Tag: Forex

Categories
Forex Fundamental Analysis

GBP/NZD Global Macro Analysis – Part 1 & 2

Introduction In this analysis, we will analyze endogenous factors that influence both the UK and New Zealand economies. The analysis will also include exogenous factors that impact the exchange rate between the GBP and the NZD. Ranking Scale We’ll rank the endogenous and exogenous factors on a scale from -10 to +10. The score of […]

Introduction In this analysis, we will analyze endogenous factors that influence both the UK and New Zealand economies. The analysis will also include exogenous factors that impact the exchange rate between the GBP and the NZD. Ranking Scale We’ll rank the endogenous and exogenous factors on a scale from -10 to +10. The score of […]

Introduction

In this analysis, we will analyze endogenous factors that influence both the UK and New Zealand economies. The analysis will also include exogenous factors that impact the exchange rate between the GBP and the NZD.

Ranking Scale

We’ll rank the endogenous and exogenous factors on a scale from -10 to +10.

The score of the endogenous factors will be determined from correlation analysis between the GDP growth rate. If the score is negative, the endogenous factor had a devaluing effect on the domestic currency. Conversely, if the score is positive, the factor led to the appreciation of the domestic currency.

Similarly, we’ll do a correlation analysis between the exogenous factors and the GBP/NZD exchange rate. If the correlation is negative, the factor results in a drop in the exchange rate. If positive, then the exogenous factor increases the exchange rate.

Summary – GBP Endogenous Analysis

A -15 score on Pound’s Endogenous Analysis indicates that this currency has depreciated since the beginning of 2020.

Summary – NZD Endogenous Analysis

A positive 5 indicates that the New Zealand dollar has appreciated since the beginning of this year.

Indicator Score Total State Comment
New Zealand Employment Rate -7 10 66.4% in Q3 2020 The NZ labor market is yet to recover from the economic disruptions of the pandemic
New Zealand Core Consumer Prices 1 10 1054 points in Q3 2020 From Q1 to Q3, inflation has increased by 1 point
New Zealand Industrial Production 5 10 A 3.1% increase in Q3 The NZ industrial sector is rebounding from a 12.1% drop in Q2.
New Zealand Business Confidence 7 10 Was 9.4 in November November showed the first positive reading in ANZ business confidence since August 2018
New Zealand Consumer Spending 5 10 Q3 spending was 41.335 billion NZD. Q3 consumer spending was the highest recorded in 2020. This shows that the domestic demand has recovered beyond the pre-pandemic period
New Zealand Construction Output -4 10 Q2 output dropped by 24.2% The worst decline in construction output in about 18 years. It’s bound to increase as COVID-19 restrictions ease
New Zealand Government Budget Value -2 10 2020 projected deficit of 4.5 billion NZD This would be a drop from a surplus of 7.5 billion NZD in 2019. Attributed to the increase in government spending during the pandemic
TOTAL SCORE 5
  1. New Zealand Employment Rate

The employment rate shows the growth in New Zealand’s labor market. The change in the labor market shows how the economy is performing – especially in the coronavirus pandemic. The labor market shows if the economy is churning out new jobs or if jobs are lost. Thus, the growth of the labor market is a leading indicator of economic growth.

In Q3 2020, New Zealand’s employment rate dropped to 66.4% from 67.1% in Q2 and 67.7% in Q1. This shows that the labor market is yet to recover from the economic shocks of the pandemic. The New Zealand employment rate has a score of -7.

  1. New Zealand Core Consumer Prices

This indicator samples the price changes in a basket of the most commonly purchased goods and services by households. The price changes represent the rate of inflation in the overall economy. Note that the computation of the core consumer prices excludes goods and services whose prices tend to be volatile. It helps avoid seasonal distortions in the index.

In Q3 of 2020, the core consumer prices in New Zealand rose to 1054 points from 1048 in Q2. The index had only increased by 1 point in 2020. Thus, we assign a score of 1.

  1. New Zealand Industrial Production

Industrial production in New Zealand refers to the YoY change in total manufacturing sales. It measures the YoY change in sales volume in the manufacturing sector. A survey of 13 industries across the manufacturing sector is surveyed to derive the YoY manufacturing sales data for the whole sector. Some of these industries include; petroleum and coal products, metal products, machinery, equipment and furniture, and food and beverage. Naturally, expansion in industrial production corresponds to the expansion of the economy.

New Zealand manufacturing sales rose by 3.1% in Q3 2020 from a drop of 12.1%. This is the largest YoY increase in manufacturing sales in three years. It shows that the economy is rebounding. We assign a score of 5.

  1. New Zealand Business Confidence

NZ business confidence is a survey of about 700 businesses. They are polled to establish their expectations about the future business operating environment and economic growth in general. Some aspects surveyed include; activity outlook, employment prospects, capacity utilization, and investment decisions.

In December 2020, the NZ ANZ business confidence rose to 9.4 from -6.9 in November. This shows an increased optimism in NZ businesses since it is the first positive reading since August 2018. Thus, we assign a score of 7.

  1. New Zealand Consumer Spending

This measures the value of the quarterly consumer expenditure in NZ. Changes in consumer expenditure go hand in hand with domestic demand changes in the economy, which drive GDP growth.

In Q3 2020, the NZ consumer spending increased to NZD 41.335 billion from NZD 35.197 billion in Q2. More so, the Q3 consumer spending is more than the NZD 40.04 billion recorded in Q1. Consequently, the NZ consumer spending has a score of 5.

  1. New Zealand Construction Output

This indicator shows the overall change in the value of all construction work done by contractors in NZ. It compares the YoY quarterly change, which helps to show if the economy is expanding or contracting.

In Q2 2020, the NZ construction output dropped by 24.2% compared to the 4.1% drop in Q2. This is the worst drop in over 18 years. Thus, we assign a score of -4.

  1. New Zealand Government Budget Value

This is the difference between the revenues that the NZ government collects and the amount it spends. Deficits arise if the revenues are less than expenditures, while surplus occurs when the revenues exceed expenditure.

In 2019, the NZ government had a budget surplus of NZD 7.5 billion. In 2020, it was projected that the budget would hit a deficit of NZD 4.5 billion. This is due to increased government expenditure to alleviate the pandemic’s economic shocks while revenues have been depressed due to nationwide shutdowns. Thus, we assign a score of -2.

For the exogenous analysis of both of these currencies, you can check our very next article. In case of any queries, let us know in the comments below. Cheers.

Categories
Forex Course

209. Inter Market Analysis At A Glance

Introduction

Introduction

Introduction

Internet analysis is referred to as a method leveraged to analyze markets by assessing the correlation between various categories of assets. This means that the ups and downs happening in one market may or may not impact the other markets. Therefore, a thorough study of their relationships is beneficial to the trader.

Understanding The Basics Of Intermarket Analysis

It works with multiple financial markets and asset classes related to each other to identify strengths or weaknesses. Rather than assessing the asset classes or financial markets individually, Inter-market analysis evaluates different correlated asset classes or financial markets like bonds, stocks, commodities, and currencies. Such analysis expands on looking at each market or asset individually while comparing them with each other.

Correlation Of Intermarket Analysis

Performing an Intermarket analysis is simple as you would need access to only data. And there is no dearth of data in today’s time; you can find them broadly and access them for free. Charting programs and spreadsheets are other things that you need for this analysis. Here you will compare one variable with another in a different data set.

In this analysis, a positive correlation can move up to +10, signifying a positive and ideal correlation between two data sets. Additionally, in a negative or inverse correlation, the value can go as down as -1.0. When the reading comes close to the zero lines, it will reflect that there lacks a discernible correlation among the two samples.

An ideal correlation between two variables for an extended time period is very uncommon. However, analysts generally agree that reading maintained below the -0.7 level or above +0.7 level is quite prominent. This level depicts around a 70% correlation. Moreover, when the correlation changes from positive to negative, it indicates an unstable relationship, which is not ideal for trading.

Please take the quiz below to know if you have got the concepts right. Cheers!

[wp_quiz id=”102178″]
Categories
Forex Signals

AUD/JPY Gains Support Over Double Bottom – Is It Worth Holding Sell Trade?

The AUD/JPY pair traded bearish, falling from 79.77 level to trade low at 79.50. On the lower side, the AUD/JPY may find support at the 79.50 level, and a bearish breakout of this level can extend selling bias until the 79.14 level. The 10 & 20 periods EMA are supporting selling bias, along with the 50 MACD and RSI indicators. Let’s follow a trading plan below:

The AUD/JPY pair traded bearish, falling from 79.77 level to trade low at 79.50. On the lower side, the AUD/JPY may find support at the 79.50 level, and a bearish breakout of this level can extend selling bias until the 79.14 level. The 10 & 20 periods EMA are supporting selling bias, along with the 50 MACD and RSI indicators. Let’s follow a trading plan below:

The AUD/JPY pair traded bearish, falling from 79.77 level to trade low at 79.50. On the lower side, the AUD/JPY may find support at the 79.50 level, and a bearish breakout of this level can extend selling bias until the 79.14 level. The 10 & 20 periods EMA are supporting selling bias, along with the 50 MACD and RSI indicators. Let’s follow a trading plan below:

Daily Support and Resistance

S1 0.7547

S2 0.7632

S3 0.7668

Pivot Point 0.7717

R1 0.7753

R2 0.7802

R3 0.7887


Entry Price – Sell 79.678

Stop Loss – 80.078

Take Profit – 79.278

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

 

Categories
Forex Signals

AUD/USD Symmetric Triangle Breakout – Brace for Selling! 

The AUD/USD failed to stop its previous session bearish moves and hit the one-week around well below 0.7700 level. The cautious sentiment ahead of U.S. President-elect Joe Biden’s office term, as well as the lack of major data/events and a long weekend in the U.S., played their major in undermining the market trading sentiment. The AUD/USD currency pair is currently trading at 0.7669 and consolidating in the range between 0.7659 – 0.7711.

The AUD/USD failed to stop its previous session bearish moves and hit the one-week around well below 0.7700 level. The cautious sentiment ahead of U.S. President-elect Joe Biden’s office term, as well as the lack of major data/events and a long weekend in the U.S., played their major in undermining the market trading sentiment. The AUD/USD currency pair is currently trading at 0.7669 and consolidating in the range between 0.7659 – 0.7711.

The AUD/USD failed to stop its previous session bearish moves and hit the one-week around well below 0.7700 level. The cautious sentiment ahead of U.S. President-elect Joe Biden’s office term, as well as the lack of major data/events and a long weekend in the U.S., played their major in undermining the market trading sentiment. The AUD/USD currency pair is currently trading at 0.7669 and consolidating in the range between 0.7659 – 0.7711.

The market trading sentiment failed to stop its last-weeks bearish moves and remains discouraged during the early Asian session as the condition of the second wave of coronavirus infections in Europe and the U.S. getting worse, which pushed the authorities to keep imposing back to back restrictions over activities in efforts to control the spread of the virus. Apart from this, the renewed inability to pass the U.S. fiscal package also weighed on the risk sentiment, which eventually weakened the perceived riskier Australian dollar and contributed to the currency pair gains. Apart from this, the reason for the market risk-off mood could also be associated with the ever-increasing US-China tussle, which puts further pressure around the market sentiment and contributes to the currency pair gains.

This, in turn, the broad-based U.S. dollar succeeded in extending its previous session gains and took some further bids during the early European session as investors still prefer the safe-haven assets in the wake of risk-off market sentiment. However, the U.S. dollar gains seem rather unaffected by the worsening coronavirus (COVID-19) conditions in the U.S. or the disappointing U.S. data. The gains in the U.S. dollar becomes the key factor that kept the currency pair under pressure. The U.S. Dollar Index that tracks the greenback against a bucket of other currencies rose by 0.05% to 90.800 by 10:46 AM ET.

In the absence of the major data/events on the day, the market traders will keep their eyes on the BOE Gov Bailey Speaks along with the Candian Housing Starts data. In the meantime, the coronavirus saga developments could play a key role in influencing the market risk sentiment and the USD price dynamics. 


Daily Support and Resistance

S1 0.7547

S2 0.7632

S3 0.7668

Pivot Point 0.7717

R1 0.7753

R2 0.7802

R3 0.7887

The AUD/USD pair is trading with a selling bias at 0.7665 level, especially after violating the support area of 0.7722 level. Closing of candles below 0.7722 level can extend selling bias until 0.7650 and 0.7610 level. Checkout our trading plan for today.  

Entry Price – Sell 0.76734

Stop Loss – 0.77134

Take Profit – 0.76334

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

 

Categories
Forex Market Analysis

Daily F.X. Analysis, January 18 – Top Trade Setups In Forex – Martin Luther King Day! 

The market may offer thin trading volume and volatility on the back of a holiday in the U.S. The U.S. banks will be closed in observance of Martin Luther King Day. However, the German Buba report will be in focus today to predict price action.

The market may offer thin trading volume and volatility on the back of a holiday in the U.S. The U.S. banks will be closed in observance of Martin Luther King Day. However, the German Buba report will be in focus today to predict price action.

The market may offer thin trading volume and volatility on the back of a holiday in the U.S. The U.S. banks will be closed in observance of Martin Luther King Day. However, the German Buba report will be in focus today to predict price action.

Economic Events to Watch Today  


 

EUR/USD – Daily Analysis

During Monday’s early European trading hours, the EUR/USD currency pair failed to stop its previous session losing streak and remained sideways around the 1.2071 mark due to the sluggish market sentiment underpinned the safe-haven U.S. dollar and contributed to the currency pair gains. Besides this, the selling bias around the currency pair could also be attributed to the rising COVID-19 and stricter activity restrictions in Europe, raising doubts about the European economies and pushing the shared currency down. Conversely, the EUR/USD currency pair’s declines were rather unaffected by the latest reports suggesting that Prime Minister Giuseppe Conte faces a confidence vote in the lower house. Currently, the EUR/USD currency pair is currently trading at 1.2075 and consolidating in the range between the 1.2065 – 1.2086.

The global equity market failed to stop its previous session’s bearish performance and remained sluggish during the early European session as concerns about the potential economic fallout from the Covid-19 surge remain on the cards. These concerns were triggered after Friday’s disappointing U.S. monthly Retail Sales data. At the data front, the core retail sales declined 1.4% month-on-month in December, which was higher than the 0.1% contraction in forecasts and the 1.3% contraction recorded in November. Meanwhile, the Producer Price Index (PPI) increased 0.3% month on month in December, while retail sales declined by 0.7% in the same month.

The equity market losses could also be tied to the prevalent cautious mood ahead of U.S. President-elect Joe Biden’s first day of duty and initially negative signals for taxpayers and Canadian oil companies. In that way, the bearish tone around the equity markets was seen as one of the key factors that helped the safe-haven U.S. dollar.

Daily Technical Levels

Support   Resistance

1.2148     1.2178

1.2129     1.2189

1.2118     1.2208

Pivot Point: 1.2159

EUR/USD– Trading Tip

The EUR/USD is trading over the 1.2065 support level, and the closing of Doji candles above the same level supports the chances of

bullish correction until the 1.2115 level. On the lower side, a bearish breakout of 1.2065 can extend the selling trend until the support level of 1.2005. The 50 EMA and MACD suggest the pair is oversold and should reverse back a bit before exhibiting selling bias.

GBP/USD – Daily Analysis

The GBP/USD currency pair failed to maintain its overnight bullish bias and drew some offers around the 1.3680 level mainly due to the downbeat market trading mood, which underpinned the U.S. dollar bullish and contributed to the currency pair losses.

At the USD front, the broad-based U.S. dollar managed to extend its early-day gaining streak and remained bullish during the European session on the day as investors still prefer to invest in the safe-haven wake of the risk-off market sentiment. The U.S. dollar has been supported by the Democrat victories in the runoff Senate elections in Georgia earlier in the month, which saw a surge in U.S. yields as Democrats got control of Congress. The U.S. dollar gains were seen as one of the key factors that kept the currency pair lower. The U.S. Dollar Index that tracks the greenback against a bucket of other currencies rose by 0.05% to 90.800 by 10:46 AM ET.

At home, the wave of the coronavirus and tighter travel restrictions in Europe keep fueling the doubts over economic recovery as back-to-back lockdown restrictions negatively affect economic activities. The latest report suggests the total novel coronavirus cases of 23,653,919 yesterday against 23,440,774 in the previous report on January 16.

Besides this, the selling bias around the currency pair could also be associated with the ever-rising numbers of COVID-19 and tougher lockdown restrictions in the U.K., which keep raising doubts over the economic recovery. In contrast to this, the latest reports suggest that the Bank of England (BOE) will keep the interest rates unchanged until 2024 to avoid negative rates, which helped the currency pair limit its losses. Also capping the losses could be the latest optimism around the coronavirus better situation in the U.K. 


Daily Technical Levels

Support   Resistance

1.3555     1.3722

1.3445     1.3781

1.3387     1.3890

Pivot Point: 1.3613

GBP/USD– Trading Tip

The GBP/USD pair also trades sideways between a narrow trading range of 1.3549 – 1.3452. On the higher side, a bullish breakout of 1.3549 level can extend the buying trend until the next resistance area of 1.3628 and 1.3698. Conversely, a bearish breakout of 1.3549 support level can extend the selling trend until 1.3455 and 1.3346. 

USD/JPY – Daily Analysis

The USD/JPY currency pair successfully maintained its bullish bias and took steps near mid- 103.00 regions largely due to the market’s downbeat mode and a big rally in the U.S. bond yield retained the U.S. dollar bullish and added to the currency pair accruals. Nevertheless, the market trading opinion was being pressed by the ever-rising figures of COVID-19 and stricter lockdown restrictions that keep fueling doubts over the global economy’s recovery. 

Meanwhile, the equity markets’ slumps were further bolstered by the renewed Sino-US tussle, which extended some support to the safe-haven Japanese yen and capped the upside for the USD/JPY currency pair. Conversely, the optimism about a potential treatment/vaccine and U.S. coronavirus (COVID-19) stimulus bill keeps challenging the market risk-off mood, which might change the direction for the USD/JPY currency pair. Currently, the USD/JPY currency pair is currently trading at 103.78 and consolidating in the range between 103.70 – 103.85.

The market trading sentiment failed to stop its early-day negative performance and remained pessimistic during the Asian trading session. The downfall was completely sponsored by the fears of intensifying coronavirus (COVID-19) conditions throughout the world, which keeps fueling the doubts over the global economic recovery from COVID-19. As per the latest report, France recently imposed a new nationwide lockdown, while German Chancellor Merkel is considering toughening the German lockdown. Apart from this, nearly 22M people are currently under strict lockdown conditions in China’s Hebei province. This happened right after the country posted the largest number of new Covid-19 infections in over 5-months on Wednesday. 

At the USD front, the broad-based U.S. dollar managed to extend its early-day gaining streak and remained bullish during the European session on the day as investors still prefer to invest in the safe-haven securities back of the risk-off market sentiment. The greenback has been supported by the Democrat victories in the runoff Senate elections in Georgia earlier in the month, which saw a surge in U.S. yields as Democrats got control of Congress. The U.S. dollar gains were seen as one of the key factors that kept the currency pair lower. The U.S. Dollar Index that tracks the greenback against a bucket of other currencies rose by 0.05% to 90.800 by 10:46 AM ET.

At home, the wave of the coronavirus and tighter travel restrictions in Europe keep fueling the doubts over economic recovery as back-to-back lockdown restrictions negatively affect economic activities. The latest report suggests the total novel coronavirus cases of 23,653,919 yesterday against 23,440,774 in the previous report on January 16.


Daily Technical Levels

Support   Resistance

103.53     104.16

103.31     104.56

102.91     104.78

Pivot Point: 103.94

USD/JPY – Trading Tips

The safe-haven currency pair USD/JPY slipped to trade at 104.054 level amid increased demand for safe-haven assets. The USD/JPY has formed an upward channel on the 4-hour timeframe, and it has the chance of leading the pair towards the next resistance level of 104.340 level. The 50 periods EMA supports the bullish trend, and we may have odds of taking a buying trade over the 103.570 level today. Good luck! 

Categories
Forex Videos

Forex Tips For Newbie Traders!

https://youtu.be/1hOFFmjkMV8

https://youtu.be/1hOFFmjkMV8


cool tips for newbie traders

Thank you for joining this forex academy educational video. 

In this session, we will be looking at how to stack the odds in the favour of consistent winning trades with a cool tip for newbie traders.

The number of retail traders who lose all of their deposited trading funds within the first 6 months is scary.

In the United Kingdom, retail brokers are required to have a financial health warning on the front page of their website.  This is one that we picked at random from a well-known UK retail broker. 

CFD’s are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investors’ accounts lose money when trading CFDs with this provider.  You should consider how CFDs work and whether you can afford to take the high risk of losing your money.

Some brokers put the figure at over 80% but let’s not split hairs. This is still a worrying trend.  It must be worrying because governments have forced brokers to put the warning on these sites.

One of the biggest areas that new traders full down is because of a lack of knowledge about how the money markets, and where they lack consistency regarding the setting up and implementation of trades, and most of all; a total disregard for stop losses and their correct implementation and the setup of leverage which falls under risk management, perhaps the most important aspects of trading. 

One of the best ways to mitigate the risk of losing trades is to use a trading criteria checklist.

Here are some ideas about what you might put on that checklist.  The idea is that it is an assistant to help you in the early days on a trade by trade basis to make sure that you have everything in place to help to stack the odds of winning trades in your favor.

Before you do anything, you want to have adopted a trading style or plan and where you have consistently made money on a demo account before trying it with real money.

 

Is the market trending?

Does it have support and resistance?

Are all of your indicators confirming your trade entry?

Consider using a scrolling vertical line, which might help you cast your eyes down to all of the indicators rather than just focusing on price action and potentially missing something.

Set a tight stop loss for each trade, and don’t risk blowing your account balance on one single.  Trade spread the risk over several trades to give yourself a chance of making more money than you lose.

 You should aim for a minimum of a 2 to 1 risk to reward ratio.  That is to say, you want to win twice the amount that you are prepared to lose on each trade.  This will help to keep your account balance in a healthy state.

Decide your preferred time of day to trade.  Try not to trade at the end of a 1-hour time frame if you are an intraday trader.  These can often be the impetus or a change in the direction of trends, and you need to ascertain if this is the case on a trade by trade basis.  Try not to trade at the end of a one-time zone and the beginning of a new one because, often, you will find the different time zone traders have different sentiment with regard to a particular currency pair, and this may be the impetus for a change in direction.

Don’t tread over economic data releases, especially if these are marked as hi-impact, which can often cause extreme market volatility.  Wait until a trend has been identified after the release.

These are just a few ideas which you could put onto your trading criteria checklist.  Print one-off and keep it beside you and meticulously go through it every time before you pull the trigger on a trade.  Eventually, these things will become like second nature, but until they do treat the checklist like a friendly assistant.

 One of the biggest barriers to successful trading in the currency markets is a lack of consistency in one’s approach.  Something like this will go a long way to helping new traders to consistently make the right decisions on a trade by trade basis, and this will stack the odds in their favor.

 

Categories
Forex Elliott Wave Forex Technical Analysis

Three Things you Ought to Know Before Buying EURUSD

The EURUSD eased the last trading week, losing 1.18%, leaving away from the yearly high at 1.23495 reached on last January 06th. The common currency accumulates losses by 1.14% (YTD), which, added to other market conditions commented in our current analysis, carries us to expect further declines in the following trading sessions.  

The EURUSD eased the last trading week, losing 1.18%, leaving away from the yearly high at 1.23495 reached on last January 06th. The common currency accumulates losses by 1.14% (YTD), which, added to other market conditions commented in our current analysis, carries us to expect further declines in the following trading sessions.  

The EURUSD eased the last trading week, losing 1.18%, leaving away from the yearly high at 1.23495 reached on last January 06th. The common currency accumulates losses by 1.14% (YTD), which, added to other market conditions commented in our current analysis, carries us to expect further declines in the following trading sessions.  

1. Retail Traders Seems to Look for Long Positions

Retail traders tend to place their trades against the primary trend, remaining on the wrong side on most occasions. Regarding this market participant behavior context, retail traders reduced their short positions from 79.77% reached last January 06th to 44% last Friday’s session, as the EURUSD pair accelerated its decline. 

