading represents the value difference between the buying price of a currency pair and its selling price. These prices are referred to as “bid” and “ask.” The spread for the AUD/PKR pair is – ECN: 32 pips | STP: 37 pips

Fees

Some forex brokers charge a fee whenever a trader opens a position. The fee is not standardized and depends on the broker and the size of the trade. Note that STP accounts normally don’t attract broker fees.

Slippage

Whether long or short, when you open a position, it can be executed at a different price than what you requested. This price difference is called slippage in the forex market and is a direct result of extreme volatility or broker delays.

Trading Range in the AUD/PKR Pair

If you observed a currency pair’s price movement, you’d notice the difference in price changes across different timeframes. That is the trading range and is used to determine the volatility of a 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/PKR Cost as a Percentage of the Trading Range

When you combine the total trading costs of a currency pair, you can analyze the percentage costs across different timeframes. This analysis can help you determine the best time to trade a currency pair.

ECN Model Account Cost

Spread = 32 | Slippage = 2 | Trading fee = 1 | Total = 35

STP Model Account Cost

Spread = 37 | Slippage = 2 | Trading fee = 0 | Total cost = 39

The Ideal Timeframe to Trade the AUD/PKR

As seen above, trading the AUD/PKR pair on shorter timeframes is costlier. In both the ECN and the STP accounts, it is cheaper trading the pair over longer timeframes since the trading costs are lower. Note that the trading costs decrease with an increase in volatility. The lowest trading cost for the AUD/PKR pair is when volatility is at the highest 852.4 pips.

The ideal trading time is evidently on the longer timeframes. But shorter-term traders can open positions when volatility is maximum across 1H, 2H, 4H. and 1D timeframes. Traders can also employ the use of forex pending order types, which eliminate the cost of slippage. Here’s an example with the ECN account.

Total cost = Slippage + Spread + Trading fee = 0 + 32+ 1 = 33

Notice how the trading costs have been reduced across all timeframes when forex pending orders are used. The maximum cost, for example, has reduced from 593.22% to 559.32%.

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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%.

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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%.

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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%.

Categories
Forex Signals

GBP/AUD Trend Pullback

Categories
Forex Signals

GBP/AUD Displaying A Break of Structure

Categories
Forex Assets

AUD and Gold Correlation Information for FX Traders

Over the past 10 years, exports of oil from Canada have been increased significantly. Canada is the fourth-largest producer and exporter of oil in the world, reaching around 3.6 million barrels per day in 2018. On the other hand, we have Australia, one of the world’s top producers of the yellow metal. More than 61% […]

Over the past 10 years, exports of oil from Canada have been increased significantly. Canada is the fourth-largest producer and exporter of oil in the world, reaching around 3.6 million barrels per day in 2018. On the other hand, we have Australia, one of the world’s top producers of the yellow metal. More than 61% […]

Over the past 10 years, exports of oil from Canada have been increased significantly. Canada is the fourth-largest producer and exporter of oil in the world, reaching around 3.6 million barrels per day in 2018. On the other hand, we have Australia, one of the world’s top producers of the yellow metal. More than 61% of Australia’s gold resources are located in Western Australia. A few days ago one of our bright trainees asked us a very interesting question during his research about precious metals. He was curious about currency correlations with other markets, to other actual commodities. So can we use one to better predict where the other might be headed?

Gold and oil are probably the two most important commodities that are always playing some of the main roles in the trading scene. The idea about this topic is to figure out if we can follow where oil is going to so we could somehow have a better clue of where the Canadian dollar is going. The same thing with shiny gold as it relates to the Aussie. There is the third one that deserves to be mentioned and that is the Nikkei index. If we follow that it often follows the same route as the USD/JPY. So are there any patterns or courses of action that we can anticipate? Sadly, looks like nothing here can help us at all.

Most professional traders keep saying that at the end of the day this is surely nothing more than a fun fact. We will try to give some explanations of why this is the case. The first reason is that they usually move in a tandem with each other so trying to get a speedy indicator where another one is going to go just doesn’t work. Second, in most cases, they don’t even correlate. Maybe they’ll correlate for a while and then they’ll stop and they’ll start up again. Here we simply never know when those changes are going to happen.

In the case of gold, the idea is that AUD and yellow metal should march in tandem. So gold actually does follow the AUD/USD down but when it rebounds, the AUD/USD doesn’t. If we dare to go long on the AUD/USD because there was a real branching there when gold went sharply, we would probably find ourselves in a problem. Even if before they moved in tandem we cannot acquire an advantage if two charts are just together in motion at the same time like that. Gold and all precious metals supposed to be the best hedge against a fragile economy if it crashes hard, so all the people holding metals out there should pay close attention to all earthquakes on the market.

The lesser-known correlation, Nikkei to USD/JPY used to move in tandem but is truly useless to traders in pursuit of real action. Over the past couple of years, since the Nikkei trades in the Asian conclave, the slowest in forex, some traders have been waiting for the closing result of the Nikkei market to better forecast directional bias for the USD/JPY in the NY and London sessions. We don’t recommend trading these lower time frames because it doesn’t work like we would want to and the Nikkei doesn’t have a powerful impact on the Eurostoxx 50 and the S&P 500 markets. These markets are much stronger from the financial angle and they would overrule anything that the Nikkei did earlier.

The only way to go forward is to put all our attention on things that matter. Worrying about how all these currencies correlate to the price of gold and oil might not be the highest tree in the forest we want to climb on. Simply, ‘Comdolls’ can not help us much. For our fellow traders who don’t know, the nickname ‘Comdolls’ refers to the AUD and USD because they are dollars and they tend to rely on commodities. So this way of trading isn’t probably the most exciting because we cannot just extract something from it and use it right away and start making pips.

It is crucially important for us to separate which are the things that can actually help us from the things that just whistle in the woods. We need to look at this thing as good news because it’s always better to know what kind of things we should eliminate from the equation. Forex market is a 4 to 5 trillion dollar a day market and surely it’s not set up for people to just come and take the money all the time. We will get out of it what we put into it. Our goal should be to absorb as much knowledge as we possibly can, to take notes, and be relentless.

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Forex Assets

How Best To Trade The ‘CHF/AUD’ Forex Currency Pair?

Introduction

Introduction

Introduction

CHF/AUD is the acronym for the Swiss Franc against the Australian Dollar, and it is an exotic Forex currency pair. Here, the CHF is the base currency, and the AUD is the quote currency. Both CHF and AUD are major currencies and are vastly traded in the foreign exchange market. CHF is the official currency of Switzerland, while AUD is the national currency of Australia.

Understanding CHF/AUD

The price of this pair in the trade market defines the value of AUD equivalent to one Swiss Franc. It is quoted as 1 CHF per X AUD. For instance, if the value of this pair is 1.5318, these many Australian Dollars are required to acquire one CHF. 

Spread

The difference between the ask-bid price is referred to as Spread, which is charged by the broker. This value is different in the ECN and STP accounts. The estimated Spreads for CHF/AUD pair is given below.

ECN: 17 pips | STP: 22 pips

Fees & Slippage

A fee is a price that one pays for the trade. There are zero fees charged on STP accounts, but a few pips are charged on ECN accounts. Slippage is the difference calculated between the price by the trader and the price the trader received from the broker.

Trading Range in CHF/AUD

The trading range is represented in the tabular format to showcase the pip movement of a currency pair in various timeframes. These values are useful in ascertaining the profit that can be generated from trade in advance. To discover the trading costs, we must multiply the below volatility value with the pip value of this pair.

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 assess a large time 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.

CHF/AUD Cost as a Percent of the Trading Range

The trading range is obtained by identifying the ratio between total cost and volatility; it expressed in terms of percentage. Below is the representation of the cost differences of traders in various timeframes and volatilities.

ECN Model Account

Spread = 17 | Slippage = 5 |Trading fee = 8

Total cost = Slippage + Spread + Trading Fee = 5 + 17 + 8 = 30

STP Model Account

Spread = 22 | Slippage = 5 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 5 + 22 + 0 = 27

Trading the CHF/AUD

When the percentage value is higher, the cost of the trade gets more expensive. From the above tables, we can conclude the values are significant in the min column and relatively less significant in the max column. It means that the costs are high when the market’s volatility is low. It is not advisable to trade when both the volatility and cost of trading is high. Balancing both these factors is ideal to trade when the pair’s volatility is in the range of the average values.

Additionally, to lower your costs even further, you can place trades using limit orders instead of market orders. By executing limit orders, the slippage will not be involved in the calculation of the total costs. And this will set the cost of the trades low by a decent number. An example of the same is given below.

STP Model Account (Using Limit Orders)

Spread = 22 | Slippage = 0 |Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 0 + 22 + 0 = 22

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Forex Assets

AUD/HRK – Analyzing The Costs Involved While Trading This Exotic Pair

Introduction

Introduction

Introduction

The abbreviation of AUD/HRK is Australian Dollar, paired with the Croatian Kuna. Here AUD is the official currency of Australia and is also the fifth most traded currency in the Foreign Exchange market. In contrast, HRK stands for the Kuna, and it is the official currency of Croatia. The Croatian National Bank issues this currency.

Understanding AUD/HRK

In the Forex market, to determine the relative value of one currency, we need another currency to compare. Here, when we buy a currency, which is known as the base currency and simultaneously sell the quote currency. The market value of AUD/HRK helps us to understand the strength of HRK against the AUD. So if the exchange rate for the pair AUD/HRK is 4.5571, it means to buy 1 AUD, we need 4.5571 HRK.

