Tag: Forex

Categories
Forex Signals

USD/JPY Braces to Trade Triple Bottom Breakout! 

The USD/JPY failed to stop its four-day declining streak and witnessed some further selling near two-weeks lows at 106.65 level, mainly due to the cautious mood around the equity markets, which strengthens the Japanese yen’s safe-haven demand and sent the pair down.

The USD/JPY failed to stop its four-day declining streak and witnessed some further selling near two-weeks lows at 106.65 level, mainly due to the cautious mood around the equity markets, which strengthens the Japanese yen’s safe-haven demand and sent the pair down.

The USD/JPY failed to stop its four-day declining streak and witnessed some further selling near two-weeks lows at 106.65 level, mainly due to the cautious mood around the equity markets, which strengthens the Japanese yen’s safe-haven demand and sent the pair down.

On the other hand, the broad-based US dollar weakness helps the pair to dip further below 107, the triple bottom level. It seems like the trader’s sentiment is badly damaged despite the latest positive hopes about easing coronavirus-related lockdowns worldwide and a push to accelerate the gradual re-opening of the economies. 

The safe-haven demand further increased by the fresh downturn in the US Treasury bond yields, which also contributed to the pair’s bearish moves. However, the latest pullback of the US dollar helped limit deeper losses.


On the technical front, the USD/JPY was facing solid support around 107, the round figure, but it got violated over increased demand for safe-haven yen. At the moment, the USD/JPY is facing strong resistance around 107, along with support at 106.500, but this support seems weaker, and we may see USD/JPY prices falling further until 106.240 later today. Consider moving your stop loss at breakeven as soon as the signal starts yielding 20 pips profit. 

Entry Price: Sell at 106.744    

Take Profit 106.244    

Stop Loss 107.244    

Risk/Reward 1.00    

Profit & Loss Per Standard Lot = -$500/ +$500

Profit & Loss Per Micro Lot = -$50/ +$50

Categories
Forex Assets

Exploring The GBP/XPF Exotic Forex Currency Pair

Introduction To GBP/XPF

Introduction To GBP/XPF

Introduction To GBP/XPF

The abbreviation of GBP/XPF is British Pound vs. the French Pacific Franc. Here GBP is the official currency of the United Kingdom, and many others, it is also proven to be the fourth most traded currency in the forex market after USD, EURO, and JPY. In contrast, The CFP franc is the currency used in French overseas.

Understanding GBP/XPF

We know that in currency pairs, the first currency is the base currency, and the second currency is the quote currency. Here, the market value of GBP/XPF helps us to understand the strength of XPF against the GBP. So let’s take if the exchange rate for the pair GBP/XPF is 135.984, it means we need 135.984 XPF to buy 1 GBP.

Spread

We have two different prices for currency pairs in forex, the bid and ask price. Here the “bid” price at which we can SELL the base currency, and The “ask” price is at which we BUY the base currency. The difference between the ask price and the bid price is called the spread. Below is the spread for ECN and STP broker for the GBP/XPF pair.

ECN: 52 pips | STP: 55 pips

Fees

A Fee in forex is simply the commission we need to pay to the broker for opening a particular position. The fees depend on the type of broker we use. Like for example, we don’t have any fees for ECN, but we have some for STP.

Slippage

Slippage is the difference between the trader’s anticipated price and the actual price at which the trade is executed. It mostly occurs when the volatility of the currency pair is high and also, sometimes, when a large number of orders are placed at the same time.

Trading Range in GBP/XPF

Volatility is an essential factor that every trader should take into consideration before entering the market. The amount of capital we will win or lose in a given amount of time can be evaluated using the trading range table. Here, the trading range is a representation of the minimum, average, and maximum pip movement in a currency pair. This can be evaluated simply by using the ATR indicator combined with 200-period SMA.

Procedure to assess Pip Ranges

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

GBP/XPF Cost as a Percent of the Trading Range

The cost of trade depends mostly on the broker and also varies based on the volatility of the market. We have various costs involved in the overall trading cost that includes slippage, spreads, and sometimes the trading fee. Below is the calculation of the cost variation in terms of percentages. The conception of it is discussed in the following sections.

ECN Model Account

Spread = 52 | Slippage = 3 |Trading fee = 5

Total cost = Slippage + Spread + Trading Fee = 3 + 52 + 5 = 60

STP Model Account

Spread = 55| Slippage = 3 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 3 + 55 + 0 = 58

Trading the GBP/XPL

There are some currencies that are very less traded in the foreign exchange market. These currencies are called exotic-cross currency pairs. GBP/XPL is one such exotic currency pairs. Further, the average pip movement on the 1H timeframe is only 14 pips, which is considered to be very less volatile.

We also have to note that if we trade in a low volatile market, our trading will be very expensive. However, It is recommended to trade in a currency pair with medium volatility. To comprehend this better, we will try to understand this with the help of an example.

As we can see in the 1M time frame, the Maximum pip range value is 865, and the minimum is 217. Now when we compare the trading cost in accordance with the pip movement, we note that in 217pip movement fess is 26.73%, and for 865pip movement, fess is only 6.71%. So overall we can conclude that trading this pair will be very expensive.