Source: myfxbook.com

Retail traders’ increasing positioning to the long-side carries us to sustain the prospect for further declines in the following trading sessions.

2. The Price Violated its Short-Term Upward Trendline

The big picture of EURUSD illustrated in its daily chart reveals the violation of the secondary trendline plotted in green, corresponding to the last rally developed by the common currency since November 04th from the 1.16025 level, which found resistance on January 06th at 1.23495. This market context leads us to observe that the price could develop a correction proportional to the last rally.

In this regard, the Dow Theory view suggests that EURUSD’s corrective move depth might lie between 33% (1.21030) and 66% (1.18565). Moreover, the price could find support in the long-term upward trendline plotted in blue.

3. Timing and Momentum Oscillator Supports the Elliott Wave View.

The intraday Elliott wave view for the EURUSD pair exposed in the next 4-hour chart shows the completion of an ending diagonal pattern corresponding to wave (v) of Minuette degree labeled in blue and its bearish reaction after its finalization.

Once the common currency topped at 1.23495, the price developed an intraday corrective move subdivided into five internal segments of Subminuette degree identified in green. This five-wave sequence of lesser degree carries us to expect the progress in a potential zigzag pattern (5-3-5). 

On the other hand, the timing and momentum oscillator lead us to observe the first downward sequence’s exhaustion corresponding to wave (a) in blue. In consequence, the common currency should develop a corrective rally corresponding to wave (b). This upward move could hit the zone between 1.21576 and 1.22523.

Once the EURUSD completes its wave (b) in blue, the price action should start its bearish wave (c), which follows an internal structure subdivided into five waves. In this context, the bearish scenario’s invalidation level can be found at the end of wave (v) at 1.23495.

What’s Next?

According to Myfxbook.com’s Community Outlook, 56% of retail EURUSD traders are positioned to the long side. Likewise, the violation of a short-term upward trendline carries to expect further declines in the common currency for the coming trading sessions. Nevertheless, the EURUSD could be at the end of the first segment of a corrective formation. In this context, the price could develop an upward bounce that could reach the zone between 1.21579 and 1.22523. After the bounce conclusion, the common currency could find fresh sellers expecting to join a new downward sequence corresponding to wave (c).

If you are interested in finding trading opportunities using the Elliott Wave Principle, follow our Forex.Academy Educational Section.

Categories
Forex Videos

Market volatility continues into 2021, where next for Cable?

https://youtu.be/V1gF-10QUsw

https://youtu.be/V1gF-10QUsw

 


Market volatility continues into 2021, where next for Cable?

 

Thank you for joining this forex academy educational video.

In this session, we will be taking a look at how the pound is faring against the United States dollar as the UK leaves the European Union to go on its own way as an independent trading nation once again.

In this daily chart for cable, we can see a general trend higher from the 12th of May 2020, which culminated in a peak of 1.3700 at position A, which coincides with a future free trade agreement being announced between the United Kingdom and the European Union, which was generally seen by the market as going to happen, and which fuelled the bull rally as played out on the chart.

The pullback to the current level at 1.3558, at the time of writing, was to be expected, on the basis many traders work on the principle of buy the rumor and sell the fact, in which case we might naturally expect to see some traders exiting their long trades due to profit-taking, and a fear of a collapse due to this common market practice of buying the rumor and selling the fact. But the sell-off has been fairly muted, only flattening out to the current exchange rate.  

The real test here will be whether there is a move higher from position B to a retest of the 1.3700 line, which would then likely cause a push above it on towards 1.3800 and beyond, or a move lower towards the support line when longer-term institutional traders will be looking for the support line to breach, or price action to bounce higher and perhaps a retest of the 1.3700 figure from there.

Things to factor in are the extremely high rate of covid infections spreading through the United Kingdom and causing further lockdowns and loss of productivity within the UK, where long-term effects of this on the economy are not good.  The markets have been buoyed by the measures put in place by the government to protect businesses and inject money into the system.

We also have to consider a new United States president will be inaugurated in a couple of week’s time, and what effect this has on the United States dollar as he begins to introduce new legislation to raise income tax and increase red tape for businesses as he has pledged to do.

The recent pullback in the pound against the dollar has largely been a result of all of these factors and a slight improvement in US dollar sentiment. 

 Expect extreme volatility as we move in towards the middle part of January, especially around the time of the inauguration on the 20th of January.

Categories
Forex Elliott Wave Forex Market Analysis

Why GBPJPY Plummeted in Friday’s Session?

The GBPJPY cross declined on Friday trading session dragged 0.70% after the price surpassed the psychological barrier of 142, being the highest level reached since early September 2020.

The GBPJPY cross declined on Friday trading session dragged 0.70% after the price surpassed the psychological barrier of 142, being the highest level reached since early September 2020.

The GBPJPY cross declined on Friday trading session dragged 0.70% after the price surpassed the psychological barrier of 142, being the highest level reached since early September 2020.

Technical Overview

The GBPJPY cross drops over 100 pips on the last trading session of the week, accumulating a modest advance of 0.02% (YTD) since the yearly opening.

On the fundamental side, the industrial production in the United Kingdom eased 4.7% (YoY) in November 2020, informed the Office for National Statistics on Friday. The reading is worse than the decline of 4.2% expected by analysts. Likewise, both coronavirus lockdown and the Brexit uncertainty contributed to the decline in the industrial output.

Source: TradingEconomics.com

On the other hand, the doubts in the fourth quarter 2020 earnings season kick-off and the elected U.S. President Biden’s stimulus plan seem not enough to keep fueling the stock market participants’ euphoric sentiment. This context looks fading the record highs in the stock market, boosting the risk-off bias pushing lower the GBPJPY cross.

The big-picture illustrated in the next daily chart shows the price action moving in the extreme bullish sentiment where the cross ended the Friday session unveiling a bearish engulfing pattern, which carries to expect further declines in the coming trading sessions.

Finally, the piercing below the yearly opening level at 140.779 suggests potential declines during the first quarter of 2021.

Technical Outlook

Our previous analysis saw the progress in a complex correction identified as a double-three pattern (3-3-3). Nevertheless, the corrective rally suggests that the GBPJPY moves in a triple-three formation (3-3-3-3-3), which looks in its terminal stage.

The following 4-hour chart shows the completion of a triple-three pattern of Minute degree labeled in black, which moves inside a wave B of Minor degree identified in green since the cross found support at 133.040 touched in last September 22nd.

The internal structure of wave ((z)) in black shows its last corrective leg corresponding to wave (c) in blue, developing an ending diagonal pattern, which seems finished its wave v of Subminuette degree labeled in green. The breakdown of the guideline that connects the end of waves ii with iv carries to support the ending diagonal pattern’s finalization.

On the other hand, the timing indicator exposes the intraday oversold (see the yellow circle), which leads to the conclusion that the GBPJPY cross should develop an upward retracement as a flag pattern before continuing with its potential further decline.

In summary, the GBPJPY cross plummeted in last Friday’s session dragged by the completion of an ending diagonal pattern, which belongs to wave ((z)) of a triple-three formation, where its upper degree sequence corresponds to wave B of Minor degree. Although the news media continue supporting hopes in the stimulus plan for the U.S. economy, the Elliott wave structure showed by the cross unveils a different story.

According to the Elliott wave theory, the price should develop a downward wave C of Minor degree. The timing oscillator also suggests an intraday upward consolidation likely as a flag pattern before continuing its drops.

If you are interested in expanding your knowledge about the Elliott wave theory from the basics to advanced, visit our Forex.Academy Educational Section.

Categories
Forex Videos

Trump Leaves Office! What Now For The Forex Space?

https://youtu.be/0xyyVHQEkzA

https://youtu.be/0xyyVHQEkzA

 


What to expect in the Forex space when Trump leaves office

Thank you for joining this Forex  Academy educational video.

In this session, we will be looking at the potential key moves in the forex space with Donald Trump leaves office in a few days’ time.

History will look back at Donald Trump’s presidency, and it looks like historians will likely give him a good kicking.

But, if we hark back 12 months, pre-pandemic, unemployment in the United States was at a record low, the gross domestic product was high, US stock markets were at all-time record highs: The United States economy had never been fitter, thanks to having him at the helm.

Donald Trump’s style of presidency will be seen as abrasive and belligerent. But we have to remember he was not a politician to start with. He was a tough businessman with a no-nonsense attitude, and that’s why people voted for him to become president in the first place. It was a poke in the eye for the political elite in an attempt to bring back wealth for ordinary people. It was his lowering of corporate taxation and red tape and policies to bring back manufacturing to the United States that lifted the US economy to retain its rank as the most powerful nation on the planet.

But, when push came to shove, Donald Trump fell on his own sword because of his mishandling of the coronavirus pandemic.  The bottom of his presidential world fell out because he buried his head in the sand and ignored all the warnings about the horrendous covid disease.  His lacklustre attitude, and slowness to respond to the crisis, created friction at every point between the democrats and republican parties instead of trying to pull both sides together for the sake of the nation, which did nothing to help while the economy as it  faltered with mass unemployment and the sharpest decrease in GDP in US history.

Financial traders won’t miss him; his use of Twitter affected the financial markets without warning, creating huge swings in stock indices, bond yields, and the forex space, only for him to reverse many of his Twitter comments later, creating more mayhem while commenting on highly sensitive foreign and economic policy decisions he planned to implement, while he fed such information into the market with no warning or embargo.  Many would say good riddance and be happy to get back to the old style of governance under a lifelong politician, Joe Biden.

Some analysts predict that President Trump will try and upset the apple cart before he leaves office, while the Democrats are threatening to impeach him and have him removed, the timing would suggest this is impossible with just 10 days until he leaves office, at the time of writing.  But it is said that fellow republicans are side-lining him with regard to policy decisions and are trying to keep him at arms-length until he has gone. 

Throw into the mix US stock markets at record highs, due to what they currently see as the new president having more clout due to the democratic party holding more power in Congress after the recent runoffs in Georgia, to be able to bring in more covid stimulus aid packages and roll out vaccines across the United States.

Certainly, the dollar index – seen here – seems to be trying to fight back to the 91.00 level at the time of writing, having almost hit 88.00 in the last few days at position B, having fallen from its high in march at position A of 103.00.  does this mean that the rot has stopped?  Possibly not, but with a president on the way out and a new one on the way in, we can certainly expect the unexpected.  

This might mean that the Eurodollar pair, which has been riding high, will take a breather, having found resistance at 1.2330, shown here on this daily chart at position A

And with cable failing to reach the key 1.3700 on this daily chart at position A,  this might also be a reason why the markets are taking a breather from shorting the US dollar.

In conclusion, expect the unexpected, expect volatility, and expect the fundamentals to take a side-line while the US transition between presidents is over and new policies are implemented by the incoming democratic party.

Categories
Crypto Videos

Is Bitcoin sucking the life out of the Forex market?

https://youtu.be/5sdgap9VQ44

https://youtu.be/5sdgap9VQ44


Is Bitcoin sucking the life out of the Forex market?

Thank you for joining this forex academy educational video.

In this session, we will be asking if bitcoin is having a negative impact on the forex market by reducing the volume of transactions?

In this daily chart of bitcoin to the US dollar, it was only back in October that we reported that bitcoin had found a support line at 10000, and at the time of writing, we suggested there could be a surge up to and above 12,000 by the end of 2020. A retest of the previous high in 2017 around the 19,500 level, shown here at position B, would have then been on the cards.

Here we can see a somewhat muted pullback to position C, but the 2017 crash to the 3,000 level was not repeated, and the price went on to find support above the key 20K exchange rate.

The acceleration during position d up to 42000 was a purely speculative fuelled bull run,  where most of this move can be put down to companies such as PayPal, the CME  clambering balls, the bitcoin euphoria bandwagon, and countries such as Switzerland  opening its arms too to companies in the bitcoin space.  These factors only go to legitimise bitcoin’s space in the investment market arena and where it has called a modern-day gold Rush with day traders in a spare room buying on the CFDs market, hedge funds, and banks and other institutions clamouring aboard the bull run in fear of missing out.

A potential side effect of this incredible move higher and interest in the bitcoin space may well be the reason why the currency markets seem to be flattening out. Certainly, cable,  seen here with its recent top of 1.3700, since leaving the European Union with an eagerly anticipated free trade agreements in place,  has flatlined since the beginning of January.  And while some of this might be attributed to the increased rates of Covid spreading through the United Kingdom, one has to wonder if some traders in the forex space are throwing caution to the wind to buy bitcoins while side-lining currencies.

The flatlining of the cable exchange rate also coincides with the most volatile period of buying activity for bitcoin, and this period is also reflected in this one-hour chart of the US dollar to Japanese yen, which is also trading within a fairly narrow range of just 146 pips during a similar timeline.

Again, this is repeated with the euro US dollar pair over the same timeline price is relatively flat and consolidating within a fairly narrow 145 pip range.

The similarity between the timelines of activity and flattening with the forex pairs while exponential growth in bitcoin to the upside cannot be ignored.  However, is this trend, if based on our hypostasis correct, likely to continue?

It is completely natural for professional traders to bail out of one asset class a jump into another if they see potential to make money.  This is what training is all about recognising opportunities and jumping aboard.

Before we consider if this is likely to continue, let’s go back to our bitcoin US dollar daily chart, where we have highlighted the most recent candlestick.

This one single daily candlestick on the 7th of January shows a range between 42,000 at the top and 36,500 at the bottom, which is a huge 5,500 dollar move in a single date.

If institutional or retail traders get it wrong, the consequences can be grave, with enormous losses piling up. The problem at these levels is that traders will be wondering if this incredible bull run has reached the top of the market and is due for a crash, with memories going back to 2017 where bitcoin to the dollar crashed from 19,500 to just above 3000 in a short space of time.  Here we are seeing swings of over 5,000 points in a single day,  which is unnerving,  making it dangerous to trade. 

And this is why many investors in bitcoin will be dubious about buying at the current levels, which might see some inflows back into the forex currency space, with other investors In digital currencies looking for more opportunities with potential for long-term growth.

PLEASE LINK https://www.youtube.com/watch?v=GEtlPyBDU3g

A few months ago, we reported on a new digital coin with its own ecosystem: the AXIA Coin, which might be a front runner for alternative investments in digital currencies.  We understand that the company is close to launching, so please watch out for updates, which we will bring you soon. Meanwhile, you can find more details about the AXIA coin at www.axiacoin.org.  

 Meanwhile, watch out for extra volume creeping into the forex space, causing currencies to break from their current consolidation trends, as we have demonstrated here.

Categories
Forex Daily Topic Forex System Design

Trading System design – The pathway to Success

This article outlines the steps needed to find, create, test, and verify a trading system. We have to bear in mind that there is no way to create a forex trading system with an equity curve straight upward. Well, yes, it can be made. I’ve made it, but only optimizing it so much that expecting it to continue performing like this under real trading would be silly. Most trading bots advertise curves like this. If you believe them, your money will be in jeopardy.

This article outlines the steps needed to find, create, test, and verify a trading system. We have to bear in mind that there is no way to create a forex trading system with an equity curve straight upward. Well, yes, it can be made. I’ve made it, but only optimizing it so much that expecting it to continue performing like this under real trading would be silly. Most trading bots advertise curves like this. If you believe them, your money will be in jeopardy.

This article outlines the steps needed to find, create, test, and verify a trading system. We have to bear in mind that there is no way to create a forex trading system with an equity curve straight upward. Well, yes, it can be made. I’ve made it, but only optimizing it so much that expecting it to continue performing like this under real trading would be silly. Most trading bots advertise curves like this. If you believe them, your money will be in jeopardy.

It would be best if you’re proficient in coding on a trading platform such as MT4/5, Ctrader, Tradestation, Multicharts, or Ninjatrader. Not all traders can do it, so we will approach this for anyone willing to create a DIY trading system without programming. It would take longer, but the added benefit is you will learn a lot while doing your testing. This methodology will also create simpler and less prone to over-optimization systems.

The results obtained will vary, and not always will we get sound systems. Of course, we should not expect great, drawdown-free equity curves. But, there is no need for that. We will show you that what is necessary is only long-term profitability.

 

The Idea

 

The first step to creating a trading system is an idea that will provide us with an edge. Among the most basic concepts are,

 

 

  • Breakouts from a range or Fading breakouts from a range

 

  • price above/below a moving average

 

  • Moving average crossovers

 

  • Overbought/oversold conditions using an indicator such as the MACD, the RSI, or the Stochastic

 

 

  • Volatility spikes

 

 

  • Support/resistance levels

 

Please bear in mind that the market already knows all these key concepts. Therefore, their direct application would probably fail.

 

Testing the Idea

The first step to see if the idea has merit is to test it in a historical sample under the market conditions it was supposed to operate. Of course, a trading idea is almost always referring to a market entry, as the concept is supposed to time the market. This entry is usually combined with a stop-loss and a take-profit to create a complete solution.

But, to test the efficacy of the idea, we should forget the stop-loss and take-profit and use a standard exit, be it,

  • After n bars
  • After a percentage profit
  • A random exit.

If you don’t have the means or skills to code, the best solution is closing after a determined number of bars. You can even register the results of closing after 5, 10, and 20 bars, so we test the predicting power at increasing time intervals.

You could also use Tradingview.com to perform the test; therefore, we recommend you open a free account there. The free account gives most of the capabilities of a pro account but is limited to fewer indicators.

There are four kinds of testing:

  • Historical backtest
  • Out‐of‐sample test. Also called forward test
  • Walk‐forward test
  • Real‐time testing

Historical backtest

The Historical backtest is the simplest test. You will need to create a spreadsheet with the required fields and computations.

After defining the rules of the trading idea, you define a start date, for instance, one year ago. For initial testing, it is recommended not to register the trades with spreads and commissions. Just the brute profit.

  1.  Set the desired timeframe and move your chart so that the initial date is near the chart’s right end.
  2. From there, you shift your chart one by one.
  3. When you spot an entry point, you write it down in your trading log:
    1. Trade #
    2. Entry date and time
    3. Trade size: enter one lot
    4. Entry price
    5. Expected stop-loss: use a standard 2 ATR
    6. Expected target: use also 2ATR
    7. Exit price
    8. Exit date and time
    9. Maximum Adverse Excursion: Written down after the trade ended.
    10. Maximum Favorable Excursion: Write down the next pivot point higher/ lower than your exit.
    11. Compute the profit of the transaction.
  4. Continue the test until you reach at least 100 trades.
  5. Compute the statistical figures of your exercise
  6. Average profit: Sum of the profits / N, the number of trades
  7. The standard deviation of the profit = STD (profits)

Optimization

After 100 backtested trades, the developer has enough information to detect the basic mistakes of the strategy. Maybe the entry has a large lag that hurts profits, or, worse, it is too early, thus triggering the stop-loss too often.

We could also spot if the stop-loss can be improved. Maybe it’s too close, so the percent winners are low or too far. The use of the Maximum Adverse Excursion info will surely help in deciding the best placement.

On the profit side, we can use the Maximum Favorable Excursion to check if the system is leaving money on the table. The idea is to adjust the profit target, so most of the trades end close to the MFE level.

Walk-forward Test / Real-time trading

After optimizing the strategy’s main parameters, we could begin a forward test, using a demo account and live market data. We should proceed as if it was a real trade. In this stage, if we use a demo account, you’ll be able to add the costs of the trade: Spread, slippage, and commissions.

This last stage before committing real money should last at least one month, preferably two or three months, during which you should continue detecting errors, improving the strategy, and having a feel of its behavior. In this stage and the coming use with real money, the trader needs to be disciplined and accept all signals the system delivers. You cannot cherry-pick the trades because this introduces a random factor that will change your system’s parameters, so you’re losing information about it.

Changing the parameters of the system

When trading it live for several trades, you may feel you need to optimize your system. This is wrong. Of course, you may adapt the system to the market, but modifying it too often is a mistake. You need to have statistical evidence that something has changed and the system is now underperforming. Therefore, at least 30 trades must occur before doing a change. In fact, since the distribution of results is not normally distributed, it would be optimal to wait for about 60-100 trades for a measure with statistical significance.

Starting light

That means you need to start slow, risking no more than 0.5 percent on every trade, or whatever you consider is small for you. That way, you won’t be affected psychologically, follow the system for the required time to have propper stats, and get a grip on the normal behavior of your strategy.

Categories
Forex Course

208. Using Yuppy (EUR/JPY) As A Leading Indicator For Stocks!

Introduction

Introduction

Introduction

EUR/JPY is among the most popular pairs in the international foreign exchange market. In fact, it indicated approximately 3% of the overall daily transaction. Moreover, it is indicated as the seventh-highest traded currency pairs in the forex market. Both traders and investors can leverage the potentials of the EUR/JPY currency pair as they both carry a high degree of volatility.

Best Time To Trade in EUR/JPY

Although you can trade EUR/JPY at any time of the day, to leverage the most benefit, you must trade when the pair is most volatile. Between 7:30 and 15:30 is the time when the currency pair trade is the busiest.

Factors Impacting EUR/JPY Rate

When it comes to making the most lucrative trade with this pair, it is important to understand what influences its rate.

Prominence Of EUR

Like many modern currencies, the prominent factors that impact the Euro price flow are financial, political, and economic. For instance, many trade decisions regarding the Euro are backed by the European Central Bank’s monthly reports.

These reports can influence the fluctuations in the Euro’s rates, and traders and investors promptly leverage the details as quickly as they are released to determine the flow of the Euro rates.

In economic terms, news releases focusing on employment can also play an important role in the fluctuations of euro rates. These details are easily accessible and offer vital insights into the economic condition of the Euro and the movement of Euro prices.

The Prominence of JPY

Japan’s economy has more factors that play an important role in determining the flow of currency. The basic health of the economy will play a significant role in involving a high rate of export and import trading. One uncommon factor that impacts the flow of the country’s currency is situations such as a natural disaster.

The Right Way To Trade EUR/JPY

In terms of speculative trading, CFDs provide traders and investors with easy access to a plethora of markets. They like to transact with CFDs as derivatives trading implies that buying the actual currency is unnecessary. When trading, investors and traders like to harness technical analysis and assess the EUR/JPY chart. This is done to determine the relationship of the pairing and forecast the highs and lows of the markets.

[wp_quiz id=”102014″]
Categories
Forex Fundamental Analysis

GBP/CHF Global Macro Analysis – Part 3

GBP/CHF Exogenous Analysis The UK and Switzerland Current Account Differential A country’s current account shows the sum of its net exports, net secondary income, and net primary income. In this case, the current account differential is the difference between the UK’s current account balance and Switzerland. In international trade, when a country has a current […]

GBP/CHF Exogenous Analysis The UK and Switzerland Current Account Differential A country’s current account shows the sum of its net exports, net secondary income, and net primary income. In this case, the current account differential is the difference between the UK’s current account balance and Switzerland. In international trade, when a country has a current […]

GBP/CHF Exogenous Analysis

  1. The UK and Switzerland Current Account Differential

A country’s current account shows the sum of its net exports, net secondary income, and net primary income. In this case, the current account differential is the difference between the UK’s current account balance and Switzerland.

In international trade, when a country has a current account surplus, it means the value of its exports is higher than imports. Thus, its domestic currency is in higher demand in the forex market. Therefore, if the current account differential is positive, it implies that the UK has a higher current account than Switzerland. We can then expect that the price of the GBP/CHF pair will increase. Conversely, a negative differential would mean that Switzerland has a higher current account than the UK. In this case, the price of the GBP/CHF pair is expected to drop.

Switzerland had a current account surplus of $10.11 billion in the third quarter of 2020, while the UK had a $20.97 billion deficit. The current account differential is -$31.08 billion. Hence a score of -7.

  1. The interest rate differential between the UK and Switzerland

Interest rate differential is the swiss interest rate subtracted from the interest rate in the UK. Forex carry traders use a pair’s interest rate differential to establish whether to buy or short the pair. For GBP/CHF, if the interest rate differential is positive, it means that the UK’s interest rate is higher than in Switzerland. This makes traders and investors go long on the pair; hence, a bullish trend.