Spread

A spread is defined as the difference between the purchasing & selling price of a Forex pair. In simple words, it is the difference between the bid price and the ask price of an asset. Below is the spread charges for ECN and STP brokers for AUD/HRK pair.

ECN: 40 pips | STP: 43 pips

Fees

A Fee is the charges that we traders pay to the broker for executing a trade. Fees to a much depend on the type of broker(STP/ECN) we use.

Slippage

When we want to execute a trade at a particular market rate, but instead, the trade gets executed at a different rate, and that is because of the slippage. Slippage occurs when we counter a volatile market, and when we execute a large order at the same time.

Trading Range in AUD/HRK

The trading range here will determine the amount of money we will win or lose in a given amount of time. In the below table, we have the representation of the minimum, average, and maximum pip movement in a currency pair. Here we will use the ATR indicator that indicates the price movement in a currency pair. We will evaluate it merely by using it with 200-period SMA.

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 assess a significant 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/HRK Cost as a Percent of the Trading Range

The cost of trade depends on the broker type and varies based on the volatility of the market. The overall cost of trade includes spread, fees, and sometimes slippage if the volatility is more. To decrease the cost of the trade, we can use limit orders instead of market execution.

ECN Model Account

Spread = 40 | Slippage = 3 |Trading fee = 5

Total cost = Slippage + Spread + Trading Fee = 3 + 40 + 5 = 48

STP Model Account

Spread = 43| Slippage = 3 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 3 + 43 + 0 = 46

Trading the AUD/HRK

AUD/HRK is an exotic currency pair. As we can see, the average pip movement in 1hr is 133, which implies higher volatility. The higher the volatility, the higher is the risk and lower is the cost of the trade and vice versa. Taking an example, we can see from the trading range that when the pip movement is lower, the charge is high, and when the pip movement is high, the charge is low.

To reduce our costs of trade, we may place trades using limit orders instead of market orders. In the below table, we will see the representation of the cost percentages when limit orders are used. As we can see, the cost of slippage is zero. In doing so, the slippage will not be included in the calculation of the total costs. And this will help us in reducing the trading cost by a considerable margin. An example of the same is given below.

ECN Model Account (Using Limit Orders)

Spread = 40 | Slippage = 0 |Trading fee = 5

Total cost = Slippage + Spread + Trading Fee = 0 + 40 + 5 = 45

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Forex Assets

AUD/RON – What Should You Know Before Trading This Exotic Pair?

Introduction

Introduction

Introduction

The abbreviation of AUD/RON is Australian Dollar paired with Romanian Leu. Here AUD is the official currency of Australia and is also to be the fifth most traded currency in the Forex market. While RON stands for The Romanian leu, and it is the currency of Romania.

Understanding AUD/RON

In AUD/RON currency pairs, the first currency (AUD) is the base currency, and the second currency (RON) is the quote currency. In the Foreign Exchange market, we always buy the base currency and simultaneously sell the quote currency and vice versa. Here, the market value of AUD/RON helps us to understand the strength of RON against the AUD. So if the exchange rate of the pair AUD/RON is 2.9141, it means to buy1 AUD we need 2.9141 RON.

Spread

Forex brokers charge some commission on the trade we open, and that depends on the ask and the bid price by the broker. Spread is the difference between this Ask and Bid price. Every broker has different ask and bid prices. Below is the spread charges for ECN and STP brokers for AUD/RON pair.

ECN: 33 pips | STP: 35 pips

Fees

A Fee is the charges that we traders pay to the broker for opening a trade. This fee depends on the type of broker we use (STP/ECN).

Slippage

When we want to execute a trade at a particular market rate, but instead, the trade gets executed at a different rate. This is because of slippage. Slippage can take place at any time, but mostly we can counter a volatile market, and when we execute a large order at the same time.

Trading Range in AUD/RON

As a trader, our main motive should be to know the market volatility and avoid losses. The trading range here will determine the amount of money we will win or lose in a given amount of time. ATR is a technical indicator that indicates the price movement in a currency pair. In the below table, we have the representation of the minimum, average, and maximum pip movement in a currency pair. We will evaluate it merely by using the ATR indicator combined with 200-period SMA.

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 significant 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/RON Cost as a Percent of the Trading Range

The cost of trade depends on the broker type and varies based on the volatility of the market. The overall cost of trade includes spread, fees, and sometimes slippage if the volatility is more. To decrease the cost of the trade, we can use limit orders instead of market execution.

ECN Model Account

Spread = 33 | Slippage = 3 |Trading fee = 5

Total cost = Slippage + Spread + Trading Fee = 3 + 33 + 5 = 41

STP Model Account

Spread = 35| Slippage = 3 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 3 + 35 + 0 = 38

Trading the AUD/RON

AUD/RON is an exotic currency pair. As we can see, the average pip movement in 1hr is 127, which shows the volatility is very high. Note, the higher the volatility, the higher is the risk and lower is the cost of the trade and vice versa.

Taking an example, we can see from the trading range that when the pip movement is lower, the charge is high, and when the pip movement is high, the charge is low. AUD/RON must be traded with proper risk management because of its volatile nature. If we have our strategy with adequate risk management, we can trade in a volatile market too.

Categories
Forex Assets

Trading The AUD/DKK Forex Pair & Analyzing The Trading Costs Involved

Introduction

Introduction

Introduction

The abbreviation of AUD/DKK is the Australian Dollar paired with the Danish Krone. Here, AUD is the official currency of Australia and many others like Christmas Island and Norfolk Island. AUD is also to be the fifth most traded currency in the Forex market. In contrast, DKK stands for the Danish Krone, and it is the currency of Denmark, Greenland, and the Faroe Islands.

Understanding AUD/DKK

In AUD/DKK currency pairs, the first currency(AUD) is the base currency, and the second currency(DKK) is the quote currency. In the foreign exchange market, when we sell a currency pair, we always sell the base currency and simultaneously buy the quote currency and vice versa. Here, the market value of AUD/DKK helps us to understand the strength of DKK against the AUD. So if the exchange rate for the pair AUD/DKK is 4.4625, it means we need 4.4625 DKK to buy 1 AUD.

Spread

Forex brokers have two prices for currency pairs: the bid and ask price. The bid price is the price in which we sell an asset, and ask is the price at which we buy it. The difference between the ask and the bid price is called the spread. Below are the spread values for the AUD/DKK Forex pair.

ECN: 20 pips | STP: 23 pips

Fees

A Fee is the charges that we traders pay to the broker for opening a trade. This fee depends on the type of broker (STP/ECN) we use.

Slippage

When we want to execute a trade at a particular price, but instead, if the trade gets executed at a different price, we call that difference as Slippage. The Slippage can take place at any time, but mostly we can counter a volatile market.

Trading Range in AUD/DKK

As a trader, our main motive should be to avoid losses and risks. The trading range here will determine the amount of money we will win or lose in a given amount of time. ATR is a technical indicator that indicates the price movement in a currency pair. In the below table, we have the representation of the minimum, average, and maximum pip movement in a currency pair. We will evaluate it merely by using the ATR indicator combined with 200-period SMA.

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 assess a significant 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/DKK Cost as a Percent of the Trading Range

The cost of trade depends on the broker type and varies based on the volatility of the market. The total cost of trade involves spread, fees, and sometimes Slippage if the volatility is more.

ECN Model Account

Spread = 20 | Slippage = 3 |Trading fee = 5

Total cost = Slippage + Spread + Trading Fee = 3 + 20 + 5 = 28 

STP Model Account

Spread = 23| Slippage = 3 | Trading fee = 0

Total cost = Spread + Slippage + Trading Fee = 23 + 3 + 0 = 26

Trading the AUD/DKK

AUD/DKK is an exotic currency pair that less traded in the forex exchange market. The average pip movement in 1hr is 183, which shows the volatility is very high.

Note, The higher the volatility, the higher is the risk and lower is the cost of the trade and vice versa. Taking an example, we can see from the trading range when the pip movement is more, the cost is low, and when the pip movement is low, the cost is high.

Trading using LIMIT ORDERS

To reduce our costs of trade, we can place the trades using limit orders instead of market orders. In doing so, we can eliminate the Slippage that will help reduce the overall cost of the trade. An example of a Limit order is given below.

Spread = 20 | Slippage = 0 |Trading fee = 5

Total cost = Slippage + Spread + Trading Fee = 0 + 20 + 5 = 25

Categories
Forex Assets

Costs Involved While Trading The ‘AUD/PLN’ Exotic Pair

Introduction

Introduction

Introduction

The expansion of AUD/PLN is the Australian Dollar and Polish Zloty. Here, AUD is the official currency of Australia, and it is the fifth most traded currency in the Forex market. Hence, it is considered as a major currency. In contrast, the PLN (Polish złoty) is thinly traded, and it is the official currency of Poland.

Understanding AUD/PLN

In AUD/PLN currency pairs, the first currency (AUD) is considered the base currency, and the second (PLN) is considered the quote currency. In the foreign exchange market, we always buy the base currency and simultaneously sell the quote currency and vice versa. The market value of AUD/PLN helps us to understand the strength of PLN against the AUD. If the exchange rate of AUD/PLN is 2.7427, it means that we need 2.7427 PLN to buy 1 AUD.

Spread

In Forex, spreads are inevitable, and it is mainly controlled by the broker. Forex brokers have two prices for currency pairs: the bid and ask price. The bid is the price at which we sell an asset, and ask is the price at which we buy it. The difference between the ask price and the bid price is called the spread. Below are the ECN & STP spread values for AUD/PLN Forex pair.