Categories
Forex Course

107. Comprehending The Impulsive Waves In Elliot Wave Theory

Introduction

Introduction

Introduction

In the previous lesson, we got started with understanding the fundamentals of the Elliot Wave theory. An introduction to impulsive waves and corrective waves was also discussed. This lesson shall go over the concept of impulsive waves.

There are two types of waves in the Elliot theory, impulsive and corrective. And as a whole, Elliot stated that a trending markets move in 5-3 wave patterns. The 5-wave pattern corresponds to the impulsive wave, and a 3-wave pattern corresponds to the corrective wave. And the combination of the 5-wave and 3-wave patterns form a trend.

Formation of Impulsive Wave

The impulsive waves are formed by five waves numbered from 1 through 5. Wave numbers 1, 3, and 5 are motive, i.e., they are the waves that go along the overall trend, while wave numbers 2 and 4 are corrective waves that go against the overall trend. Below is a diagram that represents the 5-wave impulsive pattern.

This is the impulsive wave that is formed in all types of instruments. It claimed that this wave patterns form not only in stocks but on currencies, bonds, gold, oil, etc. as well. Now, let’s interpret each wave in the impulsive wave pattern.

🌊 Wave 1 – This is the first up move in the market. This is typically caused by a handful number of people who think that the currency is at a discounted rate and is the right time to buy.

🌊 Wave 2 – This move is against the previous move. There is a dip in the market as the initial buyers are booking profits, thinking it is now overvalued. However, it does not go down until the previous lows because it is also considered to be at a discount for other traders.

🌊 Wave 3 – Wave 3 resembles the wave 1. This wave is usually the longest and the strongest in terms of momentum. This is because, as the price goes higher and higher, the mass public begins to buy along with the institutional players. Hence, it is stronger than wave 1.

🌊 Wave 4 – After a strong up move (wave 3), some traders start to book profit, assuming the security has become expensive. However, this down-move is not quite strong because there are traders who still believe in the bullishness and hence see this as a discounted price.

🌊 Wave 5 – Wave 5 is when most people start to buy security. This is solely due to panic and is considered to a rat trap. Wave 5 is when the security has reached the news. All traders and investors on the news channels advice the public to buy.

But, in reality, this is when the security is considered to be overpriced. The big investors and institutions begin to short and square off their positions. And the liquidity for it is provided by the mass public.

All these waves together form the 5-wave impulsive pattern. We hope you were able to comprehend this concept of impulsive waves. If not, shoot your questions in the comment section below, and don’t forget to take the below quiz.

[wp_quiz id=”71436″]
Categories
Forex Elliott Wave

Alternation and Extensions in the Wave Analysis – Advanced Level

Introduction

Introduction

Introduction

In previous articles, we discussed the concepts of alternation and extensions and their importance in wave analysis.

R.N. Elliott, in his work “The Wave Principle,” described alternation as a principle of nature. Likewise, since financial markets are the result of human activity, and consequently part of nature, they are governed by the “law of nature.”

Elliott also identified the existence of extensions as part of impulsive movements. In particular, in his Treatise, Elliott points out that extensions should appear only on one of the three motive waves and never on more than one.

In this educational article, we will review and expand on the concepts of Alternation and Extensions applied in wave analysis.

Alternation

As we have seen in previous articles, alternation can be recognized in different forms, which are detailed as follows:

  1. Price, which corresponds to vertical advance, either increasing or decreasing.
  2. Time, which corresponds to the time taken by the construction of each wave.
  3. Severity, which is the ratio of the wave to the impulsive pattern, this aspect applies only to corrective waves 2 and 4.
  4. Complexity, which refers to the number of subdivisions that the Elliott pattern has in development.
  5. Construction, an Elliott wave pattern, can be a flat, zigzag, triangle, etc.

So far, we have studied the characteristics of alternation in the first three aspects. 

In impulsive structures, they can alternate in terms of time and price. However, in corrective structures, alternation in terms of price is usually not relevant. 

However, on alternation in time, in particular, one must verify the time taken by each phase of the corrective pattern, which in general will be very different from each other. Likewise, in terms of severity, if a corrective wave produces a deep retrace to the previous impulsive wave, likely, the next corrective wave will not show a deep retrace and vice versa.

The next aspect that corresponds to the alternation principle is complexity or intricacy, which refers to the number of internal subdivisions that have an Elliott wave pattern, compared to the number of subdivisions that have the adjacent structure.

In practical terms, it will be useful for the analysis of poly-waves and multi-waves. In this way, it will be helpful for one wave to be subdivided and the other not. 

The following figure shows cases for impulsive and corrective structures.

The alternation in terms of construction corresponds to the patterns that compose an impulsive or corrective structure. 

For example, in a corrective sequence in which the first movement is composed of a zigzag pattern, the next corrective move can be any structure, minus a zigzag. 

In this context, in the real market, a typical sequence is first the appearance of a zigzag and then a movement corresponding to a flat pattern, as shown in the following figure. Likewise, if the price action develops an impulsive structure, the next movement will correspond to a corrective structure of the same degree.