Conversely, if the interest rate differential is negative, it means that Switzerland’s interest rate is higher than in the UK. Thus, forex traders will short the GBP/CHF pair; hence, a bearish trend.

The Swiss National Bank has maintained the interest rate at -0.75%, while the UK’s interest rate is 0.1%. Therefore, the GBP/CHF interest rate differential is 0.85%. It has a score of 3.

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

GDP growth rate differential is the difference between the economic growth in the UK and Switzerland. A negative differential means that the UK’s economy is expanding faster than that of Switzerland. Consequently, the GBP/CHF pair will adopt a bullish trend. Conversely, if the GDP growth rate differential is negative, the swiss economy is growing faster than that of the UK. Hence, the GBP/CHF pair will adopt a bearish trend.

The UK economy has contracted by 5.8% in the first three quarters of 2020, while the swiss economy has contracted by 1.5%. That means the GDP growth rate differential is -4.3%. We assign a score of -3.

Conclusion

Indicator Score Total State Comment
The UK and Switzerland Current Account Differential -7 10 A differential of – $31.08 Switzerland has a $10.11 billion current account surplus, while the UK has a deficit of $20.97 billion
The interest rate differential between the UK and Switzerland 3 10 0.85% The differential is expected to remain at 0.85% all through 2021
The differential in GDP growth rate between the UK and Switzerland -3 10 -4.30% Switzerland’s economy contracted by 1.5% in the first three quarters of 2020 while the UK by 5.8%
TOTAL SCORE -7

The exogenous analysis of the GBP/CHF pair has a cumulative score of -7. Thus, we can expect a short-term downtrend in the pair.

In technical analysis, GBP/CHF’s weekly price is seen bouncing off from the upper Bollinger band.

We hope you find this analysis informative. Let us know if you have any questions in the comments below. Cheers.

Categories
Forex Signals

GBP/USD Supported Over Double Bottom – Buy Signal Update! 

The GBP/USD is trading at 1.3692, and it has closed a Doji candle on the four hourly timeframes, and it may extend a bearish correction in the GBP/USD pair. On the lower side, the support stays at 1.3636 and resistance at 1.3692 and 1.3720 today. The GBP/USD pair’s 10 & 20 periods EMA is supporting bullish bias in the Sterling. The MACD and RSI support bullish bias; therefore, bullish bias dominates over the 1.3646 level today.

The GBP/USD is trading at 1.3692, and it has closed a Doji candle on the four hourly timeframes, and it may extend a bearish correction in the GBP/USD pair. On the lower side, the support stays at 1.3636 and resistance at 1.3692 and 1.3720 today. The GBP/USD pair’s 10 & 20 periods EMA is supporting bullish bias in the Sterling. The MACD and RSI support bullish bias; therefore, bullish bias dominates over the 1.3646 level today.

The GBP/USD is trading at 1.3692, and it has closed a Doji candle on the four hourly timeframes, and it may extend a bearish correction in the GBP/USD pair. On the lower side, the support stays at 1.3636 and resistance at 1.3692 and 1.3720 today. The GBP/USD pair’s 10 & 20 periods EMA is supporting bullish bias in the Sterling. The MACD and RSI support bullish bias; therefore, bullish bias dominates over the 1.3646 level today.


Entry Price – Buy 1.36606

Stop Loss – 1.36206

Take Profit – 1.37006

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Signals

AUD/NZD Upward Channel Underpinds – Bullish Setup in Play! 

The AUD/NZD pair is trading with a bullish bias at 1.07901 level, facing immediate support at 1.07820 level. On the higher side, the pair may find resistance at the 1.07990 level, and a bullish crossover of 1.0799 level can extend the buying trend until the 1.0810 level. The MACD is closing histograms over 0, suggesting bullish bias in the AUD/NZD pair. In any case, the pair can drop until the 1.0782 level before extending further higher. Here’s a trade plan…

The AUD/NZD pair is trading with a bullish bias at 1.07901 level, facing immediate support at 1.07820 level. On the higher side, the pair may find resistance at the 1.07990 level, and a bullish crossover of 1.0799 level can extend the buying trend until the 1.0810 level. The MACD is closing histograms over 0, suggesting bullish bias in the AUD/NZD pair. In any case, the pair can drop until the 1.0782 level before extending further higher. Here’s a trade plan…

The AUD/NZD pair is trading with a bullish bias at 1.07901 level, facing immediate support at 1.07820 level. On the higher side, the pair may find resistance at the 1.07990 level, and a bullish crossover of 1.0799 level can extend the buying trend until the 1.0810 level. The MACD is closing histograms over 0, suggesting bullish bias in the AUD/NZD pair. In any case, the pair can drop until the 1.0782 level before extending further higher. Here’s a trade plan…


Entry Price – Buy 1.07861

Stop Loss – 1.07461

Take Profit – 1.08261

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Fundamental Analysis

GBP/CHF Global Macro Analysis – Part 1 & 2

Introduction The global macro analysis of the GBP/CHF currency pair will involve analysing endogenous and exogenous factors. Endogenous factors drive the domestic GDP growth in the UK and Switzerland. Exogenous factors influence the exchange rate for the currency pair. Ranking Scale The analysis will rank the endogenous and exogenous factors on a scale from -10 […]

Introduction The global macro analysis of the GBP/CHF currency pair will involve analysing endogenous and exogenous factors. Endogenous factors drive the domestic GDP growth in the UK and Switzerland. Exogenous factors influence the exchange rate for the currency pair. Ranking Scale The analysis will rank the endogenous and exogenous factors on a scale from -10 […]

Introduction

The global macro analysis of the GBP/CHF currency pair will involve analysing endogenous and exogenous factors. Endogenous factors drive the domestic GDP growth in the UK and Switzerland. Exogenous factors influence the exchange rate for the currency pair.

Ranking Scale

The analysis will rank the endogenous and exogenous factors on a scale from -10 to +10. The score for endogenous factors will be determined from a correlation analysis with the domestic GDP growth rate. If the score is negative, it means that the endogenous factor has led to the domestic currency depreciation. If positive, it has caused the appreciation of the domestic currency.

The exogenous analysis score is from a correlation analysis with the exchange rate for the GBP/CHF pair. When the score is negative, traders can expect the bearish trend for the pair. If positive, then the pair is expected to have a bullish trend.

Summary – GBP Endogenous Analysis

A -15 score implies that GBP has depreciated since the beginning of 2020.

Summary – CHF Endogenous Analysis

A score of 3 implies that CHF has partially appreciated since the beginning of this year.

Indicator Score Total State Comment
Switzerland Employment Rate -3 10 79.7% in Q3 2020 Slightly below the 80.4% recorded in Q1.
Switzerland Core Consumer Prices 4 10 100.82 points in November Inflation, as measured by the core consumer prices, rose by 0.28 points from January to November
Switzerland Manufacturing Production -2 10 4.7% decrease in Q3 2020 The YoY swiss manufacturing production is recovering
Switzerland Business Confidence 3 10 103.5 in November Swiss KOF Economic Barometer dropped in October and November. The majority of the consecutive drop was driven by private consumption
Switzerland Consumer Spending 5 10 Q3 spending was 91.929 billion CHF Q3 had the highest consumer spending compared to Q1 and Q2.
Switzerland Construction Output -2 10 A 0.4% drop in Q3 2020 Q3 output recovered from the 5% drop in Q2 but is still lower than the 3.1% growth in Q1
Switzerland Government Budget Value -2 10 An expected deficit of 2.2 billion CHF in 2020 Switzerland had a surplus of 8.1 billion CHF in 2019. The projected deficit is on account of aggressive government stimulus program and decreases in revenue due to COVID-19
TOTAL SCORE 3
  1. Switzerland Employment Rate

The Swiss employment rate measures the quarterly change in the percentage of the labour force that is employed. Changes in the number of people employed in the economy are a leading indicator of economic growth. When the economy is expanding, businesses create more job opportunities; hence, higher employment rate. Conversely, a shrinking economy leads to job cuts, which result in a lower employment rate.

In 2020 Q3, the Switzerland employment rate rose to 79.7% from the 6-year lows of 79.1%. Although the Q3 employment rate is lower than the 80.4% recorded in Q1, it shows that the Swiss economy is recovering from the economic shocks of COBID-19. The swiss employment rate scores -3.

  1. Switzerland Core Consumer Prices

Core consumer prices measure the rate of inflation by monitoring the price changes of only a select basket of goods and services. Consumer products with volatile prices are excluded. The rate of inflation is a leading indicator of economic growth. That’s because when inflation rises, it means domestic demand is on the rise, too, hence a higher GDP growth rate. Similarly, a decrease in the inflation rate means domestic demand is depressed, which may be followed by a contracting economy.

In November 2020, the swiss core consumer prices dropped to 100.82 points from 100.89 points in October. However, it is still higher than 100.54 points recorded in January. It has a score of 4.

  1. Switzerland Manufacturing Production

This measures the YoY change in the value of output from the swiss manufacturing sector. This sector plays a significant role in the Swiss economy. Therefore, growth in manufacturing production is accompanied by growth in the labour market and, consequently, the domestic economy’s expansion.

In Q3 of 2020, the YoY swiss manufacturing production dropped by 4.7%. That’s an improvement from the 9.6% drop in Q2. We assign a score of -2.

  1. Switzerland Business Confidence

The KOF Swiss Economic Institute compiles this index. It measures company managers’ optimism based on their perspective of the economy and the growth prospects of their businesses. The business that is surveyed are drawn from multiple sectors in the economy and contains 219 different variables.

In November 2020, the Swiss KOF Economic Barometer dropped to 103.5 from 106.3 in October. This marks the send consecutive month of a drop in the swiss business confidence. Notably, the drop in the index is primarily driven by the manufacturing sector and private consumption. Swiss business confidence has a score of 3.

  1. Switzerland Consumer Spending

This is the value of the total consumption by Swiss households. Domestic consumption is a primary driver of GDP growth. More so, it also an indicator of the performance in the labour market. With a higher rate of employment, disposable income increases, which increases consumer spending.

Swiss consumer spending increased to CHF 91.929 billion in the third quarter of 2020, which is the highest recorded compared to CHF 89.79 billion in Q1 and CHF 82.03 billion in Q2. It has a score of 5.

  1. Switzerland Construction Output

This indicator measures the percentage change in the value paid for construction work in Switzerland. The construction work includes building and engineering works done by public and private companies. Typically, when construction work increases, it is expected to be accompanied by an increase in the employment rate and economic growth.

In the third quarter of 2020, the YoY swiss construction output dropped by 0.4%. That is an improvement compared to the 5% drop in Q2 but still less than the 3.1% growth recorded in Q1. It has a score of -2.

  1. Switzerland General Government Budget Value

This represents the difference between the revenues received by the Swiss government and its expenditures. Government expenditure includes all transfer payments and purchases of goods and services. The general government budget value shows if the Swiss government has a surplus or a deficit. Too much deficit means that the economy is probably not responding to expansionary fiscal policies.

In 2019, the Swiss government had a budget surplus of CHF 8.097 billion. In 2020, the general government budget was expected to hit a deficit of CHF 2.2 billion. This deficit is primarily driven by a significant drop in revenue collection due to COVID-19. It has a score of -2.

In the very next article, you can find the Exogenous analysis of the GBP/CHF currency pair, so make sure to check that out. Cheers.

Categories
Forex Signals

AUD/USD Bullish Bias Continues – Symmetric Triangle Plays!

On Thursday, the AUD/USD trades bullish at 0.7767, and an upward violation of the 0.7778 mark is likely to extend the bullish trend until the next target of the 0.7818 mark. Whereas the support holds around the 0.7722 mark. The RSI and MACD are suggesting bullish sentiment; thus, we have begun a buying trade at the 0.7750 mark. 

On Thursday, the AUD/USD trades bullish at 0.7767, and an upward violation of the 0.7778 mark is likely to extend the bullish trend until the next target of the 0.7818 mark. Whereas the support holds around the 0.7722 mark. The RSI and MACD are suggesting bullish sentiment; thus, we have begun a buying trade at the 0.7750 mark. 

On Thursday, the AUD/USD trades bullish at 0.7767, and an upward violation of the 0.7778 mark is likely to extend the bullish trend until the next target of the 0.7818 mark. Whereas the support holds around the 0.7722 mark. The RSI and MACD are suggesting bullish sentiment; thus, we have begun a buying trade at the 0.7750 mark. 

The prevailing risk-off market mood also weighed on the risk-sensitive Australian dollar that ultimately added further pressure over the AUD/USD pair. On Tuesday, the daily death toll in the United States from the coronavirus hit a record of 4327 as the Trump administration attempted to fast-track the roll-out of vaccinations across the country. The US has the highest toll in the world from the coronavirus with a total of above 3lacs deaths, and it has also reported the highest number of infections with 22,959,610 confirmed cases of coronavirus. 

Despite lockdown and restrictive measures, these rising cases of coronavirus added to the risk-off market sentiment in the market and weighed on the risk perceived by Aussie that ultimately added pressure on the declining AUD/USD pair. Furthermore, the mixed signals from some of the US Federal Reserve members on how much longer policy can stay so accommodative also dragged the treasuries and supported the demand in US dollar that ultimately added in the losses of AUD/USD pair.


Entry Price – Sell 0.77599

Stop Loss – 0.77199

Take Profit – 0.77999

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Daily Topic Forex System Design

Trading System design – Basic Concepts

In previous articles, we explained the importance of a plan to succeed in Forex and described its general features. In this article, we will describe the concepts that need to be considered when designing a trading system.

In previous articles, we explained the importance of a plan to succeed in Forex and described its general features. In this article, we will describe the concepts that need to be considered when designing a trading system.

In previous articles, we explained the importance of a plan to succeed in Forex and described its general features. In this article, we will describe the concepts that need to be considered when designing a trading system.

A trading strategy is what most traders call a trading system, but it is not. A trading strategy is just a set of loose rules discretionary traders use to trade. A trading system is a set of closed rules used to systematically trade the market, usually through a computer EA, although a disciplined trader could also use it.

Traders, especially novice traders, get emotional and lose money because their emotions interfere and stop making rational decisions in the battle’s heat. Thus, the first thing to avoid is discretionary trading. Please read the article Know the Two Systems Operating inside Your Head. That’s why what we aim to create is a trading system that should be systematically traded.

Price imbalances

There are plenty of criteria to find these imbalances. There are two visual clues we can think of. The first one is a rubber band. The rubber band idea describes the price as if it was a rubber band or spring. When it moves far away from equilibrium, we expect the force to pull it to its center to increase and eventually drive it back to equilibrium.

The second visual clue is looking at the price moving in waves. Since there are numerous traders, their goals set in different timeframes, we can expect waves of different periods and amplitudes. A trend form when the combination of different waves are in sync, and chaotic moves occur when waves desync.

The main idea of a trading system is to find imbalances in the price and profit from it. Essentially, it takes the form of “buy low and sell high,” “sell high to buy back low,” or its variants “buy high sell higher,” “sell low, sell lower.”

The Effect of timeframes and a portfolio in the trading results

In their book Active portfolio management, Grinold and Kahn described the fundamental law of active management. The formula has two variables: The manager’s skill (IC) and the number of investments performed (N).

We could think of IR ( Information Coefficient) as a quality index of the results.

If we analyze the equation, we see that IC measures a trader’s ability to produce profits, since if N is constant, IR grows if IC grows.

But, if we keep the IC constant, we see that IR grows with the number of trades (N).

This explains that a portfolio of assets will be more profitable than only one asset. It also explains why shorter trading timeframes would produce higher results. Of course, with very short timeframes, the trading costs would eat a growing portion of the profits, so there is a limit to how short we could go.

Diversification

Diversification is a key concept to reduce the overall risk in trading. The idea is simple. Let’s say we have a long position the EURUSD with an overall dollar risk of 10 pips. If the dollar moves up and drives the pair southwards, we lose $100 on every lot. If we have an equivalent long position on the USDJPY, we will cover the risk on the EURUSD with the gains on the USDJPY, driving it to zero or, even, being positive overall.

If the assets are uncorrelated and the risk on each trade is similar on all trades, the overall basket’s risk will less than 50% of the sum of all open trades risk.

The profitability rule

Two parameters define the profitability of a system: the percent winners and the reward risk ratio.

The formula that tells the minimum percent winners (P) required with a determined reward/risk ratio (Rwr) for the system to be profitable is:

P > 1 / (1+Rwr) 

Conversely, below is the formula of the minimum reward/risk ratio needed with a determined percent winners figure on a profitable system:

Rwr > (1-P)/P

If you play with the second formula, you will see that at reward/risk ratios below one, the system should grant winners higher than 50 percent. Furthermore, Systems with high reward risk ratios would need less than 50% winners to be profitable.

The conclusion is we must look for systems with high reward/risk ratios to protect us from periods of low winner’s percent.

Assessing the quality of a trading system

There are several methods to measure the quality of a trading system. We propose the use of Van Tharp’s SQN, which is a variation of the chi-square test, a well-known method to evaluate the goodness of a sample against a random distribution. The SQN test is a Chi-square test that is capped to 100 samples so that the length of the sample does not modify its value.

  SQN = 10 x E / STD(E)

Where E is the expected profit on each trade, which is the sum of all profits divided by the number of trades, and the denominator is the standard deviation of E.

But if the sample is less than 100 instead of 10, the multiplier is the square root of N, the number of trades.

SQN = √N x E / STD(E)

Systems below 1 are bad. systems of 1.5 to 2 average, and from 2 to 3 good and over 3 excellent.

Elements of a Trading System

We can decompose a trading system into its several elements, although not all of them need to be present.  We have already discussed this, but let’s describe its basic elements.

A Setup: The setup is a market state where we think there is an imbalance in the price, or a condition we expect can be resolved with a price move, for example, the price reaching a top or a bottom of a channel.

A permissioning filter: This forbids trading under specific market conditions: Low volume, extreme volatility, particular hours or days.

Entries: This the stage that times the market. It can be a breakout, a candlestick pattern, or an indicator signal.

Stop-loss: This defined an invalidation level, under which the trade is likely no longer profitable. This level will limit our losses and save our capital for further trades.

Take-profit: It defines our planned profit. It may be set using support/resistance levels or any other sign the current trade movement is over, such as a reversal signal or the crossover of averages.

Re-entry rule: You may also consider this rule in your findings. For instance, a market failing to do something, for example, continue moving up, may signify it will move down. Thus, you could stop and reverse instead of close the position. Also, if you got out of a position, you could consider re-entry if the market flags a continuation of the previous movement. That way, you could tight your stops keeping most of your profits and reenter instead of loose stops, which may eat a large portion of your hard-earned profits if the market does not recover.

Categories
Forex Course

207. The Affects Of Stock Market On The Foreign Exchange Market

Introduction

Introduction

Introduction

The impact of the stock market on the flow of the forex market is quite significant. In fact, the foreign exchange market reflects the performance of the stock market. For instance, when the US stock market with Dow Jones, or NASDAQ, S&P 500 on the upward showing gains, the similar is likely to happen to the USD pairs in the foreign exchange market.

Rising Stock Market’s Impact

When the stock market is booming, investors from around the world will run to invest their money in the rising stocks of the nation as they are looking to obtain higher returns on the investment. With more investors demanding the currency, its value will increase significantly.

This is because if the investors want to put the money on, say, the US market, they have to convert their local currency into the US dollar. This significantly raises the demand for the dollar, hence makes the forex market perform better.

Falling Stock Market’s Impact

If the stock market is performing badly, the investors are likely to take their money out. This means that the investors will convert the currency back into the domestic ones or invest in some other country or asset. Subsequently, this will decrease the value of the concerned currency. This is something that all economies do in terms of investments.

Decision Making Based On Stock Market’s Performance 

Foreign exchange traders can leverage this information to assess the situation and predict the market. If you assess the stock of a particular currency and witness that they are moving up, then evaluate it against the currency, you will be able to make a prediction.

An increasing stock market will be influencing a boost in the value of the currency of the country. So you can base your trading decision on the same. At the same time, when the stock market is performing inadequately, you can sell the currency of that country. This is because the value of the currency will be falling in the market.

This correlation between the stock market and the foreign market can alter based on the global financial marketplace condition. The financial landscape is interconnected to different elements. Policies of central banks, political events, changes in the environment, everything affects how the trades are performed worldwide. The reason why stock influence forex is because stock includes companies that drive the economy of the country.

We hope you find this course article informative. Please let us know if you have any questions in the comments below. Cheers.

[wp_quiz id=”101824″]
Categories
Forex Elliott Wave Forex Market Analysis

EURAUD Under Bearish Pressure, What’s ahead?

The EURAUD cross is advancing in its incomplete third wave from a mid-term downward sequence that remains in play. Follow with us on what the Elliott wave theory tells about its next movement.

The EURAUD cross is advancing in its incomplete third wave from a mid-term downward sequence that remains in play. Follow with us on what the Elliott wave theory tells about its next movement.

The EURAUD cross is advancing in its incomplete third wave from a mid-term downward sequence that remains in play. Follow with us on what the Elliott wave theory tells about its next movement.

Technical Overview 

The big picture of the EURAUD cross unveiled in the following 12-hour chart exposes the price action moving in the extreme bearish sentiment zone during the second week of the year. However, both the acceleration and oversold could suggest the exhaustion of the bear market.

The following 12-hour chart exposes the market participants’ sentiment, unfolded by the 90-day high and low range. The figure reveals the institutional activity pushing the cross in the extreme bearish zone and consolidating under the yearly opening price at 1.58763.

On the other hand, the EMA(60) to Close Index recently pierced the -0.0300 level. This reading suggests both the oversold and the exhaustion of its accelerated downtrend identified with the black trend-line.

In this context, the accelerated downward trend-line breakout and the close above yearly opening price should warn about potential recoveries in the EURAUD cross.

Technical Outlook

The short-term Elliott wave outlook for the EURAUD cross unfolded in the 8-hour chart reveals the progress of an incomplete bearish impulsive wave of Minuette degree labeled in blue, suggesting further drops.

The previous chart illustrates the downward sequence that began on October 20th when the cross found fresh sellers at 1.68273 and started a bearish structural series of Minute degree labeled in black, which currently could be in its wave ((c)) or ((iii)). The internal structure seems developing its wave (iii) of Minuette degree identified in blue. 

The wave (iii) potential bearish target can be found between 1.56175 and 1.55359, which coincides with the descending channel’s base-line. Once the price tests the possible target area, the market participants could carry up the EURAUD cross toward the short-term descending channel’s upper line.

Regarding the wave (iv) in blue, considering the alternation principle, as wave (ii) is a simple corrective formation in price and time, wave (iv) should be complex and should last longer than wave (ii).

On the other hand, both the trend indicator and the timing plus momentum oscillator remain, supporting the bearish bias. Each rally could represent an opportunity to add positions to the bearish side.

In summary, the EURAUD cross continues in the extreme bearish sentiment zone advancing in an incomplete downward sequence, which could find support in the potential target zone between 1.56175 and 1.55539. Once the price finds support, the cross could start to bounce toward the upper line of its short-term descending channel. Finally, the bearish scenario analyzed will be invalid if the price soars above 1.60416, corresponding to the end of wave (i) in blue.

Categories
Forex Market Analysis

Daily F.X. Analysis, January 14 – Top Trade Setups In Forex – U.S. Fed Chair Powell Speech in Focus! 

The eyes will remain on the ECB Monetary Policy Meeting Accounts due during the late European session on the data front. Alongside, the U.S. Unemployment Claims and Fed Chair Powell Speaks will remain in highlights today.

The eyes will remain on the ECB Monetary Policy Meeting Accounts due during the late European session on the data front. Alongside, the U.S. Unemployment Claims and Fed Chair Powell Speaks will remain in highlights today.

The eyes will remain on the ECB Monetary Policy Meeting Accounts due during the late European session on the data front. Alongside, the U.S. Unemployment Claims and Fed Chair Powell Speaks will remain in highlights today.

Economic Events to Watch Today  

 

EUR/USD – Daily Analysis

The EUR/USD closed at 1.21577 after placing a high of 1.22226 and a low of 1.21396. The U.S. dollar recovered on Wednesday and weighed on EUR/USD pair that resulted in losses for another day. On Tuesday, the benchmark 10-year Treasury yields fell nearly seven basis points from a 10-month high hit on the day following strong demand at a $38 billion 10-year auction and comments from the U.S. Federal Reserve officials reiterating that monetary policy was going to stay supportive. 