ECN: 17 pips | STP: 20 pips

Fees & Slippage

A fee in Forex is the charges we pay to the broker for opening a trade. Mostly, these fees depend on the type of broker (STP/ECN) we use.

There are times when we want to execute a trade at a particular price, but instead, we end up executing it at a different price. This happens because of slippage. Slippage can take place at any time, but mostly it occurs, we can counter a volatile market.

Trading Range in AUD/PLN

As a trader, we must be aware of the risks involved before entering any trade. The trading range here will guide us about the amount of money we will win or lose in a given amount of time. In the below table, we have the representation of the minimum, average, and maximum pip movement in a currency pair. We will evaluate it by using the ATR indicator combined with 200-period SMA.

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 assess a significant 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/PLN Cost as a Percent of the Trading Range

The cost of trade depends on the broker type and varies based on the volatility of the market. The total cost of trade involves spread, fees, and sometimes slippage if the volatility is more.

ECN Model Account

Spread = 17 | Slippage = 3 |Trading fee = 5

Total cost = Slippage + Spread + Trading Fee = 3 + 17 + 5 = 25

STP Model Account

Spread = 20| Slippage = 3 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 3 + 20 + 0 = 23

Trading the AUD/PLN

AUD/PLN is an exotic currency pair that is rarely traded in the Forex exchange market. The average pip movement in 1hr is 63 pips, and that shows the volatility is at medium range.

Note – The higher the volatility, the higher is the risk, and the lower is the cost of the trade and vice versa. Taking an example, we can see from the trading range when the pip movement is more, the cost is low, and when the pip movement is low, the cost is high.

To reduce our trading costs, we may place trades using limit orders instead of market orders. In doing so, the slippage will not be included in the calculation of the total costs. This greatly helps us in reducing the overall cost of the trade. An example of the same is given below. In the below table, we can see how the trading costs have reduced comparatively.

ECN Model Account (But by using Limit Orders)

Spread = 17 | Slippage = 0 |Trading fee = 5

Total cost = Slippage + Spread + Trading Fee = 0 + 17 + 5 = 22

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Forex Assets

Everything About Trading The ‘AUD/NOK’ Forex Exotic Pair

Introduction

Introduction

Introduction

The abbreviation of AUD/NOK is the Australian Dollar and the Norwegian Krone. AUD is the official currency of Australia and many others like Christmas Island, Cocos Islands, and Norfolk Island. This currency is also proven to be the fifth most traded currency in the Forex market right after USD, EURO, JPY, and GBP. Whereas the NOK stands for Norwegian Krone, and it is the official currency of Norway and its dependent territories.

Understanding AUD/NOK

In the Forex, Currency pairs are the national currencies from two countries coupled for being exchanged in reference to each other. The first currency here is the base currency, and the second currency is the quote currency. Here, the market value of AUD/NOK helps us to understand the strength of NOK against the AUD. So if the value for the pair AUD/NOK is 6.5921, it means we need 6.5921 NOK to buy 1 AUD.

Spread

All Forex brokers have two different prices for currency pairs: selling price and buying price, and they are known as bid and ask price. Spread is the difference between the selling price and the buying price. Below is the spread for ECN and STP brokers for the AUD/NOK pair.

ECN: 50 pips | STP: 53 pips

Fees & Slippage

A Fee in Forex is the commission we need to pay to the broker for executing a particular position. If we subtract the trader’s expected price with the actual price at which the trade is executed, we get the Slippage. It occurs when the volatility of the currency pair is high. It may also occur when a large number of orders are placed at the same time.

Trading Range in AUD/NOK

Volatility is a basic measure of risk every trader should be well aware of before entering the market. Whether we have a profit or loss in a given time period relies on the pip movement of that currency pair. This can be assessed using the trading range table. The trading range here represents the minimum, average, and maximum movement of the pip in AUD/NOK.

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 assess a significant 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/NOK Cost as a Percent of the Trading Range

We must be aware of the over cost we will pay to trade a currency pair. The cost of trading a currency pair depends mostly on the volatility and also the broker, which we use. The overall cost here involves spread, slippage, and the trading fee. Below we will see the calculation of the cost variation in terms of percentages.

ECN Model Account

Spread = 50 | Slippage = 3 |Trading fee = 5

Total cost = Slippage + Spread + Trading Fee = 3 + 50 + 5 = 58

STP Model Account

Spread = 53 | Slippage = 3 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 3 + 53 + 0 = 56

Trading the AUD/NOK

We are much aware of major and minor currency pairs, but there are few currencies that are less traded in the foreign exchange market. These currencies are called exotic-cross currency pairs. AUD/NOK is one such exotic pairs. As we see in the trading range chart, the average pip movement of AUD/NOK is 205, and by this, we can conclude that AUD/NOK is a volatile market.

To have a better understanding of the volatility, we will try to understand this with the help of an example. In the 1H time frame, the average pip movement is 205, and the cost percentage is 28.29%. Where in the minimum pip movement in 1hr is 81 and trading, it will cost us 71.60%.

This shows us that higher the volatility lesser is the cost of a trade. But trading in a volatile market involves risk as the movement of the pips is very fast. However, we can trade a volatile market if we follow proper money management rules.

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Forex Videos

How To Trade The Australian Dollar – Is It Time To Sell?

https://youtu.be/jLnzORuZbHA

https://youtu.be/jLnzORuZbHA

How to trade the Australian Dollar

The Australian Dollar is one of the six major currencies traded against the USD and is also popular with cross pairs, such as against the British pound, Euro and Yen.
So far this year, the Australian Dollar has been one of the worst-performing assets among major currencies. A combination of domestic weakness and other external factors such as, more recently, the Coronavirus in China has heavily impacted on this currency.

While Australia’s gross domestic product growth has been recovering since and a low point in 2018, the only expanded very moderately in 2019, the international monetary fund has lowered its forecast in 2020 from 2.8% to 2.3. This may be further impacted the longer the coronavirus goes on because Australia’s gross domestic product is heavily influenced by its commodities exports to China: its largest trading partner with 29.2% of total exports in 2018.

If the virus is contained quickly, Australia can fall back on its low unemployment rate, which has been steady around 5% and it’s housing market which has been turning around since a drop in 2018, and where the more recent upturn is supported by rising house prices.
The Royal Bank of Australia has been doubled in its stance and hinted at depot rate cuts growth remain subdued. It is possible that the Central Bank could roll out extraordinary policies including negative interest rates and large-scale quantitative easing in order to stimulate the economy.

Therefore, the overall sentiment against the Australian Dollar should be considered dovish.
Let’s look at a couple of charts to try and determine the short to the medium-term direction for this currency.

Example A


Example A is the daily chart for the AUSUSD pair. After a rally to the key resistance line of 0.70 in December, the pair has been on the back foot and has declined to a key area of support at 0.6880 at the time of writing. We predict that because there does not seem to be any improvements with the Coronavirus situation and where 50 million people are in lockdown in China. And with no vaccine in sight, we see short to medium term problems for the Australian Dollar continuing. Especially where this major pair is concerned, we expect major stop losses to be breached at its current level and a continuation to the downside due to weakness in the Australian Dollar and strength in the US dollar.

 

Example B


Example B is a daily chart of a popular cross pair: the Euro against the Australian Dollar.
This pair has been fluctuating from two areas of support and resistance in this time frame at 1.5955 and its current position at 1.6577 since May 2019. The rather sharp uplift in this pair over the last two days from the 1.6227 level, confirms general weakness in the Australian Dollar. Again this is an area where we would predict stop losses to be triggered should it move above the 1.66 key level. In the short term, we believe that traders will recognize this is a major level of resistance and where we might expect a pullback in the short term. And whereby Fibonacci technical analysis may help to determine if the pair will continue moving higher. Remember that the euro area has its own problems in terms of growth slow down, which may curtail this move much higher.

Example C


In example C, we get even further clarification of a general weakness in the Australian Dollar with a daily chart of the Australian Dollar against the Japanese yen. After rejecting the resistance line at position A around the 76.50 level, traders failed to reach it again again at position B, and where we have seen an acceleration to the downside. Traders will now be targeting the support line at around 71.80 level, and if

this is breached, stops will be triggered and price action will drive the pair lower to their next target which is around the 70:50 level. The hypothesis is based again on the weakening Australian Dollar and the fact that the market is buying Yen as a safe haven currency, and therefore the emphasis and sentiment is that this pair is due to declining further.

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Forex Assets

What Should Know About The AUD/JPY Currency Pair?

Introduction

Introduction

Introduction

AUDJPY is the abbreviation for the Australian dollar and the Japanese yen. It commonly referred to as “Aussie yen.” It is one of the cross-currency pairs in the forex market. AUD, being on the left, is termed as the base currency and JPY as the quote currency.

Understanding AUD/JPY

The market price of AUDJPY corresponds to the value of JPY that needs to be paid to buy one AUD. It is quoted as 1 AUD per X JPY. For example, if the value of AUDJPY is 74.571, then these many units of the yen are to be produced to purchase one Australian dollar.

AUD/JPY Specification

Spread

Spread is the medium through which brokers generate their revenue. They set different prices for buying a currency and selling a currency. The difference amount becomes their profit margin. The spread usually changes from time to time and varies on the type of execution model.

ECN: 0.7 | STP: 1.6

Fees

Apart from spreads, one needs to pay a charge for every execution a trader makes. It is essentially the commission levied by the broker on each trade. As a matter of fact, there is no fee on STP accounts. But, on ECN accounts, there is a fee of few pips.

