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Forex Fundamental Analysis

EUR/CAD Global Macro Analysis Part 1 & 2

Introduction

The global macro analysis of the EUR/CAD pair will analyze endogenous factors that drive the domestic GDP in the EU and Canada. We’ll also analyze exogenous factors that affect the dynamics of the EU and Canada economies, hence affecting the EUR/CAD exchange rate.

Ranking Scale

We’ll rank both endogenous and exogenous factors on a sliding scale from -10 to +10. When the endogenous factors are negative, it means they caused the domestic currency to depreciate. A positive ranking means they resulted in an appreciation of the currency during the period under review. The endogenous scores are based on correlation with the domestic GDP growth.

Similarly, when the exogenous factors get a negative score, they resulted in a drop in the exchange rate. A positive exogenous score means it increased the exchange rate of the EUR/CAD pair. The exogenous scores are based on a correlation with the price of the EUR/CAD pair.

EUR Endogenous Analysis – Summary

The endogenous analysis of the EUR has presented a score of -3. Based on the indicators that we have analyzed, we can conclude that the Euro has depreciated marginally this year.

CAD Endogenous Analysis – Summary

This economic indicator shows the monthly change in the number of Canadians who are employed. It covers both full-time and part-time employment. Normally, employment changes correspond to an increased business activity, which corresponds to changes in the GDP.

In November 2020, employment in Canada increased by 62,000, down from the 83,600 increase registered in October. The November employment change was the lowest since May 2020, when economic recovery from the effects of the coronavirus began. Up to November 2020, the Canadian economy has shed about half a million jobs. We assign a score of -6.

  • Canada GDP Deflator

The GDP inflator is a comprehensive measure of the change in the inflation rate in Canada. It is comprehensive since it reflects the changes in the prices of all goods and services produced within the economy. This contrasts with other measures of inflation like the CPI, which only measures changes in the price of a select basket of goods and services.

In Q3 of 2020, the GD deflator in Canada rose to 111.6 from 108.8 in Q2. Q3 reading is the highest ever in the history of Canada. This shows that the Canadian economy is bouncing back from the economic downturn brought about by the pandemic. We assign a score of 2.

  • Canada Industrial Production

This indicator measures the total output from businesses operating in the industrial sector. Canadian industrial production comprises mining, manufacturing, and utilities. It is the backbone of the Canadian economy, with crude oil production alone accounting for almost 10% of the GDP.

In September 2020, the YoY Canadian industrial production dropped by 7.9%, while the MoM increased by 1.41%, up from the 0.13% drop in August. Up to September, the overall industrial production is down 5.54%. We assign a score of -5.

  • Canada Manufacturing PMI

This indicator measures the Canadian manufacturing sector’s performance from the perspective of firms’ purchasing managers in the sector. The PMI aggregates the following indexes; inventories, employment, new orders, output, and suppliers’ deliveries. The sector is expanding if the index is above 50, while a reading below 50 shows contraction.

In November 2020, the Canada Manufacturing PMI rose to 55.8 from 55.5 in October. This marked the fifth consecutive expansion in the manufacturing sector from July 2020. Thus, we assign a score of 4.

  • Canada Retail Sales

The Canada retail sales data measures the changes in the value of final goods and services purchased by households over a particular period. It is a critical leading indicator of the overall economic growth since households’ consumption is considered the primary driver of GDP growth.

In September 2020, the MoM retail sales in Canada increased by 1.1%  compared to a 0.5% increase in August. YoY retail sales rose by 4.6% compared to 3.7% in August 2020. Up to September 2020, the retail sales figure has risen by an average of 1.38%. We assign a score of 3.

  • Canada Consumer Confidence

Canada consumer confidence is calculated from an aggregate of 11 questions from the survey of households. This survey estimated the current situation to that expected by households in about six months. The questions touch on the areas of the economy, personal finances, job security, household purchases, and savings vs. expenditure goals. Their confidence is measured on a scale from 0 to 100.

In November 2020, consumer confidence in Canada rose to 44.5 from 42.08 in October. It is, however, still lower than during the pre-pandemic period. We assign a score of -5.

  • Canada Government Gross Debt to GDP

In 2019, Canada had a government debt to GDP ratio of 88.6%, down from 89.7% in 2018. The 2019 ratio was the fourth consecutive year since 2016, when the government debt to GDP ratio dropped.

In 2020, it is projected that the Canadian government debt to GDP ratio will increase to 97%. This increase is due to the increased expenditure to alleviate the economy during the coronavirus pandemic. Over the long term, Canada’s government debt to GDP ratio is expected to stabilize around 90%. We assign a score of -2.

In the next article, you can find the exogenous analysis of the EUR/CAD forex pair where we have qualitatively forecasted the future price movement of this pair. Cheers.

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Forex Course

200. The Correlation Between USD/CAD Pair & Crude Oil

Introduction

Crude oil, also known as black gold, is the major energy source that runs the economy. Canada is among the top oil producers in the world. It is one of the major oil exporters to the USA. Canada exports more than 3 million barrels of petroleum and oil products, a figure that is sufficient to impact USD/CAD’s movement.

USD/CAD and Crude Oil – The Correlation

The volume of crude oil that Canada exports to the US generate massive demand for the CAD. Moreover, Canada’s economy depends a lot on its exports, and approximately 85% of the country’s exports go to the US.

Therefore, the value of USD/CAD is significantly impacted by how the consumers in the United States reach oil prices. If the US’s demand increases, manufacturers have to order more oil to cater to the rising demand. This can result in rising oil prices, thereby resulting in reducing the value of USD/CAD.

Conversely, if the US’s demand falls, the manufacturer will not need to order in more oil to make goods. Subsequently, the oil prices might fall, which would be bad from the CAD value. So essentially, USD/CAD has a negative correlation.

It’s all about Supply and Demand

Supply and demand are the prominent influencers of the correlation between USD/CAD and crude oil, impacting the demand and supply of US dollars and Canadian dollars.

Export of cruise oil covers a significant percentage of the US currency acquired by Canada. This means that a shift in the price and volume of crude oil will have a considerable impact on the flow of the Greenback into the Canadian dollar.

Furthermore, high crude oil prices also imply a higher flow of USD into Canada due to its exports. This implies that there will be a strong supply of the USD into the Canadian dollar, thereby increasing the value of the Canadian dollar.

Similarly, when the crude price falls, the US dollar supply will be lowered as opposed to the Canadian dollar, leading to a decreasing value of the Canadian dollar.

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Cryptocurrencies

How Defi will Help To Bank The Unbanked

The statics couldn’t paint a grimmer picture. According to the World Bank’s findex report of 2017, up to 1.7 Billion people are either unbanked or underbanked. They, for the most part, cannot access financial services. Where they do, it is inadequate for their needs. As access to financial services impacts poverty reduction, this statistic makes for sad reading. We need urgent interventions to remedy the situation.

So how then do we increase this access? The financial space continues to pursue interventions that’ll expand the reach of its services. One such intervention is Decentralized finance (Defi), a  product that promises to disrupt the financial landscape. In this article, we discuss the role of Defi in enhancing financial inclusion. First off, though, a look at the global state of the unbanked.

Banking the Unbanked is more than a third world issue

Banking the unbanked is a problem for the LDCs, right? Well, not exactly. It is easy to assume that underdevelopment confines it to developing nations. Statistics do, however, tell a different story. Ironical as it sounds, a significant population in the developed world suffers the same problem. In the US, for instance, up to 25% of its households do not have access to banking fàcilities. To effectively tackle the issue, there’s a need for a broader perspective.

How is Defi a Solution to the Challenges of Realising Financial Inclusion?

Defi exploits gaps in the traditional financial system. Chiefly it seems to expand access to financial services. It does so in the following ways.

i) Eliminates the Need for Brick and Mortar Facilities

Despite the adoption of tech, legacy financial institutions still depend on brick and mortar premises. Setting up a physical branch network is expensive. Banks may, therefore, not feel compelled to establish these everywhere.

Furthermore, some regions are far-flung. Banks might, therefore, deem it unprofitable to invest in them. These reasons and others prevent many from enjoying financial services. Defi could be the remedy for such.

Digitalization of Transactions Expands Access

As stated earlier, Defi dispenses off with the need for physical premises. It runs on the Blockchain. Consequently, it digitalizes every financial function. 

This way, it expands financial services to the remotest of places. Hence it allows the hitherto unserved segments the enjoyment of these services.

A good Internet Connection is all One Needs

A reliable internet connection is all one requires to get set. Using devices such as phones, customers can:

  • Open accounts
  • Deposit and withdraw funds from their accounts
  • Make payments for goods and services
  • Make P2P funds transfers

Cross-segment Solutions

There are solutions for every income segment. High-end customers may use in-phone apps, offline codes, and QR codes to transact. The lower segments can use SMS.

ii) Lowers the transaction Costs

High transaction costs discourage entry into the financial sector. The decentralization of finance allows P2P trading. Deploying dApps and smart contracts eliminate intermediaries. These attract transaction fees per transaction. Their removal significantly lowers or eliminates costs. As such, it spurs demand and use of financial services.

iii) Enhances Access to Credit Through P2P lending and Non-collateralized loans

Many of the Unbanked find it difficult to attract credit. Normally, banks consider them a high-risk refusing to lend them. They require them to put up collateral that is often not available. Their perceived high-risk profile means that the banks price their loans higher than their peers.

Defi programs provide ways out for them. They incorporate crowdfunding and P2P lending.  Anyone can easily get credit in these ways. 

Additionally, repayment rates are affordable. Again, lending proceeds regardless of one’s credit score

iv) Allows the Entry of Undocumented Person’s

Banks require documentation for one to open an account. These may not be readily available for one reason or another. Inability to produce them leads to denial of service.

Defi, on the other hand, insists on the autonomy and privacy of users. As such, they have relaxed KYC requirements. This is in keeping with the true nature of distributed ledger technologies. Less stringent KYC requirements enable a higher uptake of financial services.

v) Round The Clock Transactions

Using the Blockchain, one can transact at any time from anywhere. You needn’t worry that the bank is closed for the day, weekend, or holiday. Even with the incorporation of tech, legacy financial institutions run by the workweek and hours. Certain transactions cannot go on past the work hours or days. This feature is a drawback, especially in emergency cases. Defi provides customers with the convenience to transact at the times of their choice.

vi) Interoperability of Functions

Defi allows cross-platform convergence. Through Cross-chain composability, two or more Blockchains can communicate with each other. The convergence enables seamless transfer of digital assets between them. 

Significance of Cross-chain Composability

Cross-chain composability is significant in that:

  • Users needn’t migrate from their networks to other compatible one’s to execute transactions
  • It cuts down on transaction costs
  • Enables near-instant transfers

On the flip side, banks tend to have differentiated products. Often this differentiation prevents convergence. It is, at times, impossible to carry out certain transactions across networks. Even when this is possible, the process is lengthy and costly.

Final Thoughts

The financial sector evolves rapidly. Players within the space continue to innovate to improve customer experiences. Some of these inventions aim at easing the accessibility of services offered. That said, the current financial systems are inadequate. To date, a significant portion of the global population remains unserved. Considering the correlation between poverty reduction and financial access, this reality is telling. We need solutions to expanding financial inclusion, and on this score, Decentralized finance offers much promise. Increased adoption will radically alter the financial landscape bringing financial services to more people.

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Forex Videos

The US Stock Market Bubble Is About To Burst – Here’s Why You Should GTFO!

US stock market: Are investors walking into a trap?

Thank you for joining this forex academy educational video.

In this session, we will be looking at US stock markets, which have rocketed to historic highs, even though the United States economy is in the grip of the Coronavirus.

On Friday the 4th December, just post the non-farm payroll numbers, the S&P 500 index reached an all-time record high…

….this was also the case for the DOW Jones 30 industrial average…….
….the NASDAQ Composite index followed suit …….
….and so did the Barons 400 index


For all of these indices to simultaneously hit fresh all-time record highs is a very rare occurrence. It shows that investor sentiment is extremely high, potentially buoyed by a forthcoming and greatly anticipated next round for the Covid stimulus bill, if and when the democrats and republicans can reach an agreement on the size, currently estimated at $900 billion. The markets are also confident that the federal reserve is doing a good job in propping up the ailing American economy and sticking to a policy of low-interest rates for at least the next 2 years, which has typically corresponded with higher investment in stocks and shares, historically speaking.
Investors will look at the fed’s response to the crisis as a kind of insurance policy, that behind the scenes, the federal reserve will not allow the stock market to crash.

However, analysts who follow the Buffett indicator, which is the original measure for US market capitalisation, point out that since 1947 earnings per share have grown at around 6.21% annually, while the economy has expanded by 6.47% annually. This premise that the market capitalisation ratio to gross domestic product is based on the economy driven roughly 70% by consumption, where individuals must earn in order to buy products. And that consumption is where corporations earn their revenues, and ultimately this is where their profits come from.

The Buffett indicator shows that the mean average of around 0.7 has been closely adhered to since the 1950s, and the last time it broke away to the upside was in 1999, when speculators were investing heavily in Dot-Com companies, and where this led to the market crash in March 2000, and where we see that around this time the indicator pulls back to the mean average. Analysts at Deutsche Bank also point out that the recent run in US stocks has taken the market shift above the ratio of price to earnings above the level seen just before the 1929 stock market crash.


And here we see that the currents levels on the indicator are again highly inflated to a record high on the graph above the mean average at around 1.7.
…….
……and coincides with being above 2 standard deviations of the average range, which is an extremely rare occurrence.
And yet with the American economy still suffering from the pandemic, American corporations profit ratios are not reflective of consumer consumption, rather this time we have the Federal Reserve and US government stimulation packages which are churning out dollars into the market, and where investors are using much of those funds to push up the level of stocks due to FOMO, or fear of missing out. and where are the traditional corporate valuation matrix simply do not apply to certain stocks anymore.
Fear of a recurrence of the dot-com bubble correction, where investors ignored earnings per share valuations – many of these Dot-com firms were not making any profit at all – is another reason why we might potentially be looking at the top for stocks. Also, a fairly simple one; many of the favourites for investors, such as Amazon, Apple, and Tesla, for example, are not cheap anymore. This means that investors will be looking at cheaper stocks with growth potential, while others which are too expensive and are seen as potentially overbought. And in an economy which may not see growth return to any kind of normality for years, it adds weight to the thorny issue that the Dow Jones 30 industrial average – home to the top 30 most expensive stocks in the USA – and which is considered as a benchmark of the health of the US economy, may find buyers to be thin on the ground now, in which case a correction could be not too far away, based on everything set out in our assessment today.

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Forex Videos

No Bulls**t Guide to Forex! Why You Are Still Blowing Your Account!


Are there Forex trading secrets? 

Thank you for joining this forex academy educational video.

In this session, we will be asking the question, are there forex trading secrets?  And hopefully coming up with some answers.

The internet is awash with firms, including brokers and educational platforms, offering to teach new traders the secrets of trading forex.  Such as ‘’9 secrets to successful forex trading’’ or ‘’seven-day trading secrets exposed’’ or something along the lines of ‘’the five major secrets to apply to make a killing in forex trading.’’

Some Forex educational platforms and Forex brokers will use any gimmick they can to get new traders on board to service the revolving door of new traders coming in, blowing their accounts – where statistics show that will over 75% of new traders lose their money in the first 6 months of trading – while enticing new traders in to maintain their client numbers and keep their businesses afloat.

And so back to the question, are there any secrets in forex trading? Absolutely not!  This is not the Knights Templar, nor the Freemasons, or a secret society.  And it is most certainly not a get rich quick scheme as some people would have you believe. 

In reality, Forex is a business – the largest business on the planet – which turns over trillions of dollars 24/5.  It is complex: the financial markets are interwoven with each other, where a forex exchange rate trend can turn in an instant, with no apparent reason, other than sentiment.

It is heavily correlated with fundamental reasons and political ones, where a rumour from a tweet, or a speech by a policymaker, can cause severe volatility in the markets.  Where trends can change because of a certain time of day, where perhaps one country stops trading for the day and another begins.

If the market isn’t changing because of fundamental reasons, it is constantly changing because of technical ones.  That’s chart patterns.  Technical analysis, or the study of chart patterns, including exchange rate price action, and the implementation of technical analysis tools and indicators is pretty much the backbone of forex trading, with the upmost single important thing being where the price is at any given time, and which is also known as price action.  This, on its own, is of paramount importance because it shows who’s in control of a forex pair, whether it’s the bulls or bears, or whether the market is simply consolidating and no one is effectively driving the market in any particular direction other than sideways.

If somebody offers to sell you the secret to fixing your car engine troubles, you would probably laugh and take your car to a garage. If they offered you the secret to remove your painful appendix, you would cry in horror and run off to see your doctor.  Forex trading is a profession not a secret ridden gimmick.  The best traders learn about fundamental analysis, technical analysis, market sentiment, market correlation, how currency pairs move and why trends are developing, and when and why they stop and reverse.  And this is the real key to making money while trading Forex:  knowledge.  The more you learn, the more you will earn.

So, in conclusion, don’t be seduced by offers of learning secrets, when here at Forex Academy our professional traders, some ex institutional,  offer a totally free educational, informative service, with its reliable signal service, supported by a broker – EagleFX – which doesn’t need gimmicks, with the idea being that if traders make money on a reliable platform, where education is absolutely free, then everyone is a winner.  

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Forex Course

199. Effects Of Gold On AUD/USD & USD/CHF Currency Pairs

Introduction

Gold is among the most traded commodities globally due to the good intrinsic value of this asset. Considering that Gold is less impacted by uncertain conditions, its prices rise when other economies perform badly and fall when there is an economic boom.

Gold impacts AUD/USD and USD/CHF in opposite manners. Price fluctuations in Gold primarily impact three major currencies that include AUD, USD, and CHF. Let’s discuss how Gold affects AUD/USD and USD/CHF.

The Effect of Gold in AUD/USD

When the price of gold rises, the AUD/USD will move upwards. These two aspects share a positive correlation; most of the time, they move together. An increase in the U.S. dollar generally contributes to the gold prices to fall and vice versa. The price of Gold perfectly depicts the economic health of the country.

During an economic crisis in the country, investors purchase Gold as protection from inflation or an economic crisis. But the inner value of the Gold does not change whether or not there is a crisis. Furthermore, gold value is displayed in the dollar, meaning every gold transaction, you spend/receive a dollar.

Australia’s Economy and its Impact on Gold Prices

AUD and Gold share a positive relationship and are inversely related to the USD. If the gold price rises, the Australian exports will increase, resulting in the expansion of the economy and foreign investment. When the gold price increases, the AUD/USD will move upwards because of the increasing demand for the AUD.

Impact on the USD/CHF

The Switzerland currency holds a positive correlation with Gold. This is because 25% of CHF is supported by the gold reserves. The refineries in Switzerland also process 70% unrefined gold every year. Additionally, Gold and CHF are inflation hedging during uncertain times.

Therefore, when the price of gold increases, the CHF value also appreciates or increases, vice-versa. Gold has a positive relationship with CHF and an inverse relationship with USD/CHF. When the price of gold rises, the value of USD/CHF falls down and vice-versa.

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Forex Fundamental Analysis

EUR/AUD Global Macro Analysis – Part 3

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

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 Course

198. The ‘Dollar Smile Theory’

Introduction

The U.S. Dollar Smile Theory is a popular notion that illustrates that the U.S. Dollar stays positive in good as well as bad market conditions. This theory was created by a former economist and strategist Morgan Stanley, and it became popular in 2007.

This was the time when the U.S. dollar witnessed a significant boost amidst the global recession. Many times, looking at the market conditions, people would think the U.S. dollar would fall, but surprisingly it continues to grow.


Source: here.

Why does that happen?

The Dollar Smile Theory answers this question.

Following are the three scenarios that Morgan Stanley put forward to explain the positive growth of the U.S. Dollar.

  • The Strength Due To Risk Aversion

The first reason that the U.S. dollar rise is due to risk aversion. This is a situation where investors rely more on safe-haven currencies such as the dollar, yen, etc. During this period, investors consider the global economy in an unstable position. Hence, they are less likely to invest in the risky asset; instead, they put their cash on U.S. dollars.

  • The Dollar Weakens to New Low – Economic Recession and Slowdown

Under this scenario, the US dollar falls to a new low. The bottom of the smile indicates the dull performance of the currency as the economy struggles with weak fundamentals. Additionally, the possibility of falling interest rates also impacts the position of the U.S. Dollar. This results in the market participants steering clear from the dollar.

Subsequently, the primary motto of the U.S. Dollar becomes to Sell. Investors move from buying the currency to selling it and moving towards currencies that are providing higher yields.