The sharp rise in the U.S. yields resulted from the bond-market sell-off triggered by the rising hopes for massive stimulus measures largely funded by government borrowing after the Democrats claimed the Senate in Georgia runoff elections. 

At 12:00 GMT, the German WPI for December raised to 0.6% against the expected 0.1% and supported Euro on the data front. At 14:00 GMT, the Italian Industrial Production for November dropped to -1.4% against the expected -0.4% and weighed on Euro. At 15:00 GMT, the Industrial Production for November also raised to 2.5% against the expected 0.2% and supported Euro. From the U.S. side, at 18:30 GMT, the Consumer Price Index for December remained unchanged at 0.4%. The Core CPI for December also came in line with the forecasts of 0.1%. The European Central bank President Christine Lagarde called on Wednesday for global regulation of Bitcoin, saying that the digital currency had been used for money laundering activities in some instances and that any loopholes needed to be closed. The largely anonymous nature of cryptocurrencies has raised the concerns that they could be used for money laundering and other legal activities.

On Wednesday, the Federal Reserve Governor Lael Brainard said that unemployment for the lowest-paid workers in the U.S. was above 20%, and it underscores the importance of policy help for the economy. Brainard said that the figure indicated how uneven the recovery has seen since efforts to control the coronavirus pandemic resulted in the biggest quarterly GDP drop since the Great Depression. She also said that the level highlighted the need for accommodative policy, but she stated that it was too early to say how long Fed’s measures will stay in place. These comments from Brainard added strength to the U.S. dollar and added losses in EUR/USD pair on Wednesday.

Meanwhile, the losses in EUR/USD pair were extended after the German Chancellor Angela Merkel wanted to extend the current lockdown in Europe’s largest economy through the end of March. Extending the lockdown will hurt the Eurozone’s economy that could drag it to a double-dip recession, and it weighed on the local currency Euro that ultimately added weight on EUR/USD pair on Wednesday. Furthermore, On Wednesday, the House voted in favor of impeachment against Donald Trump, and he became the first U.S. President to be impeached twice. The House voted to impeach Trump on incitement of insurrection after the President incited a violent crowd to storm the Capitol last week, ultimately resulting in five deaths. These developments kept the safe-haven greenback under demand and added further losses in EUR/USD pair.

Daily Technical Levels

Support   Resistance

1.2148       1.2178

1.2129      1.2189

1.2118      1.2208

Pivot Point: 1.2159

EUR/USD– Trading Tip

The EUR/USD is gaining support at the 1.2136 level, and violation of this can cause further dip until 1.2105 and 1.2065 level. On the higher side, the EUR/USD pair may face resistance at the 1.2170 level, and a bullish breakout of this level can prolong the buying trend until 1.2220. The RSI and MACD have shifted their selling trends; therefore, we may see further sell-off upon the bearish breakout of the 1.2136 level today.

GBP/USD – Daily Analysis

The GBP/USD closed at 1.36364 after placing a high of 1.37010 and a low of 1.36115. The GBP/USD pair dropped on Wednesday after British Pound started trimming its previous daily gains amid the U.S. dollar recovery. The greenback recovered strength, and the DXY rose back to the area of the daily high near 90.30. The gains were modest as Wall Street trades mixed and despite the decline in the U.S. treasury. The 10-year U.S. Treasury yield fell to 1.09%, its lowest since January 8. 

After the third national lockdown in the U.K. was announced last week, there had been speculations that the Bank of England (BoE) could introduce negative interest rates to help support the economy, which proved negative for the British Pound. However, following Tuesday’s comments from Bank of Governor Andrew Bailey, which ended the speculation, Sterling has since rallied and continued to find support from markets. Furthermore, the British Pound also rose as Home Secretary Priti Patel addressed the nation and said that the current lockdown restrictions were strict enough, claiming investors who had been worried that tougher restrictions could have been announced to tackle rising infection rates. 

The prospects of new restrictions added weight to the local currency, and it was further supported by the comments from the Scottish Minister, who announced further restrictions. Nicola Sturgeon urged people to minimize their interaction and keep in mind that the virus was there with everyone. He said that people should assume that they have the virus or any person they were in contact with and urged the public to prevent it from spreading by following the rules and SOPs. The rising number of coronavirus cases and imposed lockdowns in the nation added weight to the local currency Sterling, which ultimately added the GBP/USD pair’s losses.

The U.S. Inflation rate and the rising U.S. Treasury yields helped and supported the U.S. dollar supported due to its safe-haven status from the rising number of coronavirus cases U.S. fiscal stimulus speculations. The rising demand for the U.S. dollar added in the losses of the British Pound to the U.S. Dollar exchange rate and dragged it down on Wednesday.

For Cable investors, any coronavirus developments will remain in focus for the end of the week, with success in the rollout of vaccines seen as British Pound positive. Sterling investors will also be watching Friday’s U.K. growth data, which could weaken the GBP/USD exchange rate. 

The British Pound investors will also be looking to Federal Reserve officials over the coming days, with Fed chair Jerome Powell speaking and indicating that U.S. monetary policy will be kept loose and the U.S. dollar is likely to struggle further. Greenback investors will also be focusing on Friday’s initial jobless claims that could also disappoint the traders.

Daily Technical Levels

Support   Resistance

1.3555      1.3722

1.3445      1.3781

1.3387      1.3890

Pivot Point: 1.3613

GBP/USD– Trading Tip

The GBP/USD is trading at 1.3692, and it has closed a Doji candle on the four hourly timeframes, and it may extend a bearish correction in the GBP/USD pair. On the lower side, the support stays at 1.3636 and resistance at 1.3692 and 1.3720 today. The GBP/USD pair’s 10 & 20 periods EMA is supporting bullish bias in the Sterling. The MACD and RSI support bullish bias; therefore, bullish bias dominates over the 1.3646 level today.

USD/JPY – Daily Analysis

The USD/JPY pair closed at 103.869 after placing a high of 103.995 and a low of 103.523. The pair refreshed daily tops on Wednesday, reversed an intraday dip near a one-week low, and recovered a quarter of the previous day’s losses. The U.S. Dollar demand rose on Wednesday amid the retracement slide from a 10-month high hit of U.S. treasury yield on a 10-year note that ultimately added to the USD/JPY pair’s upward momentum. The U.S. dollar was also high onboard amid the risk-off market sentiment on Wednesday due to increased infection cases and imposed lockdowns worldwide.

The Benchmark 10-year Treasury yields fell nearly seven basis points from a 10-month high hit on Tuesday following strong demand at a $38 billion 10-year auction. The comments from U.S. Federal Reserve officials stating that monetary policy would stay supportive also helped the U.S. dollar regain its strength and support the USD/JPY pair’s gains on Wednesday.

On the data front, at 04:50 GMT, the M2 Money Stock for the year from Japan remained flat at 9.2%. At 10:58 GMT, the Prelim Machine Tool Orders from Japan raised in December to 8.7% against November’s 8.6%. . From the U.S. side, at 18:30 GMT, the Consumer Price Index for December remained unaffected at 0.4%. The Core CPI for December also came in line with the projections of 0.1%.

The Kansas City Fed President Esther George has said that she does not expect the Fed to react if inflation exceeds the central bank’s 2% goal. Earlier in the month, the Democrats claimed the Senate after the runoff elections in Georgia that raised hopes for larger stimulus measures funded by the government borrowing. This resulted in a bond-market sell-off that drove U.S. yields sharply higher, helped stall the U.S. dollar’s decline, and supported the USD/JPY pair’s upward trend. 

The U.S. Federal Reserve officials expect a quick economic recovery if coronavirus vaccinations continue to gather pace; however, that could leave markets estimating about the outlook for the monetary policy by Central Bank. Federal Reserve might not recourse to faster than expected loosening of coronavirus stimulus efforts. Such a move from the Fed could put pressure on it to raise interest rates faster than expected, and this would help the U.S. dollar gather strength and support the rising USD/JPY pair. Moreover, on Tuesday, the daily U.S. coronavirus death-toll hit a record of 4327 as the Trump administration moved to rush the rollout of vaccinations across the country. During the holiday season around January 8, the rising death-toll was first seen in the U.S. with 4000 deaths, and it has reached 4327 now.

The total number of deaths in the United States from coronavirus has reached 382,624, and it is the biggest death-toll in the world. The U.S. also has the highest number of coronavirus cases globally, with 22,959,610 confirmed cases of coronavirus. Despite lockdown and restrictive measures, these rising coronavirus cases added weight on the U.S. dollar and capped further gains in the USD/JPY pair.

Daily Technical Levels

Support   Resistance

103.53      104.16

103.31      104.56

102.91      104.78

Pivot Point: 103.94

USD/JPY – Trading Tips

The safe-haven currency pair USD/JPY slipped to trade at 104.054 level amid increased demand for safe-haven assets. The USD/JPY has formed an upward channel on the 4-hour timeframe, and it has the chance of leading the pair towards the next resistance level of 104.340 level. The 50 periods EMA supports the bullish trend, and we may have odds of taking a buying trade over the 103.570 level today. Good luck! 

Categories
Forex Signals

EUR/JPY Violates Descending Triangle Pattern – Quick Sell Setup! 

The EUR/JPY is trading with a bearish bias at the 126.497 level, violating the support level of 126.497, which now is working as a resistance for the EUR/JPY pair. On the lower side, the EUR/JPY pair may find support at the 126.250 level, and further support can be expected at 126.100. The MACD value has crossed below 0, supporting selling bias as histograms are being formed under zero. The recent bearish engulfing candle on the hourly timeframe suggests strong odds of selling the EUR/JPY pair. Let’s consider selling trades in the EUR/JPY today. 

The EUR/JPY is trading with a bearish bias at the 126.497 level, violating the support level of 126.497, which now is working as a resistance for the EUR/JPY pair. On the lower side, the EUR/JPY pair may find support at the 126.250 level, and further support can be expected at 126.100. The MACD value has crossed below 0, supporting selling bias as histograms are being formed under zero. The recent bearish engulfing candle on the hourly timeframe suggests strong odds of selling the EUR/JPY pair. Let’s consider selling trades in the EUR/JPY today. 

The EUR/JPY is trading with a bearish bias at the 126.497 level, violating the support level of 126.497, which now is working as a resistance for the EUR/JPY pair. On the lower side, the EUR/JPY pair may find support at the 126.250 level, and further support can be expected at 126.100. The MACD value has crossed below 0, supporting selling bias as histograms are being formed under zero. The recent bearish engulfing candle on the hourly timeframe suggests strong odds of selling the EUR/JPY pair. Let’s consider selling trades in the EUR/JPY today. 


Entry Price – Sell 126.45

Stop Loss – 126.85

Take Profit – 126.05

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Signals

GBP/JPY Violates the Ascending Triangle Pattern – Bullish Signal Update! 

The GBP/JPY pair trades with a bullish bias at 142.090 level ever since it has violated the triple top resistance level of 141.296. On the higher side, the GBP/JPY pair soar until the next target level of 142.510. The GBP/JPY pair’s technical side is supporting strong bullish bias as the 10 & 20 periods EMA are in support of the buying trend. Here’s a quick trade plan…

The GBP/JPY pair trades with a bullish bias at 142.090 level ever since it has violated the triple top resistance level of 141.296. On the higher side, the GBP/JPY pair soar until the next target level of 142.510. The GBP/JPY pair’s technical side is supporting strong bullish bias as the 10 & 20 periods EMA are in support of the buying trend. Here’s a quick trade plan…

The GBP/JPY pair trades with a bullish bias at 142.090 level ever since it has violated the triple top resistance level of 141.296. On the higher side, the GBP/JPY pair soar until the next target level of 142.510. The GBP/JPY pair’s technical side is supporting strong bullish bias as the 10 & 20 periods EMA are in support of the buying trend. Here’s a quick trade plan…


Entry Price – Buy 141.942

Stop Loss – 141.944

Take Profit – 142.342

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Signals

AUD/USD Symmetric Triangle Pattern – Potential Sell Trade!

The AUD/USD closed at 0.77738 after placing a high of 0.77772 and a low of 0.76865. The AUD/USD pair recovered on Tuesday after the US dollar came under fresh pressure due to the US’s rising political risks.

The AUD/USD closed at 0.77738 after placing a high of 0.77772 and a low of 0.76865. The AUD/USD pair recovered on Tuesday after the US dollar came under fresh pressure due to the US’s rising political risks.

The AUD/USD closed at 0.77738 after placing a high of 0.77772 and a low of 0.76865. The AUD/USD pair recovered on Tuesday after the US dollar came under fresh pressure due to the US’s rising political risks.
The risk-sensitive Aussie gained traction on Tuesday despite the rising risk-off mood in the market. The risk sentiment suffered on Tuesday as the FBI told that it had received information indicating armed protests were being planned at all 50 state capitols and Washington. These comments also weighed on the US dollar that ultimately added to the AUD/USD pair’s rising prices on Tuesday.

On the other hand, the greenback was weak during Tuesday as the US Dollar Index that measures the value of the US dollar against the basket of six major currencies fell to 90.20 level and supported the upward momentum in AUD/USD pair. The risk-off market sentiment was also supported by the rising number of coronavirus cases and the increased tougher restrictions across the world to curb coronavirus spread. Meanwhile, the 10-year US Treasury yields were up by almost 2% on Tuesday, suggesting that DXY’s downside will remain limited if yields continued to rise.

On the data front, there was no macroeconomic data to be released from Australia. While From the US side, at 16:00 GMT, the NFIB Small Business Index for December fell to 95.9 against the expected 100.1 and weighed on the US dollar that ultimately added in the gains of AUD/USD pair. At 20:00 GMT, the JOLTS Job Openings for November rose to 6.53M against the anticipated 6.42M and supported the US dollar that capped further gains in AUD/USD pair. At 20:02 GMT, the IBD/TIPP Economic Optimism came in line with the anticipations of 50.1.

From China, the M2 Money Supply for the year dropped to 10.1% against the forecasted 10.7% and weighed on China-proxy Aussie that capped further upside in AUD/USD pair. The New Loans from China raised to 1260B against the forecasted 1250B and supported China-proxy Aussie that added AUD/USD pair gains.

On Tuesday, Donald Trump’s administration said that it gave millions of coronavirus vaccine doses that it had been keeping back for second shots and encouraged states to offer them to all Americans above age 65 or with persistent health conditions. These comments added in the risk sentiment and supported risk perceived Aussie that ultimately added the AUD/USD pair’s upward momentum.


Daily Technical Levels
Support Resistance
0.7650 0.7756
0.7605 0.7817
0.7544 0.7862
Pivot point: 0.7711

The AUD/USD pair jas formed a symmetric triangle pattern, supporting a selling bias in the pair. On the 2 hour timeframe, the Aussie is likely to find support at the 0.7722 level along with a resistance level of 0.7776. The MACD and RSI support selling bias, whereas the 10 & 20 periods EMA are suggesting selling bias. The AUD/USD is showing a bearish crossover on the two-hourly timeframes, supporting a selling bias. Let’s consider taking a sell trade below 0.7760 today. Good luck!

Categories
Forex Signals

EUR/GBP Violates Descending Triangle Pattern – Sell Signal In Play! 

The EUR/GBP pair is trading with a bearish bias at a 0.8930 level, having violated the support level of 0.8940. The Euro seems to get weaker as the European countries have tightened measures to fight coronavirus after a brief relaxation over the Christmas and New Year period. They have re-imposed lockdowns, closed shops and offices, and introduced laws to make it easier for governments to impose further restrictions to battle the pandemic. 

The EUR/GBP pair is trading with a bearish bias at a 0.8930 level, having violated the support level of 0.8940. The Euro seems to get weaker as the European countries have tightened measures to fight coronavirus after a brief relaxation over the Christmas and New Year period. They have re-imposed lockdowns, closed shops and offices, and introduced laws to make it easier for governments to impose further restrictions to battle the pandemic. 

The EUR/GBP pair is trading with a bearish bias at a 0.8930 level, having violated the support level of 0.8940. The Euro seems to get weaker as the European countries have tightened measures to fight coronavirus after a brief relaxation over the Christmas and New Year period. They have re-imposed lockdowns, closed shops and offices, and introduced laws to make it easier for governments to impose further restrictions to battle the pandemic. 

These new lockdown measures across Europe to fight the second wave of coronavirus raised the fears of a double-dip recession in the Eurozone that added weight on the single currency Euro and capped further upside in the EUR/USD pair on Tuesday.

The Sterling is gaining strength as Bailey said that there were many issues with cutting interest rates below zero, and such a move could hurt banks. After these comments from Bailey, the British Pound gained traction and raised that ultimately pushed the EUR/GBP pair lower.

Meanwhile, The Deputy Governor of Bank of England, Ben Broadbent, said on Tuesday that Britain’s coronavirus pandemic was likely to have a limited long-run impact on inflation and has led to less short-term downward pressure on prices than might have been expected from the slump in headline economic output.

On the technical side, the EUR/GBP has violated the support level of 0.8940, and now it’s likely to extend the selling trend until it reaches 0.8873. The MACD and RSI are in support of selling; thus, we have entered the selling trade in the EUR/GBP pair. Here’s a trading plan…


Entry Price – Sell 0.89138

Stop Loss – 0.89538

Take Profit – 0.88738

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

 

Categories
Forex Fundamental Analysis

GBP/JPY Global Macro Analysis – Part 3

GBP/JPY Exogenous Analysis The United Kingdom and Japan Current Account Differential The current account data is the most comprehensive measure of a country’s participation in international trade. It is the sum of net exports, net factor income, and net transfer payments. Remember that in the forex market, the value of a country’s fluctuates depending on […]

GBP/JPY Exogenous Analysis The United Kingdom and Japan Current Account Differential The current account data is the most comprehensive measure of a country’s participation in international trade. It is the sum of net exports, net factor income, and net transfer payments. Remember that in the forex market, the value of a country’s fluctuates depending on […]

GBP/JPY Exogenous Analysis

  • The United Kingdom and Japan Current Account Differential

The current account data is the most comprehensive measure of a country’s participation in international trade. It is the sum of net exports, net factor income, and net transfer payments. Remember that in the forex market, the value of a country’s fluctuates depending on its demand. Therefore, when a country has a current surplus account, it means that the demand for its currency is higher, and vice versa.

In this case, the current account differential is the difference between the UK and Japan’s current account balance. If the current account differential is positive, it means that the GBP will appreciate more than JPY hence a bullish GBP/JPY. Conversely, if the current account differential is negative, JPY will appreciate faster than the GBP hence a bearish trend for GBP/JPY.

In Q3 2020, Japan had a current account surplus of $15.4 billion while the UK had a $20.97 billion deficit. Thus, the current account differential between GBP and JPY is – $36.37 billion. Thus, the UK and Japan current account differential have a score of -3.

In the forex market, the interest rate is one of the most closely monitored economic indicators. Suffice to say, traders and investors monitor every other domestic economic indicator to predict the interest rate policy changes. The interest rate differential for the GBP/JPY pair is the difference between the UK’s interest rate and that in Japan.

If the differential is positive, traders and investors can receive better returns by selling the JPY and buying the GBP, hence, bullish GBP/JPY. Conversely, if the interest rate differential is negative, currency traders would prefer to sell the GBP and buy JPY hence, the bearish GBP/JPY pair.

In 2020, the BOE cut interest rates from 0.75% to 0.1%, while the BOJ has maintained an interest rate of -0.1%. Therefore, the GBP/JPY interest rate differential is 0.2%. It has a score of 4.

  • The differential in GDP growth rate between the UK and Japan

The GDP growth rate differential measures the difference between the UK and Japan’s average annual growth rate. This is an effective way of comparing two economies since all economies vary in size and composition.

When the GDP growth rate differential is positive, it means that the UK economy has expanded more than Japan. Hence, the GBP/JPY will be bullish. Conversely, if the differential is negative, Japan’s economy has expanded faster than the UK’s. Hence, the GBP/JPY pair will be bearish.

In the first three quarters of 2020, the UK economy has contracted by 5.8% while Japan contracted by 3.5%. The GDP growth rate differential is -2.3%. Thus, we assign a score of -3.

Conclusion

Indicator Score Total State Comment
The UK and Japan Current Account Differential -3 10 A differential of – $36.37 The UK has a current account deficit of $20.97 billion, while Japan has a surplus of $15.4 billion. This is expected to continue to widen as both economies recover from the pandemic
The interest rate differential between the UK and Japan 4 10 0.20% Both the BOJ and the BOE have no plans to change their monetary policies in the foreseeable future. This means the differential will remain at 0.2% in the short-term
The differential in GDP growth rate between the UK and Japan -3 10 -2.30% The UK economy contracted more than the Japanese economy. As economic recovery progresses, this differential could change
TOTAL SCORE -2

The cumulative score for the exogenous factors is -2. That means that the GBP/JPY pair is set on a bearish trend in the short-term.

Technical analysis of the pair shows the weekly chart attempting to break below the middle Bollinger band.

Categories
Forex Daily Topic Forex System Design

Building a Trading System: Elements of a Trading Plan

Now that we know the importance of having a plan, let’s discuss the necessary components of a trading plan.

Now that we know the importance of having a plan, let’s discuss the necessary components of a trading plan.

Now that we know the importance of having a plan, let’s discuss the necessary components of a trading plan.

A trading plan should consist of at least these elements:

  1. A basket of instruments
  2. A trading system consisting of timeframes, permissioning filter, entry rules, trade management: stop-loss, take profits.
  3. A position sizing methodology
  4. A trading record
  5. Trade-forensics analysis.

In this article, we will provide an overview of these elements.

A basket of Instruments

Every asset has its characteristics, and its market movement differs from others on volatility, liquidity, and ranges. Therefore, professional traders track a limited basket of instruments to trade. A few, even, specialize and trade just one instrument.

 

The best criteria to decide which are best are:

  • Liquidity: It means how much trading volume it moves. Illiquid assets are easy to manipulate, spreads (the difference between the bid and ask prices) are wider, and the trading rules fail more often.
  • Price Action: The instrument should have enough swings in the trading timeframe to merit trading it. Instruments that do not move or move too erratically are prone to failed trades. A security that trends are the best.
  • Familiarity: As said, your trading results improve if you’re familiar with how an asset moves, its usual support and resistance levels, the typical length of swings, and so on.
  • Economic Data: Economic news releases affect the security and trading signals fail at the time of the release. Therefore, it is advisable not to trade it in the vicinity of a news release.

The Trading System

As said in our previous video, financial markets are unbounded territories where each trader needs to set his own rules; otherwise, they will be influenced by his emotions and fail. A trading system is their set of rules that enable them a long-term success.

 

Timeframes

The chosen timeframe should match the availability to trade. A trader with a day job would need to select a daily or a 12-hour timeframe, whereas a full-time trader could use shorter frames, such as 15-min, one, two, or four-hour timeframes.

Similarly to asset selection, the trader must familiarize himself with how his assets move in these timeframes and evaluate the liquidity and range at different times and weekdays to choose the best periods to trade.

Permisioning filter

A permisioning filter is a way to avoid trading under determined circumstances. It can be a filter that allows only trading in the direction of the primary trend or an overbought/oversold sign that should be on for a determined candlestick or pattern formation to be valid.

The key idea of the permisioning filter is to screen the trades and pick the ones with the best odds of success.

Entry rules

Entry rules can be technical or fundamental rules to time the market, although we will focus on technical rules.

 

There are two philosophies regarding entries.

  • Enter on the trend’s weakness

This methodology aims to profit from pullbacks of a primary trend to optimize the price entry. Different indicators and patterns may help time the entry: MA crossovers, Oscillators, or reversal candlestick patterns such as the engulfing pattern or morning star and evening star.

  • Enter on the trend’s strength.

Enter on strength aims to profit from an increasing momentum of the price. We acknowledge the trend’s strength is increasing and recognize the trend will continue for a while. Technical indicators such as the Momentum, RSI, and MACD may help time the entry. Price action patterns, such as range breakouts, are quite useful too.