 

Extensions

Usually, in wave analysis, the extension and subdivision concepts tend to be used interchangeably. However, Glenn Neely, in his work “Mastering Elliott Wave,” shows that both terms are independent.

On the one hand, the extension corresponds to the wave with the longest movement in favor of the trend. As we have seen in previous articles, the extended wave appears in a single wave, and this may be in the first, third, or fifth wave, but it will never be present in more than one simultaneously.

On the other hand, the term subdivision applies to the number of segments constituting a wave, which can be impulsive or corrective.

Thus, the extended wave will not necessarily be the one with the most subdivisions. Likewise, as the complexity of the wave under study increases, the level of subdivisions that constitute it will also increase.

Finally, as indicated by R.N. Elliott in his Treatise, the extended wave is a relevant factor in terms of the behavior of an impulsive wave, either by what the most complex corrective wave will be. It can also lead the wave analyst to avoid losses and obtain gains from its knowledge.

When the first wave is extended, the structural sequence has a wedge shape. In this series of waves, the ends of waves 1 and 3 and waves 2 and 4 are joined. Usually, the fifth wave will end up under the higher guideline. The structure shall be complete when the price action violates the lower guideline joining waves 2 and 4.

When the third wave is the extended one, the fourth wave should not retrace beyond 38.2% of the third wave advance. If the retrace extends beyond 38.2%, this would be indicative of a weakness in impulsive movement, and consequently, the fifth wave should not reach a new high.

Finally, when the fifth wave is the most widespread, waves 1 and 3 may be similar, the third wave being slightly longer than the first and the fourth wave the most complex corrective wave compared to the second wave. The fifth wave will have the appearance of a false rupture of the directive that joins waves 1 and 3.

Conclusions

In this educational article, we have seen the importance of the principle of alternation in wave analysis, which can provide valuable information in the study of price action.

Also, knowledge of the alternation principle can help the wave analyst to identify which wave will be extended. In particular, when the analysts look to incorporate to the trend when it is in progress.

In the next educational article, we will study the process of wave counting and counting.

Suggested Readings

  • Neely, G.; Mastering Elliott Wave: Presenting the Neely Method; Windsor Books; 2nd Edition (1990).
  • Prechter, R.; The Major Works of R. N. Elliott; New Classics Library; 2nd Edition (1990).

 

Categories
Forex Options Forex Videos

Forex Option Expiries Over $100,000,000 – The 10AM New York Cut!

https://youtu.be/sI0pNPnyYEo

https://youtu.be/sI0pNPnyYEo

 FX Expiries 27 04 2020

Hello everybody, and thank you for joining us for the daily FX expiries briefing video for the 10 a.m. New York cut today.

If it is your first time with us, the FX currency options market runs in tandem with the spot FX market, but where traders typically place Call and Put trades on the future value of a currency exchange rate and these futures contracts typically run from 1 day to weeks, or months.
Each day we bring you details of the notable FX option expiries where they have an accumulative value of a minimum of $100M + and where quite often these institutional size expiries can act as a magnet for price action in the Spot FX arena leading up to the 10 a.m. cut.

We will also plot the levels on to the relevant charts at the various exchange rates where there are due to expire, and also identify the levels which are in play, and where we believe there is a greater chance of the expiry maturing based on technical analysis at the time of writing, we will label them as hot, warm or cold.


So today we have Option Expires for the EURUSD Pair The levels are all in Euro amounts and are as follows:
• 1.0760 599m
• 1.0800 1.1bn
• 1.0820 504m


Also, there are also Options expiring for USDJPY pair!

The levels are all in US Dollar amounts:
USD/JPY: USD amounts

• 106.75 457m
• 107.00 1.2bn
• 107.50 874m
• 107.55 410m
• 107.60 668m
• 108.00 1.3bn
• 108.35 788m
• 108.40 521m
• 108.50 632m


Also, there are also Options expiring for EURGBP pair Just one key level which is in EURO amount

• 0.8700 775m

As stated, we have color-coded the levels on the chart from COLD WARM HOT with regard to the likelihood of the exchange rate reaching these levels at the 10 a.m. cut based on technical analysis at the time of writing.
We suggest you take the levels and plot them onto your own trading charts and incorporate the information into your own trading methodology in order to use the information to your advantage.

Remember, the higher the amount, the larger the gravitational pull towards the exchange rate maturity at 10:00 a.m. Eastern time.
For a detailed explanation of FX options and how they affect price action in the spot forex market, please follow the link to our educational video.

Categories
Forex Options Forex Videos

Make Huge Profits With Our New Free Options Based Forex Price Target Tool

https://youtu.be/HhJiaet2IJA

https://youtu.be/HhJiaet2IJA

P

How do forex option expiries affect price action in the spot FX market?

In this video presentation, we are going to be looking at how forex option expiries affect price action in the spot FX market.
We will be exploring how forex options work, although we will not be concentrating too much on the technicalities of how they are traded because we are more interested in how FX options expiries can be of great benefit to traders in the spot FX arena.