  • The Strength Of The U.S. Economy Helps

The U.S. dollar continues to grow because of the strong economy of the country. After the low, a new smile emerges as the economy sees its light at the end of the tunnel. With the signs of the recovery of the economy, a sense of optimism spreads through the market.

This increases the sentiments towards the dollar again. With the US economy enjoying higher GDP growth, the greenback continues to appreciate. This increases the interest rate in the international market.

Though the theory is quite relevant and backed by some logic, the economy is extremely volatile. So only time will tell how definite the Dollar Smile theory is in the future.

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Crypto Videos

WordPress adds official Ethereum ad Plugin – Users Stand To Gain More Than Google Adsense!


WordPress adds official Ethereum ad plugin.

WordPress’s new crypto plugin will enable publishers that use this content management system to receive ad earnings directly into their Ether wallets, according to a Dec 10 plugin description that got posted on the WordPress’ official website.

The plugin known as “EthereumAds” will enable content publishers to auction their advertisement space for ETH using smart contracts. “After publishers insert our widget, their ad space is automatically openly auctioned off by using smart contract every 14 days to the highest bidder,” the official plugin description reads.

According to the EthereumAds website, the newly-announced WordPress plugin plans on competing with Google AdSense, allowing the publishers that use it to earn ETH through banner ads. EthereumAds emphasizes that it will provide publishers with lower commissions, stating: “Google Adsense only pays its publishers 68% of their total ad earnings. We, on the other hand, will pay them a whopping 90%.” This should provide a considerable increase in ad revenue that publishers get for renting their website space for ads.

The new ad plugin can be used to monetize any form and type of content built on WordPress, including websites, blogs, and billboards. They also officially stated that they are limiting publishers to crypto-related content.

As EthereumAds intends to enter the space ruled by a major ad monetization platform such as Google AdSense, it remains yet to be seen how both Google Adsense and other traditional ad platforms deal with the new crypto rival.

WordPress’s introduction of EthereumAds came at a great time, as the world’s largest ad monetization platform, Google Adsense, has had some issues with cryptocurrencies in the past. In April 2020, it has been reported that Google AdSense was running fraudulent cryptocurrency ads while prohibiting some legitimate cryptocurrency firms from using its services. Google Ads also previously blacklisted keywords mentioning Ethereum in Jan 2019, reports say.

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Crypto Videos

Sweden Leading the Way in the CBDC Sector – The First Country To Go Fully Digital?


Sweden Leading the Way in the CBDC

The Swedish government is currently progressing with its central bank digital currency by launching a formal review of a potential digital transformation to the digital currency.

According to a Bloomberg report published Dec 11, the review will explore the feasibility of moving the complete country’s payments infrastructure to a digital currency. Sweden features one of the most cashless economies in the world.

Per Bolund, financial markets minister of Sweden, reportedly said that the government expects to finish its digital currency review by the end of Nov 2022. Anna Kinberg Batra, a former chairwoman of the finance committee at Sweden’s central bank, would lead the initiative.

Bolund emphasized that ensuring that the digital payments system in Sweden functions in a safe way and is “available to everybody” is crucial. “Depending on how a CBDC is designed and which technologies are being used, it can have large consequences for the financial system as a whole,” the minister said.

Sweden has emerged as one of the leaders in the CBDC technology sector, announcing a pilot platform for its own digital currency known as e-krona in late 2019. In order to properly build the platform, Sweden’s central bank partnered with Accenture, a professional services company coming from Ireland. Riksbank launched its first e-krona CBDC pilots in February, claiming that the digital currency testing will be in operation until Feb 2021.

Sector

In Oct, Riksbank Governor Stefan Ingves expressed complete confidence that an e-krona CBDC should be issued by the central bank and fully recognized as legal tender. Last year, Ingves stated that Sweden’s central bank could not be the only institution that decides on the future of an e-krona implementation:

“Considering how important this issue is to the economy, the Riksbank cannot take this decision on its own. The decision on whether the e-krona should be introduced to the public is a decision that must have substantial political support.”

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Forex Basic Strategies

Trading The Forex Market Effectively Using ‘Renko’ Charts

Introduction

If you are a Forex trader, you can agree-many winning strategies exist out there. And Renko charts are among the handy weapons you can deploy to your advantage. This write-up will help you grasp handy tips to get your feet wet, as well as scaling your trading into a profitable trajectory.

Renko charts are not very popular as bars or candlesticks among traders. However, they can be very profitable when a trader uses them correctly. Renko chart trading is a robust way to analyze price trends, and even superb when you combine it with another tool to confirm entry and exit positions.

What Is Unique With Renko?

Well, Renko charts only show you the price movements of an underlying asset without factoring in time and volume. The formation of a Renko bar or body is in one direction. And it forms only when prices move by a predefined amount in pips. You can adjust the number of pips per block to suit your needs or trading strategy.

Also, a subsequent Renko bar can only form either adobe or below a previous one. It’s that model that shows you the price direction with unique preciseness.

Their naming arises from Japanese “Renga,” which means brick. Therefore, Renko charting arises from a series of blocks. In the light of Forex trading, the charting of the blocks moves up or down with prices.

Advantages of Trading Forex using Renko charts

  1. Renko charts are simple in both ease of interpretation and use.
  2. Great for determining the levels of support and resistance.
  3. Traders can adjust the block sizes to suit their trading needs.
  4. Renko charts are great at signaling price breakout or reversal.
  5. Ideally, Renko charts only show you how prices are moving.

Overall, Renko charts give traders an edge with overly volatile commodities like Oil and Gold. The charting digs deeper into the pricing histories. The charting model behind Renko builds on plotting price on the -Y-axis Vis a Vis time.

Renko beats conventional price-charting by removing insignificant price movements.

There are three metrics that Renko shades off from ordinary price action. And they are:

  • Any false price breakouts
  • The candle-wicks
  • The price volatility

Ideally, it pays attention to the critical metrics: support, resistance, and the trend.

Whenever prices move, Renko converts that into a commensurate block on the chart. And every block forms after price confirmations. The reality is, Renko charts do not work with partial blocks. They have to be wholesome and in line with the set numbers per single block.

As a trader, it makes great sense if you’re able to sift out short-term fluctuations out of a price chart. Beauty is Renko charting is a great tool at that. Price volatility is the greatest enemy for many traders, especially if you can only bring in a small trading margin.

While most traders can establish trends from normal price- charting, Renko charting is another wholesome set of trading tools to help you sharpen your decisions while trading.

More Pointers with Renko Charts

As indicated earlier, Renko charting creates blocks after by concurrently establishing the closing positions of a previous block. Next, subsequent blocks can only form either below or above a previous one.

Using the precedence above, Renko charting brings you a precise tool into your trading arsenal to help you view trends more clearly. Along with that, it’s also important to calculate the most appropriate block size – in line with the asset you target to trade.

Calculation of Renko blocks

There are two documented methods for the determination of the optimal sizes of Renko blocks.

First is the ATR or Average True Range. It relies on the ART indicator to determine the height of an ordinary candlestick.

Second is the model where a trader provides a predefined value for the size of a block.

So, new blocks only form when price movements meet the minimum value set for a block.

Sniffing a Buy Opportunity with Renko Charts

Image credits: best-trading-platforms.com

Renko charts help traders spot trend directions very clearly. And there are two ways to spot an opportunity to go long. Using the image above, a monthly view of a stock’s prices is visible. Simple, green bricks signify uptrends, while the ref ones signify the downtrend.

Primarily, the years 2017 and 2019 are trends – good opportunities to go long (buy). Towards the end of 2018, there’s a trend reversal (bricks turn red- the opportunity for buyers to exit and pocket profits)

Also, the same trend reversal creates an opportunity for traders to go short and also take profits. Look at 2019 also; the green bricks signify the continuity of the uptrend.

Image Credits: best-trading-platforms.com

Look at the figure above, the EUR/USD pair oscillations ranging from 1.0500 – 1.1500 from 2015 through to -2016. Also, notice the uptrend starting from 2017 but with a reversal along the way. Uptrends are opportunities to go long, while downtrends are opportunities to go short.

Pro Tip: If you are looking to upscale your trading success, Renko charts greatly help. However, ensure that aside from mastering them, it’s excellent to confirm the trends, support, and resistance levels using one or more indicators.

Keep in mind that trading success arises from careful analysis of entry and exit positions. Upfront, it may seem cumbersome – taking time to do the due diligence in the analysis. Utmost, do not trade with emotions. Renko charts and many other tools will help you sharpen your analysis.

The preciseness and effectiveness of a strategy arise from long spells of practical use. Renko is a super-tool for scalping when you compare it to classical price charting or bar or candlesticks.

Other handy trade signal tools to combine with Renko Charts

  • Simple Moving Averages -SME Enter trades with three bars in the direction of the trend and 10 SME sloping downwards or upwards. (This will help you avoid false breaks in a reversal against the trend)
  • On Balance Volume –OBV Enter trades when you confirm the trend and SME as tally that with OBV indicator’s direction.

Parting Shot

Renko charting brings in more preciseness for your trend confirmation in line with price action and the trend. It helps you filter out the noise with volume and time and leaves you with price direction only. For successful scalping, incorporating Renko is a better way to go about it. Renko charts help you keep the focus on the trend for position trades and note it’s the reversal in good time to exit.

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Forex Fundamental Analysis

EUR/NZD Global Macro Analysis – Part 3

EUR/NZD Exogenous Analysis

  • The EU and New Zealand Current Account to GDP differential

An economy’s current account comprises the balance of trade, net transfer payments, and net factor income. In international trade, a country with a higher current account surplus experiences higher demand for its domestic currency. That means the value of its currency will be higher. Typically, a higher current account to GDP means that the country has more current account surplus.

For the EUR/NZD pair, if the differential of the current account to GDP is negative, it means that the pair’s exchange rate will fall. If it’s positive, we can expect the pair’s exchange rate to increase.

In 2020, New Zealand’s current account to GDP is forecasted to reach -0.8% while that of the EU 3.4%. Thus, the current account to GDP differential between the EU and New Zealand is 4.2%. We assign a score of 4.

The prevailing interest rate in a country determines the flow of capital from foreign investors. Naturally, the country that offers a higher interest rate will attract more foreign investors who seek higher returns. Similarly, a country with lower interest rates will experience an outflow of capital by foreign investors. In the forex market, a currency pair with a positive interest rate differential tends to be bullish since traders are buying the base currency – which offers a higher interest rate and sell the quote currency – which has a lower interest rate. Conversely, a currency pair is expected to be bearish if the interest rate differential is negative since investors will sell the base currency and buy the quote currency.

In 2020, the Reserve Bank of New Zealand cut the official cash rate to 0.25%, while the ECB maintained the interest rate at 0%. Hence, the interest rate differential for the EUR/NZD pair is -0.25%. We assign a score of -3.

  • The EU and New Zealand GDP Growth Rate differential

The value of a country’s domestic currency is impacted by the growth rate of the local economy. Thus, comparing the growth rate between countries’ GDP growth rates helps determine which currency appreciated or depreciated more than the other.

The New Zealand economy contracted by 3.2% in the first three quarters of 2020 and that of the EU by 2.9%. The GDP growth rate differential is 0.3%. We assign a score of 2.

Conclusion

The EUR/NZD exogenous analysis has a cumulative rank of 3. This means that the pair is expected to trade in a bullish trend in the short-term.

The bullish trend can also be observed from the technical analysis of the weekly price charts. The pair is trading above the 200-period MA and the weekly price rebounding from the lower Bollinger Band.

We hope you found this analysis informative. If you have any questions, please let us know in the comments below. Cheers!

Categories
Forex Fundamental Analysis

EUR/NZD Global Macro Analysis – Part 1 & 2

Introduction

In conducting the global macro analysis for the EUR/NZD pair, we will analyze the endogenous factors that impact the EU and New Zealand economic growth. We’ll also analyze exogenous economic factors that affect the EUR/NZD pair’s exchange rate in the forex market.

Ranking Scale

We will rank the effects of the endogenous and exogenous factors on a sliding scale of -10 to +10. The endogenous factors will be ranked based on correlation analysis with the GDP growth rate. When the endogenous ranking is negative, it means that the domestic currency will depreciate and appreciate when positive.

Similarly, the exogenous factors are scored based on correlation analysis with the EUR/NZD pair’s exchange rate. A positive score means that the EUR/NZD pair’s price will rise and drop if the score is negative.

Summary – EUR Endogenous Analysis

Based on the factors we have analyzed, we have got a score of -3, and we can expect the Euro to be marginally depreciating in 2020.

Summary – NZD Endogenous Analysis

A score of -4 on NZD Endogenous Analysis implies that in 2020, the NZD has depreciated as well.

Employment change measures the quarterly change in the number of people who are gainfully employed. It can be used as a comprehensive measure of the labor market changes, which corresponds to economic growth.

In Q3 of 2020, Employment in New Zealand dropped by 0.8%, from a 0.3% drop in Q2 to 2.709 million. The Q3 reading is the largest drop in QoQ employment since Q1 of 2009. We assign a score of  -6.

  • New Zealand GDP Deflator

This indicator measures the quarterly changes in the price of all economic output in New Zealand. It is regarded as the most specific inflation measure since it covers price changes for every good and service produced.

In Q2 of 2020, the New Zealand GDP deflator dropped to 1238 points from 1242 in Q1. This shows that the economy contracted in Q2. Hence, we assign a score of -3.

  • New Zealand Manufacturing Sales

New Zealand manufacturing sales track the change in the volume of total sales made in the manufacturing sector. The indicator tracks the sales in 13 industries, which comprehensively represents New Zealand’s economy. The changes in the volume of sales are directly correlated to the growth of the economy.

In Q3 of 2020, the YoY manufacturing sales in New Zealand increased by 3.1% after dropping by 12.1% in Q2 and 1.9% in Q1. The increase in Q3 is the largest recorded since January 2017. However, since the overall industrial production is still at multi-year lows, we assign a score of -6.

  • New Zealand Manufacturing PMI

This index is aggregated from a survey of purchasing managers in the manufacturing sector. It is a composite of scores regarding output in the sector, prices, expected output, employment, new orders, and inventory. When the PMI is above 50, it means that the manufacturing sector is expanding. A PMI score below 50 shows that the sector is contracting. Naturally, these periods of expansions and contractions are leading indicators of changes in the GDP growth rate.

In November 2020, the New Zealand manufacturing PMI rose to 55.3 from 51.7 in October. The rise was due to increased new orders, inventory, production, and deliveries, as uncertainties surrounding COVID-19 decreased. We assign a score of 4.

  • New Zealand Retail Sales

The retail sales track the changes in the quarterly purchase of final goods and services by households in New Zealand. Although retail sales are often affected by seasonality and tend to be highly volatile, it is a significant measure of the overall economic growth since consumer expenditure is one of the primary drivers of GDP growth.

In Q3 of 2020, New Zealand retail sales increased by 28% from 14.8% recorded in Q2. Historically, the Q3 retail sales increase is the largest rise recorded in New Zealand since 1995. The increase was driven by increased expenditure on groceries, vehicles, and household goods. On average, the QoQ New Zealand retail sales figure has grown by 4.1%. We assign a score of 4.

  • New Zealand Consumer Confidence

The New Zealand consumer confidence is also called the Westpac McDermott Miller Consumer Confidence Index. The index measures the quarterly change in consumers’ pessimism or optimism about the performance of the economy. When the index is above 100, it shows increased optimism by households, and that below 100 shows pessimism.

In the fourth quarter of 2020, New Zealand consumer confidence rose to 106 from 95.1 in Q3. The increased optimism was driven by higher readings in both the current and expected financial situation. We assign a score of 2.

  • New Zealand Government Net Debt to GDP

Investors use this ratio to determine if the economy is capable of servicing its debt obligations. Consequently, the government’s net debt to GDP affects the government securities yield and determines a country’s borrowing costs. Typically, levels below 60% are deemed favorable.

In 2019, the New Zealand Government Net Debt to GDP dropped to 19% from 19.6% in 2018. In 2020, it is projected to range between 27% to 32%, which would be the highest since 1998. We assign a score of 1.

In the next article, we have done the exogenous analysis of both EUR and NZD pairs to accurately forecast this currency pair’s future trend. Please check that out. Cheers.

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Forex Trading Guides

Guide To 160+ Forex Fundamental Indicators

As we all know, there are three primary techniques to trade the Forex market. They are Technical Analysis, Fundamental Analysis, and Sentimental Analysis. Technical Analysis is one of the most prominent ways of trading the market, which involves using Technical Indicators, Price Action Techniques, etc. However, Fundamental analysis is one of the most underrated techniques to gauge the currency price movement.

Therefore, at Forex Academy, we have put forward a series of Fundamental Indicators that we believe strongly impact the Forex price charts. We have clearly explained the importance of each of these indicators and pictographically showed the relative impact of the indicator’s news release on the Forex currency pairs.

This guide will help you navigate through these indicators in the easiest way possible. The order of these indicators implies their relative importance. As the list goes down, the importance of the indicators deteriorates.

Interest Rate

Inflation Rate

Government Debt to GDP Ratio

Current Account to GDP Ratio

Balance Of Trade

Unemployment Rate

Labor Force Participation Rate

Core Inflation

Cash Reserve Ratio

Productivity

Foreign Exchange Reserves

Non-Farm Payroll

Consumer Price Index

Producer Price Index

Corporate Tax

Building Permits

Income Tax

Consumer Confidence

Capital Flows

Crude Oil Production

Consumer Credit

Gold Reserves

Consumer Spending

Tourism Revenues

Personal Spending

Personal Saving

Initial Jobless Claims

Terrorism Index

Gasoline Prices

Government Debt

Credit Rating’

Core Consumer Price

New Orders

Mining Production

Car Registrations

Manufacturing Production

Manufacturing PMI

Leading Economic Index

Households Debt to GDP

Imports

Housing Index

Housing Starts

Government Budget

Disposable Personal Income

Cement Production

Car Production

Capacity Utilization

Bank Lending Rate

Home Ownership Rate

Government Spending

Foreign Direct Investment

Fiscal Expenditure

Government Revenue

Exports

Employed Persons

Construction Output

Wage Growth

Private Sector Credit

Steel Production

Services PMI

Terms Of Trade

Ease of Doing Business

Corruption Index

Electricity Production

Composite PMI

Industrial Production Index

Factory Orders

Corporate Profits

Internet Speed

ZEW Economic Sentiment Index

Changes in Inventories

GDP Constant Prices

Retail Sales MoM

Gross National Product

GDP From Agriculture

Gross Fixed Capital Formation

GDP From Manufacturing

GDP From Public Administration

GDP Per Capita PPP

GDP Per Capita

GDP Growth Rate

Long Term Unemployment Rate

Labour Costs

Full-Time Employment

Minimum Wages

Employment Change

Central Bank Balance Sheet

Youth Unemployment Rate

Harmonized Consumer Prices

Export Prices

Imports by Category

Import Prices

Imports by Country

Exports by Category

GDP From Utilities

GDP From Transport

GDP from Services

GDP from Mining

GDP from Construction

Business Confidence

Sales Tax Rate

Social Security Rate

Job Vacancies

Corruption Rank

Interbank Rate

Small Business Sentiment

Bankruptcies’

Deposit Interest Rate

Employment Rate

Food Inflation

Households Debt to Income

Lending Rate

Industrial Production MoM

Inflation Rate MoM

Producer Prices Change

GDP Annual Growth Rate 

Loan Growth

Loans to Private Sector

Retail Sales YoY

Wages

GDP Deflator

Total Vehicle Sales

IP Addresses

Asylum Applications

Government Budget Value

Social Security Rate For Employees

Social Security Rate For Companies

Employment Trends Index

Commitments of Traders

Reserve Assets

Money Supply

New Home Sales

Public Sector Net Borrowing

Cryptocurrency Negotiation

Existing-Home Sales

Durable Goods Orders

Pending Home Sales

Job Cuts

Home Loans

Sentix Investor Confidence

Gross Domestic Product Estimate

Foreign Securities Purchases

Mortgage Market Index

US Crude Oil Inventories

Personal Consumption Expenditures Price Index

Machinery Orders

Long Government Bond Auction 

US Redbook

German Ifo Business Climate Index

US 10-Year TIPS Auction

US Baker Hughes Oil Rig Count

Jobs to Applications Ratio

Commodity Prices

Business Investment

Wholesale Trade Sales

Retail Sales Monitor

Economy Watchers Current Index

US TIC Net Long-Term Transactions

This list is all you need, to master the fundamental indicators and how they affect the Forex price movements. If you have any questions, please let us know in the comments below. Cheers!