Slippage

Going by the definition, slippage is the difference between the price executed by the trader and the price he actually received. It could be in favor of the trader or against him. It all depends on the broker’s execution speed and the change in the volatility of the market.

Trading Range in AUD/JPY

A trading range is a tabular representation of the minimum, average, and the maximum pip movement in a currency pair on different timeframes. These values help in determining the profit that can be made or loss one must bear in a given time frame. And this can be found out by simply finding the product between the pip movement and the value per pip ($9.15).

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 large time 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/JPY Cost as a Percent of the Trading Range

Cost as a percent of the trading range is an illustration of the cost variation by considering the total cost and the volatility of the market in different timeframes. These values are expressed in a ratio that is converted to percentages. And the magnitude of these percentages helps in determining the cost variation in each trade.

ECN Model Account

Spread = 0.7 | Slippage = 2 |Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 2 + 0.7 + 1 = 3.7

STP Model Account

Spread = 1.6 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.6 + 0 = 3.6

The Ideal way to trade the AUD/JPY

Though Forex is a 24/7 market, it is not ideal to enter any time in the market. There are certain times when you must enter the market, which can help reduce costs significantly. Let us determine that using the above tables.

Note that the higher the magnitude of the percentage, the higher is the cost of the trade. From the table, it can be ascertained that the values are high in the minimum column, implying that the costs are high when the volatility of the market is low. Similarly, the costs are low when the volatility is high. However, it is not ideal to trade during these times. To ensure optimum volatility and affordable cost, one must trade during those times when the volatility is around the average range.

Furthermore, there is another way through which you can reduce your costs. Trading using limit orders instead of the market orders brings down the total cost significantly, as the slippage becomes zero. The decline in the costs on the trade when slippage is made zero is shown below.

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Forex Assets

Understanding The AUD/CAD Forex Currency Pair

Introduction

Introduction

Introduction

AUDCAD is the abbreviation for the currency pair, the Australian dollar, and the Canadian dollar. It is a cross-currency pair. One can expect great volatility and liquidity in the market during the Australian session. AUD is the base currency, and CAD is the quote currency.

Understanding AUD/CAD

The value of AUDCAD is the number of Canadian dollars required to buy one Australian dollar. It is quoted as 1 AUD per X CAD. For example, if the value of this pair is 0.9013, then 0.9013 CAD is needed to purchase one AUD.

AUD/CAD Specification

Spread

Spread in trading is the difference between the bid price and the ask price set by the broker. This pip difference is how brokers generate revenue. The spread always varies from broker to broker and the type of account model.

ECN: 1 | STP: 1.9

Fees

Apart from spreads, brokers charge a few pips of fee or commission on each trade you take. This exists only ECN accounts, as a fee on STP accounts is nil.

Slippage

Due to the delay in the broker’s execution speed and volatility of the market, a trader doesn’t get the exact price he intended. This difference in prices is referred to as slippage. It typically varies from 0.5 pips to 5 pips.

Trading Range in AUD/CAD

The trading range is the representation of the minimum, average, and maximum volatility in the market in a given timeframe. This proves to be useful in determining the profit/loss that can be made in a specific amount of time. One can determine this simply by finding the product of the pip movement on the required timeframe and the pip value (mentioned in the specification table).

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 assess a large time 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/CAD Cost as a Percent of the Trading Range

The cost of trade is an essential point of consideration in trading. Cost is that factor that is not fixed and varies on different variables. For example, when the volatility changes, the costs change. The same is the case with timeframes as well. Below is a table that illustrates the variation in the costs on a trade for different timeframes and volatilities.

ECN Model Account

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

Total cost = Slippage + Spread + Trading Fee = 2 + 1 + 1 = 4

STP Model Account

Spread = 1.9 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.9 + 0 = 3.9

The Ideal way to trade the AUD/CAD

Comprehending the above tables is simple. The higher the magnitude of the costs, the higher is the total cost that has to be paid on a trade and vice versa. In the table, the percentages are on the higher side in the min column and lower in the max column. Hence, it can be concluded that the costs are higher when the volatility is low and vice versa. However, it isn’t ideal to trade in these situations. It is rather preferred to enter the market when the volatility is around the average values because the costs are affordable, and the volatility is as needed.

Moreover, it is recommended to design strategies such that limit orders are put to use. This shall completely eliminate the slippage on the trade. And with the elimination of slippage, the total cost would significantly reduce as well.

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Forex Assets

AUD/NZD – Everything About This Forex Currency Pair

Introduction

Introduction

Introduction

AUD/NZD is derived from the full-form of the currency pair, the Australian dollar, and the New Zealand dollar. It comes under the classification of cross currency pairs. In this pair, AUD is the base currency, and NZD is the quote currency.

Understanding AUD/NZD

The value of AUD/NZD depicts the value of NZD that is equivalent to AUD. It is simply quoted as 1 AUD per X NZD. For example, if the current value of this pair is 1.0405, then these many New Zealand dollars are needed to purchase one Australian dollar.

AUD/NZD Specification

Spread

Spreads are a typical way through which brokers make money. The pip difference between the bid price and the ask price is their profit margin, which is referred to as the spread. It varies from the type of account model.

ECN: 0.9 | STP: 1.8

Fees

The fee is basically the commission on a trade levied by the broker on each trade. Again, it varies from the type of account model.

Fee on STP = 0

Fee on ECN = 6 to 10 pips (starts from as low as one pip)

Slippage

The slippage is the difference between the broker’s executed price and the trader’s execution price. There is this variation as the order is executed using market execution. There are two reasons for slippage to take place.

  • Broker’s execution speed
  • Market’s volatility

Trading Range in AUD/NZD

Assessing the profit/risk is a great add-on to one’s trading analysis. With this, the trader can know how long he must before his trade performs. And below is the table that enables the analysis of it.

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 assess a large time 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/NZD Cost as a Percent of the Trading Range

This is one great application of the above table. By combining these values with the total cost of trade, one can determine variations in the costs by varying the parameters like volatility and timeframe.

ECN Model Account

Spread = 0.9 | Slippage = 2 |Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 2 + 0.9 + 1 = 3.9

STP Model Account

Spread = 1.8 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.8 + 0 = 3.8

The Ideal way to trade the AUD/NZD

Before getting into finding the best way to trade this pair, let us comprehend what the above table has got to say.

The higher the magnitude of the percentages, the higher is the cost on the trade for that particular volatility and timeframe. The min column represents low volatility, and the max column represents high volatility.

It can clearly be ascertained from the table that the percentages are comparatively higher on the min column and lower on the max column. This means that the costs are high when volatility is low and vice versa.

But, it is not ideal to trade in neither of the two situations mentioned below.

When the volatility is high -> because of the risk involved
When the volatility is low -> because the costs are high

Now, to maintain a balance between all the parameters, it is best to trade when the pip movement is around the average values.

Furthermore, another simple way to reduce cost is by trading using a pending/limit order instead of market orders, as it will nullify the slippage on the trade. And this, in turn, will reduce the total cost of the trade as well.

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Forex Assets

Fundamentals Of Trading The GBP/AUD Currency Pair

Introduction GBPAUD is an abbreviation for the Great Britain pound and the Australian dollar. This cross currency pair is widely traded with high volume in the forex market. In this pair, GBP is the base currency, and AUD is the quote currency. Understanding GBP/AUD The value of GBPAUD in the market is the value of […]

Introduction GBPAUD is an abbreviation for the Great Britain pound and the Australian dollar. This cross currency pair is widely traded with high volume in the forex market. In this pair, GBP is the base currency, and AUD is the quote currency. Understanding GBP/AUD The value of GBPAUD in the market is the value of […]

Introduction

GBPAUD is an abbreviation for the Great Britain pound and the Australian dollar. This cross currency pair is widely traded with high volume in the forex market. In this pair, GBP is the base currency, and AUD is the quote currency.

Understanding GBP/AUD

The value of GBPAUD in the market is the value of AUD equivalent to one pound.GBPAUD is quoted as 1 GBP per X AUD. For example, if the value of GBPAUD is 1.8505, then these many Australian dollars are to be given to receive one pound.

GBP/AUD Specification

Spread

The prices for buying and selling a currency pair are different. To buy, one must refer to the ask price; and to sell, one must refer to the bid price. The difference between the bid price and the ask price is called the spread. The spread varies from the type of account model.

ECN: 0.7 | STP: 1.7

Fees

Apart from the spread, brokers levy fee on every round-trip trade. This fee is fixed in for every trade. However, it varies from broker to broker. Usually, there is no fee on STP accounts. On ECN accounts, there is a fee of a few pips.

Slippage

Slippage is the difference between the price when the trader entered the market order and the price he was actually given. Most of the time, there is a variation in the prices. This difference could be in favor of or against the trader. There are two factors responsible for it. One, the volatility of the market, and two, broker’s execution speed.

Trading Range in GBP/AUD

The trading range of currency pairs simply depicts the volatility of the pair in a different timeframe. In other terms, the trading range represents the minimum, average, and maximum pip movement in different timeframes. These values are helpful in assessing one’s risk, as well as making trades much cost-effective.

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 large time 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.

GBP/AUD Cost as a Percent of the Trading Range

Cost as a percent of the trading range is a very supportive tool in analyzing the cost of a trade, in different timeframes, and at different volatilities. This is done by finding the ratio of the total cost and volatility values and then expressing it as a percentage. The comprehension of the below tables shall be discussed in the subsequent topic.