So what are FX Options, and what is the significance of their expiries?
FX options are essentially another way of trading forex. In effect, they are different branches of the same entity. One is traded on the spot FX, thus known as the Spot FX market, which most of you will be familiar with, and the one we are discussing today is the Future’s FX Options market, where trades are made based upon the price of a currency exchange rate at some point in the future.

So what are FX options? Options traders purchase what is called a premium, which is a contract and which gives them the right, but not an obligation to buy or sell an FX currency exchange rate at a specified price. This exchange rate is called a strike. Typically these contracts will be purchased for a future date, typically days, weeks, or even months in advance and where the contract is purchased from a market maker, which is usually an institution that offers futures contracts trading, unlike banks and brokers which offer spreads in spot forex. Contracts expire on the date that the trader chose and always at 10:00 a.m. in New York, USA. This is known as the New York Cut.


If a trader wishes to purchase a premium, for a future date, for an FX Option, where he or she believes that a chosen currency pair’s exchange rate will be above that at the time of the purchase, he or she buys a Call Option. This is an option to buy. Alternatively, if the trader wishes to purchase a premium for an option where he or she believes that the future currency pair’s exchange rate would be below that at the time of the purchase, he or she buys a put option. This is an option to sell.

So how much does the premium contract cost a trader? This will vary depending on the size of the contract and also so how far the future currency exchange rate is from the current one and the length of the future expiry date. However, futures traders often prefer this type of exposure in the FX market because they take a long term view of where exchange rates will be. And rather than swing trade to these levels in the spot FX market, they prefer to pay the price or premium for the contract upfront, and this then becomes their risk and exposure, unlike spot FX traders whose level of risk fluctuates with price action.

How do options traders make money? If on the day of the maturity of the FX options contract at 10 a.m. for the New york cut the strike rate, or currency exchange rate, Is it at or above the exchange rate for a call option, or at or below the exchange rate for a put option, then the trader is known as being in the money. If a currency exchange rate is not hit, they are out of the money. If they are out of the money, the option expires, and the contract is worthless to the buyer, and he loses the premium.

If, however they are in the money, the buyer will get to exercise the option and create a position in the market. And the seller of the contract will be the counterparty in the ongoing trade. The seller of the contract also gets to keep the premium.

So who trades FX currency options? Anybody can trade FX options, but typically we will find institutions, high net worth individuals, forex traders looking to hedge positions, forward forex traders, speculators, exporters, banks, institutions, companies with exposure in the foreign exchange market generally.

So how do FX currency options affect the spot FX market? Interestingly, when FX options expiries accumulate into large amounts, typically $100 million +, we often find that these accumulated amounts at a set currency exchange rate have somewhat of a magnetic effect to spot FX Trader in the run-up to the 10 a.m. new york cut. Although these huge amounts of options expiring at a particular level occur on an almost daily basis, it does not definitely mean that price action pertaining to a particular pair will hit the strike rate. However, some of the traders who are involved in FX options will also use the Spot FX market to hedge some of their own positions, thus using the Spot market to try and move price to where they need it to be.
Also, these currency options expiry levels with the accumulated amounts are available via certain brokers and commentators before the expiries. Thus this publicly available information is used by Spot FX traders to keep an eye out in the market in the period leading up to the expiry. Remember, the larger the amount of the expiring contracts, the more it would seem that there is a gravitational pull towards these exchange rates.

Forex.Academy will be making these levels available to you, free of charge, and they can be accessed on the options drop-down menu of our home page. For your convenience, as and when option expiries become available almost each day, we will also plot them onto a chart, as per this slide, and you will be able to view them there for your convenience.

Categories
Forex Market Analysis

Daily F.X. Analysis, April 28 – Top Trade Setups In Forex – Get Ready for C.B. Consumer Confidence

On Tuesday, the eyes will be on the U.S. Commerce Department, which will release March wholesale inventories (-0.5% on month expected) and advance goods trade balance (55.0 billion dollars deficit expected). The Conference Board will publish April Consumer Confidence Index (87.9 expected)S.P.SP/Case-Shiller will report 20-City Composite Home Price Index for February (+0.4% on month expected). Let’s look at today’s trade setups.

On Tuesday, the eyes will be on the U.S. Commerce Department, which will release March wholesale inventories (-0.5% on month expected) and advance goods trade balance (55.0 billion dollars deficit expected). The Conference Board will publish April Consumer Confidence Index (87.9 expected)S.P.SP/Case-Shiller will report 20-City Composite Home Price Index for February (+0.4% on month expected). Let’s look at today’s trade setups.

On Tuesday, the eyes will be on the U.S. Commerce Department, which will release March wholesale inventories (-0.5% on month expected) and advance goods trade balance (55.0 billion dollars deficit expected). The Conference Board will publish April Consumer Confidence Index (87.9 expected)S.P.SP/Case-Shiller will report 20-City Composite Home Price Index for February (+0.4% on month expected). Let’s look at today’s trade setups.