Categories
Forex Course

197. Using The USDX Numbers To Trade The Forex Market

Introduction

The U.S. Dollar Index is one of the most reckoned currency indexes and trades on exchanges with the DXY ticker or the USDX ticker. This index has been around in the market since 1973, when the base value was kept at 100,000.00, which is now 100.00.

It is a very prominent factor that facilitates Greenback. And the basket used to measure the U.S. dollar index value has only been changed once post-Euro replaced many other European currencies in 1999.

Formula To Calculate USDX

USDX = 50.14348112 * the EUR/USD exchange rate ^ (-0.576) * the USD/JPY exchange rate ^ (0.136) * the GBP/USD exchange rate ^ (-0.119) X the USD/CAD exchange rate ^ (0.091) × the USD/SEK exchange rate ^ (0.042) * the USD/CHF exchange rate ^ (0.036).

Implementing The US Dollar Index to Trade Forex

The movement determined in the U.S. currency index, such as the USDX, offers traders a sense of how the currency is experiencing a change in its value against other currencies in the index. For instance, if there is a rise in the USDX level, this indicates the rise in the U.S. dollar. Similarly, when the level of USDX is falling, so is the dollar in the foreign exchange market.

Many financial reporters leverage the changes witnessed in the U.S. Dollar Index’s value to offer their viewers and audiences an idea of how the U.S. dollar performed in the foreign exchange market. This works as an alternative to analyzing how each currency increased or decreased against the dollar.

Moreover, the USDX can also act as an inverse indicator that reflects the strength of the consolidated Euro currency of the European Union, considering that the weight of Euro (57.6%) is the most in the index.

Another prominent aspect that the forex trader should consider is how the movements of the USDX is associated with the other currencies that are put against the U.S. Dollar.

For instance, when the currency pair is measured as USD/JPY, it is likely to be positively correlated, and both the currencies should rise and fall at the same time.

Contrarily, when the currency pair is measured like EUR/USD, then the currency pair and USDX are inversely correlated. This implies that they are likely to move in the opposite direction, where one will fall when the other rises.

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Categories
Forex Course

196. Ever Wondered What ‘Trade-Weighted Dollar Index’ Is All About?

Introduction

The trade-weighted dollar is a prominent index developed by the FED in order to measure the value of the U.S. dollar spending on its competitiveness against the trading partners. It is used to determine the purchasing value of the U.S. dollar and to summarize the impact of appreciation and depreciation of the currency against foreign currencies.

The Importance Of Trade-Weighted Dollar Index

When the value of the U.S. dollar rises, the import to the country becomes less expensive, whereas exports become expensive. A Trade-Weighted Dollar Index is used to measure the value of the foreign exchange of the U.S. dollar in comparison to specific foreign currencies.

It offers weightage or importance to currencies that are most popularly used in international trade, instead of comparing the dollar value to every foreign currency. As the currencies are weighted distinctively, the modifications in each currency will have a different effect on the trade-weighted dollar as well as corresponding indexes.

After the U.S. Dollar Index, Trade-Weighted Dollar Index is the primary tool used to measure the strength of the U.S. dollar. It is also reckoned as the Broad Index was introduced in 1998 by the U.S. Federal Reserve Board.

It was created after the integration of the Euro and to reflect the trade patterns of the U.S. more precisely. The Federal Reserve picked 26 currencies for this broad index, envisioning the acceptance of the Euro by 11 countries belonging to the European Union.

Countries Included In The Trade-Weighted Dollar

Index

Here are the countries with the weight on the index –

  • Eurozone – 18.947
  • China – 15.835
  • Canada – 13.384
  • Mexico – 13.524
  • Japan – 6.272
  • United Kingdom – 5.306
  • Korea – 3.322
  • Taiwan – 1.95
  • Singapore – 1.848
  • Brazil – 1.979
  • Malaysia – 1.246
  • Hong Kong – 1.41
  • India – 2.874
  • Switzerland – 2.554
  • Thailand -1.096
  • Australia – 1.395
  • Russia – 0.526
  • Israel – 1.053
  • Sweden – 0.52
  • Indonesia – 0.675
  • Saudi Arabia – 0.499
  • Chile – 0.625
  • Philippines – 0.687
  • Colombia – 0.604
  • Argentina – 0.507

Final Thoughts

Trade-Weighted US Dollar is a broad index that includes countries from all across the world. Traders will also find some developing countries in the broad index list, which makes it a better reflection of the value of the U.S. dollar worldwide.

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Categories
Forex Fundamental Analysis

EUR/GBP Global Macro Analysis – Part 3

EUR/GBP Exogenous Analysis

  • The EU and the UK Current Account to GDP differential

This indicator is used to measure how competitive an economy is in the international market. When a country has a higher trade surplus, the current account to GDP ratio is higher. Conversely, if a country has a lower trade surplus or deficit, the ratio is smaller.

Typically, economies with a higher surplus in terms of the balance of trade tend to have more exports than imports. That means that their value on exports is higher than imports, implying that the domestic currency is in high demand in the forex market. Similarly, a running deficit means lower demand for the domestic currency in the forex market since it is a net importer.

In 2020, the EU current account to GDP is expected to hit 3.4% while that of the UK -4%. The differential is 7%. Based on the correlation with the exchange rate of the EUR/GBP pair, we assign a score of 6. That means we expect a bullish trend for the pair.

This helps determine where the most investor capital will flow. Expectedly, investors will direct their capital to the country with a higher interest rate to earn superior returns. In the forex market, traders tend to be bullish when a currency pair has a positive interest rate differential and bearish if it has a negative interest rate differential.

In the EU, the ECB has maintained interest rates at 0%, while the BOE cut interest rates from 0.75% to 0.1%. Therefore, the interest rate differential for the EUR/GBP pair is -0.1%. Based on the correlation with the EUR/GBP exchange rate, we assign a score of -2.

  • The EU and the UK GDP Growth Rate differential

The differential in GDP growth helps to efficiently compare economic growth by eliminating the aspect of the size of different economies.

For the first three quarters of 2020, the EU economy has contracted by 2.9% while the UK has contracted by 6.8%. That makes the GDP growth rate differential between the two economies 3.9%. It means that the EU economy contracted at a slower pace than the UK. Based on the correlation with the EUR/GBP price, we assign a score of 5.

Conclusion

The exogenous analysis of the EUR/GBP pair has a score of 9. This inflationary score means that we can expect a bullish trend for the pair in the short-term.

Our technical analysis shows the pair trading above the 200-period MA. More so, notice that the EUR/GBP pair bounces off the lower Bollinger band crossing above the middle band, supporting our fundamental analysis. Happy  Trading.

Categories
Forex Fundamental Analysis

EUR/GBP Global Macro Analysis – Part 2

GBP Endogenous Analysis – Summary

The GBP endogenous analysis has a score of -9. We can therefore understand that the GBP has depreciated in 2020.

  • United Kingdom Employment Change

The UK unemployment change measures the changes in the number of people who are above 16 years and employed. This data is a 3-month moving average of the change in employment, which measures a general trend in the labor industry changes, which typically corresponds to fluctuations in the economy.

In the three months to September 2020, the number of employed people in the UK dropped by 164,000. The YoY employment change shows a drop of 247,000 jobs, which is the worst in ten years. Based on correlation analysis, we assign a score of -7.

  • United Kingdom GDP Deflator

The UK GDP deflator is used as a measure of the comprehensive change in inflation. It filters out any nominal price changes in the entirety of the goods and services produced within the UK.

In Q3 of 2020, the UK GDP deflator dropped to 109.12 from 111.9 in Q2 – the highest ever recorded in UK history. The UK GDP deflator has increased by 6.41in 2020. We, therefore, assign a score of 4 based on its correlation with the GDP growth.

  • United Kingdom Industrial Production

This indicator tracks the changes in all the firms operating under the industrial sector in the UK. The manufacturing sector accounts for about 70% of the total industrial output. The major components of the manufacturing sector are food, tobacco, and drinks, which account for 11%. The manufacture of transport equipment and basic metals account for 17%, pharmaceuticals and non-metallic 6% each. Quarrying and mining activities account for 12% of the industrial production, with 10% for oil and gas extraction.

In September 2020, MoM industrial production in the UK rose by 0.5 while YoY dropped by 6.3%. Despite the growth and recovery of industrial activity from the coronavirus pandemic, the output is still 5.6% lower than the pre-pandemic levels. Thus, we assign a score of -3 based on correlation with GDP growth.

  • United Kingdom Manufacturing PMI

This index is a result of a survey of about 600 companies in the industrial sector. It is a composite of new orders, which accounts for 30%, output 25%, employment 20%, deliveries from suppliers 15%, and inventory 10%. When the index is above 50, it shows that the manufacturing sector is expanding. Below 50, the manufacturing sector is expected to contract, which impacts the GDP output.

In November 2020, the UK manufacturing PMI was 55.6 – the highest recorded in three years. This was mainly driven by increased inventories and increased new orders as a result of Brexit. We assign a score of 3 based on correlation with the GDP growth rate.

  • United Kingdom Consumer Spending

Consumer spending in the UK shows the amount of money that households spent on the purchase of goods and services in the retail sector. Note that expenditure by households is among the primary drivers of GDP growth.

In Q3 of 2020, the UK consumer spending rose to £304.5 billion from £258.32 billion in Q2. This increase is attributed to the restriction imposed at the onset of the coronavirus outbreak, resulting in the economic slowdown. It is, however, still lower than the pre-pandemic levels. Thus, we assign a score of -5 based on correlation with the GDP growth rate.

  • United Kingdom Consumer Confidence

In the UK, GfK surveys about 2000 households to establish their opinions about the past and future economic conditions, their financial situation, and prospects of saving. The survey period covers about 12 months into the future, which makes it a leading indicator of consumer spending, and by extension, the overall economy.

In November 2020, the UK consumer confidence dropped to -33 edging closer to yearly lows of -34 registered at the height of the pandemic. We assign a score of -5 based on its correlation with the GDP growth rate.

  • United Kingdom Public Sector Net Debt to GDP

This ratio tracks the indebtedness of the UK economy. Based on the economy out, both domestic and foreign investors use the ratio to determine whether the UK can be able to service its debt obligations in the future comfortably.

In the financial year 2018 – 2019, the UK’s public sector net debt to GDP was 80.8%, down from 82.4%. In 2020, it is expected to hit 100% with a longer-term average of 91%. We assign a score of 4 since the increased net pubic debt managed to avoid a deeper recession in 2020.

In the next article, we have performed the Exogenous analysis of the EUR/GBP pair and concluded what trend to expect in this currency pair in the near future. Cheers.

Categories
Forex Fundamental Analysis

EUR/GBP Global Macro Analysis – Part 1

Introduction

A global macro analysis attempts to analyze the endogenous factors that influence the value of a country’s domestic currency and exogenous factors that affect how the domestic currency fairs in the forex market. The endogenous analysis will cover fundamental economic factors that drive GDP growth in the UK and the Euro Area. The exogenous factors will analyze the price exchange rate dynamics between the EUR and the GBP.

Ranking Scale

Both the endogenous and the exogenous factors will be ranked on a scale of -10 to +10. A negative ranking for the endogenous factors means that they had a deflationary effect on the domestic currency. A positive ranking implies that they had an inflationary impact. Similarly, a negative score for the exogenous factors means the EUR/GBP is bearish and bullish when the score is positive.

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.

This is a quarterly measurement of the changes in both part-time and full-time employment in the EU. It includes individuals working for profit or pay and those who perform family work unpaid. Changes in employment help put economic growth in perspective since an expanding economy corresponds to increased employment opportunities and a contracting economy leads to job losses.

In the third quarter of 2020, employment in the EU increased by 0.9% compared to the 2.7% drop in Q2. Up to Q3 2020, employment in the EU has dropped by 2.1 %. Based on correlation with GDP, we assign a score of -5.

  • European Union GDP Deflator

The GDP deflator is an in-depth measure of the rate of inflation. It measures the changes in the price levels of all goods and services produced in an economy. Therefore, it is the perfect measure of the changes in real economic activities. i.e., it filters out any nominal changes in price.

In Q3 of 2020, the EU GDP deflator rose to 107.17 from 106.37 in Q2. Cumulatively, the EU GDP deflator in 2020 has increased by 2.45. We assign a score of 3 based on the weak correlation between the inflation rate and GDP.

  • European Union Manufacturing Production

In the EU, manufacturing production accounts for about 80% of the total industrial output. With most EU economies heavily reliant on manufacturing, the sector forms a significant portion of the GDP and the labor market.

In September 2020, the YoY manufacturing production in the EU decreased by 6.1%. This is an improvement from the decline of 6.3% in August. The overall industrial production reduced by 5.8% during the period.

We assign a score of -5 based on its correlation with the GDP.

  • Euro Area Manufacturing PMI

Markit surveys about 3000 manufacturing firms. The Markit manufacturing PMI comprises five indexes: new orders accounting for 30% weight of the index, output 25%, employment 20%, delivery by suppliers 15%, and inventory 10%. The Euro Area manufacturing is seen to be improving when the index is above 50 and contracting when below 50. At 50, the index shows that there is no change in the manufacturing sector.

In November 2020, the IHS Markit Eurozone Manufacturing PMI was 53.8, down from 54.8 registered in October. The October reading was the highest ever recorded in the past two years. Despite the November drop, the manufacturing PMI is still higher than during the pre-pandemic period. We, therefore, assign a score of 5.

  • European Union Retail Sales

Retail Sales measures the change in the value of goods and services purchased by households for final consumption. In the EU, food, drinks, and tobacco contribute to the highest in retail sales – 40%. Furniture and electrical goods account for 11.5%, books and computer equipment 11.4%, clothing and textile 9.2%, fuel 9%, medical and pharmaceuticals 8.9%, non-food products and others 10%.

In October 2020, the MoM EU retail sales increased by 1.5%, while the YoY increased by 4.2%. Based on our correlation analysis with EU GDP, we assign a score of 3.

  • Euro Area Consumer Confidence

The consumer confidence survey in the Euro Area covers about 23,000 households. Their opinions are gauged from issues ranging from economic expectations, financial situation, savings goals, and expenditure plans on households’ goods and services. These responses are aggregated into an index from -100 to 100. Consumer confidence is a leading indicator of household expenditure, which is a primary driver of the GDP.

In November 2020, the Euro Area consumer confidence was -17.6, down from -15.5 in October. It is also the lowest reading since May – primarily because of the new lockdown measures bound to impact the labor market. Based on correlation with GDP, we assign a score of -3.

  • Euro Area Government Debt to GDP

This is meant to gauge whether the government is over-leveraged and if it might run into problems servicing future debt obligations.

The Euro Area Government Debt to GDP dropped from 79.5% in 2018 to 77.6% in 2019. In 2020, it is projected to hit 102% but stabilize around 92% in the long run. Based on correlation with GDP, we assign a score of -1.

In our very next article, we have performed the Endogenous analysis of GBP to see if it has appreciated or depreciated in this year. Make sure to check that and let us know in case of any questions in the comments below. Cheers.

Categories
Forex Course

195. Understanding The U.S. Dollar Index Numbers

Introduction

The U.S. Dollar Index is a measure of the value of the Dollar in respect to foreign currencies as measured by the respective exchange rates. More than half of the index value of the Dollar is measured against the Euro. The British Pound, the Japanese Yen, the Swedish Krona, the Canadian Dollar, and the Swiss Franc. It is a market on its own as well as an indicator of the U.S. dollar strength on a global level. Moreover, it can also be used as the technical analysis to determine trends of various markets.

How Is The US Dollar Index calculated?

Below is the formula to calculate USDX

USDX = 50.14348112 × EUR/USD^(-0.576) × USD/JPY^(0.136) × GBP/USD^(-0.119) × USD/CAD^(0.091) × USD/SEK^(0.042) × USD/CHF^(0.036)

Each currency value is multiplied by its weights. When the U.S. dollar is the base currency, this comes at a positive figure. On the other hand, when the U.S. dollar is used as the quoted currency; then this would come as a negative value. Additionally, pounds and euros are only countries where the U.S. dollar is used as the base currency as they are quoted in respect of the Dollar.

How To Interpret the U.S. Dollar Index?

Similar to any currency pair, there is a dedicated chart of the U.S. Dollar Index (USDX). Additionally, the index is calculated five days a week and 24 hours a day. The U.S. Dollar Index measures the value relative to a 100.000 base.

If the index value stands at 120, this means that the U.S. dollar has witnessed 20% appreciations against other currencies in the basket. This simply implies that the U.S. dollar has strengthened in comparison to other currencies. On the other hand, if the index value shows at 70, this implies a depreciation of 30%

Final Thoughts

The U.S. Dollar Index enables traders to monitor the value of the U.S. dollar in comparison to six currencies within the bracket in a single transaction. Moreover, it also assists them to hedge the bets against risks associated with the Dollar. Investors can use this index to hedge the normal movement of currency or speculate.

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Categories
Cryptocurrencies

Top 5 Best DeFi Tokens for Smart Investors

2020 is undoubtedly one year that will go down in history books. Far from the global health and economic crisis resulting from the pandemic, this year has seen an explosive growth of decentralized finance. In fact, we can only compare it to the 2017 ICO boom. 

It goes without saying that the booming industry has seen developers come up with various DeFi tokens that provide different solutions. So, how do you, as a smart investor, choose the best tokens for your portfolio. 

Well, you really are spoilt for choice when it comes to DeFi tokens. However, if you’d like to make a sound investment decision, you’d better be on the lookout for the best and most promising DeFi tokens. 

It doesn’t sound like an easy decision, which is why we are here to the rescue. Have a look at the five best DeFi tokens that are totally worth your time and money. 

Chainlink (LINK)

Smart contracts are an essential feature of decentralized finance, and the Chainlink Network aims to create a world connected through smart contracts. The decentralized oracle network allows for the creation of smart contracts that are securely attached to real-time data. This functionality makes Chainlink ideal for sending payments anywhere and connecting to any external API. 

The platform’s native token, LINK, has been rising steadily over the last year. At the time of writing, LINK had a $5.299 billion market capital and was trading at $13.633. The proven track record of completed milestones, plus the token’s growth potential, make LINK one of the best DeFi tokens to invest in. 

Wrapped Bitcoin (WBTC)

The introduction of Bitcoin to the world opened up an entire world of possibilities. However, despite all the fantastic features it presented, the Bitcoin network lacked in several ways, which initiated the search for better blockchains that would be more flexible than the rigid parent technology. This search eventually led to the development of the Ether network, which is the core of most DeFi projects. 

Now, suppose you could combine the best features of Ether and Bitcoin? Wouldn’t that be amazing?

Wrapped Bitcoin does precisely that. The token enjoys a 1:1 ratio backing with bitcoin. It comes with the strength of the pioneer cryptocurrency, coupled with the flexibility of ERC-20 tokens. This feature makes it easier for the token to standardize bitcoin to ERC-20, allowing for the creation of Bitcoin smart contracts. 

WBTC is currently trading at $22,703, a 6.07 % increase over the last 24 hours. 

Compound (COMP)

Borrowing and lending are some of the critical features of the DeFi industry. If you’re looking to invest in a token offering lucrative options for these functionalities, you should consider looking at COMP

The ERC-20 token asset gained the massive attention of the DeFi world after its value skyrocketed immediately after its launch, before correcting to normal levels. It is currently trading at $169.984 and has increased by 10% over the last 24 hours at the time of writing. 

Many will argue that COMP isn’t worth investing in since it is only a governance token. However, Compound Protocol, the network behind the token, was one of the first to leverage decentralization in borrowing and lending, a concept that has been around for ages. As more investors realize this protocol’s potential, its value will increase, getting more people on board. 

Polkadot

Investing in different DeFi and crypto projects will have you working with various blockchains. Therefore, you’re going to need one or two projects that allow for true interoperability, which is precisely what Polkadot offers. The network developed by Ethereum’s co-founder, Gavin Wood, has its native token as DOT, which is currently trading at $4.902

The DOT token powers the Polkadot network and fulfills three purposes; staking, bonding, and governance. Staking helps to keep the network secure by incentivizing DOT token holders. The game theory requires that holders behave honestly and those who don’t lose their stake in the network. 

Holders also have complete control over the protocol. They have a say in managing protocol upgrades and fixes and other exclusive privileges that would typically be given to miners on other platforms. 

One of the DOT token’s best features is its bonding, which is a form of proof of stake. The mechanism makes it easier to add new parachains to the networks by bonding tokens. If there are any outdated or non-useful parachains, removing the bonded tokens gets rid of the chains. 