Trade Management

Trade management is a vital element of any trading system. It is responsible for getting out of unprofitable positions, trails the stops to break-even, and above to optimize profits or close the trade when the target is hit or when a technical signal warns of a trend reversal.

Many top traders value more trade management than entries. The money is won on exits, they say.

Money management should be consistent with the concept of cutting losses short and letting profits run. A sound trading system should present an average reward/risk ratio at least over 1.5, and ideally above 2.

Position sizing

Position sizing is the part of your plan that tells you how much risk you should take on a trade. We have had a complete video section on this subject, which we encourage you to study. To summarize it here, position sizing is the tool to help you reach the trading objectives and put drawdown under the levels that fit you. Finally, proper position sizing enables you to minimize the risk of ruin while optimizing your trading account’s growth.

The trading record / Trade-forensics

The path to improvement is an analysis of past results. Nobody is perfect, and, also, markets aren’t immutable but changing. A trading record is necessary to evaluate your system’s performance, detect and correct weaknesses, such as stops or target placements, errors in timing – too late or too early on a trade, and evaluate how permisioning filters work. Finally, the trading record will help traders know their system’s key parameters: the average profit and its standard deviation, percent winners, and average reward/risk.

Key Elements of the trading record:

The main data you should record on the spreadsheet record are:

  • Entry date/time
  • entry price
  • trade size
  • entry level
  • stop-loss level
  •  $risk of the trade
  • planned take-profit level
  • Exit price
  • Exit date/ time

Other desirable parameters that would help optimize stops and take-profit targets are:

maximum adverse price of the trade if there were no stops.

maximum favorable price of the trade if not considering the take-profit

The first one would help you find better places for the stops, and the second one will show you the best place for the take-profit placement.

Main Parameters:

With the suggested trading record entries, you will be able to measure the key parameters of your system:

Average profit: Total profits/ number of trades

Standard deviation of profits: Use Excel’s Standard Deviation formula

Percent winners: Nr of Winners/ total trades x 100.

Average Reward/ risk:  Sum of Profits / sum of $risk

You may find an example of a trading record in this forex.academy article. Furthermore, since we consider it an essential element to your trading success, we offer you to download our freely available trading log. You are free to adapt it to your taste and needs.

Forensics

After the closure of a trade, you should analyze its quality, regarding execution and goals. A losing trade does not have to be of low quality if executed according to your system’s rules. But it is necessary to determine if you’re acting according to the rules and assess how much of the available profit did you take.

Points to consider

  • Percent of the available profit ( if any)
  • percent of the loss you’ve taken ( if any)
  • Timing: has it been right, too early, or too late?
  • Exit timing: right, too early, or too late?
  • Stop-loss: Can stop-loss settings be improved?
  • Take profit: Can they be improved?
  • Average Reward/risk: is it according to your settings?

Also, after  a determined number of trades/weeks, you should assess:

  • Is the system improving or worsening over time?
  • Losing streaks: are normal for the system you’re using or due to bad stop-loss settings?
  • How many trades could be on profit if you’ve loosened your stops?
  • How much profit could you pocket if your take-profit levels were moved here/there, based on the maximum favorable price data?

 

This ends our overview of the main elements of the trading plan.

Categories
Forex Fundamental Analysis

GBP/JPY Global Macro Analysis – Part 2

JPY Endogenous Analysis Summary An overall score of -13 implies that this currency (JPY) has depreciated since the beginning of this year. Indicator Score Total State Comment Japan Employment Rate -4 10 60.4% in October 2020 The Japanese labor market has shed about 820,000 jobs between January and October 2020 Japan Core Consumer Prices -1 […]

JPY Endogenous Analysis Summary An overall score of -13 implies that this currency (JPY) has depreciated since the beginning of this year. Indicator Score Total State Comment Japan Employment Rate -4 10 60.4% in October 2020 The Japanese labor market has shed about 820,000 jobs between January and October 2020 Japan Core Consumer Prices -1 […]

JPY Endogenous Analysis

Summary

An overall score of -13 implies that this currency (JPY) has depreciated since the beginning of this year.

Indicator Score Total State Comment
Japan Employment Rate -4 10 60.4% in October 2020 The Japanese labor market has shed about 820,000 jobs between January and October 2020
Japan Core Consumer Prices -1 10 101.2 points in November 2020 The index has dropped marginally by 0.8 points in the first 11 months
Japan Manufacturing Production 2 10 3.1% drop in October The decrease in YoY manufacturing production is slowing down
Japan  Business Confidence -2 10 Q4 reading was -10 Businesses are growing increasingly optimistic
Japan Consumer Spending -2 10 Was ¥280.8 trillion in Q3 2020 The increase in Q3 expenditure by households shows that the economy is steadily recovering
Japan Construction Industry Activity -2 10 YoY drop of 6.9% in July 2020 The July drop was the second-worst recorded in over ten years
Japan Government Budget Value -4 10 the budget deficit of ¥308414 in Q2 2020 This is the worst deficit in 20 years. It’s expected to improve as the economy goes back to normal
TOTAL SCORE -13
  • Japan Employment Rate

This indicator shows the number of Japanese nationals employed as a percentage of the entire Japanese working-age population. With this indicator, we can track the Japanese economy’s performance since employment corresponds to the expansion and contraction of the economy.

In October 2020, the Japan employment rate rose to 60.4% from 60.3% in September. Although Japan’s employment rate is higher than in January, the labor market has lost about 820,000 jobs since January. We assign a score of -4.

  • Japan Core Consumer Prices

Core consumer prices measure the inflation rate in Japan based on a select basket of goods. The core consumer prices do not include goods and services with volatile prices. Typically, when inflation rises, it implies that the economy is expanding and the labor market is growing. Conversely, when the index drops, it means that the labor market is shrinking.

In November 2020, Japan Core Consumer Prices dropped to 101.2 points from 101.3 in October. Since January, the index has shed 0.8 points. Thus, it scores a -1.

  • Japan Manufacturing Production

This indicator measures the percentage change in the value of the output in the manufacturing sector. Since the Japanese economy is highly reliant on the manufacturing sector, changes in this indicator can be considered a leading indicator of economic growth.

In October 2020, the YoY manufacturing production in Japan decreased by 3.1% compared to the 9% decrease recorded in September. The October decrease is the slowest since February.  We assign a score of 2.

  • Japan Business Confidence

In Japan, the business confidence index results from a survey of about 1100 large manufacturers with a capital of at least ¥1 billion. The survey evaluates the current industry trends, business conditions within the company and the industry, and expectations for the next quarter and year. The sentiment in Japanese businesses is ranked with an index of a scale from -100 to +100. The negative index shows pessimism, while a positive index shows optimism.

In Q4 of 2020, the Bank of Japan’s Tankan business sentiment index increased to -10 from -27 in Q3. This improvement shows that the economy is potentially recovering from the impact of the COVID-19 pandemic. However, it is still lower than the -8 registered in Q1. Thus, we assign a score of -2.

  • Japan Consumer Spending

It tracks the quarterly value of expenditure by households. In Japan, the consumption expenditure accounts for both the supply-side and demand-side. The supply-side from the survey of family income, while the demand-side is from the expenditure survey. The weighted average of both these estimates represents the final consumption expenditure.

In Q3 2020, the consumer spending in Japan rose to ¥280.8 trillion from ¥268.2 trillion in Q2. However, it is still lower than the consumer spending recorded in Q1. Japan consumer spending scores -4.

  • Japan Construction Industry Activity

This index tracks the YoY changes in the construction industry in Japan. It shows the changes in companies’ monetary value of construction work and billed to the clients. Note that in Japan, the construction industry accounts for about 6% of the total industrial activity. Thus, the construction output index can be a leading indicator of the entire industrial activity. More so, since it is a tertiary industry, it can signal longer-term changes in the GDP.

In July 2020, Japan’s YoY construction output dropped by 6.9%. This drop is the second-worst in over ten years. The worst was recorded in June at -7.9%. The Japan construction industry activity scores -2.

  • Japan Government Budget Value

In Japan, the government budget value evaluates the difference between government revenues and expenditure. This is meant to determine whether there is a government budget surplus or deficit. A budget surplus arises when revenues exceed the expenditure, while a deficit occurs when government expenditure is more than revenues.

In Q2 of 2020, Japan has a government budget deficit of ¥308414. This is the worst deficit recorded in over two decades. Thus, the Japan Government Budget Value has a score of -4.

In the upcoming article, you can find the Exogenous analysis of the GBP/JPY currency pair where we have forecasted its price movements. All the best.

Categories
Forex Fundamental Analysis

GBP/JPY Global Macro Analysis – Part 1

Introduction

Introduction

Introduction

The GBP/JPY pair’s global macro analysis interrogates the endogenous factors that drive the GDP growth in the UK and Japan. The analysis will also cover exogenous factors that affect the exchange rate between the GBP and the JPY.

Ranking Scale

The analysis will use a sliding scale from -10 to +10 to rank the endogenous and exogenous factors’ impact. Endogenous factors impact the value of the domestic currency. Thus, when it is negative, it means that the domestic currency has depreciated. When positive, it means that the domestic currency has increased in value during the period under review. The ranking of the endogenous factors is based on correlation analysis with the domestic GDP.

On the other hand, a positive ranking for the exogenous factors means that the GBP/JPY pair’s price will increase. Conversely, when negative, it means that the price of the pair will drop. This ranking is derived from correlation analysis between the exogenous factors and the GBP/JPY exchange rate fluctuation.

GBP Endogenous Analysis – Summary

A score of -15 implies that GBP has depreciated since the beginning of this year.

Indicator Score Total State Comment
UK Employment Rate -5 10 75.2% in September 2020 Dropped by 1.4% from January to September. The labor market has shed around 551,000 jobs
UK Core Consumer Prices 2 10 109.82 points in November 2020 The UK core consumer prices have increased by 1.82 points since January. Shows that the demand in the domestic economy has not been depressed
UK Factory Orders 3 10 Was -25 in November The CBI trends orders are improving. The -25 recorded in November was the highest since February
UK Business Confidence -2 10 Neutral in Q4 of 2020 UK businesses are still pessimistic about the future operating environment.
UK Consumer Spending -5 10 Was £304.5 billion in Q3 2020 Q3 household expenditure shows domestic demand is recovering from the lows of Q2. Consumer spending is still below the pre-pandemic Q1 levels
UK Construction Output -2 10 YoY drop of 7.5% in October 2020 The construction output is improving, which implies that the UK economy is steadily recovering from the economic disruptions of the pandemic
UK Government Budget Value -6 10 UK public sector net borrowing deficit was £22.3 billion The growing budget deficit is a result of increased government expenditure in the wake of COVID-19 pandemic. Also worsened by reduced revenues due to business disruption
TOTAL SCORE -15
  • United Kingdom Employment Rate

The employment rate shows the percentage of the UK labor market that is actively and gainfully employed. It is a comprehensive representation of the growth in the labor market. Note that the changes in the employment rate measure the changes in the economic activities of a country.

In September 2020, the UK employment rate dropped to 75.2% from 75.3% in August. From January to September 2020, the employment rate has dropped by 1.4%, equivalent to about 551,000 job loss. The UK employment rate scores -5.

  • United Kingdom Core Consumer Prices

This index measures the change in the rate of inflation in the UK by tracking price changes of specific consumer products. The index calculation excludes items whose prices tend to be highly volatile, such as fuel and energy.

In November 2020, the core consumer prices in the UK dropped to 109.82 from 109.9 in October. The index has increased by 1.82 points since January. The UK core consumer prices score 2.

  • United Kingdom Factory Orders

In the UK, the CBI Industrial Trends Orders tracks orders from about 500 companies in 38 sectors of the manufacturing industry. The survey’s components include domestic goods orders, exports, inventory, output prices, and expectations of future investments and output levels. The surveyed manufacturers respond whether the current conditions are normal, above, or below normal. This is used as a leading indicator of industrial production.

In December 2020, the UK CBI trends orders were -25, 15 points up from -40 in November. This is the highest level since February 2020 but still lower than -18 in January. We assign a score of 3.

  • United Kingdom Business Confidence

This index gauges the optimism of businesses operating in the UK. A survey is conducted on 400 small, medium, and large companies to determine their optimism. The survey covers exports, output levels and prices, capacity, order books, inventory, competitiveness in the domestic market,  innovation, and training. The business sentiment is then ranked from -100 to +100, with 0 showing neutrality.

In the fourth quarter of 2020, the UK business confidence was neutral at 0, a slight change from -1 in Q3. It is, however, still below the 23 recorded in Q1. We assign a score of -2.

  • United Kingdom Consumer Spending

Expenditure by households contributes to a significant proportion of the domestic GDP. In the UK, this index tracks quarterly changes in the amount of money spent by households and Non-profit institutions serving households (NPISH). Note that when the economy is performing well, consumer spending is high. Conversely, a poorly performing economy corresponds to low consumer spending.

In Q3 2020, consumer spending in the UK rose to £304.5 billion from £258.3 billion in Q2. However, the Q3 expenditure is still lower than Q1. The UK consumer spending scores -5.

  • United Kingdom Construction Output

This economic indicator tracks the yearly change in the value of work done in the construction sector. The amount of money charged by construction companies in the UK is based on a sample of 8000 companies that employ over 100 employees. Note that in the UK, the construction sector contributes about 6.4% of the GDP.

In October 2020, the UK’s YoY construction output dropped by 7.5%, up for the 10% drop recorded in September. This marks the smallest decrease in the UK’s construction output since the pre-pandemic period. We assign a score of -2.

  • United Kingdom Government Budget Value

This indicator tracks the changes between the government’s revenues and expenditure. When the revenue exceeds the expenditure, it is a surplus and indicates that the economy is expanding. When the deficit is increasing, it means that the government is spending much more than it receives. This poses a threat of overburdening the economy with future debt repayment obligations.

In October 2020, the UK public sector net borrowing deficit was £22.3 billion. This is an improvement from the deficit of £28.6 billion in September. In January 2020, the UK had a surplus of £9.6 billion. Thus, we assign a score of -6.

In the next article, we have discussed the endogenous analysis of JPY currency to see how it has performed in the year’s due course. Make sure to check that out. Cheers.

Categories
Forex Market Analysis

Daily F.X. Analysis, January 13 – Top Trade Setups In Forex – U.S. Inflation Report in Focus! 

On the news front, eyes will remain on the ECB President Lagarde Speaks as she may discuss the upcoming monetary policy event; however, the major focus will remain on the U.S. Inflation rates, which may help determine the further direction of the U.S. dollar.

On the news front, eyes will remain on the ECB President Lagarde Speaks as she may discuss the upcoming monetary policy event; however, the major focus will remain on the U.S. Inflation rates, which may help determine the further direction of the U.S. dollar.

On the news front, eyes will remain on the ECB President Lagarde Speaks as she may discuss the upcoming monetary policy event; however, the major focus will remain on the U.S. Inflation rates, which may help determine the further direction of the U.S. dollar.

Economic Events to Watch Today  

  

EUR/USD – Daily Analysis

The EUR/USD closed at 1.22077 after placing a high of 1.22095 and a low of 1.21369. After falling for three consecutive sessions, the EUR/USD pair rose on Tuesday as the U.S. dollar eased and U.S. Treasury declined. The U.S. Dollar had hit a more than two and half year lowest level in January after sliding for months as the U.S. Federal Reserve cut its interest rates and speculation of heavy rounds of fiscal stimulus under President-elect Joe Biden’s tenure. However, after Democrats won the Georgia runoff elections, the hopes for massive stimulus packages increased, and the U.S. Treasury yields started to rise that ultimately lifted the U.S. dollar.

This rise in the U.S. dollar weighed heavily on EUR/USD pair during last week; however, the recent rally in U.S. Treasury yields ran out of the stream, and the dollar came back to its previous levels. The U.S. Treasury yield on a 10-year note reached a 10-month high on Tuesday but ultimately had a reverse effect and weighed on the U.S. dollar. This slide-in U.S. dollar added gains in EUR/USD pair on Tuesday as the investors started taking profits. Meanwhile, on Tuesday, the Turkish President Recep Tayyip Erdogan said that country was ready to settle its frayed relationship with the European Union back on track and called on the 27 nation bloc to display the same determination. 

These new lockdown measures across Europe to fight the second wave of coronavirus raised the fears of a double-dip recession in the Eurozone that added weight on the single currency Euro and capped further upside in the EUR/USD pair on Tuesday.

On the data front, there was no macroeconomic data to be released from Europe while from the U.S., at 16:00 GMT, the NFIB Small Business Index for December dropped to 95.9 against the expected 100.1 and weighed on the U.S. dollar that ultimately added in the gains of EUR/USD pair. At 20:00 GMT, the JOLTS Job Openings for November rose to 6.53M against the expected 6.42M and supported the U.S. dollar that capped further gains in EUR/USD pair. At 20:02 GMT, the IBD/TIPP Economic Optimism came in line with the forecasts of 50.1.

Daily Technical Levels

Support   Resistance

1.2159     1.2234

1.2111     1.2259

1.2085     1.2308

Pivot point: 1.2185

EUR/USD– Trading Tip

The EUR/USD is gaining support at the 1.2200 level, and below this, it can dip further until the 1.2189 level. On the higher side, the pair may face resistance at the 1.2226 level, and a bullish breakout of this level can extend the buying trend until 1.2260. The RSI and MACD support a bullish trend, but there’s a chance of bearish correction upon the violation of 1.2190. On the 4 hour timeframe, the EUR/USD pair may face resistance at the 1.2220 level, which is extended by a downward trendline.

GBP/USD – Daily Analysis

The GBP/USD closed at 1.36645 after placing a high of 1.36702 and a low of 1.34932. After falling for four consecutive sessions, the GBP/USD pair raised on Tuesday after Sterling strengthened amid the Bank of England’s positive comments. The Pound Sterling jumped against the U.S. dollar and the Euro on Tuesday as comments from the Bank of England’s governor Andrew Bailey on the viability of negative interest rates dampened some sub-zero rates’ expectations in the U.K. 

Bailey said that there were many issues with cutting interest rates below zero, and such a move could hurt banks. After these comments from Bailey, the British Pound gained traction and raised that ultimately pushed the GBP/USD pair higher on Tuesday.

Meanwhile, The Deputy Governor of Bank of England, Ben Broadbent, said on Tuesday that Britain’s coronavirus pandemic was likely to have a limited long-run impact on inflation and has led to less short-term downward pressure on prices than might have been expected from the slump in headline economic output. Broadbent said that a smaller slowdown in inflation reflected shifts in consumer demand during the pandemic that had led to temporary capacity constraints in businesses, as well as support to household incomes from government furlough schemes.

On the data front, at 05:01 GMT, the BRC Retail Sales Monitor for the year for December dropped to 4.8% against the expected 5.9% and weighed on British Pound and capped further upside in GBP/USD pair. From the U.S. side, at 16:00 GMT, the NFIB Small Business Index for December declined to 95.9 against the projected 100.1 and weighed on the U.S. dollar that ultimately added the gains of the GBP/USD pair. At 20:00 GMT, the JOLTS Job Openings for November surged to 6.53M against the projected 6.42M and supported the U.S. dollar that capped further GBP/USD pair gains. At 20:02 GMT, the IBD/TIPP Economic Optimism came in line with the projections of 50.1.

On the other hand, the U.S. dollar was also weak on Tuesday as the U.S. Dollar Index dropped as investors kept an eye on U.S. politics while pressure continued to grow to impeach President Donald Trump. Furthermore, the U.S. dollar was also weak as the prospects of massive stimulus packages from Joe Biden’s government raised as he has shown a willingness to add trillions in new relief bills that ultimately supported the upward momentum of the GBP/USD pair.

Daily Technical Levels

Support   Resistance

1.3555     1.3722

1.3445     1.3781

1.3387     1.3890

Pivot point: 1.3613

GBP/USD– Trading Tip

The GBP/USD is trading at 1.3692, and it has closed a doji candle on the four hourly timeframes, and it may extend a bearish correction in the GBP/USD pair. On the lower side, the support stays at 1.3636 and resistance at 1.3692 and 1.3720 today. The GBP/USD pair’s 10 & 20 periods EMA is supporting bullish bias in the Sterling. The MACD and RSI thesupport bullish bias; therefore, bullish bias dominates over the 1.3646 level today.

USD/JPY – Daily Analysis

The USD/JPY pair closed at 103.749 after placing a high of 104.333 and a low of 103.718. After rising for four consecutive days, the USD/JPY pair dropped on Tuesday amid the slide in the U.S. dollar. The U.S. dollar index dropped to fresh weekly lows in the 90.20 level as hopes for additional fiscal stimulus raised and provided support to high yielding equities. The House of Representatives introduced an impeachment article against U.S. President Donald Trump that weighed on the U.S. dollar and dragged the pair USD/JPY on the downside.

The U.S. Dollar Index (DXY) fell almost 0.3% on Tuesday against its rivals, while the 10-year U.S. Treasury yields dropped to a session’s low of 1.146%. The U.S. stocks opened higher on Tuesday and recovered from the previous session’s losses, with investors looking for additional fiscal stimulus amid continued political turmoil. The Dow Jones Industrial Average was down by 0.3%, and the S&P 500 was down by 0.6% lower while NASDAQ was low by 1.2%.

On the data front, at 04:50 GMT, the Bank Lending for the year from Japan dropped to 6.2% against the forecasted 6.5% and weighed on the Japanese Yen that capped further losses in the USD/JPY pair. The Current Account Balance from Japan for November raised to 2.34T against the forecasted 2.00T and supported the Japanese Yen that ultimately added the USD/JPY pair’s losses. At 10:00 GMT, the Economic Watchers Sentiment dropped to 35.5 against the expected 36.9 and weighed on the Japanese Yen, which capped further losses in the USD/JPY pair.

From the U.S. side, at 16:00 GMT, the NFIB Small Business Index for December decreased to 95.9 against the anticipated 100.1 and weighed on the U.S. dollar that ultimately added further losses in the USD/JPY pair. At 20:00 GMT, the JOLTS Job Openings for November increased to 6.53M against the anticipated 6.42M and supported the U.S. dollar that capped further losses in the USD/JPY pair. At 20:02 GMT, the IBD/TIPP Economic Optimism came in line with the anticipations of 50.1.

Meanwhile, the safe-haven appeal rose on Tuesday after fears rose that there could be further disruptions in the days leading up to Biden’s inauguration on January 20. FBI has said that it has received information specifying that armed protests were being planned at all 50 state capitols and Washington. The FBI’s comments raised the safe-haven appeal and supported the safe-haven Japanese Yen that ultimately added the USD/JPY pair’s losses on Tuesday.

On Tuesday, Federal Reserve Governor Lael Brainard said that the federal banking agencies were in the process of enlisting requests for information on the risk management of artificial intelligence applications in financial services. Whereas, the Boston Federal Reserve Bank President Eric Rosengren said that the U.S. economy could see a strong rebound in the second half of this year as vaccinations became widely available and that monetary policy will remain accommodative. However, the virus was still driving the economy. The losses in USD/JPY pair were also capped on Tuesday after the Donald Trump administration said that it was releasing millions of coronavirus vaccine doses and urged states to offer them to all Americans over age 65 or with chronic health conditions.

Daily Technical Levels

Support   Resistance

103.53     104.16

103.31     104.56

102.91     104.78

Pivot point: 103.94

USD/JPY – Trading Tips

The safe-haven currency pair USD/JPY slipped to trade at 103.623 level amid increased demand for safe-haven assets. On the lower side, the USD/JPY pair has completed 38.2% Fibonacci retracement at 103.611 level, and on the further lower side, the USD/JPY pair may find support at 50% Fibonacci level of 103.400 level. The MACD and RSI support selling bias; therefore, we may find support at the 103.283 level. Let’s consider taking the buying trade over the 103.283 level and selling below the same. Good luck! 

Categories
Forex Signals

AUD/USD Completes 38.2% Fibonacchi Retracement – Trade Idea! 