ECN Model Account 

Spread = 0.7 | Slippage = 2 |Trading fee = 1

Total cost = Slippage + Spread + Trading Fee = 2 + 0.7 + 1 = 3.7

STP Model Account

Spread = 1.7 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.6 + 0 = 3.7

The Ideal way to trade the GBP/AUD

Note that the higher the magnitude of the percentage, the higher is the cost of the trade. From the table shown above, we can observe that the values are highest on the min column and lowest on the max column. This means that the costs are higher when the volatility of the market is low and vice versa. Reading it horizontally, the cost gets lower as the timeframe widens. Hence, the ideal to trade when the pip movement of the currency pair is near the average values. This will ensure decent volatility by keeping the costs minimal.

Another effective way to reduce the total cost is by trading using limit orders, not market orders. Doing so, the slippage on the trade will shrink to zero. The following table shows the costs of the GBP/USD with no sleppage, for the same market conditions as on the preceding tables.

Total cost = Spread + trading fee + slippage = 0.7 +1 + 0 = 1.7

Hence, from the above table, it can be inferred that the cost percentages have a significant value.

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Forex Assets

What Should You Know About AUD/USD Forex Pair

Firstly, the abbreviation of the AUDUSD currency pair is the Australian dollar and the US dollar. AUDUSD is a major currency pair. It is considered a major pair because it is AUD is paired with the US dollar, and also, this is one of the pairs where a huge volume of trading takes place. In AUDUSD, AUD is the base currency, and USD is the quote currency.

Firstly, the abbreviation of the AUDUSD currency pair is the Australian dollar and the US dollar. AUDUSD is a major currency pair. It is considered a major pair because it is AUD is paired with the US dollar, and also, this is one of the pairs where a huge volume of trading takes place. In AUDUSD, AUD is the base currency, and USD is the quote currency.

Firstly, the abbreviation of the AUDUSD currency pair is the Australian dollar and the US dollar. AUDUSD is a major currency pair. It is considered a major pair because it is AUD is paired with the US dollar, and also, this is one of the pairs where a huge volume of trading takes place. In AUDUSD, AUD is the base currency, and USD is the quote currency.

Understanding AUD/USD

The exchange value of AUDUSD represents the units of USD equivalent to one unit of AUD. In technical terms, it is the value of AUD against USD. For example, if the current market price of AUDUSD is 0.6960, then it means that it takes 0.6960 US dollars to buy 1 Australian dollar. Trading the AUDUSD currency pair is basically trading the Aussie (Australian dollar).

AUD/USD Specification

Spread

Spread is the difference between the bid price and the ask price. The spread usually varies based on account type. The spread on an ECN account and an STP account is as follows:

ECN: 0.7 | STP: 1.4

Fee

There is charged by brokers for every trade a trader takes. However, this depends on the type of forex account. Typically there is a fee in ECN accounts and zero-fee in STP accounts. Also, there is no exact value of fee on a single trade, as it differs from broker to broker.

Slippage

Slippage is the difference between the trader’s requested price and the real executed price. Slippage happens when the volatility of the market is quite high. It happens for market orders. Slippage can be in favor of the trader or against him. If entering and closing of the trade is done by market execution, then slippage happens twice. The slippage is usually between 0.5 and 3 pips. However, it depends on the broker’s execution speed as well.

Trading Range in AUD/USD

There are several timeframes to trade this currency pair. A day trader may pick the 1H, 4H, or the 1D timeframe, while a positional trader may opt for the weekly or the monthly. Apart from analyzing these timeframes, it is also necessary to know the volatility range in each of the timeframes. Knowing the pip movement range in each timeframe, one can assess their risk involved in each trade.

Below is the table, which represents the minimum, average, and maximum pip movement in each timeframe.

Note: The below values are an approximation from the Average True Range (ATR) indicator.

AUD/USD PIP RANGES 

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 assess a large time 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.
GBP/USD Cost as a Percent of the Trading Range

This is where the above values are put into play. By considering the volatility range in each timeframe, the cost (fee) for a single trade is measured in terms of a percentage for every mentioned timeframe. The basic idea to this is that the higher the percentage value, the higher is the cost of the trade.

The cost is calculated by considering three variables, namely, slippage, spread, and trading fee. And the sum of these values gives the total cost of each trade.

As mentioned earlier, the cost varies from the type of trading account. So, there will be variation in cost percentages as well.

ECN Model Account

Spread = 0.7 | Slippage = 2 | Trading fee = 1

Total fee = Spread + Slippage + Trading fee = 0.7 + 2 + 1

Total cost = 3.7 (pips)

STP Model Account

Spread = 1.4 | Slippage = 2 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 2 + 1.4 + 0

Total cost = 3.4

The Ideal Timeframe to Trade GBP/USD

The first observation that can be made from the above percentage values is that the minimum column has the highest percentages compared to other columns. This means that the cost is pretty high when the volatility of the market is too low irrespective of the timeframe. Contrarily, the costs are significantly less when the volatility of the market is high (max column). However, it is quite risky to trade when the market volatility is high though the fee is less. So, it is ideal during those times of the day when the market volatility is above average.

Note that volatility is not only one which decides on which is the best timeframe and time of the day to trade. The slippage value equally plays an important role, as well. For instance, if the slippage is made nil and the percentages are calculated, it is seen that the ranges drop down considerably. Hence, it is recommended to enter and exit trades using limit orders and not market orders.

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Forex Market Analysis

What Happened Last Week and What Lies Ahead

Last Week Wrap-up

Economic Data Today:

UK

Last week started with a slightly upbeat UK Construction PMI report that slightly beat expectations and the Pound rallied on the news. Next day,  the Market Services PMI figure at 54.0, also beating the expectations continue pushing the Pound higher.

Euro-Zone

Meanwhile, April’s Euro-zone Producer Price Index (YoY) was 2.0%, below the expected 2.4%, while the Composite PMI came at 54.0, as expected.

Then, April’s Euro-zone Retail Sales (MoM) came slightly below expectations at 0.1%  but the year over Year figure kept steady at 1.7%.

What started moving the Euro up was an ECB spokesman’s announcement on June 5th’s “live” meeting discussion regarding QE, at their next June 14th meeting, sparkling the speculation about the end of massive bond purchases.

 

Dax and FTSE

The DAX and the FTSE 100 were having jumpy days, with gaps down that filled during the session. Investors were nervous seeing the FTSE at its near all-time highs, while German DAX suffering was caused by not so good numbers in production and factory orders in the negative territory growth (-2.5% MoM and -0.1% YoY).

 

Australia

June 6th woke up with the positive news about the Australian Economic Growth (YoY) soaring above analysts expectations for the first quarter, reaching 3.1%  above a forecasted 2.8%, and the Aussie jumped up on the news.

 

What lies ahead

 

G7 Meeting

The G7 meeting is the real news queen of this weekend, especially exciting after the verbosity depicted by US President Donald Trump and his tweet-driven messages complaining about his close allies for treating the US unfairly.

Trump, true to his style, refused to endorse a joint G7 declaration calling for a reduction of tariffs.

 

The best description of the meeting came from a fake Angela Merkel tweet:

https://twitter.com/Queen_Europe/status/1005483518271610882

What seems a sure thing is that the underlying trade war is alive and well, with 25% tariff on steel and 10% on aluminium from the EU, Canada and Mexico, after the expiration of the exemptions, and the speedy retaliation by the affected nations. This also raised the question about how alive the NAFTA space remains.

It is likely that this war on tariffs will remain active at least until mid-term elections in November.

 

Trump-Kim Summit

Expect the unexpected here. When two characters like these meet, the unexpected is common.  Trump says he’ll know if Kim is serious in less than 60 seconds and calls the summit a “one time shot” for the North Korean leader.

There is almost nothing at a stake here, as Kim Jon Un has already dismantled the North Korean Nuclear Testing Installations.

 

FED Rate Decision

It is widely expected that FED’s rate decision next Wednesday at 18:00 GMT+2 time will be a 0.25% increase that will put the FED funds rate between 1.75%-2%.

ECB Policy Meeting

The main theme, after the comments of chief economist Peter Praet, is whether the ECB plans to end the bond purchasing program will be announced.

 

Bank of Japan

Friday, June 15th will see the BoJ decision on rates, which the market expects to be kept on hold.  But everybody is expecting the words of BoJ governor Kuroda regarding inflation and quantitative easing.

 

Technical Analysis

 

S&P 500

The S&P 500 is behaving very bullishly. Friday’s close was near the high of the daily range and is heading towards its next resistance area marked in cyan. We have yet to see the effect of the news coming from the G7 meeting and Trump-Kim summit, but the overall picture is bullish.



 

 DAX

The DAX is not that optimist, although it is close to its 2018 peak. The price looked at on a weekly chart is moving at the top of what seems to be a descending channel, and Ehlers Adaptive Cyber Cycle shows that a potential bearish leg has started.



 

Last Friday, the daily chart showed an opening gap that was filled during the day helped by the strength in Wall Street, but the index broke the pennant formation down and the CyberCycle oscillator also signs a possible bearish continuation.



 

FTSE 100

The FTSE 100 has drawn three consecutive weekly bearish candles, but each one of them with less downward impulse than its preceding one. The price is within a triangular formation so it shows a corrective movement. The question now is whether it breaks up or down.  Ehlers Adaptive Cyber Cycle points to a bearish continuation, but it has to be confirmed by price action.