The rigidity of blockchains and the inability to transfer and receive data is a significant setback in the crypto world. Therefore, Polkadot’s ability to transmit arbitrary data between chains and tokens makes this project a worthy investment venture. 

DeFiChain (DFI)

Everyone in the crypto space knows that most DeFi projects are built on Ethereum, the world’s second-largest blockchain network. However, if you’re after a DeFi project built on the King coin, you should undoubtedly check out DeFiChain. This network brings together the security and immutability of Bitcoin and the best of Proof of Stake mechanisms. 

One of the features that make DeFiChain stand out is that it’s a non-Turing complete protocol. Ethereum is a Turing blockchain, which compromises its security. Therefore, anything can happen on the protocol, which is not the case for DeFiChain. Having the network’s core built on Bitcoin also helps to increase the levels of security. 

The DFI token serves several functions on the network. Besides using the token as collateral, for staking, and paying network fees, users can also use DFI to create custom DCT tokens. This unique functionality makes DeFiChain the ideal investment option for crypto enthusiasts looking to make their cryptos work for them. Over the last 24 hours, DFI has increased in value by 16.32% to trade at $0.76593.

Parting Shot

The DeFi scene has exploded in 2020, with new tokens being released by the day. As a smart investor, you’ll undoubtedly be on the lookout for the ideal tokens that will make you more money from your investment. 

When choosing the ideal DeFi token, be sure to check out the solution it provides in the crypto world, its growth potential, and whether it has a proven track of accomplished milestones. It would also be best if you had a look at the team behind the project to have a clear picture of what to expect.

Choosing smart tokens for your DeFi portfolio is only the first step, but many investors will agree that it’s a crucial one. Therefore, if you have no idea where to start, the five tokens in this article should give you a pretty good head start. So, head on over to the official sites, read through their documents, and decide which ones to choose. All the best in your investment ventures!

Categories
Crypto Daily Topic Cryptocurrencies

The Best Use Cases For Decentralized Finance Projects

There’s hardly a facet of our lives left untouched by blockchain technology. From the most ubiquitous to the complex of our engagements, its effects are discernible. But perhaps the one sector where its effects are most discernible is in finance. The shortfalls of the legacy financial systems provide the right environment for innovation to sprout. Fintech firms are outdoing themselves in the production of products and technologies aimed at bettering users’ experiences.

This year has seen the emergence of many disruptive technologies. However, non features as prominently as decentralized finance(DeFi). DeFi is technology’s response to an inadequate financial system. 

In this article, we tackle two significant aspects of Defi. First, the significance of Defi projects. We also present the best use cases to give you insight into this revolutionary technology. 

Let’s get into it!

What is the Significance of Decentralized Finance Projects?

Defi projects are universally beneficial. The buzz they continue to generate emphasizes this truth. Here’re a few of the benefits associated with them:

  • They streamline transactions- smart contracts execute exchanges increasing efficiencies.
  • Increase the security of transactions- they draw on the Ethereum blockchain’s Immutability to secure trades.
  • They are scalable- Ethereum’s composable software ensures that DeFi protocols and applications are interoperable, giving the developers and product the flexibility to build on top of existing ones. 
  • Increase transparency of transactions- distributed ledger technology enables one’s peers to access and verify their transactions, curbing fraud.
  • It is permissionless- DeFi facilitates anyone with a crypto wallet and the Internet to access its applications regardless of their location.
  • Gives the user control over their data- Web3 wallets like MetaMask interact with permissionless dAapps and protocols to provide users custody of their assets data. 

What are the Best Use Cases for Decentralized Finance?

From the preceding, it is clear that DeFi projects are beneficial. The question then arises, where can we best use this technology? DeFi technology has wide usage. The following are some of the prominent use cases.  

i) Management Of Assets

DeFi protocols give users full custody of their funds. Additionally, Crypto wallets help one easily and securely interact with decentralized applications (dApps) for different transactions. These transactions range from trading and transferring crypto to earning interest on their crypto holdings. Tracking one’s assets becomes easy this way.

ii) Gaming

Defi platforms are interoperable. This feature has opened up opportunities for developers to build cross-platform protocols across a variety of verticals. 

Ethereum-based games have gained popularity due to their inbuilt economies and rewards. Take the case of the PoolTogether game. Its users acquire digital tickets using the DAI stable coin. They then pool their tokens for lending on the Compound money market.

iii) Provision of Credit

DeFi allows the creation of P2P lending pools and borrowing contracts. For instance, Compound -an autonomous interest rate protocol- integrates with most DeFi platforms, enabling users to earn interest in crypto that they’ve lent.

Compound’s smart contract automatically matches creditors to borrowers. Additionally, it determines interest rates by comparing the volume of the borrowed to supplied funds.

iv) Decentralized Exchanges

Decentralized exchanges (DEXs) are crypto trading platforms allowing P2P transactions. They achieve this by eliminating central authorities. As they’re non-custodial, they mitigate price manipulation, hacking, and theft.

DEXs are the mainstay of token projects. They enhance their access to affordable liquidity as they allow projects to list without fees. This way, they differ significantly from centralized exchanges that charge higher prices per listing.

The degree of decentralization varies with the exchange. Whereas exchanges may centrally host order books and other aspects of a users’ account, they don’t hold their private keys. Examples of popular DEXs in the DeFi space currently include AirSwap, Liquality, Mesa, Oasis, and Uniswap.

v) Decentralized Insurance

Investing in cryptos (DeFi included) comes with its fair share of risks. As such, different products that hedge against risks in this space are available. They help protect against market crashes, hackings, failure of smart contacts, among others. Nexus Mutual is one such example.

The players within the Defi space underwrite the risk. That is to say, they pool resources to acquire the premium providing the cover. Utilizing smart contracts makes the products transparent. Anyone can access the payout terms via the Blockchain.

vi) Issuance of Synthetic Assets

Synthetic assets are tokenized representations of derivatives. An Ethereum based smart contract locks them to the Blockchain. These derivatives may represent real-world assets, including fiat currencies, bonds, commodities, or even cryptos.

Synthetic assets are tradeable. Consequently, they allow the disposal and acquisition of assets that are illiquid or difficult to obtain. The Synthetix protocol is essential to their issuance. It employs a 750% collateralization ratio that guards against price shocks.

vii) Liquidity Mining

Liquidity Mining, also known as yield farming, is holding digital assets for rewards. Through smart contracts, owners of crypto assets get incentives for keeping rather than trading them.

Participation in these projects requires stacking liquidity provider (LP) tokens. One obtains these through providing liquidity to a DEX, such as UNISWAP. Users then stake their tokens to mind new ones for exchange.

viii) Identity Management

Traditional financial systems rely on KYC guidelines to comply with AML and CFT regulations. Defi, on the other hand, uses Know- your-transactions (KYT) protocols to deter fraud and other financial crimes. KYT uses the behavior of participating addresses rather than individual IDs to assess and stem the risk for financial crime. The assessment is in real-time. 

ix) Enhancing Financial Inclusion

In tandem with Blockchain-based identity systems, DeFi opens up financial opportunities to those previously excluded. It eases collateralization requirements for those seeking credit. Again it delinks creditworthiness from such aspects as income and ownership of property. Instead, it shifts it to attributes like financial reputation and activity. 

x) Development of Stablecoins

A stablecoin is a cryptocurrency whose value depends on a stable asset or group of assets. The supporting assets could be fiat commodities or other cryptocurrencies.

Intended to mitigate the volatility of cryptos, they have found a home in the DeFi space. They are essential in remittances, borrowing, and lending. Another area they’re gaining prominence in is the Central Banks Digital Currencies.

xi) Provision of Marketplaces

Many marketplaces have arisen to exploit DeFi functions. These allow P2P exchanges globally. From them, traders and consumers enjoy a wide variety of products and services.

Final Thoughts

The year 2020 could be defined as the year of Defi. During this period, interest in this disruptive technology peaked. The heightened interest attests to its significance. Not only will it increase access to financial services, but also ease transactions besides securing them. The technology has wide useability. For instance, it is essential in credit provision, creating market places, and even combating financial crimes. Even though it is still developing, it has shown the potential to alter our economic landscape for the better. As we expand research and development in the area, we can only look forward to exciting products and solutions in the space.

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Forex Course

194. Introduction To The US Dollar Index (USDX)

Introduction

The U.S. dollar index is referred to as a measure of the value of the U.S. dollar, which is relative to the value of a series of currencies that are the most important trading partners of the country. The USDX is similar to other forms of trade-weighted indexes that also use the exchange rates from the leading currencies.

U.S. Dollar Index – A Brief History

In the year 1970, the U.S. Dollar Index switched between 80 and 110. This was the time when the U.S. economy was witnessing recession and rising inflation levels. With the Federal Reserve increasing interest rates to cut inflation, money flowed into the U.S. dollar, resulting in a rise in the USD index. In February 1985, the USD Index hit 164.720; this is the highest it has ever been.

However, this caused significant issues for the U.S. exporters whose goods were no longer competitive internationally. Subsequently, strong actions were taken by the U.S. government to make the currency more competitive, with five nations agreeing to manipulate the U.S. dollar in the forex markets.

This made the Dollar Index dropped by 51% over the course of four years. Since that time, the index has tracked the performance of the economy as well as liquidity flows.

Fundamentals of U.S. Dollar Index

This index is presently calculated by factoring in the exchange rates of six leading world currencies, including Euro (EUR), British Pounds (GBP), Canadian Dollar (CAD), Swiss Franc (CHF), Swedish Krona (SEK), and Japanese Yen (JPY). The biggest component of this index is the EUR, which accounts for approximately 58% of the basket. The weights of the rest of the currencies in the index include –

  • GBP (11.9%)
  • JPY (13.6%)
  • SEK (4.2%)
  • CAD (9.1%)
  • CHF (3.6%)

What Impact The Price Of The USD Index?

The USD Index is primarily impacted by the demand for and the supply of the U.S. Dollar. Related currencies of the baskets are also an important factor. These factors impact the price of each pair of currency in the formula that is being used to calculate the value of the U.S. Dollar’s value. The demand and supply of currencies are determined by monetary policies.

In the upcoming course lessons, we will be learning more about the US Dollar index. So, stay tuned. Please take the quiz below before you go. Cheers.

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Categories
Crypto Daily Topic Cryptocurrencies

Top 5 DeFi Projects to Look Out for in 2021

The DeFi industry is still in its infancy stage but has already registered some impressive growth over the years. The industry’s total value is currently locked at $14.92 billion and is expected to grow in the coming year. 

There’s no doubt that DeFi brings about some unique solutions that are quite lucrative for investors of all kinds. If you’ve had your eye on the crypto industry for a while, there are chances that you’ve thought of putting your money in this exciting venture. But if you don’t know how to get started, you may feel stuck when choosing the best projects.

If you’re in this position, this article is just what you need. Buckle up, and let’s dive into the five best DeFi projects you should consider investing in the coming year. 

Uniswap

Anyone who has been in the crypto industry for quite a while will agree that decentralized exchanges were primarily associated with thin order books and poor UX. These issues, coupled with exorbitant fees, centralized gateways, and too many transactions was the reason dex enthusiasts demanded a simple yet effective decentralized exchange. 

Uniswap was launched in 2018 as an automated liquidity protocol for ETH and ERC-20 tokens. The platform has its own token, UNI, which is instrumental in governing protocol changes. 

One of the things that make Uniswap unique is that it doesn’t use order books but instead has an automated market maker. Users only need to select the assets they want to trade, and the platform automatically completes the transaction. 

Uniswap presents several advantages, which is why you should hop onto it already. It has no listing fees for new tokens, and users don’t have to complete the KYC checks. Besides, you get full custody of your funds and an excellent way to earn some extra tokens through the platform’s liquidity pools. 

If you choose to invest in the platform, you could either be a casual user, an arbitrageur, or a liquidity provider, all of whom play essential roles in the ecosystem. 

Yearn Finance

Yearn.Finance should be your go-to project if you’re looking to maximize the annual percentage yields on the cryptocurrencies you’ve deposited in DeFi. The unique project is an array of DeFi protocols built on Ethereum and designed for high-yield returns through liquidity pools and community governed lending protocols. Like Uniswap, Yearn Finance uses an automated market marker to allow users to convert tokens and earn from both lending and trading fees.

Yearn Finance is still relatively new in the industry, having been launched in February 2020. The platform had a rapid ascent in August, which saw its value rise to $650 million, accounting for a significant percentage of the entire industry’s value.

According to Jesse Walden, CEO of Variant Fund, “The unifying goal of all Yearn products is to create a simple, intuitive interface to all of DeFi.”

Yearn’s intuitive interface makes trading easier for all users. The platform is a portal for other DeFi products and has the YFI as its governance token. Yearn is considered entirely decentralized because the YFI tokens cannot be pre-mined, and the platform didn’t hold an ICO.

Although YFI was initially designed to be entirely community-governed, it can now be traded on other platforms such as Uniswap.

Curve Finance

You’ve probably heard of stablecoins, and if you know a thing or two about cryptocurrencies, they must have piqued your interest as an investor. Well, Curve Finance is an excellent DeFi platform if you’d like to trade-in stablecoins efficiently. It provides a solution to one of the most considerable problems in the DeFi sector; price slippage.

Like any other ideal marketplace, demand and supply forces determine the lending rates in DeFi. Now, suppose you want to trade between USDC and DAI. If the lending yield for USDC becomes higher than that of DAI, lenders will want to migrate to USDC. Curve Finance allows you to effectively do this and still earn better than you would with a regular DEX.

Switching between stablecoins effectively helps correct any anomalies in the interest rates that may result from mismatches in the demand and supply. Users can keep their profits once the interest rates are back to normal. 

Curve Finance provides one of the best ways to earn as a liquidity provider with returns of over 300% per year for BUSD. This is made possible by providing liquidity to other DeFi protocols using the deposited funds. This move generates interest for the other protocols, and Yearn, in turn, assigns the interest to liquidity providers. Additionally, they receive some CRV tokens and a cut of the trading fees from the platform.

DAI 

Speaking of stablecoins, DAI is one you should definitely watch out for in the coming year. The coin has its price pegged to the US dollar, which helps maintain its value. Whenever users on MakerDAO, the protocol behind DAI, take out a loan, the stablecoin is created. The decentralized nature of the protocol, together with the lack of volatility, ensures that DAI remains stable and transparent. 

Initially, you’d only be able to use ETH as collateral for DAI. However, the stablecoin now supports different cryptocurrencies as collateral for a DAI loan. You can place your cryptos and get them back for the same price, despite changes in the coins’ values. 

There are plenty of stablecoins available, so what makes DAI any different? Well, if you are really against censorship by governments and other regulatory bodies, you’re going to love using DAI. It is backed by smart contracts, which makes it resistant to censorship. It also provides privacy when transacting since users don’t need to complete KYC checks or create any accounts. 

Kava

Kava developers used various technologies to create a system that would allow users of significant crypto assets to access collateralized loans and stablecoins. The network uses USDX as its stablecoin, and users get to collateralize their crypto assets in exchange for the stablecoin. 

To help you gain a leveraged position in the market, you could take out several collateralized loans. For each of these loans, you’ll receive an equivalent amount of USDX to create synthetic leverage. You can then earn a passive income from the platform by staking and bonding your USDX coins. 

Kava uses a dual token system that ensures usability and flexibility. The native token for the blockchain is Kava tokens, which double up as the governance and voting tokens. Kava tokens help to ensure the platform’s security through staking, which also earns users block rewards. 

Kava has already made a name for itself in the business world by gaining some major entities’ attention. For example, Arrington Capital, Ripple, and Cosmos are behind this DeFi project, which provides some assurance in its profitability and sustainability. 

Parting Shot

There’s no denying that the DeFi industry has taken giant leaps over recent months and will continue to do so in 2021. Like most investors, you’ll undoubtedly want to add long-term value projects to your portfolio, and DeFi is an excellent way to go about it. 

Sure, it’s totally okay to be skeptical about new ventures such as this. However, the DeFi industry has proven to provide solutions to problems poised in centralized finance. 

Just as you would with any other investment, it’s best to do your due diligence and learn as much as possible before placing your money in a DeFi project. These five projects should give you an excellent head start for your 2021 investments. 

Categories
Crypto Daily Topic

5 Crucial Principles for Investing in DeFi

Unless you’ve been blind to the crypto industry in 2020, you’ve undoubtedly caught wind of the DeFi craze. On the one hand, some investors are minting lucrative yields from the industry. On the other, some are losing their life savings. 

If you’ve been following the trend, you’ve probably heard loads of things about investing in the new industry. Influential Bitcoin advocate, Anthony Pampliano, tweeted that all it took to shut down most DeFi dapps was for Jeff Bezos to shut down AWS. The tweet sparked quite a debate on the decentralization aspect, which is the core of DeFi projects. 

Truthfully, investing in DeFi is quite similar to any other worthy project. It comes with risks, and investors need to do their own research before getting on board. 

Well, DeFi is mostly uncharted territory for most investors, including crypto enthusiasts- which is why this article will come in handy. Here are some crucial principles you need to have in mind before deep diving. 

Check the Number of Active Users 

The value of a blockchain is dependent on the number of users, seeing as the technology solely relies on networks. Just like other network companies like Facebook, the more people who join the platform, the more valuable it becomes. 

When determining whether to invest in a Defi project, check the number of active users on the platform. Luckily, unlike other network companies, DeFi projects built on Ethereum allow you to view real-time data on the users. With other platforms such as Twitter and Facebook, you have to wait for the quarterly reports to get this insight. 

Additionally, you should also check the growth in the number of users. You want to invest in a project that registers sustained growth that keeps accelerating over time. The network effects of blockchain mean that the number of users won’t grow linearly as you’d expect, but rather quadratically, as shown below.

Source: Dune Analytics

Put Your Money in What You Understand

“Never invest in a business you cannot understand.” – Warren Buffet.

If you cannot take it from me, then take it from the investment mogul. Buffet has built his empire by investing in multiple businesses over the years, but he always keeps it simple. You should apply the same principle when investing in DeFi projects. 

The DeFi world is complex, and before placing your money anywhere, you should ensure you understand as much as you can. Scam projects take advantage of the industry’s complexity to dupe investors into getting on projects that will not yield much, or worse yet, lead to significant losses. 

It sure is boring, but go through a project’s documents, including the whitepaper, beforehand and understand the basic tokenometrics. What is the project’s native token, if any? How exactly will you make profits? What is the project’s primary aim? 

Similarly, you don’t have to leap for every DeFi project that seems promising. Implement the 20-slot rule to help you separate the wheat from the chaff. 

Watch Out for Gas Fees!

Most DeFi projects will quote gas fees for transactions, which are simply service charges. You’ll probably not bat an eyelid on the gas fees, but here’s why you should. 

For starters, these platforms won’t display the gas fees in fiat currency. Instead, they’ll have it in ETH, which makes it easier for you to ignore it. However, the fees are absolutely real, and when gas fees are high, you’ll probably end up making a loss. 

Say, for example, you want to invest $1000 in tokens, but the service fees are $50 worth in cryptocurrencies. With just one transaction, you’ll already have lost 5% of your investment. 

Usually, gas fees will skyrocket when there are too many people using the network. Therefore, you end up paying more for the same transaction. Higher gas fees also indicate you’re following the crowd, in the case of FOMO. 

As a rule of thumb, stay away from investing in DeFi when fees are high to avoid FOMO and FUD

Don’t Invest in the Platform, Buy DeFi Tokens Instead

If you’ve read up a bit on investing in DeFi, this principle is probably contrary to what you’ve heard from the industry. Yield farming is the most common strategy in DeFi platforms and involves moving your tokens between protocols and platforms to wherever they’ll earn the most interest. This approach is time-consuming since you have to keep checking what platforms are gaining interest so you can move your assets there. 

Although this is a popular way to invest in DeFi, stay away from it. Instead, invest in the protocol, which is quite similar to buying the company’s stock. 

I know what you’re thinking; most of these projects are decentralized, and there are no companies. So, how exactly do you go about that? 

Most DeFi projects will offer governance tokens that allow holders to vote on proposed changes. In this way, you gain something similar to a shareholder’s vote, which is like buying the company’s stock. 

Therefore, instead of locking up your crypto assets on the platform or chasing after yield farming, consider investing in the platform’s native token. If the project is viable, your tokens’ value will keep increasing with an increased number of users, which is just what your investment portfolio needs. 