Economic Events to Watch Today     

 

 

EUR/USD – Daily Analysis

Today in the early Asian session, the EUR/USD currency pair is flashing red, and, having faced rejection at 1.0860, it pulled back mainly because the European leaders failed to reach on the agreement and left the ECB alone for the fight against coronavirus recession. That keeps the shared currency under pressure.

The broad-baseU.S.S. dollar latest recovery sentiment also pushes the currency pair lower. However, the pair’s sentiment will remain neutral while the pair is confined within the trading range of 1.0727-1.0860. A breakout could pave the way for at least a 100-pip rally, while a range breakdown would show the 2020 low of 1.0636. As of writing, the EUR/USD currency pair is currently trading at 1.0820 and consolidates in the range between the 1.0817 – 1.0837.

The direction in the currency pair would depend on Fed & ECB actions. It remains to see what the Federal Reserve and the European Central Banks Deliver during this week. Although, there is an option of increased bond purchases for both Central Banks but having eased aggressively between meetings.

The United States is struggling over the past two months in the fight against the coronavirus and having used multiple ways to tame this outbreak. So, as in result, the Federal Reserve can be quiet and measure the situation about the virus front, and the impact of the multiple easing measures announced over the past two months. 

In the meantime, the European leaders did not succeed in reaching an agreement on spending last week, left the European Central Bank alone during its tough time in a fight against the coronavirus-induced recession. Most of the observers think the ECB could hint that it will be ready to provide additional easing during the month of June. As a result, EUR/USD is more likely to suffer a range breakdown. 

Daily Support and Resistance

  • S1 1.0748
  • S2 1.0792
  • S3 1.0811

Pivot Point 1.0836

  • R1 1.0855
  • R2 1.0879
  • R3 1.0923

EUR/USD– Trading Tips

On Tuesday, the EUR/USD is trading sideways around 1.0828, despite the stronger Spanish Spanish Unemployment Rate from the Eurozone. The overall trading bias continues to be bearish as the EUR/USD prices are holding below 50 EMA, which is extending resistance around 1.0837 level. On the 4-hour chart, the EUR/USD may find resistance around 1.0837 level, and bullish breakout of this level can continue buying until 1.0889 level. Conversely, the bearish breakout of 1.0765 level can drive selling until 1.0649 level today, let’s look for selling trades below 1.0770 level today.  

GBP/USD – Daily Analysis

During Tuesday’s early Asian session, the GBP/USD currency pair failed to extend its four-day winning streak and dropped from the weekly high to 1.2415 while representing 0.13% losses on the day, as the broad-baseU.S.S. dollar regains the bids on optimism about reopening thU.S.S. economy. In the meantime, the intensifying fears and uncertainty abouU.K.K. lockdowns extension in the wake of coronavirus (COVID-19) also keeps the currency pair under pressure. The GBP/USD pair is trading at 1.2442 and consolidates in the range between the 1.2407 – 1.2450.

News oU.K.K. Prime Minister Boris Johnson returning back to the office helped the currency pair to register a 3-day winning streak on Monday after the Tory leader gave a cautious statement regarding the pandemic fears and showed some willingness to ease the lockdown despite coming coronavirus cases.

As per the latest report, the virus figures from thU.K.K. registered further 360 people died due to the virus in hospitals, reaching the total number of deaths to 21,092. Whereas, the death toll fell to the lowest in a month as compared to previous months.

Apart from this, the on-going criticism on Tory government’s about the handling of coronavirus crisis, and shortage of medical supplies also keeps the UK PM worried about lifting the lockdowns restrictions.

On the other hand, the Tory government’s struggles for further tests in order to achieve 100,000 a day target as well as calling for public questions to be discussed in the daily briefings also showing the UK PM Johnson and Tory party’s interest for the country while the chancellor’s struggles to keep small companies comfortable are also favorable for Tory’s despite recent criticism about the cracks in the mechanism.

Daily Support and Resistance

  • S1 1.2315
  • S2 1.2371
  • S3 1.24

Pivot Point 1.2427

  • R1 1.2456
  • R2 1.2483
  • R3 1.2539

GBP/USD– Trading Tip

The GBP/USD is exhibiting bullish bias as it’s trading at 1.2459 area, having violated the sideways trading range of 1.2450 – 1.2396. Closing of candles outside this range will determine further trends in the market. The Cable has closed candles above 50 EMA, which are extending support to the GBP/USD pair. 

On the upper side, the GBP/USD may find resistance around 1.2523, and violation of this can lead Sterling further higher until 1.2626 area. While immediate support holds around 1.2396 level, let’s look for buying trades above 1.2399 and bearish trades below 1.2520 level today. 

USD/JPY – Daily Analysis

The USD/JPY lost 0.2% to 107.28. The Bank of Japan announced that it would purchase the required amount of Japanese government bonds with no border, compared with a previous target of Y80 trillion, while keeping its benchmark rate at -0.1% unchanged. This morning, official data showed that Japan’s jobless rate edged up to 2.5% in March (as expected) from 2.4% in February.