The AUD/USD pair was closed at 0.76953 after placing a high of 0.77604 and a low of 0.76658. AUD/USD pair dropped on Monday amid the rising US dollar prices and the improved risk-off market sentiment in the market. The risk-sensitive Australian dollar suffered due to the rising risk-off market sentiment after the world’s second-largest economy entered into restrictions as the number of coronavirus cases rose rapidly. China saw almost 18 new imported infections from overseas, and on Monday, the country in northeastern Heilongjiang province moved into lockdown after reporting new coronavirus infections. It weighed on the risk sentiment that ultimately plunged the risk-sensitive Aussie and dragged the pair AUD/USD on the downside.

The AUD/USD pair was closed at 0.76953 after placing a high of 0.77604 and a low of 0.76658. AUD/USD pair dropped on Monday amid the rising US dollar prices and the improved risk-off market sentiment in the market. The risk-sensitive Australian dollar suffered due to the rising risk-off market sentiment after the world’s second-largest economy entered into restrictions as the number of coronavirus cases rose rapidly. China saw almost 18 new imported infections from overseas, and on Monday, the country in northeastern Heilongjiang province moved into lockdown after reporting new coronavirus infections. It weighed on the risk sentiment that ultimately plunged the risk-sensitive Aussie and dragged the pair AUD/USD on the downside.

The AUD/USD pair was closed at 0.76953 after placing a high of 0.77604 and a low of 0.76658. AUD/USD pair dropped on Monday amid the rising US dollar prices and the improved risk-off market sentiment in the market. The risk-sensitive Australian dollar suffered due to the rising risk-off market sentiment after the world’s second-largest economy entered into restrictions as the number of coronavirus cases rose rapidly. China saw almost 18 new imported infections from overseas, and on Monday, the country in northeastern Heilongjiang province moved into lockdown after reporting new coronavirus infections. It weighed on the risk sentiment that ultimately plunged the risk-sensitive Aussie and dragged the pair AUD/USD on the downside.

The China proxy-Aussie suffered more due to its trading relationship with China as the country imposed strict anti-virus measures in the Hebei province due to rising coronavirus cases. It also harmed the risk-sensitive currency Aussie that ultimately added losses in AUD/USD pair. On the data front, at 05:00 GMT, the MI Inflation Gauge for December from Australia raised to 0.5% in comparison to November’s 0.3%. At 05:30 GMT, the Retail Sales for November from Australia raised to 7.1% against the forecasted 7.0% and supported the Australian dollar that capped further downside in the AUD/USD pair.

Meanwhile, the data from China also impacted the prices of the AUD/USD pair. In December, the CPI from China raised to 0.2% against the expected 0.0% and supported China-proxy Aussie. The PPI from China came in as -0.4% against the expected -0.7% and supported the China-proxy Australian dollar that ultimately limited the AUD/USD pair’s rising prices.

The US dollar was also strong on the board as the US treasury yields continued to rise on Monday. The US Dollar Index was also up to 90.50 level on Monday, followed by declining to the two-year lowest level last week and supporting the AUD/USD pair’s downward momentum on Monday. Aussie traders will remain reluctant to place a buying position in AUD/USD pair as the market sentiment was deteriorated due to the rising coronavirus cases around the globe that would hurt the risk-sensitive Aussie.


Daily Technical levels

Support Resistance

0.7700 0.7755

0.7679 0.7789

0.7645 0.7811

Pivot Point: 0.7734

The AUD/USD pair has bounced off over the 0.7690 level, forming a bullish engulfing candle on the 2-hour timeframe. It may bounce off to trade until the 0.7740 level, where 10 & 20 periods EMA are likely to extend resistance at 0.7740. On the lower side, the AUD/USD may find support at the 0.7690 level. A bearish breakout of 0.7690 level can extend the selling trend until the next support area of 0.765 level today. Good luck! 

 

Categories
Forex Daily Topic Forex System Design

Building a Trading System: Why do you need a trading plan?

The necessity of a trading system has been discussed many times. Still,  new traders don’t consider it important when, in fact, it is a crucial element.  Could you conceive building a bridge without a project, playing tennis, or chess, with no strategy?

The necessity of a trading system has been discussed many times. Still,  new traders don’t consider it important when, in fact, it is a crucial element.  Could you conceive building a bridge without a project, playing tennis, or chess, with no strategy?

The necessity of a trading system has been discussed many times. Still,  new traders don’t consider it important when, in fact, it is a crucial element.  Could you conceive building a bridge without a project, playing tennis, or chess, with no strategy?

 

 

 

 

 

The trading profession is alike. If you take this business seriously, you’ll need to have a plan. Else, you’ll be in the loser team, in which are 90 percent of traders.

Reasons for a trading plan

1.- The financial markets are not deterministic

A market is a strange place where you cannot predict an outcome. An engineer can design a bridge, knowing that he can predict the bridge’s strength and behavior under heavy loads with proper calculations.  In the financial markets, you don’t have the benefit of an analytical formula to success. All you can expect is a small edge. Not following your plan is comparable to random trading; thus, losing the edge.

2.- Not following a plan weakens you psychologically

When you buy a lottery ticket or play roulette, you’re entering a bounded game. You know the cost of your ticket, the reward associated with a successful bet, and you don’t need to make any other decision. All parameters of the play, including the exit time, are fixed.

The financial markets are different. Everything there is unrestricted. The trader decides when, how much, exit time, stops, and target levels.  With so many parameters, a trader needs to define his rules and stick to them. Otherwise, he will be shattered by his emotions and lose money.

3.- The need to measure

Traders need to record and analyze their trades for many reasons.  The first is the need to analyze their performance and see if it has improved or not. Also, if the system performs as expected or lags its past performance. The most important reason is that traders need to know the strategy’s main parameters: percentage of winners, reward/risk ratio, the average profit and its standard deviation.

A trading plan that fits you

New traders don’t know much about statistics, and trading is about odds and their properties. One of them is streaks. There are winning streaks and losing streaks. The point is, streaks are mathematically linked to the ods of the system.

Let’s think of a system as a loaded coin, in which the odds of a winner can be different from 50 percent. Let’s say the odds of a system is 60 percent instead.  That means there is a 60 percent chance the next trade is a winner, and, consequently, a 40 percent chance it is a loser.

But what are the odds of a loser after a previous losing trade (a two-losing streak)? For the second trade to be a loser, the first one should also be a loser.  So the odds of two consecutive losing trades in a row is 0.4 x 0.4 = 16%. The odds of three successive losers would be 0.4×0.4×0.4 =6.4%, and so on.

The general formula for the probability of a losing streak is

n-losing-Streak = prob_lossn

which is the probability of one loss to the power of n, the size of the losing streak.

What we have shown here is that streaks are inherent to trading. In fact, inherent to any event with uncertainty. Golf pros, football players, and spot teams are subject to streaks, which are entirely expected. Trading systems are no different.

So, what’s the problem?

There are a variety of trading systems. Some, such as the well-established Turtles Trading System, which is trend-following, have less than 38 percent winners, although with average reward/risk ratios over 5. Other systems show over 70 percent success but reward/risk ratios of less than 1.

The odds of a 10-losing streak on the Turtles system, assuming 38% winners or 62% losers, is about 0.84%. That means we can expect ten losers in a row every 120 trades.

On a 70% winner system, the odds for ten losers in a row are one every 200 thousand trades.

The rationale behind the turtle is to lose small and profit big. When a Turtle trader sees they are right, they add to their position, and on and on, following the trend.

People who use the later system are scalpers that jump for the small profit and get our fast before the movement fades.

Nobody is wrong. They trade what best fits their psychology. You need to know your limits, as well. Many wannabe traders move from system to system after only a five-losing streak, discarding a sound strategy when its first perfectly normal streak occurs. Also, most traders use sizes inconsistent with the expected streaks and lose their entire account.

By now, you should have learned the importance of having a plan that fits your psychology and trading tastes.

In the coming article, we will discuss the components of a trading strategy or system. Stay tuned!

Categories
Forex Signals

GBP/USD Hit Take Profit – Downward Trendline in Play!

35679 and a low of 1.34507. The GBP/USD pair lost ground on Monday and dropped to a fresh 2-weeks lowest level amid the broad-based US dollar strength. The GBP/USD witnessed some selling for the fourth consecutive session on Monday and extended its retracement slide from 33-months highs. The momentum dragged the GBP/USD pair further below as the strong rally in the US Treasury bond yields supported the US dollar. The greenback recovered from nearly three-year lowest level after the treasury yields rally amid the hopes of additional US fiscal stimulus measures. Investors started pricing in the prospects for a more aggressive US fiscal spending in 2021 after the Democratic sweep in the US Senate runoff elections in Georgia.

35679 and a low of 1.34507. The GBP/USD pair lost ground on Monday and dropped to a fresh 2-weeks lowest level amid the broad-based US dollar strength. The GBP/USD witnessed some selling for the fourth consecutive session on Monday and extended its retracement slide from 33-months highs. The momentum dragged the GBP/USD pair further below as the strong rally in the US Treasury bond yields supported the US dollar. The greenback recovered from nearly three-year lowest level after the treasury yields rally amid the hopes of additional US fiscal stimulus measures. Investors started pricing in the prospects for a more aggressive US fiscal spending in 2021 after the Democratic sweep in the US Senate runoff elections in Georgia.

35679 and a low of 1.34507. The GBP/USD pair lost ground on Monday and dropped to a fresh 2-weeks lowest level amid the broad-based US dollar strength. The GBP/USD witnessed some selling for the fourth consecutive session on Monday and extended its retracement slide from 33-months highs. The momentum dragged the GBP/USD pair further below as the strong rally in the US Treasury bond yields supported the US dollar. The greenback recovered from nearly three-year lowest level after the treasury yields rally amid the hopes of additional US fiscal stimulus measures. Investors started pricing in the prospects for a more aggressive US fiscal spending in 2021 after the Democratic sweep in the US Senate runoff elections in Georgia.

The Cable has traded in line with our forecast and closed our position in 47 green pips profit. At the moment, the GBP/USD pair may find resistance at the 1.3589 level that’s extended by a downward trendline on the 2 hourly timeframes. Let’s wait for the GBP/USD pair to reach 1.3630 resistance before getting any additional trade today. Good luck! 

Support Resistance

1.3496 1.3553

1.3475 1.3589

1.3439 1.3611

Pivot Point: 1.3532


Entry Price – Sell 1.36436
Stop Loss – 1.36836
Take Profit – 1.36036
Risk to Reward – 1:1
Profit & Loss Per Standard Lot = -$400/ +$400
Profit & Loss Per Micro Lot = -$40/ +$40
Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.
iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368
Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Signals

Gold Violates Daily High – Brace to Capture Buying Trade! 

The yellow metal managed to stop its overnight losses and drew some fresh bids around above mid-$1,800 level as the prevalent downbeat market trading sentiment, triggered by the worsening coronavirus (COVID-19) conditions Sino-US tussle, underpinned the safe-haven metal prices. Though, the equity market losses were further bolstered after the Chinese planned to extend the Hong Kong crackdown after the arrests of nearly 50 democrats during last week, which in turn, provided some additional support to the yellow metal prices. 

The yellow metal managed to stop its overnight losses and drew some fresh bids around above mid-$1,800 level as the prevalent downbeat market trading sentiment, triggered by the worsening coronavirus (COVID-19) conditions Sino-US tussle, underpinned the safe-haven metal prices. Though, the equity market losses were further bolstered after the Chinese planned to extend the Hong Kong crackdown after the arrests of nearly 50 democrats during last week, which in turn, provided some additional support to the yellow metal prices. 

The yellow metal managed to stop its overnight losses and drew some fresh bids around above mid-$1,800 level as the prevalent downbeat market trading sentiment, triggered by the worsening coronavirus (COVID-19) conditions Sino-US tussle, underpinned the safe-haven metal prices. Though, the equity market losses were further bolstered after the Chinese planned to extend the Hong Kong crackdown after the arrests of nearly 50 democrats during last week, which in turn, provided some additional support to the yellow metal prices. 

In the meantime, the chatters surrounding that the U.K. is considering to increase hardships for Chinese companies, via tightening laws on imports, which in turn, added further pressure on the market trading sentiment and underpins the precious metal. In contrast to this, the U.S. President-elect Joe Biden’s pledge to announce trillions of dollars in new COVID-19 relief measures keep easing doubts over the global economic fallout, which becomes the key factor that kept the lid on any additional gains in the yellow metal prices. Meanwhile, the jump in global vaccinations could also help the equity market to limit its losses. The yellow metal prices are currently trading at 1,856.94 and consolidating in the range between 1,841.51 – 1,858.30.

The global markets trading sentiment failed to stop its overnight negative performance and remained sour amid Sino-US-UK tensions and growing coronavirus fears. At the COVID-19 front, the number of global cases has exceeded 90.87 million as of Jan. However, approximately 22.6 million cases were only marked in the U.S., with over 22,000 American has died from the virus during the previous week. Considering the current condition of the virus, the authorities from more countries, such as Europe and China, tighter their lockdown measures, which positively impacted the yellow-metal prices. 

Besides the virus woes, the reason for the bearish trading sentiment could also be associated with the long-lasting US-China tussle, which is continuously picking pace as the US Trump administration plans more sanctions. On the other side, China has shown its dislike over U.S. interference in matters relating to Hong Kong and Taiwan. In addition to the U.S., the U.K. has also increased hardships for Chinese companies via tightening laws on imports. However, the fears of a full-fledged trade/political war between the U.S., U.K., and China have been weighing on the market trading sentiment and were seen as major factors that kept the gold prices higher.


Entry Price – Buy 1857.14

Stop Loss – 1851.14

Take Profit – 1864.64

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400

Profit & Loss Per Micro Lot = -$40/ +$40

Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.

iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368

Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

 

Categories
Forex Course

206. The Correlation Between The Stock and Forex Markets

Introduction

Introduction

Introduction

The stock market encompasses individual stocks that create an index or a sector. An active under trader must define an approach to the equity as it differs depending on what she or he trades. When purchasing individual shares of an enterprise, some factors such as voting rights, dividend date, earnings per share, earnings releases, etc., play an important role.

The Relationship Between Forex and Stocks

The primary principles theory behind this is when there is an increase in the equity market rise. The demand for that particular currency also rises, resulting in more fund inflow from international investors. Additionally, it generates higher demand for the specific currency, leading it to rally instead of other foreign currencies.

On the other hand, when a local stock market does not perform well, this confidence lowers, resulting in investors to take their funds and put them somewhere safer and more lucrative.

Currency Correlation

Correlation is referred to as the measurement of the degree to which prices of two things have moved in a similar direction at the same time. For instance, if A and B prices always move up and down in sync, they have a correlation coefficient of 1, which implies an ideal positive correlation.

Contrarily if the value of these things moves simultaneously in the opposite direction, then their correlation coefficient is -1, which signifies a negative correlation.

Example – Correlation between Stock & Forex Markets

If the USA stock market performs well, international investors will sell their local currency to purchase USD-denominated stocks. When the demand for the dollar rises, it experiences an increase in value. In the Foreign exchange market, USD pairs will move in favor of the dollar ( i.e., The EURUSD falling, the USDCAD rising); hence a strong US stock market will favor the value of the US Dollar.

On the other hand, if the USA’s stock market is not performing well, investors will sell their USD-denominated shares and buy stocks or ETFs in places where they can generate more yield. This shows that the economy in the USA is performing badly. Since the demand for the dollar is less, it adversely affects the value of the US dollar.

Possibility Of Negative Correlation

There is also a possibility that the currency market will rise in answer to a volatile stock market. This may happen due to tons of other factors that contribute to currency performance. We will discuss more related to this topic in the upcoming course lessons.

Don’t forget to take the quiz below before you go. Cheers.

[wp_quiz id=”100352″]
Categories
Forex Basics Forex Brokers

Tell-Tale Signs You Need to Get a New Forex Broker

Are you here because your forex broker hasn’t been meeting your expectations lately? If so, then you don’t have to settle. New brokers open their doors every single day and hundreds of options have probably popped up since you first signed up for that old trading account. Finding a new broker can offer multiple benefits, from reduced fees to a wider selection of trading instruments, the chance to make extra money through bonuses, and more. If you’re seriously considering switching, then take a look at our list of tell-tale signs that you need to find a new forex broker.

Are you here because your forex broker hasn’t been meeting your expectations lately? If so, then you don’t have to settle. New brokers open their doors every single day and hundreds of options have probably popped up since you first signed up for that old trading account. Finding a new broker can offer multiple benefits, from reduced fees to a wider selection of trading instruments, the chance to make extra money through bonuses, and more. If you’re seriously considering switching, then take a look at our list of tell-tale signs that you need to find a new forex broker.

Are you here because your forex broker hasn’t been meeting your expectations lately? If so, then you don’t have to settle. New brokers open their doors every single day and hundreds of options have probably popped up since you first signed up for that old trading account. Finding a new broker can offer multiple benefits, from reduced fees to a wider selection of trading instruments, the chance to make extra money through bonuses, and more. If you’re seriously considering switching, then take a look at our list of tell-tale signs that you need to find a new forex broker.

Sign #1: You’re Paying Too Much in Fees

You’re likely paying commissions, spreads, and possibly withdrawal fees for trading through your broker. In some cases, you might not be paying commissions but you’re dealing with a higher spread to make up for it. If you’ve been trading with the same company for some time, you may not have been paying much attention to these fees, but have you compared them to any other brokers lately? If your broker is charging you a spread that is above 1.5 pips on EURUSD, we can almost guarantee that their other prices are too high, which means that you could be walking away with more of your own money in your pocket at the end of the day if you simply switch to a broker with cheaper fees. There’s also a good chance you could find a broker with no withdrawal fees for debit cards versus the 7% fees we’ve seen listed through several brokerages. 

Another thing to watch out for are extra charges, like inactivity fees or account maintenance charges. Some brokers do charge small inactivity fees to clear out balances that are left behind forever, but others charge high fees after about a month of zero trading activity. Account maintenance charges are basically like made-up charges that your cell phone provider would come up with to make a few extra dollars. Now is a good time to check your broker’s terms & conditions to see if any of these fees apply. If so, you might want to switch, especially if you’ve been hit with inactivity fees before. 

Sign #2:LacklusterCustomer Service

When it comes to customer service, a good broker offers flexible hours, quick and convenient contact methods, and polite service representatives. Sadly, you won’t find this available with every broker and you’d have an easier time pulling teeth than getting in touch with an agent through some shadier brokerages. Imagine having an issue where you never received a withdrawal you desperately needed, but you couldn’t get in touch with anyone to find out what happened. Or perhaps you simply get locked out of your account and can’t reset your password, so you’re stuck missing out on trading opportunities for days while you wait for an agent to respond to you. If you haven’t been there before, there’s always a chance that this will affect you in the future. Rudeness is another thing that you shouldn’t have to tolerate and is a sure sign that you’ll do better with another company. 

Sign #3: Limited Trading Opportunities

If you’re a trader that is only interested in currency pairs, then this one might not matter to you as much, as long as your broker offers a good selection of majors, minors, and exotics. However, many traders do look to diversify their trading portfolio over time, even if they started out focusing only on currency pairs. If this is the case for you, then you’ve probably outgrown your forex broker if they don’t offer much in the way of commodities, stocks, or cryptocurrencies. If you’re in this situation, you might want to switch to gain access to a wider diversity of investment options – or you could open a secondary account through another broker and continue to trade currencies on your current account if your broker offers competitive prices. 

Sign #4: An Unsatisfactory Trading Platform

Some brokers offer access to award-winning platforms like MetaTrader 4 and/or 5, or they have their own trading platform for users to trade on. If you’re dealing with a broker that lets you trade on MT4 or MT5, then you already have access to one of the best platforms out there, but don’t hesitate to switch if you don’t personally like those options. If your broker offers their own platform, you’ll need to think about how satisfied you are with the features and tools within it. Does it seem basic? If your trading platform is missing out on all the tech you’re looking for, consider switching. Also, know that more popular brokers are more likely to offer outstanding platforms, while smaller shadier brokers are likely offering up more basic trading platforms. 

Sign #5: Your Broker Is Too Basic

Some brokers have a lot to offer in the way of extra perks, like bonuses and promotional opportunities, a wide selection of assets to choose from, a wide array of educational resources, trading tools like calculators, amazing trading platforms, and etc. Others only offer a basic trading platform with zero resources or extra perks on their site. Obviously, the latter is rather boring when there are so many companies offering so much more out there. If your broker only offers the bare minimum, we highly recommend looking at other options so that you can benefit more from the trading experience.

Categories
Forex Elliott Wave Forex Market Analysis

Is US Dollar Index Ready for a Rally?

The US Dollar Index reveals exhaustion signals of its bearish trend. A trend that remains in progress since the currency basket topped at 102.992 pm mid-March 2020. Follow with us what signs show the Greenback to expect a rally during the first quarter of the year.

The US Dollar Index reveals exhaustion signals of its bearish trend. A trend that remains in progress since the currency basket topped at 102.992 pm mid-March 2020. Follow with us what signs show the Greenback to expect a rally during the first quarter of the year.

The US Dollar Index reveals exhaustion signals of its bearish trend. A trend that remains in progress since the currency basket topped at 102.992 pm mid-March 2020. Follow with us what signs show the Greenback to expect a rally during the first quarter of the year.

Technical Overview

The big picture of the US Dollar Index (DXY) illustrated in the next weekly chart reveals the downtrend that remains active since the price found fresh sellers at 102.992 in mid-March 2020. The following figure also exposes the market participants’ sentiment represented by the 52-week high and low range.

The previous figure shows the extreme bearish sentiment dominating the big participants’ bias since mid-March 2020. Nevertheless, the long-tailed candlestick corresponding to the last trading week that was closed above the yearly opening, suggests the bearish trend’s exhaustion in progress.

On the other hand, the reading -4.26 observed in the EMA(52) to Close Index suggests the currency basket is oversold; thus, a potential corrective rally could occur in the coming weeks.

The mid-term Elliott wave view of the US Dollar Index exposed in the next 8-hour chart suggests completing an extended third wave of Minute degree labeled in black, when the price found support at 89.209 on January 06th.

Once the price found support, the price started to bounce, developing an incomplete wave (a) of Minuette degree identified in blue, which belongs to wave ((iv)) in black. Finally, the momentum and timing oscillator suggests that the bearish pressure persists, and the current upward movement could correspond to a corrective rally.

Technical Outlook

The mid-term outlook for the US Dollar Index unfolded in the next 8-hour chart shows the incomplete wave ((iv)) in black, which advances in wave (a) identified in blue. In this context, the current climb experienced by the Greenback could be a corrective rally.

According to Elliott Wave theory, the fourth wave in progress could retrace to 50% of wave ((iii)),  and reach 91.205. Likewise, considering that the second wave was a simple correction in terms of price and time, the current fourth wave should be complex in terms of price, time, or both. 

On the other hand, if the price extends beyond 50%, this could indicate weakness in the bearish pressure. If the price action advances above 92.107, the bearish scenario will be invalidated leading us to expect more upward movement.

In summary

The US Dollar Index completed a bearish third wave of Minute degree at 89.209 on January 06th, when it began to bounce, starting an upward corrective rally that remains in progress. The current intraday movement could reach 91.206 where the price could complete its wave (a) of Minuette degree labeled in blue. On the other hand, considering the alternation principle, the current corrective formation, the structure should be complex in terms of price, time, or both. Finally, the bearish scenario’s invalidation level locates at 92.107, corresponding to the end of wave ((i)) in black.

Categories
Forex Signals

EUR/USD Downward Channel in Play – Sell Signal Update!

The strength in the U.S. dollar also dragged the EUR/USD pair lower to the 1.2175 level. For the moment, the EUR/USD is gaining support at the 1.2175 level, and below this, it can dip further until the 1.2130 level. On the higher side, the pair may face resistance at the 1.2216 level. The RSI and MACD support bullish correction, and these may cause a bounce off in the EUR/USD pair until the 1.2216 level. Below 1.2216, we can again see a dip in EUR/USD.

The strength in the U.S. dollar also dragged the EUR/USD pair lower to the 1.2175 level. For the moment, the EUR/USD is gaining support at the 1.2175 level, and below this, it can dip further until the 1.2130 level. On the higher side, the pair may face resistance at the 1.2216 level. The RSI and MACD support bullish correction, and these may cause a bounce off in the EUR/USD pair until the 1.2216 level. Below 1.2216, we can again see a dip in EUR/USD.