DeFi is only a Portion of Your Blockchain Investment

Investing in blockchain projects is a fraction of your entire portfolio, and your DeFi investments should be a fraction of that. In other words, your investment basket is an entire pie, blockchain is a slice of it, and DeFi is only a portion of the blockchain investments. 

The majority of your investments should be in stocks and bonds. A smaller portion should then go to the blockchain projects you’re interested in, and an even smaller portion of this in DeFi. This way, if the DeFi markets were to crash suddenly, you’d only make a small loss. 

Similarly, with most of your investments are in stocks and bonds, a crash of the entire blockchain market will only slightly affect your portfolio. 

Endnote

Investing in a new industry requires caution, but when it comes to DeFi, you have to be particularly careful. There are two sides to the coin, and you could either make some good money or incur losses. Whatever the case, be sure it’s what you want to do and that you aren’t only following the ongoing DeFi craze. 

Every investment bears some risk, and you just need to decide which one’s worth your money. So go ahead and identify an investment you’d like and implement the above strategies for an enhanced fighting chance. 

Categories
Crypto Videos

Stimulus Hope Is Driving Up The Dow Jones – Should You Buy Or Short it?


Stimulus hopes drive up the Dow Jones – where next? 

Thank you for joining this Forex Academy educational video

In this session, we will be looking at the Dow Jones 30 Industrial Index and looking for indications of the next likely move.

While the United States economy is still reeling from the ongoing Covid situation, which has as a country in its grip, investors are looking long-term, buoyed on by vaccine news and hopes of a speedy back to normal recovery once it has been rolled out to the general population. 

In reality, of course, this may still take over 12 months to implement. Therefore hopes of the recovery are fuelled by my hopes that the American government will continue to support individuals and companies via a Covid-19 relief aid stimulus to help unemployed and financial relief for other individuals and those who need it.

This has been stifled somewhat by the fact that the discussions between the democrats and republicans have not yet been able to agree on how much money the state should put up. Current estimations are that a $900 billion stimulus bill may include checks for $600 for eligible adults and their independents. 

Some Republicans have asked for hand-outs of $1,200 per individual and $2400 per couple, with $500 going to children, to support families through this critical time.

The plan is that the 900 billion stimulus package will be the first of two parts, with phase one considered as an emergency relief bill, and phase two will kick in during the early part of January 2021, once that has been agreed on.

It is talk of the stimulus package, which has been keeping the Dow Jones at record highs.

This is a daily chart of the Dow Jones 30 industrial index.  We can see that since March 2020, the general trend has been a bull trend to the upside, following on from the earlier crash as the pandemic took hold in early February. The technical line numbered 1 shows the general upward trend as hopes of a V-shaped recovery fuelled investor to buy the index.

More recently, talks of an emergency stimulus package, and especially during November where investors believed a deal was imminent, saw price action move higher from this average and particularly where we see the bullish bounce from the line where we see a steady rise up to the record-breaking 30,000 level at position A. 

Talks of the stimulus package went to and fro between the democrats and republicans, with concerns of the, will they or won’t they agree on a package and where price action moved lower to the trend line at position 2, while talks stalled, and where price action itself bounced this higher trend line, marked as 2, back up at position B C  and D in an overall bias squeeze to the upside, where price continued to flirt with 30,000 and eventually where there was a significant close and open above this key level.

In this 1-hour chart, we can see that price action is seeing resistance at around 30,300.

And by adding this support line, we now have rising wedge formation clearly evident, where price action is fading to the upside, with a potential break above the 30,300 level. Should this immanent covid relief bill be agreed upon, price action could punch higher and continue with potential for the 30,300 level to become a support line and a possible move higher by 200 or 300 points.

There is so much pressure on the American government right now to come up with an agreed amount of stimulus for those who need it that it is almost impossible that nothing will happen. This is what is driving the Dow Jones Index and other US indices higher at the moment.

  

Categories
Crypto Videos

It’s Not To Late To Buy Bitcoin – Follow The money!


Smartest People in the Room are Buying Bitcoin – Winklevoss Brothers Speak Up

Throughout 2020, over a handful of traditional financial giants have picked up stacks of Bitcoin, including the likes of billionaire investor Paul Tudor Jones and business intelligence company MicroStrategy. These investments are a part of a flow of big money that has recently entered BTC, Gemini crypto-exchange co-founders Tyler and Cameron Winklevoss recently stated.

“These are the most sophisticated investors, the smartest people in the room, buying up Bitcoin quietly, so it’s not a fear of missing out thing,” Tyler Winklevoss said in a CNBC interview, published on Dec 11. Major institutions are here now for this bull run, as opposed to Bitcoin’s retail-led bull run of 2017, Tyler explained.

Over the course of 2020, in addition to Tudor Jones and MicroStrategy, ack Dorsey’s Square, Stanley Druckenmiller, J MassMutual, and Guggenheim Partners have all invested substantial amounts of money in Bitcoin. Their crypto plays come as a response to the unstable global economic atmosphere.

Bitcoin is often compared to gold as a store of value as well as an inflation hedge. Both Druckenmiller and Tudor Jones align themselves with this narrative. Tyler Winklevoss added:

“You have publicly-traded companies such as Square and MicroStrategy putting their cash into Bitcoin because they’re worried about the oncoming inflation that would come with all the money printing and the COVID pandemic stimulus packages.”

When asked about Bitcoin’s volatility as an asset used for transactions, the brothers called Bitcoin with its current system a “buy and hold” strategy comparative to gold. “We see Bitcoin as an emergent store of value that will disrupt gold,” Tyler said. “So it actually doesn’t even have to be used as a currency, meaning that the volatility doesn’t matter if it’s actually a store of value.” The billionaire also expects dwindling volatility for the asset as time passes.

Categories
Cryptocurrencies

Should You Invest in Privacy Coins in 2021?

As cryptocurrency use cases increase by the day, several investment opportunities have cropped up, making it increasingly difficult for fintech investors to choose their portfolios’ best options. 

One of the viable investment options in the crypto space is privacy coins. The first of these coins was launched in 2014, paving the way for several others. Today, there are about 86 privacy coins, each with its unique feature. 

Privacy coins are increasingly becoming popular among crypto enthusiasts and investors. If they have piqued your interest, you’re probably wondering if you should invest in them in the coming year. After all, they offer several lucrative benefits that you just can’t ignore. 

Well, this article seeks to provide some answers and determine whether privacy coins will bring in significant returns in 2021. 

What Are Privacy Coins?

Before analyzing their worth as investment vehicles, we must first define what they are and why they are causing a stir in the crypto world.

Privacy coins are a type of cryptocurrency that allows the users’ total anonymity when transacting on the network. Older cryptocurrencies, such as bitcoin, aren’t entirely private. The transactions are recorded on a public ledger, allowing anyone with enough resources and determination to track transactions from their origin to their destination. 

Privacy coins offer different levels of privacy to their users. Some of these coins hide the users’ ID, the origin of transactions, wallet addresses, and balances. The extra privacy makes these coins a favorite for users who prefer not to leave a trail when transacting on a network. 

The enhanced security features of privacy coins make them stand out from other cryptocurrencies. For example, Monero (XMR) uses ring signatures to blur the public ledger. This way, it becomes harder to trace the origin of a transaction, making it difficult to determine the number of coins held by a particular node. 

Dash, on the other hand, has the PrivateSend feature. It uses the CoinJoin technique to mix up the network transactions, quite similarly to how bitcoin tumblers work. 

Privacy Coins and Government Regulation

One of the most significant factors that’ll influence investments in privacy coins in 2021 is government regulation. Over the last few years, governments worldwide have been looking for ways to regulate crypto use in their sovereign states, and some have succeeded

For the most part, the regulation aims to make crypto transactions more transparent, which helps curb illegal activities. While this move is great for other cryptocurrencies, what does it mean for privacy coins?

Crypto enthusiasts are drawn to privacy coins by the lucrative security features. If government regulations are imposed on these coins, they risk being stripped of the extra-security features. 

Will this be the end of privacy coins, and should you invest in them in the face of this impending doom? 

Well, the truth is that members of the crypto community will always have an interest in privacy coins. As regulatory bodies worldwide continue finding ways to dictate how cryptocurrencies are used, the need to remain anonymous will increase. Therefore, investors will shy away from other cryptocurrencies, thanks to the increased scrutiny, and turn to privacy coins. 

The exact market size for these digital currencies is currently unknown. Still, crypto enthusiasts and investors will always turn to them to escape the watchful eyes of the government and regulatory bodies. Privacy coins will keep growing in places with crypto use restrictions as the added security becomes a significant selling point. Therefore, developers will have to find more ways to keep users’ data private on a network, which will ensure the continuous growth of the global market for privacy coins. 

3 Reasons Why You Should Invest in Privacy Coins

The privacy coin market will keep growing and is a worthy venture to look into in the coming year. These digital currencies provide several benefits, including reduced chances of money laundering incidents

If you’re still undecided, here are three reasons why you should put some of your money in privacy coin projects. 

Long-Term Use Case

The crypto industry is ever developing, and new projects keep emerging each day. Although most of them have some sustainable use cases, several don’t have much to offer. As more crypto projects flood the space, only those that provide actual solutions to users’ problems will survive. 

Most crypto enthusiasts got on board with digital currencies because of benefits like anonymity. However, they discovered that older cryptocurrencies like bitcoin weren’t exactly private. Therefore, developers came up with ways to curb this challenge, and privacy coins seem to be the best solution thus far. 

Investors and other crypto users will keep seeking to remain anonymous while transacting, which is why you can be assured that privacy coins are in for the long haul in the crypto industry. 

Freedom of Use

One of the biggest disadvantages of having the government track crypto transactions is that users are limited in using their digital currencies. For example, donating to political organizations or other counterculture groups becomes a problem, especially if the government is against it. 

With other cryptocurrencies, governing bodies only require access to the public ledger to track transactions on the network and figure out where the donations came from. Privacy coins dispel this disadvantage, thanks to the top-notch security features. Therefore, you can always donate to any organization of your choice without worrying about being tracked. 

Portfolio Diversification

Every investor worth their salt knows that one of the crucial factors to successful investments is diversifying their portfolios. Having different investment vehicles reduces the risk of loss and helps ensure greater returns. 

As a fintech investor, you have a variety of investment vehicles to choose from. Investing in privacy coins is one of the ways to get into the crypto industry. It provides a sustainable investment that has the potential for greater returns as more people get on board and find different use cases for these digital currencies. 

Parting Shot

So, is investing in privacy coins in 2021 a good idea? Absolutely!

The industry is growing rapidly, and 2021 will see more crypto enthusiasts get on board. Privacy coins offer one of the most sought-after traits in digital currencies-anonymity- which is why they’ll remain viable for quite some time. 

Like any other investment, you should carry out your research before staking your money. You’re spoilt for choice when it comes to the best privacy coins to invest in, but remember, don’t stake more than you can afford to lose.

Categories
Forex Videos

Forex Trading Algorithms Part 5 Elements Of Computer Languages For EA Design!

 

Trading Algorithms – The Elements of a Computer Language – Part III: Objects

 

The most striking feature of modern programming is object-oriented programming. This video will explain the underlying philosophy and why OOP is such a big deal in modern app development.

 

Procedural programming versus OOP

Traditional programming is based on procedures or functions applied to a pre-defined collection of data structures. The main procedure starts moving and modifying variables and structures to obtain an output to print or display on a screen. 

The main drawback is that most of the primary data is globally allocated and potentially modified by other application sections. Thus a change to improve or correct one section of the code may interact with other sections, potentially creating hard to detect new bugs. The maintenance of large projects based on procedural programming is a nightmare, especially when a different programmer has to do it.

 

Object-oriented programming, on the other hand, uses objects with their own inner data structures. So, code mods happen within a single self-contained object, and any new bug is limited to that object.

 

Classes

The basic unit on Object-Oriented Programming is the Class. A Class is the description of an Object. Then, several objects are to be created using that Class description, called “instances” of the Class. 

Simply put, a Class is a collection of data structures and the procedures or functions allowed for these data structures. Classes provide data and function together. 

In our real-life, we are surrounded by objects with shape and functionality, such as cars, TVs, houses, and pants. All have their intrinsic properties. A vehicle has an engine, four wheels, battery, throttle, brakes, steering wheel, doors, seats, and so forth, and all these parts are also objects. But not all cars are equal; brand, color, engine power, seat materials, etc., change. That also happens with computer objects.

A new class can be created from a parent class, with new functionality, or with changing functionality from the parent class in a process called “inheritance.”

 

An example of a class

The Bag class is just a container for other objects. We can add or take out items to and from the Bag. The main data storage is in the self.data variable. But, bear in mind that self.data is different for every new Bag object created!. We can see that the data structure of the Bag object cannot be accessed but with the supplied methods, addsub, and show.

 

A Python financial class

A financial class can be made of around a historical OHLC data structure. Using it, we can create new information such as indicators and various stats, such as swing high/low length and duration statistics, and other information related to price analysis and forecasting.

You can see an example of what a pro-built class can do by looking at the stock-pandas class package documentation. We can see that the stock-pandas project is solely focused on the creation of a class to handle statistics and indicators for a financial data series, presenting a complete package.

As we can see, the advantages of OOP are huge. Packages can be built, which, later, can easily be versioned, updated, and expanded. The creation of apps using classes and OOP is much more straightforward, so the time needed to complete a project is shortened drastically.

Now that we have reviewed the basics of modern programming, let’s move back to trading algorithms.

Categories
Crypto Market Analysis

BTC/USD Weekly Chart Analysis + Possible Outcomes

In this week’s BTC/USD analysis, we will be taking an in-depth look at the most recent technical formations, as well as look for the possible price outcomes in the following days.

Overview

The crypto sector was nothing short of explosive as Bitcoin pushed past its old all-time highs and reached almost as high as $24,000. The largest cryptocurrency by market cap went into skyrocket mode without facing much resistance until it hit a wall near $23,800. As it failed to break this level twice, it started a consolidation phase.

While Bitcoin’s sentiment is extremely bullish, many analysts call for a pullback and say that the most recent push to the upside is still much overextended. However, Bitcoin is consolidating sideways rather than pulling back. One thing is certain, Bitcoin is preparing for its next move.

Technical factors



Bitcoin is currently in consolidation mode after it hit a wall twice near the $23,800 price level. The price range is getting narrower and narrower as time passes, indicating a strong breakout move out of the current boundaries inevitable. On top of that, Bitcoin’s volume has been steadily declining after the final attempt above $23,777. When it comes to support, Bitcoin’s downside is protected by the 21-period moving average as well as the $22,320 Fib retracement line.

While a move to the downside should be considered healthy, the current price bouncing off of its support levels might be just good enough for BTC to push towards the upside once again.

Likely Outcomes

We can expect three main outcomes for Bitcoin, with the ones starting with an upswing being just slightly more plausible.

  1. Bitcoin’s price can easily shoot up past $23,777 and enter price discovery mode yet again. Not much to say about the target levels there, except that the possible resistance zones might be Fib extensions from the current Fib retracement levels.
  2. Bitcoin’s price is most likely to push towards the upside, hit the all-time high level, and fail to break it, therefore prompting a pullback. In this case, the price will most likely fall below $22,320 and head straight for the $21,420 or even lower (some analysts are calling for a drop below $20,000 and a CME Futures gap fill).
  3. Bitcoin’s price might head straight down and break the $22,320 level, in which case the market will steadily test every single support level that has worked until now.

In any case, a significant increase in volume will be required, and traders should certainly pay attention to it.

Categories
Forex Fundamental Analysis

NZD/USD Global Macro Analysis – Part 3

NZD/USD Exogenous Analysis

To effectively compare the US and the New Zealand economies, we will conduct exogenous analysis using the following fundamental aspects;

  • The US and New Zealand balance of trade difference
  • GDP growth differential in the US and New Zealand
  • The US and New Zealand interest rate differential

The US and New Zealand balance of trade difference

A country’s participation in international trade tends to determine the demand for its domestic currency. If a country is a net exporter, its currency will be in high demand in the forex market, increasing its value against other currencies.

In October 2020, New Zealand’s trade deficit was NZD 500 million compared to the US trade deficit of $63.1 billion. Although New Zealand’s trade deficit is improving, it is still lower than the balance of trade in January. On the other hand, the US trade deficit has been widening throughout the year. The difference between the two countries’ balance of trade is the trade deficit differential. Based on its correlation with the price of the NZD/USD pair, we assign a score of 4.

GDP growth differential in the US and New Zealand

GDP growth differential is the difference between the rate at which the US and New Zealand economies are expanding. It will help to show which economy is growing at a faster pace hence impacting the exchange rate between the two countries. A country whose GDP is expanding faster will enjoy favorable domestic macroeconomic conditions. Hence its currency will appreciate.

In Q3 of 2020, the New Zealand GDP contracted by 12.2% while that of the US expanded by 33.1%. That represents a GDP growth rate differential of 45.3%. If this trend continues, we should expect that the USD will strengthen against the NZD hence a bearish NZD/USD pair.

Based on our correlation analysis, we assign the GDP growth differential between the US and New Zealand a score of -4.

The US and New Zealand interest rate differential

The interest rate differential is the difference between the prevailing interest rates in New Zealand and the US. The country with a higher interest rate tends to attract more capital, inceasing the value of its currency.

At the onset of the coronavirus pandemic, the Reserve Bank of New Zealand cut its official cash rate from 1% to 0.25%. During the same period, the US Federal Reserve cut the interest rate from 1.75% to 0.25%. Presently, the interest rate differential in NZD/USD is 0%.

Based on the correlation with the price of the NZD/USD pair, we assign a score of 1.

Conclusion

The NZD/USD pair has an exogenous score of 1. That means we should expect that the pair will continue on a mild bullish trend in the short-term. Note that this trend is also supported by technical analysis.

As seen in the above 1-week chart, the NZD/USD has successfully breached the upper Bollinger band indicating bullish momentum. This supports our fundamental analysis, as well. All the best.

Categories
Forex Fundamental Analysis

NZD/USD Global Macro Analysis – Part 1 & 2

Introduction

The global macro analysis of the NZD/USD pair will involve the endogenous and exogenous analyses of the US and New Zealand economies. The endogenous analysis will focus on domestic macroeconomic factors that drive the economy. The exogenous analysis will focus on economic indicators that comprehensively compare both the US and New Zealand economies.

Ranking Scale

Both the endogenous and exogenous factors will be ranked on a scale of -10 to +10. A negative ranking for the endogenous means that the factor had a negative impact on either the currency, while a positive ranking had a bullish impact on the currency.

Similarly, when the exogenous factor is negative, it has a bearish impact on the currency pair, while a positive ranking means it had a bullish impact.

Summary – USD Endogenous Analysis

From the above table, a clear deflationary effect can be seen on the USD currency and implies that USD has depreciated in its value since the beginning of 2020. For the complete USD Endogenous Analysis, please check here.

Summary – NZD Endogenous Analysis

The NZD endogenous analysis has a total score of 4. This shows that the NZD appreciated in 2020.

  • New Zealand Inflation Rate

The CPI is the most commonly used measure of inflation in New Zealand. Here are the top categories included in the CPI: Housing with a weight of 24.2%; food and non-alcoholic drinks 18.8%; transportation 15%; recreation 9.4%; alcoholic drinks 7%; clothing, household goods and services, health, and education all have a combined weight of 18.2%.

In September 2020, New Zealand CPI increased by 0.7%. Based on the correlation with the GDP, we assign a score of -1.

  • New Zealand Unemployment Rate

This rate shows the number of New Zealand’s working population out of work and actively looking for gainful employment. As an economic indicator, it can be used to show the economy’s ability to add new jobs to the market.

In Q3 of 2020, the New Zealand unemployment rate increased to 5.3% from 4% in Q2. This shows that the labor market is yet to recover from the economic shocks of the coronavirus pandemic. Based on correlation analysis, we assign a score of -5.

  • New Zealand Manufacturing PMI

This is an index that measures the growth in the manufacturing sector in New Zealand. It is a composite of new orders, employment, inventories, and orders delivered from the manufacturing sector. When the index is above 50, it means that the manufacturing sector in New Zealand is expanding. The sector is seen to be contracting when the index is below 50.

In October 2020, the index declined to 51.7 from 54. However, the index is above the pre-coronavirus levels. That implies the manufacturing sector is recovering swiftly. Based on the correlation analysis with GDP, we assign it a score of 3.

  • New Zealand Business Confidence

In any economy, business confidence goes hand-in-hand with business confidence. In New Zealand, the business confidence index is based on a survey of about 700 businesses. The index is the difference between the number of businesses that anticipate economic improvements and those that expect the economic conditions will decline. The index covers export intentions, profit expectations, employment intentions, activity outlook, and capacity utilization.