ThU.S.S. Dollar Index, which dropped below the 100 marks earlier in the day, is up 0.12% on the day at 100.47 and stays on track to close the 4th-straight day in the positive area. The latest pullback of the U.S. dollar kept a lid on bullish moves in the pair. Currently, the USD/JPY is trading at 107.27 and consolidates in the range between the 106.98 – 107.86. However, investors are cautious and waiting for a fresh catalyst before placing any position.

Looking forward, the virus headlines will be the key catalyst, while thU.S.S. data about the Consumer Confidence and Richmond Fed Manufacturing could offer intermediate moves. ThU.S.S. Commerce Department will release March wholesale inventories (-0.5% on month expected) and advance goods trade balance (55.0 billion dollars deficit expected). 

The Conference Board will publish April Consumer Confidence Index (87.9 expected). S.P./Case-Shiller will report the 20-City Composite Home Price Index for February (+0.4% on month expected).

Daily Support and Resistance    

  • R3 108.25
  • R2 107.94
  • R1 107.59

Pivot Point 107.29

  • S1 106.94
  • S2 106.64
  • S3 106.29

USD/JPY – Trading Tips

The USD/JPY is trading with a bearish bias on Tuesday, as its prices are holding above the triple bottom support level of 107. Since Japanese yen is gaining bullish momentum, driving USD/JPY down, the violation of the 107 level can lead the pair towards the next support area of 106.550. The resistance today stays around 107.400, and above this, the next resistance may be found around 107.640. 

The 50 EMA is left around 107.570, which is far away around from current market prices of 107.045. While the MACD is suggesting selling bias among USD/JPY traders, so let’s keep an eye on the 107 level as we may see selling below this, and buying above this level today. 

All the best for today! 

Categories
Forex Options

FX option expiries for Apr 28 NY cut

FX option expiries for Apr 28 NY cut

28 April 2020, 08:35
FX option expiries for Apr 28 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

EUR/USD: EUR amounts

  • 1.0820 557m
  • 1.0980 508m

USD/JPY: USD amounts

  • 107.50 3.2bn
  • 107.99 428m

GBP/USD: GBP amounts

  • 1.2400 291m

NZD/USD: NZD amounts

  • 0.6050 352m

Categories
Forex Daily Topic Forex Fibonacci

Fibonacci Trading: The Golden Ratio

Fibonacci trading is one of the most prolific trading methods, which is widely used by Forex traders. Retracement length, Fibo levels as well as reversal candle are three factors that Fibonacci traders need to pay attention to. In today’s article, we are going to demonstrate an example of a chart, which makes an excellent bearish move after having a retracement. The length of retracement, the most significant Fibo level, and the reversal signal all play their part in this example. Thus, fasten your seat belt and read through.

Fibonacci trading is one of the most prolific trading methods, which is widely used by Forex traders. Retracement length, Fibo levels as well as reversal candle are three factors that Fibonacci traders need to pay attention to. In today’s article, we are going to demonstrate an example of a chart, which makes an excellent bearish move after having a retracement. The length of retracement, the most significant Fibo level, and the reversal signal all play their part in this example. Thus, fasten your seat belt and read through.

Fibonacci trading is one of the most prolific trading methods, which is widely used by Forex traders. Retracement length, Fibo levels as well as reversal candle are three factors that Fibonacci traders need to pay attention to. In today’s article, we are going to demonstrate an example of a chart, which makes an excellent bearish move after having a retracement. The length of retracement, the most significant Fibo level, and the reversal signal all play their part in this example. Thus, fasten your seat belt and read through.

The chart shows that it makes a strong bearish move and makes a breakout at long-held support. The price heads towards the South, searching for its support. The sellers are to wait for the price to have a retracement.

The price starts having retracement. It produces a bullish inside bar followed by another bullish candle. The sellers are to wait for the price to find its resistance and produce a bearish reversal candle. However, the Fibonacci traders are to wait for the price to produce a bearish reversal candle at a very particular level, which is the 61.8 level.

The chart produces a bearish engulfing candle closing well below the last bullish candle. The Fibonacci traders must draw the Fibonacci retracement levels to find out which level produces this reversal candle. If this is the level of 61.8, the Fibo sellers are going to go short in the pair.

The highest high is the level of 0.00, and the lowest low is the level of 100.0. The price has a retracement and produces a bearish engulfing candle right at Fibo level 61.8. Usually, when the level of 61.8 works as support/resistance, it drives the price towards the level of 161.8. This means the price may head towards the South and hit the level of 161.8 next. Let us proceed to the next chart and see what the price does here.

The price hits 161.8 level. It makes an upward correction on its way. However, it reaches the level at last. The last candle shows that it breaches the level of 161.8. The price may head towards the South further.

The level of 61.8 is called the Golden ratio. It is a super significant level as far as Fibonacci Retracement is concerned. The buyers in a buying market and the sellers in a selling market wait for the price to produce a reversal candle/signal candle to go long/short in a pair. Yes, there some equations for the traders to know and obey to be able to trade with Fibonacci retracement. Once they learn them well, Fibonacci trading can make them a handful.

Categories
Forex Market Analysis

Gold’s Triple Top Resistance Weighs – 23.8% Fibonacci Retracement Holds! 