The strength in the U.S. dollar also dragged the EUR/USD pair lower to the 1.2175 level. For the moment, the EUR/USD is gaining support at the 1.2175 level, and below this, it can dip further until the 1.2130 level. On the higher side, the pair may face resistance at the 1.2216 level. The RSI and MACD support bullish correction, and these may cause a bounce off in the EUR/USD pair until the 1.2216 level. Below 1.2216, we can again see a dip in EUR/USD.


Entry Price – Sell1.21603
Stop Loss – 1.22003
Take Profit – 1.21103
Risk to Reward – 1:1
Profit & Loss Per Standard Lot = -$400/ +$400
Profit & Loss Per Micro Lot = -$40/ +$40
Fellas, now you can check out forex trading signals via Forex Academy mobile app. Follow the links below.
iPhone Users: https://apps.apple.com/es/app/fasignals/id1521281368
Andriod Users: https://play.google.com/store/apps/details?id=academy.forex.thesignal&hl=en_US

Categories
Forex Fundamental Analysis

EUR/CHF Global Macro Analysis – Part 3

EUR/CHF Exogenous Analysis The EU and Switzerland Current Account to GDP differential The ratio of the current account to GDP helps us determine the level of a country’s participation in the international market. When a country has net exports, it means that it will have a current account surplus; and, the larger the surplus, the […]

EUR/CHF Exogenous Analysis The EU and Switzerland Current Account to GDP differential The ratio of the current account to GDP helps us determine the level of a country’s participation in the international market. When a country has net exports, it means that it will have a current account surplus; and, the larger the surplus, the […]

EUR/CHF Exogenous Analysis

  • The EU and Switzerland Current Account to GDP differential

The ratio of the current account to GDP helps us determine the level of a country’s participation in the international market. When a country has net exports, it means that it will have a current account surplus; and, the larger the surplus, the higher the current account to GDP ratio. Conversely, a country with higher imports than exports; it means it has a current account deficit, and its current account to GDP ratio will be lower.

The domestic currency will be in higher demand in the forex market when a country is a net exporter.

In 2020, the Swiss Current Account to GDP is projected to reach 7.5% and that of the EU 3.4%. Thus, the current account to GDP differential between the EU and Switzerland is -4.1%. That means we should expect that the CHF will be in higher demand than the EUR. Thus, we assign a score of -5.

The interest rate differential for the EUR/CHF pair determines which of these currencies is preferable to investors and carry traders in the forex market. When the interest rate differential is positive, it means that investors will earn more by buying the EUR. Similarly, carry traders will be bullish on the EUR/CHF pair, thus driving the exchange rate higher. A negative interest rate differential implies that the Swiss Franc will be preferable to investors, while carry traders will be bearish on the pair.

The Swiss National Bank has maintained the interest rate at -0.75% throughout 2020, and the ECB interest rate has been at 0%. The interest rate differential for the EUR/CHF pair is 0.75%. We assign a score of 2.

  • The EU and Switzerland GDP Growth Rate differential

The GDP growth differential is the difference between the rate at which the EU and the Swiss economy are growing. This will help us identify which economy is growing faster. A positive GDP growth differential between the EU and Switzerland will result in a higher exchange rate for the EUR/CHF pair. A negative one will lead to a drop in the exchange rate for the pair.

In the first three quarters of 2020, the EU economy has contracted by 2.9% while the Swiss economy contracted by 1.5%. The GDP growth rate differential is -1.4%. We assign a score of -3.

Conclusion

The exogenous factors between the EUR/CHF pair have a score of -6; which implies that the pair can be expected to be on a downtrend in the short term.

As you can see above, the Technical analysis shows that the weekly chart for the EUR/CHF pair has failed to breach the upper Bollinger band successfully and has bounced off of it supporting our fundamental analysis. All the best.

Categories
Forex Fundamental Analysis

EUR/CHF Global Macro Analysis – Part 1 & 2

Introduction

Introduction

Introduction

In conducting the global macro analysis of the EUR/CHF pair, we’ll focus on endogenous economic factors that contribute to the growth of GDP in the EU and Switzerland. Exogenous factors that influence the exchange rate of the EUR/CHF in the forex market will also be analysed.

Ranking Scale

A sliding scale of -10 to +10 will be used to rank the impact of endogenous and exogenous factors.

The ranking of the endogenous factors will be based on their correlation analysis with the GDP growth rate. A negative score implies that they resulted in the contraction of the economy hence depreciating the domestic currency. A positive score implies that they led in economic expansion hence appreciation of the domestic currency.

The exogenous factors are ranked based on their correlation with the EUR/CHF exchange rate. A positive score means that the pair lead to an increase in the exchange rate, while a negative ranking means that the exchange rate has decreased.

EUR Endogenous Analysis – Summary

The EUR’s endogenous analysis has a score of -3. This implies that the Euro had marginally depreciated in 2020.

CHF Endogenous Analysis – Summary

The change in the level of employment covers the quarterly developments in the labour market in Switzerland. The statistic includes the changes in both fulltime and parttime employment. Typically, changes in employment is a result of changes in business activities.

In Q3 of 2020, 5.08 million people were employed in Switzerland compared to 5.02 million in Q2. The employment level is still below the 5.11 million registered in Q1. We assign a score of -4.

  • Switzerland GDP Deflator

Switzerland GDP deflator is used to calculate the change in real GDP in terms of prices of all goods and services produced within the country. This is a comprehensive measure of inflation compared to measures like CPI and PPI, which only focus on a small portion of the economy.

In Q3 2020, Switzerland GDP deflator rose to 98.8 from 98 in Q2.  Up to Q3, the GDP deflator has increased by 0.8 points. The increase in inflation can be taken as an indicator that the economy is bouncing back from the economic shocks of the coronavirus pandemic. We assign a score of 3.

  • Switzerland Industrial Production

This indicator shows the changes in output for firms operating in the manufacturing, mining, quarrying, and electricity production. Although Switzerland is not heavily dependent on industrial production, it is still an integral part of the economy.

In Q3 2020, the industrial production in Switzerland increased by 5% from a drop of 9% in Q2. The YoY industrial production for Q3 was down 5.1%. For the first three quarters of 2020, the industrial production is down 3.8%. We assign a score of -3.

  • Switzerland Manufacturing PMI

This is an indicator of the economic health of the Swiss manufacturing sector. The purchasing managers are surveyed based in a questionnaire which covers the output in the sector, suppliers’ deliveries, inventories, new orders, prices, and employment. A PMI of above 50 shows that the Swiss manufacturing sector is expanding, while below 50 shows that the sector is contracting.

In November 2020, Switzerland manufacturing PMI rose to 55.2 from 52.3 in October. This is the highest reading since December 2018 and the fourth consecutive month of expansion since July. We assign a score of 7.

  • Switzerland Retail Sales

The retail sales measure the consumption of final goods and services by households in Switzerland. The expenditure by households drives the aggregate demand in the economy, which results in the changes in GDP.

In October 2020, Switzerland retail sales increased by 3.2% from a drop of 3.2% in September. YoY retail sales increased by 3.1% in October from 0.4% in September. Up to October 2020, the average retail sales has increased by 0.84%. We assign a score of 1.

  • Switzerland Consumer Confidence

About 1000 Swiss households are surveyed in January, April, July and October. They are evaluated based on their opinions about the economy, job security, financial status, inflation, and purchases. Consumer confidence tends to be higher when the economy is expanding and low during recessions.

In Q4 2020, the Swiss consumer confidence dropped to -12.8 from 12 in Q3. Although it is higher than it was in Q2 at the height of the pandemic, it is still lower than in Q1. The expectations on households’ financial situation also dropped to -6.6 from -4.2 in Q2. Households were increasingly pessimistic about the labour market and their job security. this can be attributed to the uncertainties that surround the ongoing coronavirus pandemic. We assign a score of -2.

  • Switzerland Government Gross Debt to GDP

This is the total amount that the Swiss government owes to both domestic and international lenders is expressed as a percentage of the GDP. It helps us to understand and evaluate the size of the debt relative to the size of the economy. At below 60%, the government is seen as being able to service its debt obligations and have room to acquire more debt without straining the economy.

In 2019, the Switzerland government gross debt to GDP was 41% same as in 2018. In 2020, it is expected to range between 49% and 51% due to aggressive expenditure to alleviate the shocks of coronavirus pandemic. We assign a score of -1.

In the very next article, you can find the exogenous analysis of the EUR/CHF Forex pair. Please check that and let us know if you have any questions below. Cheers.

Categories
Forex Basics Forex Daily Topic

The Trading Log: Key Component for a Pro Trader

At forex.academy, we understand that a trading record is a decisive component to be successful in Forex. That’s why we took the time to create a free trading log on an Excel Spreadsheet. It was designed to present all the needed information at a glance. Here we present its guide.

At forex.academy, we understand that a trading record is a decisive component to be successful in Forex. That’s why we took the time to create a free trading log on an Excel Spreadsheet. It was designed to present all the needed information at a glance. Here we present its guide.

At forex.academy, we understand that a trading record is a decisive component to be successful in Forex. That’s why we took the time to create a free trading log on an Excel Spreadsheet. It was designed to present all the needed information at a glance. Here we present its guide.

The Stats Section

The top of the spreadsheet shows the Main statistics of your trading record. 

Total net P/L: The net profits after the trading costs. You can set an average cost in the bottom right cell named “LOT Costs”. If you enter the lot cost, the sheet will compute every trade cost by multiplying it by the actual lots of the trade. Of course, you can set it manually on every trade with the exact costs your broker charged.

Gross P/L: The total profit without costs.

Total R won. R is the measure of your risk. The “R multiple” column converts the net profit into a ratio Net Profit/$Risk. R is a measure of the profit/loss for every dollar risked.  This helps you plan your objectives and calculate the risk needed to achieve them. For example, if you find that you are making 20R per month and plan to earn 3000$ monthly, you will need to risk $3000/20 = $150 on every trade.

% Winners: The winner percent figure.

% Losers: The percent of losers

AVG P/L per Trade: The average dollar won/lost. It is the Total net won/lost divided by the number of trades.

Avg % loss on losers: The average percent capital lost on losing trades.

Avg % profit on winners: The average percent capital won on winning trades.

Expectancy: A measure of what you can expect to gain in the next trade for every dollar risked. The example shown is 0.79, which means you can expect to earn $79 every time you trade if your risk is $100.

Expectancy’s Standard Dev: A statistical measure of the variability of the expectancy figure. You can expect that 95% of  Expectancy’s values are plus and minus two stdev from 0.79.

#winners: The number of winners.

#losers: the number of losers.

Hours Spent: this is a manual input of your time spent in trading.

P/L per hour: It will compute your profit per hour spent in trading.

Net Profits: These are the net profits on winning trades.

Net Losses: The losses on losing trades.

% Gains on account: The total sum of the percent gained on winning trades.

% Losses: The sum of the percent lost on losing trades.

Reward:risk: The average reward/risk of your trades.

LOT Costs: This is a manual entry for the average costs per lot your broker charges you.

Running Balance: The initial capital ( Cell B17) plus the total net P/L amount (on closed trades).  Please note that this balance does not take into account open trades.

Total costs: The sum of the cost of spreads and commissions of your trades. This parameter will help you understand how much of your money goes to your broker. It could be handy if you want to negotiate rebates or shift your business to another cheaper broker.

The trades

The cells in columns with a yellow heading are for you to enter manually. The rest were filled with the needed formulas to get the stats figures, so there is no need to touch them when trading.

The exception is The Trade Cost column. This column is also filled with the formula to approximate your costs if you supply the average cost per lot in the B12 cell. But you can also manually enter your true cost.

Entering a Trade

We have designed the sheet so that you have total control over your risk on every trade. Therefore, we should begin to enter the desired percent risk for the coming trade. Let’s say 1%.  With this figure, the sheet computes the dollar-risk based on your current account balance.

After entering the entry price and stop-loss level, it will also compute the recommended trade size in lots. You should then input the real lot number in the following column, “Real lots.” It was designed that way because we must take into account several open trades at the same time.

How the sheet computes the risk of the next trade?

When allowing several simultaneous trades, the model chosen to compute risk is to subtract the risk of the previous open trades to the available capital. That way, you risk a percent of the money not currently at risk.  But when you close a trade and record it, the sheet recalculates all cells. Thus, the sheet needs the “Real Lots” column, so the record does not get modified every time an open trade is closed.

After the trader decides the percent of his account to risk on a trade, the real lot size, and the entry and stop-loss point are set, the sheet also shows the leverage of that trade. That way, all the risk information is displayed. Please, beware that a risk of 3 percent corresponds with a leverage of 10, and that leverages over 10:1 should be avoided, especially when several trades are open on major currency pairs.

JPY pairs

The column JPY? was added for the right calculation of JPY pairs’ values, as these pairs’ pip value is in the second decimal place instead of in the fourth decimal. You should input Y on these pairs to get the right trade size, profit, and leverage. Please, note that pip values on non-USD quote currencies are approximate.

Entry and exit date and time

These are optional entries, but it is advisable to register these values to get observations about the average time on a trade and the average time for a trade to hit stop-loss and take-profit levels.

Trading results

Once the Exit price has been entered, the sheet displays the profit/loss (P/L), Net P/L, %P/L and R multiple of the trade. This will help assess essential parameters, such as the average Trade profit, the usual percent obtained, and the real reward/risk values (R), which is also the profit on a one-dollar risk.

Trade quality

Alexander Elder recommends traders value the quality of the trade based on one objective parameter: The percentage of the available profit you could obtain from the trade.

One possible scale is 0: less than 10%, 1: from 10 to 25%, 2: from 25, to 50%, 3: from 50 to 75% 4: from 75 to 90%  5: over 90%. This will help you see if, over time, you’re improving, maintain, or decrease the quality of your trades. It will reveal the best times of the session to trade.

MAE/MFE

These are to annotate the Maximum adverse excursion and Maximum Favorable excursion. These two parameters are important clues to improve stop-loss and take-profit levels. It will help you also analyze if your entries are too early or too late and take measures to correct them. For more on this subject, please read an MAE/MFE explanation here.

Summarizing

We hope this spreadsheet will help you be a better trader. Please modify and complete it at will for your purposes.  This trading log is not perfect, but it is a starting point.

Categories
Forex Signals

AUD/USD Violates Ascending Triangle – Double Bottom Support! 

The AUD/USD closed at 0.77665 after placing a high of 0.77984 and a low of 0.77280. The currency pair AUD/USD remained flat throughout the day on Friday and closed its day at the same level it began its day with as the risk rally pushed the pair higher and the US dollar strength dragged the pair AUD/USD lower at the same time. 

The AUD/USD closed at 0.77665 after placing a high of 0.77984 and a low of 0.77280. The currency pair AUD/USD remained flat throughout the day on Friday and closed its day at the same level it began its day with as the risk rally pushed the pair higher and the US dollar strength dragged the pair AUD/USD lower at the same time. 

The AUD/USD closed at 0.77665 after placing a high of 0.77984 and a low of 0.77280. The currency pair AUD/USD remained flat throughout the day on Friday and closed its day at the same level it began its day with as the risk rally pushed the pair higher and the US dollar strength dragged the pair AUD/USD lower at the same time. 

The risk-sensitive Aussie just went with the flow and boosted by rallying equities and persistent hopes that the economic chaos triggered by the coronavirus pandemic was on its final stage. The risk sentiment in the market was also supported by the latest announcement from the UK on Friday. The UK announced that it’s medical regulatory has approved a third vaccine for coronavirus made by Moderna for emergency use authorization. 

The rising risk sentiment was also supported by the decreasing political risk in Washington related to power transition. The US President Donald Trump has agreed to a transition of power, and this has raised the risk sentiment in the market and supported the upward momentum in AUD/USD pair in the early trading session. However, the AUD/USD pair’s gains were lost in the late trading hours on Friday after the US Dollar became strong across the board. The greenback was high on Friday, with the US Dollar Index above the 90.00 level for the first time this week. The US treasury yields on the 10-year note were also high on Friday, with 3% up for the day and 21% up for the week. All these factors added to the US dollar demand that ultimately weighed on AUD/USD pair and forced the pair to lose its early daily gains.

On the data front, from the US side, at 18:30 GMT, the Average Hourly Earnings for December raised to 0.8% against the predicted 0.2% and supported the US dollar that added further weight to AUD/USD pair. In December, the Non-Farm Employment Change plunged to -140K against the predicted 60K and weighed on the US dollar. During December, the Unemployment Rate plunged to 6.7% against the predicted 6.8% and supported the US dollar that added further AUD/USD pair losses. At 20:00 GMT, the Final Wholesales Inventories for November came in as 0.0% against the predicted -0.1% and weighed on the US dollar.

The AUD/USD pair remained flat throughout Friday amid the mixed market sentiment and left the investors to await the publication of the final reading of November Retail Sales from Australia while China will provide an update on inflation that will also remain under close observation by AUD/USD investors. 

On Thursday, China will release its December Trade Balance that may also impact AUD/USD pair. The US’s CPI data on Wednesday and Retail Sales on Thursday will also affect the AUD/USD pair’s momentum in upcoming days.


Daily Technical Levels

Support Resistance

0.7700 0.7755

0.7679 0.7789

0.7645 0.7811

Pivot point: 0.7734

The AUD/USD pair has bounced off over the 0.7690 level, forming a bullish engulfing candle on the 2-hour timeframe. It may bounce off to trade until the 0.7740 level, where 10 & 20 periods EMA are likely to extend resistance at 0.7740. On the lower side, the AUD/USD may find support at the 0.7690 level. A bearish breakout of 0.7690 level can extend the selling trend until the next support area of 0.765 level today. Good luck! 

Categories
Forex Course

205. How Global Equity Markets Affect The Forex Market?

Introduction

Introduction

Introduction

The equity market is also referred to as the stock or share markets. This is an extensive marketplace where traders and investors purchase and sell shares of the publicly listed organizations. The company’s share, stock, or equity is an important financial instrument that denotes the company’s ownership. Contrary to the market, when you buy a share in the stock market, you own a percentage of the company’s overall shares.

Global equity markets have a direct impact on the Forex market. A stable equity market reflects a good currency. Generally, when the country’s equity market is performing well, it attracts higher foreign investors. Therefore, it increases the demand for the local currency, resulting in a boost in a positive trade balance as well as currency appreciation.

Contrarily, when the equity market is not performing well, the investors begin to pull out their money and invest in safer securities. This results in a decrease in the demand for a particular currency.

Impact Of Global Equity Markets On The Forex Market

Forex and equity markets trades center on the currency exchanges of various countries. In case there is a rise in the equity market, more international investors will want to put their money in that particular stock.

However, to do the same, they need to transfer their local currency to the currency of a particular country. This increases the currency demand for the nation. So when there is a huge demand for the currency, its value naturally increases in the market.

Example Of How The Equity Markets Impact Forex Market

If you are looking to invest in the UK’s stock market and your local currency is US dollars. So you need first to change the USD to GBP. This way, you are selling the US dollar while purchasing the GBP.

When more people sell the USD to buy GBP, it increases the demand for pounds, thereby boosting the value of the GBP. Additionally, it also contributes to a positive trade balance. On the other hand, since more US dollars are being sold, it increases the supply of USD, which results in a fall in the value of the dollar.

So when the demand for the currency rises, its value appreciates. This makes the forex market more bullish. Similarly, if the currency demand falls, its value will also fall. It will make the forex market more bearish.

We hope you got the gist of what we are talking about. In the upcoming course lessons, we will be learning more about various equity markets and how their movement can be used to predict the Forex price charts. Cheers.

[wp_quiz id=”101514″]
Categories
Forex Market Analysis

Daily F.X. Analysis, January 11 – Top Trade Setups In Forex – Stronger Dollar In Play! 

On the news side, the European Sentix Investor Confidence will be in focus, along with speeches from UK MPC Member Tenreyro, and the U.S. FOMC Member Bostic will remain in highlights. The U.S. dollar was also strong on the board, mainly because of the rising U.S. treasury yields that rose more than 3% on the day. The unemployment rate and average hourly earnings data from the U.S. support the greenback. 

On the news side, the European Sentix Investor Confidence will be in focus, along with speeches from UK MPC Member Tenreyro, and the U.S. FOMC Member Bostic will remain in highlights. The U.S. dollar was also strong on the board, mainly because of the rising U.S. treasury yields that rose more than 3% on the day. The unemployment rate and average hourly earnings data from the U.S. support the greenback. 

On the news side, the European Sentix Investor Confidence will be in focus, along with speeches from UK MPC Member Tenreyro, and the U.S. FOMC Member Bostic will remain in highlights. The U.S. dollar was also strong on the board, mainly because of the rising U.S. treasury yields that rose more than 3% on the day. The unemployment rate and average hourly earnings data from the U.S. support the greenback. 

Economic Events to Watch Today  

  

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.22122 after placing a high of 1.22844 and a low of 1.21928. The EUR/USD pair dropped on Friday and extended its losses amid the broad-based strength of the U.S. dollar on the day amid the rising U.S. Treasury yields.

The U.S. dollar was also strong on the board, mainly because of the rising U.S. treasury yields that rose more than 3% on the day. The unemployment rate and Average Hourly earnings data from the U.S. also supported the greenback that ultimately added further losses in the currency pair EUR/USD. From the U.S. side, at 18:30 GMT, the Average Hourly Earnings for December rose to 0.8% against the forecasted 0.2% and supported the U.S. dollar and weighed on EUR/USD prices. In December, the Non-Farm Employment Change fell to -140K against the forecasted 60K and weighed on the U.S. dollar and capped further losses in EUR/USD pair. 

During December, the Unemployment Rate fell to 6.7% against the forecasted 6.8% and supported the U.S. dollar that added further EUR/USD pair losses. At 20:00 GMT, the Final Wholesales Inventories for November came in as 0.0% against the forecasted -0.1% and weighed on the U.S. dollar that limited the losses in EUR/USD pair on Friday.

Meanwhile, the fact that Democratic leader and incoming President Joe Biden will have complete control over all three legislative houses included the White House, the House of Representatives, and the Senate, also supported the U.S. dollar as it suggested a stable government ahead. The U.S. President Donald Trump also agreed to an orderly transition of power that also lifted the lingering political risk from the local currency and gave further strength to the U.S. dollar that ultimately added further pressure on the EUR/USD pair on Friday.

Daily Technical Levels

Support   Resistance

1.2228     1.2330

1.2186     1.2388

1.2127     1.2431

Pivot Point: 1.2287

EUR/USD– Trading Tip

The strength in the U.S. dollar also dragged the EUR/USD pair lower to the 1.2175 level. For the moment, the EUR/USD is gaining support at the 1.2175 level, and below this, it can dip further until the 1.2130 level. On the higher side, the pair may face resistance at the 1.2216 level. The RSI and MACD support bullish correction, and these may cause a bounce off in the EUR/USD pair until the 1.2216 level. Below 1.2216, we can again see a dip in EUR/USD.

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.35606 after placing a high of 1.36356 and a low of 1.35382. The currency pair GBP/USD remained flat throughout Friday as it showed no movement and closed the day at the same level it started its day with. The pair GBP/USD raised during the early trading session on the day but faced some heavy pressure during the second half of the day and closed the trading week at the same level it started its day on Friday. The rise in the early trading session was caused after the U.K. announced the approval to use its third coronavirus vaccine. However, the downward pressure on the currency pair was caused by the relative strength of the U.S. dollar amid the rising U.S. Treasury yields on the day.

After the coronavirus press conference of the British Prime Minister Boris Johnson on Friday, the PM announced that the army would be brought in to help aid the vaccination rollout. On Friday, Britain’s medical regulatory approved Moderna’s coronavirus vaccine for emergency use. The U.K. also agreed to purchase an additional 10 million doses; however, the Moderna vaccine will not play a part in the first stage of Britain’s vaccine rollout.

The Health Minister of Britain, Matt Hancock, said that about 1.5 million people have already been vaccinated across the U.K. and Moderna’ ‘s vaccine will allow them to accelerate their vaccination program even further once doses become available in spring. These comments from the U.K. added optimism and supported the GBP/USD pair to rise in the early trading session on Friday.