In November 2020, the ANZ Business Confidence was -6.9 compared to -15.7 in October. Although in the negative territory, the November reading is the highest since September 2017. This shows that more businesses are becoming optimistic about the future operating environment, mostly thanks to the aggressive expansionary monetary and fiscal policies.

Based on correlation analysis with the GDP, we assign ANZ business confidence a score of 4.

  • New Zealand Retail Sales

In New Zealand, retail sales data is aggregated quarterly. It measures the change in the value of goods and services purchased by households. Remember that consumer expenditure is the main driver of economic growth, which makes the retail sales data a leading indicator of GDP growth.

In Q3 of 2020, the New Zealand retail sales increased by 28% from a drop of 14.6% and 1.2% in Q2 and Q1, respectively. The 28% increase is the largest quarterly increase in 25 years. The YoY retail sales increased by 8.3% in Q3 compared to a 14.2% drop in Q2. Based on our correlation analysis, we assign the New Zealand retail sales a score of 6.

  • New Zealand Consumer Confidence

In New Zealand, consumer confidence tends to correlate with households’ willingness to spend in the economy. The Westpac McDermott Miller Consumer Confidence Index gauges the optimist of New Zealand households regarding the economy. The index covers households’ views on their finances, purchases in the economy, and the overall economy.

A score of above 100 shows an increasing level of optimism, while below 100 shows increasing pessimism.

In Q3 of 2020, the New Zealand consumer confidence index dropped to 95.1 from 97.2 in Q2 and 104.2 in Q1. Q3 reading is the lowest in New Zealand since 2008. Based on its correlation with GDP, we assign a score of -4.

  • New Zealand Government Net Debt to GDP

Gross national Debt to GDP helps both local and foreign creditors gauge a country’s ability to service its debt. This indicator shows the level at which the domestic economy is leveraged. A lower ratio is preferable since it means that the country has a higher GDP compared to its debt. This means that it can be able to access cheap debt in the future.

In the 2018/2019 fiscal year, the New Zealand government debt to GDP dropped to 19% from 19.6% in the 2017/2018 fiscal year. In 2020, the New Zealand government debt to GDP is projected to increase to 27% on account of the government’s aggressive spending to ease the economic pressure from the coronavirus pandemic. Based on correlation analysis with GDP, we assign New Zealand government debt to GDP a score of 1.

In the very next article, let’s analyze the exogenous indicators and forecast if this currency pair seems to be bullish or bearish in the near future.

Categories
Forex Videos

Forex Trading Algorithms Part 4 Elements Of Computer Languages For EA Design!

Trading Algorithms – The Elements of a Computer Language – Part II

 

A computer program is a combination of data structures and a set of instructions or commands in the form of functions that process the data structures to construct a solution or solutions.

 

Control flow tools

To efficiently process information, a high-level programming language owns specific instructions to do mathematical operations, check for conditions, and control data flow.

 

The if Statement:

The if statement is the most basic flow-control instruction. It allows us to check for conditions or the validity of a statement.

for example, 

if x > 0 checks for the variable x being higher than zero. If it is zero or negative, it will deliver a False value. If over zero, it will provide a True condition.

The if statement, combined with the else statement, handles the flow of the information. If/else is mostly similar in all languages. ( Example taken from docs.python.org 

Iterators

Iterators are used to move through the components or a data structure, such as lists or arrays. There are several ways to iterate, some language-specific, but most are present in all languages.

 

 The for statement

The for statement is used to do an orderly iteration on an array or list. In C++, it has the following structure:

for (initialization; condition; increase) . Initialization is the starting point; condition defines the endpoint, and increase sets the step.

CPP example, source cplusplus.com

Python’s for is more versatile and simple. To loop through a list is straightforward (taken from docs.python.org):

But we can use the range() function to do a similar C++ for (taken from docs.python.org):

The While statement

The while statement creates a computer loop that is exited only after a certain condition is met:

For example, the above while loop appends the Fibonacci numbers up to n, storing them in the fibo list. The loop breaks only when a is bigger than n.

 

Function definition

In a computer app, the code repeats itself most of the time, sometimes the values may be different, but the basic computational structure is the same. To organize these computational structures, all computer languages have functions. 

In C++ a funtion is defined with the following structure:

<out type> function name (<type> parameter1, …. <type> parameter n){

body

}

The out type is the output type of the function. It can be an integer, a floating-point, or any other data structure, pointer, or no output at all.

The parameters are inputs to the function but can be used to modify an external structure as well.

In Python, the definition is simpler. 

def function_name ( parameter1…parameter n):

body

If the function returns a value or data structure, it is delivered through a return statement.

The following example shows the fib function, which computes the Fibonacci numbers up to the input parameter. The results of the Fibonacci computations are stored in the fibo list, which, after exiting the while loop, is returned. The variable res is assigned the output of the fib function and printed. Please note that the last two statements are not part of the fib function.

The last introductory article on high-level languages will talk about classes, objects, and object-oriented programming.

Once we have completed this basic wrap-up on programming language features, we’ll start studying trading-focused algorithms in the coming videos.

Categories
Forex Videos

US Stock Indices – Which Currencies Should You Be Buying Right Now!


US stock indices – Bad news is the new good news!

Thank you for joining this forex academy educational video.

In this session we will be looking at us stock indices,  and trying to reason why they are at record highs when the US economy is faltering due to the ongoing coronavirus pandemic.

This is a chart of the S&P 500 index which measures the stock performance of 500 of the largest companies listed on the United States stock exchanges it is a commonly follow equity index.

On Friday the 4th of December 2020 the index rose to an all-time record high currently sitting at 3699.  Remarkable considering the unit United States is still in the grip of the coronavirus pandemic and where hospitals are currently overrun with victims of the disease across the United States, and especially New York and California, where ICU capacity is down to just 15%, and where the governor of California has recently said he expects large areas of the state of California to be locked down within the next few days affecting businesses and individuals’ livelihoods.

 In an almost identical trajectory since march the Dow Jones industrial average index has also reached record highs and is holding ground above the key 30,000 level.  This is simply staggering bearing in mind millions of people are still unemployed and gross domestic product and have a key indicators show that the American economy is not showing a V-shaped recovery, as was expected and hoped for by the federal reserve.

The NASDAQ Composite index and Barrons 400 also simultaneously hit all time highs. A rare occurrence.

Conversely the US dollar index, or DXY, which is a weighted index against major currencies including the euro, British pound, and yen, over the same period since the middle of march 2020 has been falling from its peak of 103.00, to 90.7 at the time of writing.

Traders have been using the dollar index as any inversely correlated technical analysis tool in particular when trading the Dow Jones 30 industrial average.

One of the reasons for this is that as the federal reserve pour billions of dollars into the system many of these are being used by institutions, traders, speculators and investors to buy stocks and shares in the hope that the US economy will quickly recover once the pandemic is under control within the United States and things revert to normal, and where history tells us that many stock indices go on to recover over 10% of their market value following previous pandemics, including Sars, and asian bird flu.

 It was no coincidence that these levels were reached after the November us non farm payroll where the unemployment rate fell to 6.7% from 6.9% and where 245,000 jobs were added, and although just year ago these types of numbers would have been seen as fantastic for the American economy,  the November key jobs report, where analyst expectations were  for over 600,000 jobs to have been added, was seen as disappointing.

 

And so while the US economy looks to be stalling and payroll numbers are weak and yet there is such optimism by investors which is keeping the US stock market buoyant. So what is going on what is really behind this?  Certainly, the US dollar seems to be reflective of the poor state of affairs with the United States economy.  And as previously alluded to, some of these dollars are finding their way back into the stock market, even though some major American corporations are lagging. The news that the covid vaccine will soon be rolled out across the globe has encouraged investors, but the truth may be that the market is expecting that the woeful economic data will simply force congress to quickly pass a stimulus bill before the Christmas break, and this would effectively prop up the American economy providing a much-needed lifeline for workers and businesses and where some of the anticipated $900 billion being talked about as a potential amount which could be agreed by both the democrats and republicans would likely maintain the buoyancy in the stock markets. The flip side of the stimulus is that on a supply and demand basis the influx of dollars will likely weigh on the dollar index providing counter currencies such as the Euro, Canadian dollar and the Australian and New Zealand dollars a lift.    

 

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Forex Course

193. Summary – Carry Trading

Introduction 

Carry trade involves borrowing or selling of an asset that has a low-interest rate, for the purpose of using the fund proceeds to make another investment with a higher rate of interest. By paying a lower rate of interest on assets and collecting a higher interest rate from another asset, traders make a difference in the interest rate.

Currency Carry Trading – How Does It Work?

In currency carry trading, the trader borrows one currency known as the borrowing fund. And, then they use this fund to purchase another currency. The traders pay low-interest rates on the borrowed currency while collecting a higher interest rate on the purchasing currency. This type of trade gives traders an effective alternative to purchasing low and sell high, which is difficult to do on other trading options. AUD/JPY and NZD/JPY are the most common currency pairs to carry trade.

Opportunities & Risks Involved

The most profitable time to perform a carry trade is when the country’s central banks are increasing or about to raise the interest rate. Low volatility situations are also profitable for these trades as traders are more likely to take more risks. Granted that the value of the currency does not fall, traders are likely to get a good amount.

There is a big risk associated with currency carry trading, primarily because of the uncertainties associated with the exchange rate. When high leverage levels are used in this trade, it implies that even small movement in the exchange rates can result in a substantial loss if the traders fail to hedge their positions properly.

Risk Management 

While lucrative, carry trading comes with its own share of risks. This is because currencies are prone to volatility. Moreover, the negative market sentiment of the traders within the currency market can also have a substantial impact on carry pair currencies. Without improper risk management, traders could end up bearing a high degree of risk. The best way to avoid risk in a carry trade is when the market sentiment and fundamentals support them.

Final Thoughts

If you are looking to invest in a carry trading, the first steps are to select the most lucrative broker vs currency pair combination. The charges of brokers vary significantly across various currencies. Therefore, it is important to ensure that the trade offers an effective risk-adjusted return. Cheers.

Categories
Crypto Videos

Is Crypto Now The Only Way You Can Pay For Porn? Verge & Bitcoin Domination!


Visa and MasterCard Cut Off Pornhub – Verge Cryptocurrency in the Spotlight

Verge, the cryptocurrency now infamous for its links to none other than the porn industry, is on the rise again — all thanks to a classic fiat money scandal.

As the adult entertainment giant Pornhub confirmed in the second week of December, payment providers Visa and MasterCard will no longer service its payments, leaving only Verge cryptocurrency for its roughly 120 million daily visitors.

The reason for the payment providers pulling out is, as the companies say, all the questions which remain over the way Pornhub is dealing with illegal content. While the suspension is permanent for MasterCard, Visa will continue to monitor its decision and possibly revert it once the dust is settled.

Responding to this event, Pornhub told the Associated Press that the allegations towards it were “irresponsible and flagrantly untrue.” Visa and MasterCard were not the first payment processors to do this, as PayPal has already done the same thing, effectively forcing the company to lean exclusively on crypto payments.

While seriously bad for the website, the move has greatly improved the Verge’s outlook.

At the time of writing, XVG/USD traded at almost $0.007, having matched highs from June. Verge is currently the 97th largest cryptocurrency, sitting at a total market cap of $112 million.

Responding to Pornhub’s troubles, a member of the Verge Core Marketing Team, Mark Wittenberg, appealed to users to consider Verge as a currency. “It is our position to be used as a currency. If any models at @Pornhub need any form of assistance in getting familiar with the payment options, it’s our role as a worldwide community to help out.”

With Pornhub also accepting Bitcoin and Litecoin while also allowing their models to cash out in a number of other altcoins, Verge’s appeal may still remain limited.

Verge originally partnered with Pornhub back in April 2018 and helped it stay afloat as the original “altseason” came to a swift end. 

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Forex Basic Strategies

The Most Reliable 5-Minute Forex Scalping Strategy

Introduction

Scalping is a type of trading that involves placing many trades in a single day to profit from minor price changes in the Forex market. Traders who use this strategy are known as scalpers. It is crucial to have a robust exit strategy for scalpers to earn large gains from small market moves.

Scalping strategies are mostly applied to the intraday markets, and the trade holding duration can vary from a few seconds to minutes. For novice Forex traders, this type of trading is not recommended as scalping involves a fast-paced activity that requires precision in timing and execution.

We must always use a smaller timeframe such as a 5-min or 1-min for scalping the Forex market. We can use various reliable indicators for scalping, but in this article, we’ll learn how to scalp the 5-minute timeframe using Bollinger Bands.

Why Bollinger Bands?

Bollinger Bands is a technical analysis tool that was developed by John Bollinger. This indicator is composed of three lines as follows – A Simple Moving Average, which is the Middle band, the Upper Band & the Lower Band. The usage of Bollinger Bands indicator goes like this – the closer the price action moves to the upper band, the more overbought the market. Likewise, the closer the price moves to the lower band, the more oversold the market. The bands in this indicator widen and contract based on the market volatility. They expand when the market activity is increased and contract in choppy or less volatile markets. Let’s use this indicator in the 5-min timeframe to identify potential trading opportunities.

Scalp Trading With Bollinger Bands

We must go long when the price hits the lower band and look out for short-selling opportunities when prices hit the upper band. This is the traditional way of trading the market using Bollinger bands which is still being used by scalp traders across the world. The reason why this strategy is famous is because of its ease of usage and its ability to milk quick buck from the market.

Scalping Ranges – Example 1

In the below price chart, you can see that we have taken five buying and four selling trades in the EUR/NZD Forex pair. In this example, we have applied this strategy in a ranging market. When the price approached the support line, and when it also hit the upper Bollinger band, it is an indication for us to go long. Similarly, when the price goes near the resistance line in a range, it is an indication for us to close our long positions and look for selling opportunities.

By doing this, we have been continuously engaged in the market and made some consistent profits overall.

Example 2

Below is another example of scalp trading the Forex market when it is in the consolidation phase. Typically in a range, both the parties have equal strength. Also, it is a known fact that it is comparatively hard to trade the consolidation markets than the ranging markets. However, using this strategy, we have managed to take five buying and three selling trades in the GBPJPY Forex pair.

Scalpers typically go long or short when the price approaches the upper or lower range lines. This is the right approach, but by pairing that strategy with an indicator like Bollinger band can drastically increase the probability of those trades. The USP of the Bollinger band indicator is that it works well in all the types of market situations. It really doesn’t matter whether you scalp the ranges, channels, or even trends; this strategy will always provide reliable trading opportunities.

Example 3

In the below price chart, the price was dragging towards the upside, indicating a buying momentum, but it ended up forming a channel. In a channel, both parties hold equal power and us being scalpers; it is easy to make money from both sides. Below we can notice that if we go either long or short, we can make an equal amount of money if we are right. This is the major benefit of using Bollinger bands in channel conditions.

Scalping Trends – Example 1

Below is the price chart of the AUD/JPY currency pair in an uptrend. As you can see, during the pullback phase, the market gave us the first buy trade. When the price action approached the upper Bollinger band, the price immediately moved in the opposite direction. As a scalper, prepare your mind for these kinds of quick moves. Follow the rules of the strategy to the point, and if any trade goes three to four pips against you, immediately exit and wait for the next opportunity.

Our third buy trade also performed, but it didn’t go for bigger targets. Instead, the price action immediately reversed, which end up generating a sell signal. The next buy trade was also ended u with minor profits. For scalpers, even a profit of 8 to 10 pips can be considered good in a single trade.

Example 2

Below is an example of buying and selling trades in an uptrend in the AUD/JPY pair. We are saying this pair is an uptrend after analyzing its higher time frame. In the lower timeframe, the market may seem to be ranging, but since we know that this pair is up-trending overall, we must consider buying opportunities over sell signals.

The markets gave us five buying and three selling trades in this pair. Even though we have identifies many sell signals, we recommend not to enter those unless you have confirmation. Always remember that trend is your friend and trade according to the trend. This is the essence of scalp trading the trending markets. Therefore, when scalping trends, always go for bigger targets by following the trend. Also, expect less accuracy on counter-trend trades.

Conclusion

It requires a lot of practice to master scalping. Since the time frame is small, you must be quick in everything you do while scalping. Also, talking additional confirmations is not possible in this form of trading because of its swift nature. Please practice these strategies on a demo account before you apply them on the live markets. All the best. Cheers!

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Forex Fundamental Analysis

USD/CHF Global Macro Analysis – Part 3

USD/CHF Exogenous Analysis

The exogenous analysis covers fundamental indicators that can compare the performance of the US and Swiss economies. Note that this comparison between the two economies is what drives the exchange rate of USD/CHF. They are:

  • US and Swiss interest rate differential
  • The difference in the GDP growth in the US and Switzerland
  • Balance of trade differential

Balance of trade differential

For each country, the balance of trade shows the demand for the domestic currency in the international market. When a country has a surplus of the balance of trade, it means that its currency is in high demand in international trade. The rationale behind this is that when a country exports more than it imports, other countries will need more of that country’s currency to participate in international trade.

The balance of trade differential measures the difference between the balance of trade in Switzerland and the US. If the Swiss balance of trade is higher than that of the US, the USD/CHF pair will be bearish.

In October 2020, Switzerland had a trade surplus of CHF 2.9 billion while the US a deficit of $63.1 billion. Throughout 2020, the US trade deficit has been widening from $37 billion in January, while the Swiss trade surplus has increased from CHF 2.8 billion.

Based on the correlation with the USD/CHF pair, we assign the balance of trade differential a score of -5.

US and Switzerland interest rate differential

Typically, the country with a higher interest rate attracts more foreign capital seeking superior returns. A higher interest rate increases the domestic currency demand, which makes it appreciate in the forex market. More so, forex traders tend to be bullish on the currency with the higher interest rate.

The interest rate by The Swiss National Bank is -0.75% since January 2015. In the US, the federal funds rate is 0.25%. That makes the interest rate differential 1% for the USD/CHF pair.

Based on the correlation analysis with the USD/CHF pair, we assign the interest rate differential a score of 3.

The difference in the GDP growth in the US and Switzerland

A country’s GDP is primarily driven by domestic consumption. Although the GDP size differs in absolute terms, we can compare the US and Swiss GDP in terms of growth rate. An expanding economy is accompanied by appreciating currency. Therefore, if the US growth rate is higher than Switzerland’s, we can expect a bullish trend for the USD/CHF pair.

In Q3 of 2020, the Swiss economy expanded by 7.2% and the US by 33.1%. It means that the US economy is recovering faster than that of Switzerland. We, therefore, assign a score of 2. This implies that the GDP growth rate differential between the US and Switzerland has led to a bullish USD/CHF.

Conclusion

The USD/CHF pair has an exogenous score of -2. This implies that we can expect the pair to continue with its current bearish trend in the near future.

Note that the USD/CHF pair has breached the lower Bollinger band. Therefore, we can expect the downtrend to continue for a while, which supports our fundamental analysis. All the best.

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Forex Fundamental Analysis

USD/CHF Global Macro Analysis – Part 1 & 2

Introduction

When conducting the global macroeconomic analysis, endogenous and exogenous factors are considered. These analyses can be used to explain the price dynamic of a currency pair. In this case, we will analyze the endogenous factors that drive the economy in the US and Switzerland. We will also analyze the exogenous factors that primarily drives the price of the USD/CHF pair.

Ranking Scale

A sliding scale from -10 to +10 will be sued to ranks the impact of the individual endogenous and exogenous factors on the currency. A negative ranking for the endogenous factors means that they had a depreciating impact on the individual currencies, while a positive ranking means they resulted in currency appreciating.

Similarly, a negative ranking for the exogenous factors implies that they’ve had a bearish impact on the currency pair, while a positive ranking means they’ve had a bullish impact.

Summary of USD Endogenous Analysis

From the above table, we can see a clear deflationary effect on the USD currency and implies that it has depreciated in its value since the beginning of the year. You can find the complete USD Endogenous Analysis here.

Summary of CHF Endogenous Analysis

Overall, the endogenous analysis of CHF has a score of -5. That implies that the CHF is expected to have depreciated marginally in 2020.

  • Switzerland Inflation Rate

The rate of inflation is used to measure the changes in the price of consumer goods in Switzerland over a specified period – usually monthly or yearly. Here are the components of the CPI in Switzerland: Housing and energy, which accounts for 25% of the total CPI weight; 16% for healthcare; Transport accounts for 11%; Food and non-alcoholic drinks 11%; hotel and restaurant services 8%; 4% for Household goods and services; and clothing 3%. Education, communication services, and alcoholic beverages cumulatively account for 7% of the total CPI weight.