During the European session, the precious metal gold was trading at 1,718 area. Technically, gold entered the overbought zone and showed a slight bearish retracement at 1,718 region, which marks 23.8% Fibonacci retracement level and can be seen on the chart below. 

During the European session, the precious metal gold was trading at 1,718 area. Technically, gold entered the overbought zone and showed a slight bearish retracement at 1,718 region, which marks 23.8% Fibonacci retracement level and can be seen on the chart below. 

During the European session, the precious metal gold was trading at 1,718 area. Technically, gold entered the overbought zone and showed a slight bearish retracement at 1,718 region, which marks 23.8% Fibonacci retracement level and can be seen on the chart below. 

As per the latest report from the Centers for Disease Control and Prevention (CDC), the number of COVID19 virus cases rose to 52,459 against the previous day’s 50,439, while the cases surged to 928,619 against 895,766. Despite this, the demand for safe-haven gold is getting hit as investors seem to do profit takings ahead of exhibiting a further bullish bias.

The positive mood around the equity market failed to impressed buyers, which normally weakens the Japanese yen’s safe-haven demand. The reason behind the risk-on market sentiment could be the hopes for the re-start the economy. The certainty about the drug trials for the treatments of the deadly disease keeps the market calm.

Gold – XAU/USD – Daily Technical Levels

Support Resistance 

1,732.65   1,748.95

1,722.9     1,755.5

1,716.35   1,765.25

Pivot Point 1739.2

On the 4 hour timeframe, the precious metal gold has formed a bearish engulfing candle, which is suggesting odds of selling trend in the market below the 1,718 area. Since the overall trend seems bullish, we will try to capture quick sell in gold as soon as gold closes below 1,718, which is 23.8%, and violation of 1,718 level can open further selling until 1,708, which marks 38.2% retracement. Let’s look for selling positions below 1,728 and buying above 1712. Good luck! 

Categories
Forex Daily Topic Forex Fibonacci

Fibonacci Retracement: A Magic Trading Tool

Financial traders rely a lot on a tool called Fibonacci Retracement. This shows the percentage of retracement that the price makes after making a strong bullish/bearish move. The percentage of retracement is very significant to the traders. There are some particular levels, where the price reacts heavily and creates a new trend. Thus, financial traders use Fibonacci Retracement tool to measure retracement length and find the potential whether it is going to create a new trend or not. The Forex traders love using the Fibonacci Retracement tool as well. Once we know how to draw it on the chart accordingly, we find out that the currency pairs on almost all the timeframes obey the Fibonacci retracement ratio.

Financial traders rely a lot on a tool called Fibonacci Retracement. This shows the percentage of retracement that the price makes after making a strong bullish/bearish move. The percentage of retracement is very significant to the traders. There are some particular levels, where the price reacts heavily and creates a new trend. Thus, financial traders use Fibonacci Retracement tool to measure retracement length and find the potential whether it is going to create a new trend or not. The Forex traders love using the Fibonacci Retracement tool as well. Once we know how to draw it on the chart accordingly, we find out that the currency pairs on almost all the timeframes obey the Fibonacci retracement ratio.

Financial traders rely a lot on a tool called Fibonacci Retracement. This shows the percentage of retracement that the price makes after making a strong bullish/bearish move. The percentage of retracement is very significant to the traders. There are some particular levels, where the price reacts heavily and creates a new trend. Thus, financial traders use Fibonacci Retracement tool to measure retracement length and find the potential whether it is going to create a new trend or not. The Forex traders love using the Fibonacci Retracement tool as well. Once we know how to draw it on the chart accordingly, we find out that the currency pairs on almost all the timeframes obey the Fibonacci retracement ratio.

Leonardo Fibonacci, an Italian mathematician, identified a series of numbers such as 0, 1, 1, 2, 3, 5, 8. 13, 21, 34, 55, etc. Each number is the sum of the preceding two numbers.  These numbers produce some significant ratios, such as 23.6. 38.2, 50, 61.8. 78.6, 100, 123.6, 138.2, 161.8. These ratios and the Fibonacci sequence are found in nature as well. Thus, people love using the sequence ratios in their design and plan. At the end of the day, people run financial markets. They buy or sell at certain levels. Since Fibonacci ratios are much related to our nature and life, traders love using these ratios to help decide where to buy and where to sell.

As far as Fibonacci ratios are concerned, the 61.8 is considered as the golden ratio. It is found in flower petals, seed heads, pinecones, fruits and vegetables, tree branches, shells, spiral galaxies, hurricanes, fingers, animal bodies, reproductive dynamics, animal fight patterns, DNA molecule, etc.

In the financial/Forex market, the ratios are used by using a tool called Fibonacci Retracement. There are other Fibonacci tools, but this one may be the trader’s most favorite.

In a buying market, a trader draws his Fibonacci retracement levels from the lowest low to highest high.

The level of 00.00 is the lowest low, and the 100.00 is the highest high of a bullish wave. Traders are to wait for the price to make a bearish retracement. All these levels are significant, and the price reacts to these levels. However, the buyers pay more attention when the price is around 61.8 level to go long in a pair.

In a bearish market, it is just the opposite. Let us have a look at how it looks like.