However, the gains in GBP/USD currency pair could not live for long as the pair faced heavy pressure from the U.S. dollar’s strength and the rising number of coronavirus cases and deaths across the U.K. despite vaccine rollout. The U.S. Dollar was strong across the board after the U.S. Treasury yields rose on Friday to more than 3% amid the full sweep victory of Democrats over the Senate. The incoming President Joe Biden is expected to have full control over the White House, Senate, and House of Representatives added in the local currency as the incoming government will have more stability in rules.

In the capital, London’s mayor declared a major incident on Friday and issued a warning that hospitals in the city were close to being overrun. London’s situation was critical with the spread of the virus out of control as the city was declared to be at a crisis point. These developments in the U.K. also added pressure on British Pound and dragged the pair lower on Friday.

Daily Technical Levels

Support   Resistance

1.3496     1.3553

1.3475     1.3589

1.3439     1.3611

Pivot Point: 1.3532

GBP/USD– Trading Tip

The GBP/USD has violated the sideways trading range of 1.3625 – 1.3530 level, and closing of candles below this area can trigger selling until the next support level of 1.3452 level. On the higher side, the resistance continues to stay at the 1.3530 mark. On the hourly timeframe, the GBP/USD pair has violated the descending triangle pattern at the 1.3547 level, and now this level is likely to provide selling in the pair. Violation of the triangle pattern can extend selling bias today.

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 103.951 after placing a high of 104.090 and a low of 103.602. The USD/JPY pair raised on Friday and extended its gains as the U.S. dollar was strong across the board amid the rising U.S. Treasury bond yields. The USD/JPY pair staged an impressive rebound and rose more than 150 pips in two days as the 10-year U.S. Treasury bond yield placed almost 13% gains in these two days. Over the week, the 10-year note U.S. Treasury yield has risen by about 21% and has supported the greenback since then. 

The U.S. dollar’s strength added further gains in the USD/PY pair and extended its upward momentum on Friday to its highest since December 15. The U.S. Dollar Index was also high beyond the 90.00 level for the first time in the week and supported the USD/JPY pair’s rise. Meanwhile, another factor involved in the rising demand for the U.S. dollar was Donald Trump’s comments, who agreed on a smooth transition of power. The political risk related to transition power that rose after Thursday’s attack was lifted and supported the local currency on Friday that eventually helped the USD/JPY pair to rise further n board. It means that the incoming President Joe Biden will have control over all three legislative bodies, the White House, the House of Representatives, and the U.S. Senate, to give his Democratic Party stability in rules. 

Despite all these positive sentiments, the incoming president promised to deliver two massive stimulus packages in 2021, and his first order is expected to increase the direct payment checks to $2000 kept the local currency USD under pressure and capped further upside in the USD/JPY pair. 

On the data front, at 04:30 GMT, the Household Spending from Japan in November raised to 1.1% against the expected -1.0% and supported the Japanese Yen that capped further upside in the USD/JPY pair. At 10:00 GMT, the Leading Indicators from Japan remained flat at 96.6%. 

From the U.S. side, at 18:30 GMT, the Average Hourly Earnings for December advanced to 0.8% against the projected 0.2% and supported the U.S. dollar that pushed the USD/JPY pair higher. In December, the Non-Farm Employment Change decreased to -140K against the projected 60K and weighed on the U.S. dollar. During December, the Unemployment Rate decreased to 6.7% against the projected 6.8% and supported the U.S. dollar that added further gains in the USD/JPY pair. At 20:00 GMT, the Final Wholesales Inventories for November came in as 0.0% against the projected -0.1% and weighed on the U.S. dollar that capped further upside in the USD/JPY pair on Friday. Furthermore, the USD/JPY pair’s upward momentum was also supported by the rising risk sentiment in the market. The risk flows were encouraged after the U.K. approved another vaccine from Moderna on Friday. U.K. became the first country to approve a third coronavirus vaccine for emergency use authorization that lifted the market’s risk sentiment that ultimately added weight on the safe-haven Japanese Yen and pushed the USD/JPY pair even higher on board.

Daily Technical Levels

Support   Resistance

103.18     104.19

102.56     104.58

102.16     105.21

Pivot Point: 103.57

USD/JPY – Trading Tips

The USD/JPY is trading at 104.123 level, facing immediate resistance at 104.223. On the 4 hour timeframe, the USD/JPY pair suggests bullish bias, and as the 10 and 20 periods, EMA is in support of buying trend while the MACD holds above 0, supporting bullish bias in the USD/JPY pair. A bullish breakout of the 104.223 level can extend the buying trend until the 104.610 level today. Let’s consider taking the buying trade over the 104.223 level and selling below the same. Good luck! 

Categories
Crypto Daily Topic Forex Daily Topic Forex Videos

Forex Trading Algorithms Part 7 Elements Of Computer Languages For EA Design!

https://youtu.be/xXkgQAvWnnI

https://youtu.be/xXkgQAvWnnI


Trading Algorithms VII – Liberal sequences and exact sequences

Translating ideas into a trading algorithm is not always easy. When examining a particular trade idea, we could find two cases: 

  • the signal can be described precisely in a consecutive sequence of trading facts, or 
  • Several conditions with variable steps among each condition need to be spotted.

The first class is easier to program. To this class belong any kind of crossovers: 

  • price to MA: 

  • MA to MA :

Similar conditions can be created with indicator crossovers and level breakouts.

 

Trading Signals Using Pivots

But what if the idea is more complex?. Let’s consider we want to catch pivot points in the direction of the trend. Let’s say we want to open a buy trade in the second pivot reversal. Let’s follow Pruitt’s example:

Buy on the second pivot pullback if

1.- The second pivot high is higher than the first pivot

2.- The pullback is larger than 2%

3.- The sequence takes less than 30 bars

 

The Flag Model

Since these conditions happen with variable price-action sequences programming, this kind of entry is much more difficult if we employ just If-then-else statements. The employment of flags to signal that a specific condition was met helps in the logic but is not the best solution.


As we see, the flag model is awkward and not too flexible. Also, this method is prone to errors.

 

The Finite State Machine

The second method to this kind of problem is the Finite State Machine (FSM). Basically, we want to detect certain states following others, defining a state when the needed condition is met. An FSM is a machine with finite states. The machine moves from state zero or START through several states until a final one, which defines the ACCEPT state. 

We can imagine a state machine as a combination lock. We need to supply the lock with a combination of numbers until its final digit, which triggers its opening.

The first step is to create the states needed. Next, we create the conditions for the change from one state to other states. Once satisfied with the diagram, we can easily write the pseudo-code, or, even, the actual code directly.

As we can see here, the code is precisely subdivided into states, each state with the precise instructions to move to the next state or back to the start state. We can see also that this algorithm is executed from top to bottom on each new bar. We hope that this example will help you better understand how an entry algorithm can be created.

Stay tuned for more interesting videos on trading algos!

Categories
Forex Videos

Forex Trading Algorithms Part 6 Elements Of Computer Languages For EA Design!

https://youtu.be/jCqvYMaG3dU

https://youtu.be/jCqvYMaG3dU


Trading Algorithms VI –  The Stages of a trading algorithm

In this video, we will discover the different parts needed for a complete trading system. 

One of the most common systems involves the crossover of two moving averages, a short- and a long-term SMA. Let’s do a system based on this idea.

Creating a trading algorithm involves at least two stages: the entry logic and the trade management logic, and the position sizing logic. 

The Entry Logic

The entry logic sets the rules for entries. The logic can be subdivided into two sections: the entry signal and the Filter or Trade setup. 

The entry signal  

An entry signal is a moment in time when something happens in the asset. Entries can be MA crossovers, level breakouts, bullish or bearish candlestick formations, and so forth.

The Filter

A filter is a condition imposed for the entry signal to be valid. For instance, you can allow a MA crossover to the long side only if the main trend is up. Then, you can programmatically define the primary trend, and this is the filter. For instance, we could describe an upward direction when the price is higher than the +1 SD line of a Bollinger Band ( in which we set the bands to 1 SD instead of the standard 2SD). We could also say that the upward trend is the price above its 200-period MA, or when there are higher highs and higher lows. A down-trend can be defined using the opposite logic.

On mean-reverting assets, an interesting filter might be overbought/oversold indicators such as RSI, Percent R, or Stochastics curving against the current move, allowing then use of candlestick reversal signals.

We can also add a filter that excludes trades whose projected reward/risk ratio is below one.

As a caveat, the higher the number of conditions, the higher the probability of over-optimizing it. The best designs are those with a few parameters. Also, the higher the number of filters, the less the system will trade. Thus, not always a filter improves a raw signal.

When building your trading system, a sound methodology starts with raw entry signals and a time stop at a determined number of bars. If the entry has an edge, it will be proved by higher than 50% profitable signals after 5-10 bars.

The trade management Logic

Trade management logic takes care of open trades. It is constituted of at least a stop-loss logic and a take-profit logic.  It may include other decision steps, such as break-even logic and trail stops.

The Stop-loss 

We have already published several articles on stop-losses. There are several ways to set a stop-loss level. We can do it using a multiple of the Average True Range of the asset, using the last swing low (or high in the case of a short-trade), or by statistically optimizing the distance using John Sweeney’s Maximum Adverse Excursion (MAE) concept.

Trail stops are also a recurrent idea in trading, although the developer should test them and assess if they really improve the results.  The same is valid for the break-even logic. Both concepts seem logical and mind relieving, but I have yet to find their utility to improve a trading system.

In some trading systems, a time stop can be handy. A time stop closes if the trade is not profitable after a certain period or a specific number of bars.

The Take-profit.

Take profit logic can also be varied, from dollar-based stops to stops based on key levels, supports, and resistances or pivots. A take-profit condition may be set, too, when a signal opposite to the current trade happens, such as an MA crossover against the trade, the price below the -1SD Bollinger line on longs or over +1SD line on short positions.

Take profit code can be added for scaling out the trade, letting a percent of the original position open to ride the wave and improve profits when your trade is right.

Position Sizing logic

The position size logic is a final step that involves setting up the right trade size for the trader’s objectives. This step should be used only in real-time trading, not during the definition, optimization, and evaluation of a new trading system.

During the definition step, a trading system must be used with one trade unit, and its results normalized to its risk, so instead of dollar profits, it should produce a stream of multiples of R, a standard one-dollar risk.

Position sizing logic is key to maximizing the returns of a system and limiting the max drawdown to the levels desired by the trader.

We will further develop these concepts in the coming videos, with specific algorithms demonstrating how to create them properly.

Categories
Forex Basic Strategies Forex Indicators Forex Service Review Forex Services Reviews-2

Market Profile Singles Indicator Review

Today we will examine the Market Profile Singles Indicator (we could also call it a single print indicator or gap indicator), which is available on the mql5.com market in metatrader4 and metatrader5 versions.

Today we will examine the Market Profile Singles Indicator (we could also call it a single print indicator or gap indicator), which is available on the mql5.com market in metatrader4 and metatrader5 versions.

Today we will examine the Market Profile Singles Indicator (we could also call it a single print indicator or gap indicator), which is available on the mql5.com market in metatrader4 and metatrader5 versions.

The developer of this indicator is Tomas Papp, who is located in Slovakia, and currently has 7 products available on the MQL5 market.

It is fair to point out that four of his products are completely FREE and are in a full-working version. These are: Close partially, Close partially MT5, Display Spread meter, Display Spread meter MT5. So it’s definitely worth a try.

Overview of the Market Profile Singles 

This indicator is based on market profile theory. It was designed to show “singles areas.” But, what exactly is a singles area?

Theory of the Market Profile Singles

Singles, or single prints, or gaps of the profile are placed inside a profile structure, not at the upper or lower edge. They are represented with single TPOs printed on the Market profile. Singles draw our attention to places where the price moved very fast (impulse movements). They leave low-volume nodes with liquidity gaps and, therefore, the market imbalance. Thus, Singles show us an area of imbalance. Singles are usually created when the market reacts to unexpected news. These reports can generate extreme imbalances and prepare the spawn for the extreme emotional reactions of buyers and sellers.

The market will usually revisit this area to examine as these price levels are attractive for forex traders, as support or resistance zones. Why should these traders be there? Because the market literally flew through the area, and only a small number of traders got a chance to trade there. For this reason, these areas are likely to be filled in the future.

The author also adds: “These inefficient moves tend to get filled, and we can seek trading opportunities once they get filled, or we can also enter before they get filled and use these single prints as targets.”

The author points out: Used as support/resistance zones, but be careful not always. Usually, it works very well on trendy days. See market profile days: trend day (Strategy 1 – BUY – third picture) and trend day with double distribution (Strategy 1 – SELL- third picture).

Practical use of the Market Profile Singles Indicator

So let’s imagine the strategies that the author himself recommends. Of course, it’s up to you whether you use these strategies or whether you trade other strategies for the singles area. Here we will review the following ones:

  • Strategy 1: The trend is your friend
  • Strategy 2: Test the nearest level
  • Strategy3: Close singles and continuing the trend

The author comments that these three strategies are common and repeated in the market, so it is profitable to trade them all.

The recommended time frame is M30, especially when using Strategy 2.

It is good to start the trend day and increase the profit, but be aware that trendy days happen only 15 – 20% of the time. Therefore, the author recommends mainly strategy 2, which is precise 75-80% of the time.

 

Strategy 1 – BUY :

  1. A bullish trend has begun.
  2. The singles area has been created.
  3. The prize moves sideways and stays above the singles area.
  4. We buy above the singles area and place the stop loss under the singles area.
  5. We place the profit target either according to the nearest market profile POC or resistance or under the nearest singles area. We try to keep this trade as long as possible because there is a high probability that the trend will continue for more days.

Strategy 1 – SELL :

  1. The bear trend has begun.
  2. The singles area has been created.
  3. The prize goes to the side and stays under the singles area.
  4. We sell below the singles area and place the stop loss above the singles area.
  5. We will place the target profit either according to the nearest market profile POC or support or above the nearest singles area. We try to keep this trade as long as possible because there is a high probability that the trend will continue for more days.

 

Before we start with Strategy 2, let’s explain the Initial Balance(IB) concept. IB is the price range of (usually) of the first two 30-minute bars of the session of the Market Profile. Therefore, Initial Balance may help define the context for the trading day.

The IBH (Initial Balance High) is also seen as an area of resistance, and the IBL (Initial Balance Low) as an area of support until it is broken.

Strategy 2 – one day – BUY:

This strategy will take place on a given day.

  1. There is a singles area near IB. (a singles area was created on a given day)
  2. The price goes sideways or creates a V-shape
  3. We expect to return to the singles area or IB. We buy low and place the stop loss below the daily low (preferably a little lower) and place the target profit below the IBL (preferably a little lower).

 

Strategy 2 – one day – SELL:

This strategy will take place on a given day.

  1. There is a singles area near IB. (a singles area was created on a given day)
  2. The price goes sideways or creates a reversed font V
  3. We expect to return to the singles area or IB. We sell high and place the stop loss above the daily high (preferably a little higher) and place the target profit above the IBH (preferably a little higher).

 

Strategy 2- more days- BUY:

This strategy takes more than one day to complete (Singles were created one or more days ago)

  1. After the trend, the price goes sideways and does not create a new low (or only minimal but with big problems)
  2. Nearby is a singles area (Since the price cannot go to one side, there is a high probability that these singles will close).
  3. We buy at a low, placing a stop-loss order a bit lower. We will place the target profile under the singles area.

 

Strategy 2- more days- SELL:

This strategy takes longer than one day (Singles were created one or more days ago)

  1. After the trend, the price goes to the side and does not create a new high (or only minimal but with big problems)
  2. Nearby is a singles area ( Since the price cannot go to one side, there is a high probability that these singles will close ).
  3. We sell at a high, and we place a stop-loss a bit higher. We will place the target profile above the singles area.

Strategy 3 – BUY:

  1. The current candle closes singles.
  2. Add a pending order above the singles area and place the stop-loss under the singles area or the candle’s low. (whichever is lower)
  3. Another candle must occur above the singles area. (If this does not happen, we will delete the pending order) .
  4. We will place the profit-target either according to the nearest market profile POC or resistance or under the nearest singles area.

 

Strategy 3 – SELL:

  1. The current candle closes singles.
  2. Add a pending order under the singles area and place the stop-loss above the singles area or candle’s high (whichever is higher).
  3. Another candle must occur under the singles area. (If this does not happen, we will delete the pending order) .
  4. We will place the profit-target either according to the nearest market profile POC or support or above the nearest singles area.

Discussion

These strategies look really interesting.  As the author himself says:

It’s not just a strategy. There is more to it in profitable trading. For me personally, they are most important when trading: Probability of profit, patience, quality signals with a good risk reward ratio (minimum 3: 1) and my head. I think this is the most important.

In this, we must agree with the author.

 

Service Cost

The current cost of this indicator is $50. You are also able to rent the indicator. For a one-month rental, it is $30 per month. There is also a demo version available it is always worth testing out the demos before purchasing. Though.

After purchasing the indicator, the author sends two more indicators to his customers as a gift: Market Profile Indicator and Support and Resistance Indicator.

Conclusion: There are only 2 reviews for the indicator so far, but they have 5 stars and are very positive.

For us, this indicator is interesting, and it is a big plus that the author shares his strategies. The price is also acceptable since the indicator costs 50 USD = 5 copies (10-USD / 1 piece), and since the author sends another 2 indicators as a gift, this price is really worthwhile.

The author added:

By studying the market profile and monitoring the market, I came up with an indicator and strategies we would like to present to you. Here you can try it for free :

 

MT4: https://www.mql5.com/en/market/product/52715

MT5: https://www.mql5.com/en/market/product/53385

 

And here you can watch the video:

 

 

Also, a complete description of the strategies and all the pictures can be seen HERE :

Other completely free of charge tools:

https://www.mql5.com/en/users/tomo007/seller#products

 

Categories
Forex Elliott Wave Forex Market Analysis

USDCAD Bullish Divergence in a Complex Corrective Formation; What’s next?

The big picture of the USDCAD pair shows a bullish divergence suggesting the exhaustion of the current bearish trend that remains active since past March 2020 when the price topped at 1.46674 and began to decline in a complex corrective pattern. Follow with us what’s next for Lonnie.

The big picture of the USDCAD pair shows a bullish divergence suggesting the exhaustion of the current bearish trend that remains active since past March 2020 when the price topped at 1.46674 and began to decline in a complex corrective pattern. Follow with us what’s next for Lonnie.

The big picture of the USDCAD pair shows a bullish divergence suggesting the exhaustion of the current bearish trend that remains active since past March 2020 when the price topped at 1.46674 and began to decline in a complex corrective pattern. Follow with us what’s next for Lonnie.

Technical Overview

The long-term Elliott wave view of the USDCAD pair unfolded in its 2-day chart and log-scale, illustrates a downward movement that began on the second half of March 2020 when the price found fresh sellers at level 1.46674. Once the price topped, the Lonnie started to decline in a complex corrective formation identified as a double-three pattern (3-3-3) of Minor degree labeled in green.

According to the textbook, the double-three pattern characterizes itself by following an internal sequence subdivided into 3-3-3, each “three” a complete corrective formation. In this regard, the previous figure shows the price action moving in the third segment of the double-tree pattern corresponding to its wave Y. Also, the lower degree structural sequence reveals the progress in its wave ((c)) of Minute degree identified in black.

On the other hand, the technical indicators support the bearish bias that dominates the downtrend, persisting since March 2020. Both the trend and the momentum oscillators confirm the downtrend in progress. Nevertheless, the timing oscillator shows a bullish divergence plotted in green. This reading suggests the exhaustion of the bearish trend. In this context, the candlesticks formations observed in the last chart remains weighting declines over rallies.

Technical Outlook

The short-term outlook for USDCAD exposed in the next 8-hour chart reveals the incomplete downward advance corresponding to wave ((c)) of Minute degree identified in black, suggesting a potential new decline.

The figure illustrates the downward channel in play that connects the extremes of waves (i)-(iii) and (ii)-(iv) Minuette degree identified in blue. The Elliott Wave theory suggests that the penetration below the base-line between waves (i) and (iii) could reveal the end of wave (v). In this regard, a potential new decline could strike the area bounded between 1.2585 and 1.2425. Likewise, the gap between momentum and timing oscillators supports the likely additional downward move in the USDCAD pair. 

In summary, the USDCAD advances in a downward complex corrective sequence identified as a double-three pattern of Minor degree, which looks running in its wave Y. Simultaneously, the internal structure reveals the progress in its wave ((c)) of Minute degree, which could see a new drop to the potential target area between 1.2585 and 1.2425. Finally, the bearish scenario will invalidate if the price soars and closes above 1.27980.

Categories
Forex Signals

USD/CAD Forms Descending Triangle Pattern – Brace for a Breakout Setup! 

The USD/CAD pair was closed at 1.26879 after placing a high of 1.27334 and a low of 1.26633. The USD/CAD pair rose on Thursday due to a strong rebound of the US dollar and Canada’s negative economic data.

The USD/CAD pair was closed at 1.26879 after placing a high of 1.27334 and a low of 1.26633. The USD/CAD pair rose on Thursday due to a strong rebound of the US dollar and Canada’s negative economic data.

The USD/CAD pair was closed at 1.26879 after placing a high of 1.27334 and a low of 1.26633. The USD/CAD pair rose on Thursday due to a strong rebound of the US dollar and Canada’s negative economic data.

The US Dollar Index that measures the value of the greenback against the basket of six major currencies recovered from the 2-years lowest level and came back to 89.85 level on Thursday after rising for 0.35% and gave strength to the US dollar against its Canadian counterpart that eventually lifted USD/CAD pair on board. Wall Street’s main indexes were also high on Thursday, with Dow Jones gaining about 1.7% and NASDAQ gaining about 2.25% on Thursday.

The US treasury yield on a 10-year note was also raised on Thursday above 1% for the first time since March, which also gave strength to the US dollar and raised the USD/CAD pair. Whereas the Canadian dollar was weak onboard on the day despite trading softer against its US counterpart, the Loonie was also underperforming against most of its G10 peers. 

Markets continued pricing the prospects of much more spending from the US government over the coming months and years under the Democratic leader Joe Biden. This increased the expectations of higher US economic growth and higher inflation, hence why US stocks, nominal US bond yields, and US inflation break-evens were higher on Thursday.

On the data front, at 18:30 GMT, the Trade Balance from Canada for November showed a deficit of -3.3B against the expected -3.6B and supported the Canadian dollar that capped further upside in the USD/CAD pair. At 20:00 GMT, the Ivey PMI from Canada for December declined to 46.7 against the expected 53.1 and weighed on the Canadian dollar, which ultimately added strength to the USD/CAD pair’s bullish momentum.

From the US side, at 17:30 GMT, the Challenger Job Cuts for the year in December advanced to 134.5% compared to November’s 45.4%. At 18:30 GMT, the Unemployment Claims from last week were plunged to 787K against the estimated 798K and supported the US dollar that added gains in USD/CAD pair. The Trade Balance from November showed a deficit of -68.1B against the estimated-66.7B and weighed on the US dollar that capped further upside in the USD/CAD pair. At 20:00 GMT, the ISM Services PMI advanced in December to 57.2 against the estimated 54.5 and supported the US dollar that added further gains in the USD/CAD pair on Thursday.

On the other hand, the WTI crude oil prices surpassed the $51 per barrel on Thursday and gave strength to commodity-linked currency Loonie that lost most of the gains from the USD/CAD pair on Thursday in late trading hours.


Daily Technical Levels

Support Resistance

1.2653 1.2727

1.2621 1.2767

1.2580 1.2800

Pivot Point: 1.2694

The commodity currency pair USD/CAD is trading with a neutral bias at the 1.2692 level, facing immediate resistance at the 1.2742 level. The USD/CAD pair may find resistance at the 1.2742 level on the hourly timeframe, and closing of a candle below this level may trigger selling until the 1.2640 level. The MACD and RSI are suggesting buying trends, along with 50 periods EMA. I will be looking to take a sell trade around the 1.2745 level today. Good luck!