In November 2020, the YoY CPI in Switzerland dropped by 0.7%, while the MoM CPI dropped by 0.2%. The fall in prices of the hotel and holiday packages contributed to the drop in the inflation rate. The Switzerland CPI is at the lowest point since January 2018.

Based on our correlation analysis, we assign the Switzerland rate of inflation a score of -3.

  • Switzerland Unemployment Rate

This economic indicator shows the percentage of the total Swiss labor force that is actively seeking a job. Note that not all unemployed portion of the working-age population are seeking employment; so, they are not captured by the unemployment rate.

The unemployment rate can also be used to show the rate at which the economy is adding or cutting job opportunities. This can be used to show economic growth.

In October 2020, the Swiss unemployment rate was 3.2%, down from highs of 3.4% in May, while the employment rate in Q3 2020 was 79.7%. Although it is higher than the 79.1% registered in Q2, it is still significantly lower than the pre-pandemic rate of 80.4%.

The Swiss unemployment rate has a high correlation with the GDP, but since it only increased marginally, we assign it a score of -2.

  • Switzerland Manufacturing PMI

The Swiss procure.ch Manufacturing Purchasing Managers’ Index surveys the executives in the manufacturing sector. The index is a measure of the Swiss manufacturing sector’s performance and serves as a leading indicator for business expectations.

The Manufacturing PMI is an aggregate of five components: new orders, which a weight of  30%, output 25%, employment 20%, supplies 15%, and inventory 10%. The manufacturing sector is expected to expand when the index is above 50 and contract when the index is below 50.

In November 2020, the Swiss procure.ch Manufacturing PMI increased to 55.2, the highest since December 2018. Based on the correlation analysis with the GDP, we assign a score of 7 since it shows a robust expansion.

The Swiss services industry employs over 60% of the working population and accounts for 73% of Switzerland’s GDP. This makes the services PMI a crucial indicator of the overall economy. The Services PMI is obtained through a comprehensive survey of 300 purchasing managers in the services sector to evaluate the changes in business activities.

The survey covers areas such as customer new orders, purchasing, and sales prices, and changes in the employment level.

In November 2020, the Swiss services PMI dropped to 48 from 50.4 in October, primarily attributed to new orders’ contraction. Although it is almost double the 21.4 recorded in April, it is still lower than the 57.3 recorded in January 2020. We, therefore, assign it a score of -4.

  • Switzerland Consumer Confidence

In Switzerland, consumer confidence is used to evaluate households’ opinion on the overall economy and their financial position. Typically, consumer confidence is higher when there is high GDP growth, and the unemployment rate is low.

In the fourth quarter of 2020, the Swiss consumer confidence was -12.8, better than Q2 -39.3. Consumer confidence is used to show the likelihood of how much households will spend in the economy. Hence we assign it a score of -2.

  • Switzerland Government Gross Debt to GDP

The Swiss government debt is the totality of the government’s amount owed to both domestic and foreign lenders. This debt is expressed as a percentage of the GDP o help determine the indebtedness of the economy. Lenders also use this metric to determine if there is a possibility of default by the government. Typically, government debt that is less than 60% of the economy is considered ideal.

In 2019, Switzerland’s government gross debt to GDP was 41%, and it’s projected to hit 49% in 2020 due to increased government expenditure to curb the economic slowdown brought about by the coronavirus pandemic. However, the Swiss government’s gross debt to GDP has been steadily declining since 2004, averaging at around 37%. Based on our correlation analysis and the fact that it has marginally increased in 2020, we assign a score of -1.

Now we know that both USD and CHF have depreciated according to their respective endogenous indicators. Please check our next article to know if this pair is expected to be bullish or bearish in the near future according to their exogenous indicators. Cheers.

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Forex Course

192. Criteria To Carry Trade The Forex Market and Risks Involved

Introduction

In the previous lesson, we discussed instances when a carry can work, and when it’s bound to fail. But, having this knowledge won’t be of much help if you do not know the best criteria for a currency carry trade and the risks involved.

Criteria to Carry Trade

There are two basic criteria to carry trade the Forex market profitably.

The interest rate differential between two currency pairs needs to be high with no prospects of reducing in the near term.

The currency pair that we choose has to be on a bullish trend in favor of the currency with the higher interest rate. The reason for this is to ensure you can remain bullish on the high yielding currency and profit from the interest rate differential for the longest possible time.

Let’s take the example of the AUD/JPY pair. Japan’s interest rate has remained at -0.1%, while in Australia was held at 0.25%. That means the interest rate differential between the AUD/JPY pair has been 0.35%. Therefore, if you were to borrow and sell the JPY to buy the AUD, you’d expect a pay-out of 0.35%. Note that this is the same as going long on the AUD/JPY pair.

In this scenario, going long on AUD/JPY from March 2020 to October 2020 would have earned you over 900 pips. At the same time, you’d be earning an interest rate differential of 0.35%.

Risks Involved In Carry Trading

So far, a carry trade sounds like a risk-free strategy. But, like any other investment, the carry trade has its fair amount of risks – especially when leverage is involved.

Remember, in the previous lesson, we mentioned two conditions for a carry trade to thrive. First, there had to be low volatility in the market. The reason for this is to ensure that your open position is not wiped out due to currency fluctuations before you reap the profits of interest rate differential. Note that using trailing stop orders can help mitigate the risk of price fluctuations in the forex market.

The second condition for a carry trade to thrive was the stable economic conditions that might encourage the hiking of interest rates. If the economic climate is full of uncertainties, like with the ongoing coronavirus pandemic, central banks are more likely to cut interest rates than hike them. Therefore, if extreme interest rate cuts occur while you are in a currency carry trade, it could result in losses. 

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Crypto Daily Topic Cryptocurrencies

How Bitcoin Has Transformed Crowdfunding

Before the world started seeing cryptocurrency as a valid way of sending and receiving money, global charities and fundraisers relied on slow, geographically-limited, censorship-prone, and expensive donation methods. Admittedly, raising funds to promote educational content for children with special needs wasn’t a particularly easy feat a decade ago – just, for example. Bitcoin came, and activities in the crowdfunding space started breathing a new life. Fundraising for charity causes moved from local to international audiences, and project champions shifted their reliance from donors to the general public. 

In this article, we look at how the adoption of cryptocurrencies (Bitcoin) has transformed crowdfunding. We will review why Bitcoin was best suited for the job and the different forms in which crowdfunding has manifested.

Why Bitcoin?

It would be unfair to dismiss the contribution that altcoins have made to the transformation of crowdfunding. However, Bitcoin remains the leading crypto and, by far, the biggest contributor to this transformation. The transformation has mainly been due to the following characteristics, which fiat currencies lack:

#1. Anonymity – There are crowdfunding causes in which contributors wish to remain anonymous. The (relatively) anonymous nature of Bitcoin has made this possibility a reality. 

#2. Global presence – Unlike fiat money, Bitcoin is available in virtually all the countries of the world. This has made it a suitable currency for collecting donations from multiple countries. 

#3: Lower transaction costs – Compared to traditional money transfer platforms, Bitcoin offers relatively lower fees. While this might not make much difference to a user donating $5, a charity could realize massive savings, particularly if it has to bear the transaction’s cost. 

While Bitcoin has taken the lead, other cryptocurrencies have gained popularity in the recent past, especially due to increased privacy concerns. For instance, Monero, Zcash, and Dash have seen a rise in use among fundraisers focused on privacy. 

Centralized versus Decentralized Crowdfunding 

The case against centralized crowdfunding has been gaining momentum, with proponents arguing that it goes against the spirit of cryptocurrencies. Centralized crowdfunding has nothing to do with the centralized nature of fiat currencies. Instead, it is the idea that crowdfunding should not be facilitated by organizations in business just for that. There are firms, such as Patreon, whose core business is collecting funds on behalf of charities. Such organizations have been condemned for giving preferential treatment to charities they consider worthy of public support. 

Given this background, crowdfunding can either be organized privately or through centrally-managed platforms. Similarly, it can be done for individuals or organizations. Crowdfunding platforms are able to reach a wider audience within a short time, but usually charge some commission. Some of the common ones include Classy, Fundly and Crowdwise, which are popular among nonprofits. For personal fundraisers, sites such as GoFundMe and YouCaring are common. Individuals can also raise funds by posting requests on social media. The bottomline is, there is no one way to crowdfund. 

So, let’s look at some of the different ways through which Bitcoin has made the crowdfunding scene more exciting. 

#1. Venture Capital (VC) Funding

When small and medium-sized enterprises want to expand, they usually seek capital from investors. In such cases, investors offer their support in exchange for part ownership of the enterprise, which they call equity. Such investors can end up acquiring a majority stake in the enterprise and controlling the company, possibly against the founders’ vision. This undesirable situation is easily avoidable through alternative crowdfunding approaches discussed below.

For various reasons, such as higher returns, venture capitalists have shown a lot of interest in supporting blockchain projects such as PiggyBank, BlockCypher, and Chronicled. The growing prospects for Bitcoin have further boosted the confidence venture capitalists have on blockchain-based startups.

Apart from inspiring traditional venture capitalists, Bitcoin has also created a new breed of crypto-focused VCs such as Node Capital. The contribution of such VCs in powering new enterprises cannot go unnoticed. For instance, investments in companies such as Coinbase and Ripple are now paying off handsomely. 

#2. Initial Coin Offerings (ICOs)

ICOs have become the new standard for startups to raise funds for their projects. Unlike traditional venture capital funding, ICOs do not target high net-worth investors, neither do they promise equity in the business. On the converse, they allow ordinary people to contribute to the growth of a project and get tokens in return. These tokens can be redeemed, exchanged for crypto or fiat money, or accord holders special privileges in the company. 

ICOs provide startups with a promising avenue for generating funds for whatever project the founders envision. Without the widespread adoption of Bitcoin, most of these startups would still be struggling to raise capital to bootstrap their operations. 

#3. Anonymous Donations

Crowdfunding has found its way to anonymous donations, especially in the wake of increased government censorship. Where authorities believe organizations are raising funds for clandestine or outright illegal projects, they normally freeze donations. For organizations that insist on pursuing their fundraising objectives despite government restrictions, anonymous fund transfer becomes the only available option. 

Bitcoin offers a substantive level of anonymity when it comes to transferring funds. While receiving addresses can be linked to a specific organization, the actors behind the organization can choose to remain anonymous since transacting with Bitcoin does not necessarily involve any know-your-customer (KYC) processes. The obscurity provided by Bitcoin’s privacy also benefits donors since those who do not wish to be identified with a certain movement can donate without leaving any trace of their identity. 

Activism has equally benefited a great deal from anonymous donations, thanks to Bitcoin. Activist movements, such as #EndSARS would have suffered a large blow if donations were restricted to fiat money. You see, it is very difficult to raise money to fight a government when you’re relying on currency issued by the same government you’re fighting. Other than beating logic, such efforts are tantamount to pushing against the wall.

Final Thoughts

Bitcoin has shaken many finance subsectors. Crowdfunding, which is a form of alternative funding, is among those sectors that have seen a massive transformation. Bitcoin has made crowdfunding possible from privacy-focused charities to those seeking support from global audiences in circumstances where it was previously impossible. The idea of crowdfunding using crypto has also inspired new funding initiatives, such as anonymous donations. It has also become easier for small organizations like startups to raise funds to power their ideas. End users have had new opportunities to contribute to ideas they believe in and would love to support – something that was less heard of before the age of Bitcoin crowdfunding. Overall, Bitcoin has made crowdfunding more accessible to the masses, which has in turn inspired radical ideas across the fundraising industry. 

Categories
Crypto Videos

Origin Dollar Is Compensating Investors After The $7,000,000 Hack!


How Can DeFi Improve Adoption Rates? Origin Dollar’s Compensation Plan Announced

Decentralized finance stablecoin project Origin Finance announced its plan to compensate users affected by a $7 million exploit that happened in Nov.

On Nov 17, Origin Dollar announced that its yield-bearing stablecoin project had been the subject of a $7 million flash loan attack. While this attack is just another instance of the numerous hacks and exploits hitting DeFi projects this year, the Origin Dollar team’s response stands out as it intends to fully compensate the affected users.

In a blog post that came out on Friday, Dec 11, Origin Dollar product manager Micah Alcorn has laid out a multi-tiered plan that would immediately pay 75% of its users their lost funds, all denominated in Origin Dollar’s stablecoin OUSD.


On the other hand, for larger depositors, payments would be a slightly more complicated process, as they would involve a 1-year time-locked quantity denominated in the e-commerce utility token OGN. This means that whether or not these larger depositors will be 100% compensated for their loss will depend on the utility OGN token’s performance.

Even with the timelock included in the payout plan, Alan, a semi-anonymous core developer for the insurance-coverage protocol Cover, says that the effort coming from Origin might help attract new users to the DeFi space. 

He stated that this type of behavior sets a precedent that allows DeFi users to feel more confident in the platforms that they use, which would, in turn, help with the adoption of the protocols themselves. According to Alan, the Cover project he is working on has nearly tripled its total value locked ever since its users decided to cover the Pickle Finance hack.

Following the same trend, Nsure Network — another coverage protocol currently in testnet phase — has been doing great lately, rising nearly 60% on the month.

As the hack and fraud coverage tools develop, Alan recommends that developers take their time to seriously investigate launching projects with coverage plans and clear exploit contingencies as a core feature.

“DeFi needs to set a strong precedent that the protocols themselves need to be held accountable if they manage to get hacked, rather than its users. From what I’ve seen with the recent exploits happening, getting hacked simply means ‘Oops, we’ll make sure to patch this bug and do better next time’ to most projects. Having an “insurance fund” really brings comfort to users, as they now know that if the protocol gets hacked, their deposits are, at least to some degree, covered.” – said Alan.

If DeFi is ever going to truly break mainstream, these kinds of protections and contingency plans might be a requirement rather than just a luxury.

Categories
Forex Videos

Make Money In Forex With Less Risk Counter Trend Trading!

 


How to reduce risk while counter trading a trend

Thank you for joining this Forex Academy educational video.

In this session, we will be looking at how to reduce your risk in a counter-trend set up.

Trading against the trend is inherently risky.  However, as your experience grows as a trader, you will likely start seeing opportunities where trends run out of steam and look right for a reversal.  These kinds of trades can often be extremely profitable if the timing is right. 

Of course, trading any financial asset, but specifically foreign exchange, is almost impossible to correctly find entries and exits which are down to the pip perfect, i.e., identifying an entry or exit of a particular move within a single pip.

This is where it is important to adopt a variable approach to leverage.  Quite often, new traders will simply execute the same amount of leverage per trade, no matter what the circumstances.  So any particular trade, they might open with half a standard lot, or even a full lot, no matter whether they are trading after an economic data release, which might be low impact or a high-impact release such as non-farm payrolls, they keep their trade size the same no matter what, and this can be particularly dangerous and it is a poor aspect of money management.  A variable approach is another string to the bow of becoming a more rounded trader.

This is a 4-hour chart of GBP USD

The majority of the price action as shown during position A in this section from the 24th of November to the 3rd of December has largely been a sideways move while traders wait for the outcome of the Brexit future trade negotiations with the EU. 

Although there was a spike outside of the range at position B, price action reverted back within the original range on the 2nd of December.

There is then a bounce off of the support line and a 200 pip bull run, which breaches the resistance line, and takes price action all the way up to within a pip of the key 1.3500 level.

This is a good opportunity for profit-taking for many traders and a potential double top reversal …….

…from this daily chart of the pair with which was a multi-month as shown during August 2020.

Under these circumstances, we believe there may be a reversal in price action, and we had decided to trade against the trend, believing that it will reverse at this point.  And we initiate a short trade, with reduced leverage than perhaps we might normally use because we are trading against the trend, and then we will layer the trade with market executions or sell limit orders just above our first trade, dependant on risk, and because we cannot predict where the reversal will happen, if at all.

Had this been a real trade, at least two of the orders would have been filled, including the at market order and where there was a reversal of 89 pips, which is a healthy profit.

In this particular instance, we have taken advantage of uncertainty in the market with regard to Brexit, a multi month high, double top scenario, and a key round number 1.3500.  We have reduced our leverage because of uncertainty and the fact that it was a counter-trend reversal trade, which can be inherently risky.  But we have diluted that risk by lowering our leverage and layering the trades over varying exchange rates in close proximity to the key level of 1.3500. Stop losses should be implemented as per your personal risk appetite.    

This style can also be implemented for long trades with similar principles, and the reduced leverage and layering style can be adopted in any trade scenario. 

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Crypto Daily Topic Cryptocurrencies

What Exactly is Proof of Keys?

In crypto, there’s a saying: “not your keys, not your coins.” This means that if you do not have sole custody of your private keys, you cannot really claim to have ownership over your funds. If your keys are with a crypto exchange or any other third-party custodian, you may as well forget about being the true owner of your funds. 

Many crypto owners today make the mistake of leaving their funds on exchanges. But considering the insecurity history of crypto exchanges, they are far from the safest place to keep your cryptocurrency. Millions, (or perhaps billions) worth of crypto has been lost through hacks on exchanges. The most famous one is Mt. Gox, in which people lost vast sums of Bitcoin and are yet to be compensated up to this day. And while that may be several years ago, crypto hackers are always upping the game. This is to say exchanges are not a safe place to store your crypto. 

So, how does that have anything to do with proof of keys? 

Understanding Proof of Keys 

Proof of Keys is actually ‘Proof of Keys Day’ in full. The event is the idea of crypto investor Trace Mayer, who came up with the concept so as to spread awareness of the need for crypto owners to practice self custody of their private keys and, in so doing, reclaim their financial independence. Proof of Keys is an annual celebration every January 3rd. 

Proof of Keys day is an idea geared at preventing crypto investors’ reliance on exchanges to store their funds. The first Proof of Keys event happened on January 3rd, 2019 – to intentionally coincide with the day of Bitcoin’s genesis block. 

In essence, Proof of Keys Day is a day to celebrate financial autonomy. The bigger picture is to remind crypto investors of the importance of keeping their private keys in their personal wallets. By having full control of their keys, they can rest assured that no one has access to their crypto holdings. 

Crypto holders have access to numerous types of crypto wallets – from online wallets to paper wallets to desktop wallets to hardware wallets. However, hardware wallets are the most secure options out there – and among the most reputable of these is Ledger, Trezor, and KeepKey. Hardware wallets are not connected to the internet. This renders them immune to hackings and other online vulnerabilities. 

What are the Intended Outcomes of Proof of Keys Day? 

The philosophy guiding Proof Of Keys Day is perfectly in step with that of Bitcoin: to eliminate third-party intermediaries and operate in a trustless electronic money transfer system where parties can operate securely and confidently without sacrificing their financial sovereignty. With that, let’s look at the intended outcomes of Proof Of Keys Day: 

#1. Teach new crypto investors how to move funds around

Crypto holders should be knowledgeable and comfortable enough to move their coins around. While this may be as easy as ABC for veterans, it can be intimidating for newcomers. From the (seemingly) complex key numbers to the wide range of wallets, it can all look absolutely bewildering. For this reason, Proof of Keys Day encourages investors to familiarize themselves with the different types of cryptocurrency wallets and how to use them. It also reminds them how the transfer of value happens on the blockchain. 

#2. Remind crypto holders to actually own their funds 

Like we’ve mentioned before, the main objective of Proof of Keys Day is to encourage crypto investors to take ownership of their private keys. When you leave your funds on an exchange, you essentially forfeit complete control of your money. Though it takes place only once a year, Proof of Keys Day is a chance for people to reclaim control of what’s theirs. 

#3. Expose dishonest crypto exchanges

Financial entities are known for fractional reserve banking – which is the practice of leveraging existing customer deposits by lending out more funds than what they truly have at hand. While this profits the institutions, it’s risky for the real owners of the money since a ‘bank panic’ could cause bankruptcy for the institution. In the crypto space, Proof of Keys Day could encourage holes of crypto investors to withdraw their money from exchanges. If enough investors do that, it may expose exchanges engaging in fractional reserve tendencies or those that lie about their actual reserves. That’s if the publicly verifiable nature of blockchain networks has not already done so.

#4. Celebrate Bitcoin’s genesis block

Last but certainly not least, Proof of Keys Day allows investors from all over the world to celebrate the Bitcoin genesis block – the first day a block was mined on the Bitcoin network. The genesis block was the first-ever Bitcoin transaction. In the transaction, Satoshi Nakamoto sent 50 BTC to Hal Finney – an early Bitcoin developer. It’s also, to an extent, a day to remember the first ‘commercial” Bitcoin transaction when somebody bought two pizzas for 10,000 Bitcoins.