 

The daily chart doesn’t clarify the picture much. Last Friday’s candle is bearish but with a large lower shadow, which points to the bears weren’t in control, but the price moved below the blue trend line that was supporting the minor upward leg. We have to see weakness in the other side of the Atlantic for a confirmation of this bearish continuation.


 

Dollar Index

The Weekly chart of the DXI shows an Evening Star formation and the Cyber Cycle indicator has signs of a cycle change. Therefore my most probable scenario is for a bearish continuation on the Dollar. This means we will see strength in the Euro, the GBP and the JPY, and possibly in the Aussie and Kiwi as well.



 

 

The daily chart shows that the downward move is a bit oversold and it needs some days of retracement or sideways movement before a continuation. Last Friday’s price has drawn a bullish hammer and Thursday’s movement bounced off the 93.24 support.


 

Interesting Educational Charts from last week’s action

AUDUSD  and NZDUSD 60 min Charts

This is a classic Elliott Wave 5 waves upward movement within a large Pennant formation. The break of the pattern and the 5th wave is the start of the corrective downward movement. (click ‘play’ to watch the development)



 

The same pattern is seen in the NZDUSD:



 

AUDJPY

AUDJPY had a five-wave upward movement that went to its previous top, hitting resistance. A short setup was triggered then the price pierced the bullish trendline downwards.



 

BTCUSD

For those crypto junkies may I present a classical bearish pennant on the BTCUSD that showed a kind of exhaustion to the upside. The breaking of this triangular formation was a very good short setup.



 

 

 

Categories
Forex Market Analysis

GBPUSD & EURUSD Reversal Based On Gann’s 49-Day Cycle

 

Most people associate Gann’s work with angles and the Square of 9. What most people are not aware of is his day counts and specific time cycles, which are arguably more important than his market geometry. One of the most important cycles he discussed was the 45-day cycle and the 49-day cycle. The number 7 is very important in Gann analysis, and 49 days is 7 days x 7 = 7 weeks. He called this the ‘Death Zone’ – a cycle which ends trends and blow-off moves. Based solely on this cycle alone, we can predict a strong corrective move.

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Forex Market Analysis

AUDUSD – May 8th, 2018

AUDUSD

There should be a bounce form the 0.744 level, it’s in a harmonic pivot and oversold condition coming off of the extremely important 0.75 mid harmonic. We should expect a retest of the 0.75 zone before continuing lower. From the latest low of 0.74338 to the most recent swing high of 0.7506, the 50% Fibonacci retracement level is sitting right on the last out arc and the 0.75 major harmonic price level. We should expect some fast price reversals here that may exceed the 0.75 zone, but ultimately we should expect lower prices moving forward into next week.

©Forex.Academy
Categories
Forex Market Analysis

Mixed Performance in the Major Pairs

Hot Topics:

NZD – Kiwi falls 0.46% waiting for PPI data release.
AUD – Making a triangulation expecting RBA Minutes.
JPY – Nikkei rises and pull the USDJPY.

Main currencies

Hot Topics:

NZD – Kiwi falls 0.46% waiting for PPI data release.
AUD – Making a triangulation expecting RBA Minutes.
JPY – Nikkei rises and pull the USDJPY.

Main currencies

Hot Topics:

  • NZD – Kiwi falls 0.46% waiting for PPI data release.
  • AUD – Making a triangulation expecting RBA Minutes.
  • JPY – Nikkei rises and pull the USDJPY.

Main currencies daily performance.

NZD – Kiwi falls 0.46% waiting for PPI data release.

In the Oceanic Session, the Statistic New Zealand (Stats NZ) will release the Producer Price Index (QoQ). The analyst consensus expects a fall in the PPI input from 1% to 0.3%, and in PPI output from 1% to 0.4%. This PPI forecast is aligned with the last CPI (QoQ) that reached 1.6% in Q4, below the 1.9% registered in Q3.

In the pair NZDUSD, we are observing the minimum recorded in the last session, which coincides with the weekly pivot point (0.73538). If the Kiwi falls below the weekly pivot, we will look for short positions up to the first weekly support level (S1 = 0.72707), which is a potential profit of approximately 80 pips.

AUD – Making a triangulation while expecting RBA Minutes.

Today the minutes of the last meeting of the Board of the Reserve Bank were announced, they decided to keep the interest rate unchanged at 1.50%. The Aussie in the hourly chart is developing a triangulation structure; in case of falling below 0.78912, it could get to drop to 0.77943. On the contrary, if it breaks higher, the objective would be 0.80097.

 

JPY – Nikkei rises and pull the USDJPY.

In the first session of the week, the Nikkei 225 index rose by 0.48%, and by inverse correlation pulled the USDJPY pair. The decorrelation between both instruments was commented on in our Daily Abstract on February 16th, where we mentioned that “this divergence in the correlation between the Nikkei Index and the USDJPY should be eliminated again” to converge in favour of the major trend of the indexes.

In the short-term, we will maintain long positions if the USDJPY climbs above 106.906 with the objective at 108.26 and a maximum extension at 110.

© Forex.Academy

Categories
Forex Market Analysis

The Germany ZEW Economic Sentiment could mark optimism for the Euro and other stories

Hot Topics:

  • GBP – The Unemployment rate in historic lows.
  • AUD – Waiting for the minutes of the last meeting of the Reserve Bank Board.
  • EUR – The Germany ZEW Economic Sentiment could mark optimism for the Euro. 

GBP – The Unemployment rate in historic lows.

On Wednesday 21th, the unemployment rate will be released. The analyst survey consensus does not foresee changes in respect to the last month’s data of 4.3 percent, the lowest in four decades. On the same day, the Bank of England (BoE) will release its Annual Inflation Report to the Treasury Select Committee. The BoE’s Governor, Mark Carney will speak in the British Parliament on the Annual Inflation Report to the Select Committee of the Treasury.

The pound reached a new low below 1.3978 and as long as it does not exceed 1.434, there is a high probability that it will fall back to new lows with a maximum target of 1.3448, which would coincide with the long-term bullish guidance.

GBP-USD 4-hour chart (click on the image to enlarge)

 

AUD – Waiting for the minutes of the last meeting of the Reserve Bank Board.

On Tuesday 20th, in the overnight session, the Reserve Bank of Australia (RBA) will publish the minutes of the last monetary policy meeting, where the members of the Reserve Bank Board decided to keep the interest rate unchanged at 1.50%. Although members observe the growth of employment, and the unemployment rate has remained at a minimum, they conclude that inflation is still below the target goal of the RBA.

The AUDUSD pair could be developing a corrective structure in the form of A-B-C, which could lead to 0.765, once it reaches this area, it could again be a new connector of a higher degree leading to new highs.

AUD-USD 4-hour chart ( click on the image to enlarge)

 

EUR – The German ZEW Economic Sentiment could mark optimism for the Euro.

In January, the German Economic Sentiment Index ZEW reached its highest point in 8 months, marking 20.4 points, increasing the expectation in the economic environment for the first half of the year. For this month, the analysts’ consensus expects it to fall to 16 points. However, considering the last GDP (YoY) in Germany reached 2.3%, and in the Eurozone which reached 2.70% (YoY), we expect the ZEW index to continue at the same level as that registered in January.

The single currency could mark a new maximum that could reach 1.2646, thus completing a sequence of five movements. After this, we could expect a corrective move for the Euro. However, we should expect all pairs against the Euro to be “aligned” before starting a more profound corrective process for the euro.

EUR-USD 4-hour chart ( click on the image to enlarge)

Categories
Forex Market Analysis

WEEKLY ABSTRACT – 12th to 16th February 2018

Hot Topics:

  • AUD – Employment data in the RBA spotlight.
  • USOIL – Expecting the IEA Monthly Report.
  • JPY – Observing the consolidation of economic growth.
  • US30 – Dow Jones bounces in the EMA (200).

 

This week the worst performance was for Crude Oil <USOil> which fell by 8.84%, just as we were predicting a few weeks ago. It would lose the support of $60 / barrel at the end of the session reaching our target profit level. We should also note that it was one of the most volatile weeks for indexes where the Dow Jones Index <US30> lost about 5% (equivalent to more than 1,200 pts.). In the currency market, we highlight the reversal of the Dollar Index <DOLLAR> that climbed by 1.39% in the week.

 

AUD – Employment data in the RBA spotlight.

Last week ended with reversals of 1.07% in the Aussie, in a week marked by volatility and the decision of investors to move away from the riskiest currencies. The consumption data and the rate decision by the RBA were not encouraging enough to boost the Australian dollar.

In this week, the labour market data will be released where it is expected that the unemployment rate remains unchanged; however, the analysts’ consensus expects a decrease in the level of employment change from 34.7K to 15.2K. The RBA keeps an eye on the level of employment to estimate future levels of inflation and thus assess future monetary policy decisions, which at the last Monetary Policy Meeting, they decided to keep unchanged at 1.5%.

In the technical aspect, we maintain a neutral position considering the advance of the bearish movement. We expect a limited fall to the area 0.774 to 0.763, from where we could begin to value long positions, a bearish acceleration as considerable as the previous one we see as a low probability. In the RSI we expect a second bullish divergence to be built as a sign of exhaustion.

AUD-USD 4-hour Chart ( Click image to enlarge)

USOIL – Expecting the IEA Monthly Report.

Crude Oil <USOil> last week fell 8.84%, helped by the volatility of the markets. This week the International Energy Agency (IEA) will publish its monthly report, which we hope will contribute to a new boost to the long-term trend.