How to Participate in the Proof of Keys Movement

Whether you’re a newcomer to crypto or a veteran, you’ll find that participating in Proof of Keys Day is very easy. Again the idea is to express financial independence by moving all funds from exchanges or other custodial services. 

To get started, take an inventory of all crypto coins you have on exchanges. This will show you who really owns what in regards to your money. Then, proceed to choose a crypto wallet of your choice. Ensure to choose a wallet that you’re comfortable with and one with a sufficient level of security. Next, transfer your funds from custodial platforms to your personal wallet. This means you can now control your private keys and, with them, your funds. 

Some crypto investors celebrate Proof of Keys Day, even if for one day. This involves moving their coins from exchanges for one day in a symbolic move to affirm their financial autonomy. Active traders are the ones more likely to engage in this kind of practice. This is because they need to have their crypto funds in exchanges to facilitate trades. After the symbolic transfer of funds to their personal wallets, they usually move them back to exchanges. But for long-term investors (HODLers), it’s better to keep their money in their personal wallets. 

Final Thoughts

Proof of Keys Day is a simple concept – but quite monumental in meaning. It’s a day to remind crypto holders to take back ownership of their funds by taking control of their private keys. Hordes of crypto investors participate in the event with a single goal of affirming their financial sovereignty. It’s a day to educate people and remind them about crypto security principles in general. 

Categories
Cryptocurrencies

Blockchain in Fashion  and Luxury Retail

Nearly every industry these days is discovering the potential and power of blockchain. Even fashion, which you may not expect, is slowly onboarding the tech. The fashion industry is one where fraud is all too common – at least when it comes to sourcing authentic materials. But putting aside the solving of problems, are there ways in which blockchain can make the fashion industry better?

In this article, we’ll discover that yes, there are. In fact, several brands are spearheading the shift to the blockchain, including the luxury jewelry industry. Whether it’s increasing transparency, giving fashion workers a fairer shot, reducing wastage, blockchain can do so much for fashion. 

With that, let’s dive into how blockchain can be good for the fashion industry. 

#1. Monitoring deliveries 

With blockchain, fashion companies can be assured of items and parcels, making their way to the desired destination. Participants to every delivery can monitor real-time where an item is. Having to wait for deliveries is a tedious and productivity-decreasing process. This becomes even worse when a project relies on several deliveries. It can be a tall order keeping track of every single delivery. And in case of losses, that might turn up bad real fast. 

Blockchain-powered tracking of deliveries and purchases can reduce the likelihood of losses and the confusion that arises from customers having to run around trying to retrieve persons that didn’t make it on time/at all. Every single step can be monitored on the transparent blockchain, where everyone can see the progress, making for an efficient and desirable experience for everyone involved.

 #2. Reducing counterfeits

The blockchain could help dramatically reduce counterfeits. In fashion, authenticity is highly valued, and in the future, a QR code to verify genuineness will be the standard. If an authentic item has been switched for a fake in the distribution process, it will be very easy for the blockchain to smoke that out. 

The Italian government recently pumped €15 million into blockchain technology to help reduce ‘Made in Italy’ counterfeiting in various industries, including fashion. The introduction of the technology will go a long way to protecting authentic ‘Made in Italy’ goods. 

#3. Reclaiming ownership

With the rise of nonfungible tokens (NFTs), people’s interest in blockchain ownership has also spiked. Blockchain allows people to own their data and intellectual and physical property in a trustless and verifiable manner. 

Fashion designers are already taking advantage of this possibility. Martine Jaelgaard, a London-based designer, incorporated QR codes in her garments, which allows them to be recorded and tracked on the blockchain. 

Paris-based Satoshi Studios sells high-quality sneakers that can be tracked using the blockchain using a QR code. This allows an individual to track the origin and supplies for the material and every process in manufacturing. 

#4. Provenance

The luxury industry of diamonds benefits from blockchain as companies use it to trace every step of the supply process. From mining to transporting to molding to sales, it’s easy to monitor every component of the process. 

Major diamond brand DeBeers is leading an industry-wide move into blockchain adoption, as blockchain-based diamond tracking platform Tracr becomes more influential. London-based diamond retailer Taylor & Hart has teamed up with blockchain company Everledger to authenticate the source of diamonds using the blockchain. Brilliant Earth, a San Francisco-based jewel retailer, is also using the Everledger platform for the same end. 

Such transparent processes ensure that buyers have more confidence in what they’re purchasing – together with its source, businesses in the diamond industry can keep their reputation. 

#5. Supply chain management

Blockchain can infinitely improve supply chain management for all kinds of industries. A lot has to do with transparency: it’s possible to track the movement of materials from the manufacturer to the retailer and, in some cases, ownership. 

Fashion giant Burberry recently partnered with IBM for a blockchain-based protocol that would allow customers to register their items and allow the viewing of the history and information about the garment and its impact on the environment and even people. 

The protocol, dubbed ‘Voyage’, allows customers to view an item’s supply chain before purchasing and registering them on the blockchain using corresponding serial numbers. Voyage is a pioneering information tool that will allow end-users to ascertain whether the right material has been used and if working conditions were good for workers.

#6. Improve employee welfare/reducing the recalling of products 

The transparency accorded by blockchain means fashion businesses can look at the data surrounding the supply chain’s employees. We hear reports all the time about poor working conditions or pay for workers all over the world. With blockchain in fashion, it will be easier to highlight concerns and improve employee welfare. This can include logging in the hours worked in the blockchain – and these hours being accounted for fairly. 

Also, blockchain-powered quality assurance can help prevent unnecessary costs, and items are less likely to depreciate in quality while being taken to the customer. 

#6. Blockchain-based warranties and coupons 

Maintaining open-source records of when goods were purchased could make it infinitely easier for manufacturers, retailers, and consumers to track when goods were purchased and keep records of warranties and guarantees. 

Customers will no longer have to hang on to physical receipts for years. All they will need to do is log into an account and access the same purchasing information as to their manufacturer and retailer.

Also, it will be easy for retailers to offer digital coupons to their customers. Such an issuance process is not only transparent; it also allows retailers to reach wider audiences in a more effective and cost-efficient process. 

#7. Consumer data ownership

Blockchain tech will help participants in fashion track items, but consumers can also have more control over their data. When fashion brands enter customer’s data on the blockchain, customers can view any activity surrounding it. 

This is incredibly important, especially in an era when concerns around data privacy become more prevalent than ever, and companies like Facebook face increased regulatory pressure around their treatment of user data. 

Final Thoughts 

Blockchain can offer so much to the fashion world. Between facilitating transparency to ensuring fair work practices to cost efficiency to the reduction of waste to improving customer experience, there’s no end in sight for the incredible potential of blockchain to positively disrupt the fashion world. Ultimately, the tech will serve to improve the relationship between brands and customers for the good of everyone involved. Blockchain can herald a new future for fashion. 

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Forex Course

191. Carry Trading Doesn’t Work All The Time!

Introduction 

Now that you understand what a carry trade is in the forex market, the next logical step is to show you when this strategy works and when it fails. We already know that the carry trade entirely depends on interest rates between two countries.

Let’s take the USD/JPY pair. The interest rate in Japan is -0.1%, and that in the US it is 0.25%. So, if you were to borrow and sell the JPY to buy the USD, your interest rate differential would be = 0.25 – (-0.1) = 0.35%.

In this case, you’d expect profits of 0.35%. By now, we already know that forex traders always anticipate the monetary policy actions of central banks.

When do Carry Trades Work?

There two main instances when carry trades become popular:

Firstly, it is during periods of low volatility. When there are minimal price fluctuations, traders may be induced to take on more risks to increase their profits – carry trade. In this case, provided the value of the currency doesn’t fall, the rollover earned is a good incentive.

Secondly, it’s when traders anticipate that central banks will raise interest rates. In this instance, traders will anticipate that the interest rate differential will increase, as will the pay-out.

When Do Carry Trades Not Work?

We’ve already established that for a carry trade to be effective, the interest rate differential needs to be high or increasing. That means that one country should be increasing its interest rate while another decreasing.

Similarly, the country with the lower interest rate should be decreasing while the one with the higher interest rate remains constant. Another scenario could be if the country with the lower interest rate remains constant while the one with the higher interest rate increases. If you find all this confusing, let’s explain using an example.

Economic indicators in the US points towards higher possibilities of a recession. Say the unemployment levels are increasing, manufacturing is falling, GDP is contracting, and retail sales are nose-diving.

Forex traders can anticipate that the Federal Reserve will cut interest rates to stimulate the economy. In this case, the USD will be considered a high-risk currency since investors will have a higher aversion towards it. Now, instead of purchasing the USD, investors will opt for other currencies with a more stable outlook.  The logic behind this is that the interest rate differential has reduced or is expected to reduce vis-a-vis USD/JPY.

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Categories
Forex Videos

Forex For Beginners – How To Trade EURGBP! Buying The Euro With A No Brexit Trade Deal!

For beginners – How to trade the EURGBP with no trade deal Brexit 

Thank you for joining this forex academy educational video.

Great Britain voted in a national referendum to leave the European Union June 2016.  The  United Kingdom officially left the EU you in January 2020 with a one-year transition period which ends on the 31st of December 2020.

This was to allow the EU and the United Kingdom four years to come up with a future trading solution with regard to laws and arrangements which would allow the United Kingdom to take back its sovereignty, which is what the people of Great Britain wanted.

However, unravelling the years of business ties between the two areas, including laws,  fishing rights,  humanitarian issues,  worker’s rights,  competitive fairness,  financial regulatory alignment, including a whole myriad of rules and regulations has been one of the most complicated issues in modern times.  The affair is turning into an acrimonious divorcAfter the transition period, theThe two sides agreed thod they would work towards having a free trade agreem,ent which would lead to an almost seamless continuation of business.

But the United Kingdom claims that many of the terms and conditions as set out by the European Union in order to grant a free trade agreement to the United Kingdom are seen as not acceptable to the British government.  Some of these conditions are centred around fishing, where the EU wants to continue fishing in British sovereign waters, a so-called level playing field,  where the United Kingdom cannot go out and sign up other trade agreements around the world by undercutting EU member states.  And where the EU has said that any breach by the UK of such a future agreement, or where the EU changes regulations, and the UK does not fall into line, would be penalised by tariffs and which the UK has said this is totally unacceptable.  Ten deadlines have come and passed between the two sides regarding reaching an agreement,  and where currently, at the time of writing,  there are just a few days left to instigate and agreement,  and where both sides are saying this is now very unlikely to happen.

This is a daily chart of the euro to Great British pound pair ,or EURGBP,  and where we can clearly by the blue candlesticks that since the latter part of November 2020, the Euro is gaining in value on the exchange rate.  

Investors believe that the sentiment has changed in the latter stages of November and certainly since the 7th of December, and  where they believe that in the current state there will likely be no deal and therefore because the European Union is economy is much greater than that of the United Kingdom that the Euro will fare better than the pound in the event of a no tariff-free arrangement being reached.

In in the same chart we have highlighted a section A,  where the pound was gaining against the euro since August,  because the market considered that an agreement would be reached.

 

 So how can investors get in on the action and ride the pair hire based on current sentiment?

Firstly, we need to bring the chart down to a smaller time frame, such as the one hour.  Here we can see a defined bull channel, with areas of support at two points and areas of resistance at two points as show by the exchange rate touching the two purple lines, and where we might consider going long at a pull-back to the support line, perhaps somewhere around the X mark.  

By reverting back to our daily chart we can see some potential targets, or areas of resistance, the closest is 0.9294  which was reached in September 2020 and way back in  the middle of March this year, where we have a target/resistance level of 0.9500.

Of course the exchange rate might be a little different by the time you get to view this video, however, should there be a no tariff deal agreement and where the United Kingdom crashes out of the EU on world trade organisation rules, where tariffs will be imposed by either side,  but most likely to be more detrimental to the UK than the EU, you should then be looking for setups such as we have shown today to buy the pair.

Categories
Crypto Videos

Crypto!The 3 Best Key Indicators To Watch When Trading Bitcoin! No

3 Key Indicators to Watch When Trading Bitcoin

 

For the past week, Bitcoin’s price has been dancing around the $20,000 mark, which has led many traders to lose their patience. In the eyes of those traders, the current lack of bullish momentum is problematic, especially when considering that Bitcoin tested the $16,200 level roughly two weeks ago.

Experienced traders tend to look at several key indicators that serve as telling signs of a major trend reversal. These key indicators are:

  • The futures premium
  • Volumes, and
  • Top traders’ positions at major exchanges


While a handful of negative indicators do not precede every dip, there are some signs of weakness that show a trend reversal more often than not. 

Monitoring the futures contracts premium

The open interest of perpetual contract buyers and sellers is matched at all times in any futures contract. Simply put, there is no way an imbalance of any form can happen, as every trade requires both a buyer and a seller.

Funding rates ensure that there are no exchange risk imbalances. When sellers are the ones demanding more leverage, the funding rate goes negative. Therefore, the traders who want to be on the short side will be the ones paying the fees. The opposite is true, as well.

Sudden shifts to the negative funding rates indicate a strong interest in keeping short positions open. Ideally, investors would monitor a couple of exchanges at the same time to avoid eventual anomalies, no matter how rare they are.

By measuring how much more expensive futures contracts are versus the regular spot market, traders can gauge the bullishness level of the market.

The fixed-calendar futures usually trade with a 0.5% or higher premium when compared to regular spot exchanges. Whenever this premium decreases or turns negative, traders can consider this a red flag. Such a situation, also called backwardation, indicates strong bearishness.

Monitoring volume

In addition to constantly checking futures contracts, good traders also track the spot market volumes. Breaking important resistance levels while simultaneously showing low volumes is somehow intriguing. Typically, low volumes show a lack of confidence. Therefore, any significant price change should be accompanied by an increase in trading volume.

Top traders long-to-short ratio 

Another key metric that can be used is the top traders’ long-to-short ratio. This metric can be found at many leading crypto exchanges.

Traders should pay attention to changes in this metric rather than absolute figures as there are often discrepancies between exchanges’ methodologies.

As an example, a sudden move below the 1.00 long-to-short ratio should be a troubling signal. This is because the historical 30-day data, as well as the current 1.23 figure, favor longs.

As we mentioned before, the ratio can differ significantly between exchanges, but traders should watch changes in ratios rather than the absolute numbers themselves.

Unlike our previous example from Binance, it is common for OKEx top traders to hold levels below 1.00, all while not necessarily indicating bearishness. According to the 30-day data on this exchange, numbers below 0.75 should be cause for worry.

Conclusion

No set rule or method could predict every single spike or dip, but certainly, there are ways to improve your chances of improving your profitability when trading.

Monitoring the funding rate, spot volumes, as well as the top traders’ long-to-short ratio provides a much clearer view of the Bitcoin market as a whole, rather than simply reading candlestick patterns and monitoring general oscillators like the RSI and MACD.

This is mostly because the aforementioned metrics provide a direct gauge of professional traders’ sentiment, rather than just retail sector sentiment, and it is crucial to take them into account as Bitcoin tries to break $20,000.

Categories
Cryptocurrencies

What’s Ethereum 2.0 and Why Does it Matter? 

After a years-long wait, Ethereum 2.0 is finally here. Well, almost. The major upgrade will see the Ethereum network fix various scalability and security issues. The most notable shift will perhaps be moving from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) protocol. 

But this is just a scratch on the surface. With Ethereum being one of the most important cryptocurrencies in the world, Ethereum 2.0 is set to shake up not just the Ethereum ecosystem but cryptoverse in general. 

Understanding Ethereum 2.0

Ethereum 2.0 is an upgrade to the Ethereum protocol. Also known as Eth2 or Serenity, the update is meant to improve the scalability and security of Ethereum. The current Ethereum blockchain, with the scalability of 15 transactions per second (TPS), can simply not handle the volume that would be required to handle millions of transactions per second. Eth2 will not just power dramatically more than that; it will also remove bottlenecks for developers and users.

Ethereum founder Vitalik Buterin and the team have been working on Eth2 for years now. This is because scaling a blockchain without sacrificing security and decentralization is not an easy task. Eth2 will address these issues through several important features that will be starkly different from the Ethereum we have now. 

What’s the difference between Ethereum and Ethereum 2.0? 

What will mainly distinguish the two versions is that Ethereum 2.0 will feature a proof-of-stake consensus, implementing shard chains and the beacon chain. Let’s look at each of these features in more detail. 

#1. Proof-of-stake 

Ethereum currently implements a proof-of-work consensus model to secure the network and maintain and facilitate an incentive mechanism to reward miners who confirm and validate transactions on the network. Unfortunately, PoW requires huge amounts of energy – which is not sustainable in the long run. 

PoS is a far faster and sustainable alternative to PoW. PoS involves granting stakers in the network the right to become a validator and get paid to verify transactions. Other validators can confirm the “minting” of the block. If there are enough confirmations, the block can be added to the blockchain. Validators will then be rewarded with block rewards for the successful block. 

PoS is a lot of times better than PoW when it comes to energy-efficiency. This is because, unlike PoW, there isn’t an energy-intensive process required to validate blocks. This is also good news for individuals who want to help secure the network. 

Another feature that a PoS model will enable security on Ethereum 2.0 not previously possible with PoW. PoW is susceptible to a 51% attack. The PoS model will not only reward validators for being honest; it will penalize attempts at fraud. One such penalty will be ‘slashing,’ which will not only involve the validator in question being forced out, but all/part of their stake will be penalized. 

#2. Sharding 

Individuals who wish to access the Ethereum network have to do that via a node. Nodes store a copy of the entire Ethereum network, meaning they have to download it. This takes up too much storage and slows things down. 

Shard chains act like the blockchain but only hold a specific subset of the blockchain in question. This means nodes only have to manage a ‘shard’ of the entire network. This goes a long way in increasing transaction throughput and enhancing scalability. 

#3. The beacon chain 

Shard chains will work in a parallel version. This necessitates a mechanism of sorts to keep them in sync with one another. Enter the beacon chain, which will facilitate consensus to shard chains. 

Beacon chain is a completely new, proof-of-stake blockchain rendering that will be the coordinator of the whole ecosystem. The chain will facilitate data sharing between the shard chains and facilitate scalability. The beacon chain will be the first roll-out feature of Eth2. 

How Ethereum 2.0 Will Be Rolled Out 

Ethereum 2.0 will not be released at once but rather in three phases. Each phase will feature a crucial feature to contribute to the success of the new blockchain. 

#1. Phase 0

Phase 0 constitutes the first rollout, and it will come down to the release of the beacon chain, which is central to the network’s functioning. The beacon chain will start accepting stakers’ deposits in preparation for the proof-of-stake consensus. All registered stakers will not be able to withdraw from the contract until shard chains are put in place. Afterward, staking deposits will be locked up until the next rollout. The Phase needed a minimum threshold of 524,288 ETH to launch. This target has already been met and even passed. 

#2. Phase 1/1.5

The next phase will be two phases combined: Phase 1 and Phase 1.5. Phase 1 will bring with it shard chains, which will allow validators to produce blocks via a PoS consensus. Phase 1.5 will officially now introduce shard chains and begin the transition from proof-of-work to proof-of-stake. This phase will be released in 2021. 

#3. Phase 2 

This will be the final phase, whereby the blockchain will fully support shard chains – which will have taken on new features and capabilities. The shards will have the ability to integrate with smart contracts, allowing decentralized applications (DApps) developers to mesh seamlessly with the network. This phase will be slowly rolled out in 2021 and beyond. 

When Will Ethereum 2.0 Be Released? 

The Ethereum 2.0 upgrade will start rolling out on December 1, according to a blog post by the Ethereum Foundation on November 4. The launch is conditional on at least 16,383 validators, each staking 32 ETH to make up 524,288 ETH. Vitalik Buterin led the way in depositing ETH, putting up 3,200 (worth more than $1 million), according to Etherscan, which tracks Ethereum transactions. See the launch pad where ETH is being deposited here

Ethereum enthusiasts are naturally excited about the launch and hope everything will fall in place. If the launch is successful, the Ethereum network as we know it will change a lot – and for the better. 

Closing Thoughts 

Ethereum 2.0 is a long-awaited update to the world’s second most popular crypto and blockchain network. Having been introduced to the world of smart contracts and DApps, the network has been the most popular go-to option for DApp developers worldwide. But in recent years, the network has been grappling with scalability issues that would have proven unsustainable in the long term.

The rollout of the new network will take a while, even longer than many expect. But as long as the train will soon leave the station – that’s good enough news for the community.