Operationally, we closed our short positions that had a profit target of $59.75. We are currently evaluating the continuation of limited falls near to $57, a level where we expect to start to develop a bounce structure, in the long term we expect it to exceed $70. Before this, we must confirm that a corrective structure has been completed in the form of A-B-C.

OIL WTI daily chart ( Click image to enlarge)

JPY – Observing the consolidation of economic growth.

During the past week, along with the high volatility of the markets due to the correction of the stock markets, and the appreciation of the bond markets, the Japanese Yen has reached the base of the lateral structure that we have been monitoring since the issuance of our forecast for 2018 (issued in December 2017), reaching the minimum of 108,042.

For this week the publication of the growth level of the Japanese economy is expected. The analysts’ consensus estimates that it reaches 0.9% for the fourth quarter compared to 2.5% for the third quarter of 2017.

In the chart, we can see that the pair USD-JPY could make a final bullish move that reaches the area of 116.66, with a maximum extension of 119.45, from where we expect it to complete a higher grade connector, and then start a fall that could lead to a loss at the psychological level of 100.

USD-JPY  Daily Chart ( Click image to enlarge)

US30 – Dow Jones bounces in the EMA(200).

The last week has been the most volatile since 2016 for the stock indexes. The 30-year Note bonds have climbed to 3.14 pts and the Dow Jones index <US30> lost over 1,200 pts (over 5%). In structural terms, we expect a further fall in the bond markets, and by inverse correlation, as in the case of the USD-JPY, we expect a new bullish rally in the stock indices before a correction of greater magnitude.

TYX- 30-year Note Bond daily Chart ( Click image to enlarge)

On a technical note, it is worth noting the movement that developed the 30-year note <TYX> and the sequence that USDJPY is forming, are very similar.

Dow-30 daily Chart ( Click image to enlarge)

Categories
Forex Market Analysis

DAILY ABSTRACT – 7th February 2018.

Hot Topics:

  • AUD – RBA maintains the monetary policy, unchanged at 1.5%.
  • NZD – Higher before employment data release.
  • DOW – Stocks bounces after the “Black Monday”.

Main currencies daily performance.

 

AUD – RBA maintains the monetary policy unchanged at 1.5%.

In the overnight session, in the last monetary policy meeting, the Reserve Bank of Australia (RBA) decided to maintain the interest rate unchanged at 1.5% as expected by the analyst’s consensus. In the decision statement, Governor Philip Lowe said: “The low level of interest rate is continuing to support the Australian economy”. Concerning inflation, Governor Lowe added: “Inflation is low, with both CPI and underlying inflation running a little below 2%. Inflation is likely to remain low for some time”.

Although we are out of this pair, our central vision for the Aussie is to expect continuity in the bearish positions, looking for an area for structural long positions in the medium term.

AUD-USD 30-min. Chart ( Click image to enlarge)

NZD – Higher before employment data release.

Kiwi advances 0.51% in the middle of the session expecting the employment data release. The consensus foresees that unemployment will be nearer to 4.7%, a little higher than the previous rate which was 4.6%. The employment change (QoQ) expected is 0.4%, lower than the last quarter, which reached 2.2%. Despite the analyst’s forecast, the unemployment rate is at its lowest level since 2009.

In technical terms, we look for continuity in the weakness in the Kiwi, which could bring the price to the weekly support area (Weekly S1), which also has a confluence of levels with the daily support S1 (0.7244) as the target area.

NZD-USD hourly Chart ( Click image to enlarge)

DOW – Stocks bounces after “Black Monday”.

U.S. stocks start the session with a bearish gap after the high volatility registered this Monday. Exxon XOM (-7.66%), Boeing BA (-8.09%) and Cisco CSCO (-8.72%) were the ones that recorded the highest losses at the opening. As the session progressed, the technical rebound of principal stocks began. Cisco CSCO (6.60%), Microsoft MSFT (5.76%), Goldman Sachs (5.68%), Visa V (5.57%), Boeing BA (5.51%) and Chevron CVX gaining (5.48%), standing out at the end of the day. In the FAANG group, Netflix NFLX was the best performer which gained 8.82% and Amazon AMZN with 6.13%.

The Dow Jones index, on the other hand, has rebounded from the EMA of 200 periods, closing the session at the Fibonacci level F(50%) of all the registered falls; the next resistance will be level F(61.8). We maintain a neutral vision until we see how the current structure develops.

Dow-30 daily Chart ( Click image to enlarge)

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Forex Market Analysis

WEEKLY FORECAST 5th – 9th February 2018.

Weekly Forecast Hot Topics:

  • NZD – Waiting for the optimism of the market to be replicated with the decision of the RBNZ.
  • AUD – No big expectations in the next monetary policy decision.
  • CAD – Continuity in the strengthening of the labour market.

Weekly performance

This week, the best performer was the Euro <EUR> (0.22%), pushed by the positive data on inflation and industrial activity. The worst performer was Aussie <AUD>,  its losses reach¡ng 2.22% due to weak inflation Australian data and the stronger US employment data. Those led to boost the Dollar <DOLLAR> (0.17%) and reverse the losses that were dragging in the week.

 

NZD – Waiting for the optimism of the market to be replicated with the decision of the RBNZ.

Last week the New Zealand Trade Balance (MoM) reported a historic surplus of $640M, the highest value since March 2015. The main factor contributing to this increase has come from dairy products exported to their principal trading partner, China.

This week, the leading data for the Kiwi will come from the employment indicators (QoQ) and the RBNZ interest rate decision. The unemployment figure is expected to increase slightly from 4.6% in October 2017 to 4.7%. As for the interest rate decision, no big surprises are expected, analysts expect the RBNZ to keep the interest rate at 1.75%.

Technically, we expect more downside moves for the Kiwi. In EURNZD we observe a bullish continuation that could reach 1.7174 before it starts a bearish sequence.

EUR-NZD 4-hour chart ( click on the image to enlarge)

AUD – No big expectations in the next monetary policy decision.

During the last trading period, inflation data (YoY) was published, which was expected to be equal to or higher than 2%. However, it did just reach 1.9%, baffling the market and removing the possibility of a new increase in the interest rate by the RBA.

For this week, the most expected event for the Aussie will be the monetary policy decision, in which no changes are expected in the current rate that is set at 1.5%.

On the technical level, we still expect weakness in the Aussie group before starting a new strengthening of the oceanic currency. In the EURAUD, we expect the price to reach the 1.6026 level, where it could complete a higher grade connector and start a new bearish cycle.

EUR-AUD daily chart ( click on the image to enlarge)

 

CAD – Continuity in the strengthening of the labour market.

This week will end with the publication of the Canadian employment data. Continuity in the strengthening of the labour market is expected, in the unemployment rate the estimated consensus is a slight increase that reaches 5.8%; however, current levels of unemployment are the lowest of four decades.

Technically, we continue to expect new lows for the Loonie, which could even lose the psychological support of 1.20, a large bearish cycle which started in January 2016.

USD-CAD daily chart ( click on the image to enlarge)

 

Categories
Forex Market Analysis

WEEKLY UPDATE from January 22 to 26, 2018

 

Weekly Update’s Hot Topics:

JPY – BOJ KEEPS THE MONETARY POLICY UNCHANGED, AND INFLATION CLOSE TO TARGET.
DOLLAR – DESPITE THE DEAL TO STOP THE SHUTDOWN THE GREENBACK HAS

 

Weekly Update’s Hot Topics:

JPY – BOJ KEEPS THE MONETARY POLICY UNCHANGED, AND INFLATION CLOSE TO TARGET.
DOLLAR – DESPITE THE DEAL TO STOP THE SHUTDOWN THE GREENBACK HAS

 

Weekly Update’s Hot Topics:

  • JPY – BOJ KEEPS THE MONETARY POLICY UNCHANGED, AND INFLATION CLOSE TO TARGET.
  • DOLLAR – DESPITE THE DEAL TO STOP THE SHUTDOWN THE GREENBACK HAS CONTINUED FALLING.
  • EUR – EURO EXCEEDS 1.25 HELPED BY DECLARATIONS OF DRAGHI.
  • AUD – EXPECTED VOLATILITY DUE TO INFLATION DATA RELEASE.

 

This week, the best performer was Crude Oil <USOil> with a rise of 4.48%. WTI has reached $66 (US)/Barrel, the highest level since December 2014. Despite the strikes deal between the Republican and Democrat US Senators to stop the Government shutdown, the Dollar <DOLLAR> cannot take a breath and continued falling 1.56% this week.

 

JPY – BOJ KEEPS THE MONETARY POLICY UNCHANGED, AND INFLATION CLOSE TO TARGET.

The Bank of Japan (BoJ) decided to keep the monetary policy and the economic stimulus unchanged. Kuroda (The Bank of Japan governor) has signalled that the BoJ might be nearing the start of policy normalisation: but not so fast. The BoJ’s members voted 8-1 to keep its interest rates and asset purchases at current levels. Also, Kuroda said inflation expectations had stopped falling. The BoJ’s perspective is that the economy will grow 1.4% in the fiscal year starting in April, with an inflation of 1.4% over the same period.

The inflation data (YoY), excluding the food component, released this week has reached 0.9%. Kuroda, speaking at the World Economic Forum in Davos has said that “there are some indicators that wages and some prices have started to rise”. Also added that “there are many factors that make reaching the 2% target difficult and time-consuming, but we are finally close”.

 

Technically, the USD-JPY is completing a sideways consolidation macro-structure. Our vision is, if we expect the price to fall to 108.16 to 107.18, the yen could find buyers again.

USD-JPY  Daily Chart ( click on the image to enlarge)

DOLLAR – DESPITE THE DEAL TO STOP THE SHUTDOWN THE GREENBACK HAS CONTINUED FALLING.

This week the Republicans Senators have struck a deal with the Democrats to temporally stop the US Government shutdown which lasted for three days, the first shutdown since 2013. In this agreement, Democrats have accepted to vote for the bill while they will continue negotiating immigration legislation for “dreamers” (children that migrate illegally to the US). This agreement has as a deadline February 8.

The week has ended with the US GDP (QoQ) data release. The US economic growth is at 2.6%, that is lower than the expected 3% in the fourth quarter. Although the fourth-quarter GDP has been slowed, in 2017 the economic growth has gained momentum from the 0.9% reported in March 2017.

 

Technically, the US Dollar Index has broken down in the past week to the 88.9 level. Our vision for the next week is a limited downward turn to the 87.85 to 87.1 area, and then for it to make a potential reversal pattern to reach 91.03 level.

US Dollar Index Daily Chart ( click on the image to enlarge)

 

EUR – EURO EXCEEDS 1.25 HELPED BY DECLARATIONS OF DRAGHI.

This Thursday the common currency has raised to over 1.25, the highest level since December 2014. In the last Monetary Policy Decision ECB Conference, President Mario Draghi has maintained the accommodative policy and the interest rates will remain well beyond the end of the QE.

Regarding forex risk, Draghi signalled that “now, we have downside risks relating primarily to geopolitical and especially foreign exchange markets. But by and large, the risks to growth are balanced.”

On the technical side, once the Euro reached the weekly Fibonacci level F(38.2), it has started to make a corrective move leading the pair to the 1.24235 level. Our central vision is that the Euro could start a new bearish cycle, where our first target is 1.16845.

 

EUR-USD  Daily Chart ( click on the image to enlarge)

AUD – EXPECTED VOLATILITY DUE TO INFLATION DATA RELEASE.

In the last week of the month in the Oceanic Session, the volatility expected will come from the Inflation (QoQ) data release. The analysts expect that the CPI (QoQ) will be 0.8% and (YoY) 2.0%. Under this context, the RBA (Reserve bank of Australia) could hike the Interest Rate in the next Monetary Policy Meeting scheduled on February 6.

As has been forecasted previously, our primary vision remains bullish for the Aussie, where the long-term target is 0.8433 level from where the price could find sellers to begin to develop a major degree connector.

AUD-USD  Daily Chart ( click on the image to enlarge)

Categories
Forex Market Analysis

Outlook for 10.24.2017

EUR/USD
The US Dollar is hesitant as President D. Trump told reporters he is very close to a decision about who should chair the Federal Reserve, which includes current Fed

EUR/USD
The US Dollar is hesitant as President D. Trump told reporters he is very close to a decision about who should chair the Federal Reserve, which includes current Fed

EUR/USD

The US Dollar is hesitant as President D. Trump told reporters he is very close to a decision about who should chair the Federal Reserve, which includes current Fed Chair, Janet Yellen. It also weighs on the US currency the rumors about Trump’s plan to reform taxes.

On the Euro front, European Central Bank is expected to announce on Thursday a possible timetable for a reduction of its asset purchases, as economic data suggest the Eurozone might witness a higher than expected economic expansion in 2017. Reducing asset purchases might, likely, be accompanied with a continuation of low interest rated, as Eurozone inflation data seems to be stable

Sideways channel movement on the EUR/USD pair

The Euro 1-hour price has been trending down since Oct, 19 when it draws an almost perfect triple top (1). Yesterday it touched Oct, 18th lows and bounced from there, and piercing up the downward trendline

Overall, the EUR/USD pair seems to trade in a sideways channel, but its current price may allow for a profitable trade, with a target touching the upper trend line (fig.1).

GBP/USD

JP Morgan analysts are convinced that shorting the GBP is still the way to go

The GBP is, still, affected by the Brexit process, but no major news about it is expected today. Slower consumer expending and softening of economic sentiment press policymakers to keep interest rates unchanged, which weighs on the British currency.

Daniel Hui, a foreign exchange strategist at J.P. Morgan said that their conviction to short the GBP is still high because they felt UK rate hikes were “overpriced”, given the “weak starting point for UK growth” and the reality of a Brexit shock that keeps dominating the medium-term outlook.

There is evidence that today’s lows might be the start of a new up-leg that may carry GBP/USD prices up to, at least, the highs of this lateral channel

GBP/USD daily price is experiencing a sideways movement, after retracing more 70% of its upward movement from its lows in August 2017

Possible scenarios:

  1. Today’s lows (1.31653) might be the start of a new up-leg that may carry GBP/USD prices up to, at least, the highs of this lateral channel (1.32272), provided that prices cross over the downward trend line.
  2. If the price does not continue up and reverse near the BB mean, then the downward leg is continuing to its next floor, at 1.31, and a good reward to risk trade is possible at about 1.3177.

USD/JPY

Japan was in focus yesterday, as prime minister, Shinzo Abe is back in power

Japan was in focus yesterday, as prime minister, Shinzo Abe is back in power, after his victory this weekend, that drove the yen downward yesterday. Today, we see a bounce that set prices to test the highs of yesterday’s session. Tuesday, the Japanese currency, instead of focusing on Japan’s manufacturing PMI, slightly lower in October, it seems to pay more attention to interest rate differentials.

Mid-term, the USD/JPY is trading on a lateral price channel whose low is at about 107.7 and it’s high is at 114.34. Currently, the price, trading at 113.71, is moving closer to the top of that channel.

A short-term bottom at (1) in sync with the MACD signal crossover, marks the start of a new uptrend. The red 10-period BB is sloping strongly up, so prices are heading for a test of the recent highs at (3), and, potentially break them up.

The best possible action here is to scalp on a short timeframe, such as 15 min charts or shorter, being aware that we are at the highs of a mid-term channel. Long and short-swing trades must wait for a clear signal or news event

USD/CHF

The Swiss National Bank (SNB) is keeping an expansive monetary policy that drives Swiss CHF down

The Swiss National Bank (SNB) considers the CHF to be over-valued, so it is keeping an expansive monetary policy that is driving the Swiss currency down. The SNB policy of negative interest rates contributes to the downward currency trend.

To sum up, the Swiss economy is slowing down, its growth rate (+0.3%) is losing track compared to the one registered in the Eurozone (+2.3%) in the second 2017 quarter.

USD/CHF is at overbought but still strongly moving up

The USD/CHF weekly is on a sideways channel with a lower limit at 0.942, and an upper limit at 1.0365. Its current price – 0.9896- is at about the middle of this channel. On a daily and weekly basis, the price is in overbought territory.

Today the USD/CHF is trading strongly up, and its hourly chart is currently at overbought territory as well, with its price touching the 3rth Bollinger band (+3STD) (1). On such a strong trend, the best thing to do is wait for a price pullback to create a short-term support near the mean of the Bollinger bands (2) and set a long trade there.

AUD/USD

Tomorrow, Australia’s quarterly inflation data will be released.

The Aussie is under pressure as the soft Chinese housing data was weaker than expected. China is a major partner for Australia, and China’s economic health shakes Australian currency for the good and the bad. The Housing Price Index grew in China by 6.3%, after an 8.3% increase in August. Next Wednesday, Australia will release its quarterly inflation figures.

AUD/USD is currently in a downtrend

The AUD/CAD pair, on a weekly chart, is moving on a downward leg, in a sideways channel that started in Jan 2015. The channel has a slight upward bias.

On the daily chart, the AUD/USD pair is down-trending after drawing a double top (July and September 2017). Actually, the price is below the -1 Bollinger Band showing that the downtrend is still in place

The most probable scenario for the AUD/USD pair is to go down to at least 0.766, or, even deeper, to touch the lower weekly trend line (0.7518). The MACD crossover to the downside confirms the bearish bias of this currency pair

USD/CAD

USD continues to show strength against the Canadian currency. Tomorrow’s interest rate decision by the Bank of Canada will bring a confirmation (or denial) to the strong uptrend od this currency pair. The odds of a new rate hike are getting lower, after weak economic data ahead of the BoC meeting.

Canada Wholesale sales rose by just 0.5% in line with forecasts, although, it seems the market expected a bit more increment.

USD/CAD moving up with strength
The USD/CAD pair, on a weekly chart, is in the middle of a retracing trend, starting at the beginning of September, which has retraced 35% of the length of the downward move. Its daily chart shows the currency pair approaching the ceiling of a potential wide and sideways price channel. The other notable fact being, a price breakout through 1.25953, starting a new impulsive leg up.

NZD/USD

NZ Government to reform RBNZ process to set rates.

The Kiwi dollar is under pressure since the government announced its plans to reform the Reserve Bank of New Zealand. NZ Labor-led coalition said it will modernize the bank’s process for rate-setting and adapt it into a format that was more “growth-friendly”. Giving hints about expansionist monetary policy. Analysts say the RBNZ reform is already well priced by the market, and have downplayed its impact on interest rate expectations.

NZD/USD is currently at the bottom of a down-trending channel

On a daily chart, the NZD/USD pair is trending down on a channel that started on July, 27. Actually, the price is oversold, well below the -2 Bollinger Band. The price is near a mid-term support, so it’s in the process of bottoming out, as is clearly seen in its hourly chart.

A possible scenario for the next few hours is a retracement from here to test resistance points at about 0.695. If it stalls without breaking 0.6908, and MACD turns bearish the retracement is failing, and the downtrend might resume testing the lows made in May 2017.