Fibonacci Retracement levels help traders spout out the trend’s initiating point. Thus, it becomes easy for the traders to take entry with excellent risk-reward. In our forthcoming articles, we are going to demonstrate charts on different pairs, time frames to find out how the price reacts to different Fibonacci levels. Stay tuned.

Categories
Forex Videos

Forex & The Covid 19 Fundamentals! What & How You Need To Be Trading To Realise Huge Profits!

https://youtu.be/jMSp4k0cxPM

https://youtu.be/jMSp4k0cxPM

How Is Fundamental Analysis Affecting Forex During Covid-19

There is absolutely no doubt about it since the coronavirus took hold in Europe, the United Kingdom, and the USA, and to a degree at the height of the epidemic in China, where previously markets had shrugged off off the disease as being contained there, the way that markets are now observing fundamental analysis has been completely turned on its head.
Before the virus, the markets were doing very nicely, with record strong economic growth, particularly in the west, and definitely in the USA, which had hit a record for the lowest number of unemployment, and stock indices which were at all-time record highs, and where within a few weeks the country has flipped into a state of record amount of unemployment of over 16 million, and growing, and is facing the worst depression in U.S. history.

Naturally, the financial markets are in a state of pandemonium because this situation is almost unprecedented. Of course, we had the banking crisis in 2008, which sent shock waves through the financial markets, and we have had other virus outbreaks such as Sars, Avian Flu, Swine Flu, and Ebola, which all caused some degree of market turbulence, but nothing on the scale of what we are seeing at the moment.

Normally financial markets, including Forex, Oil, Gold, and Commodities, turn to stock market indices for guidance because they present a good gauge of economic activity. But of course, while most countries are in lockdown, the majority of business sectors are closed, and economies have essentially flatlined. And so GDP, a key area of fundamental analysis, is now useless. In fact, any economic data releases coming out of major western countries right now can only tell us varying degrees of catastrophic failings.
Where once currencies would rise and fall in exchange rates based upon strong data which only fluctuated in relatively small varying degrees, and where markets were able to predict such data releases within a narrow band of expectation, now analysts are gauging the value of one currency against the next on which country is suffering the fewest fatalities and sometimes this causes see-sawing of price action on an hour by hour and day by day basis.
As China slowly begins to come out of the virus and starts opening for business, we should not be surprised to see countries such as Australia and New Zealand, who export heavily into China, to be amongst the first countries to start to bounce back from the virus, especially as they are recording lower numbers deaths at the moment.

This would mean that their currencies strengthen against counterparts and we are seeing that against the U.S. Dollar right now, INSERT B, where 17-year lows of $0.5500 for AUDUSD pair, has recovered to $0.6360 and where the NZDUSD pair hit an eleven-year low of $0.5460 before recovering to $0.6025 currently.


While countries such as the USA, which was the last continent to be affected, are directly in an area of focus right now because of the exponential death rate and the fact that it is the largest economy on the planet. And although so it might end up being the most severely affected country, both in terms of people suffering and dying from the condition and also its economy taking a huge hit, in both unemployment and its GDP going into the minus territory, the thing that is stopping a complete stock market annihilation is the fact that the Federal Reserve acted quickly to slash interest rates and enter into one of the biggest quantitative easing programs in history in order to bolster the finances of small to large businesses across the United States, to try and stave off mass bankruptcies, and the offer of financial relief to the majority of its population.

This has helped us stock indices to bounce off their lows and steady themselves to a certain extent. And, surprisingly, the U.S. dollar index is actually higher than before the crisis. So are people now looking at the U.S. Dollar as being a safe haven currency? Probably. So what now? Well we know that for at least the next few months economic data coming out of Western countries is going to be bad with economies flatlining and grinding into negative territory across the board with gross domestic product tanking in each country
Also as we have seen in recent economic data releases coming from the United States, such as the weekly unemployment numbers, which are getting worse week on week, the markets are largely discounting this information, while betting that the U.S. economy will fare better than most in the long term once things start to recover. Therefore analysts are predicting that all western countries will record high levels of unemployment, and negative gross domestic product numbers, but the hope is that these will be short shocks and that as long as the virus is contained in a short period of time, those economies are likely to bounce back and grow strongly.
And so, the big question is how to trade the foreign exchange markets based on fundamental analysis? The best advice that we could give you is to expect the unexpected which you should do anyway, but even more so right now. Because we know that data numbers coming for all countries are going to be bad to horrendous, and some of the big players out there will completely be ignoring the data and strategize their forex trading based on technical analysis only, and that would be our advice to you too. Stay out of the market during times of economic data releases especially, reduce your trading size, and tighten your stop losses.

Categories
Forex Elliott Wave

Understanding the Complexity in Wave Analysis – Advanced Level

Introduction

Introduction

Introduction

Financial markets are the result of human interactions where one party buys and the other sells. The results of these actions are reflected in a price chart. 

R.N. Elliott studied the interactions between these two forces that move the market. In his study, Elliott detected that specific patterns repeat themselves over time. He also identified that the price tended to move in impulsive and corrective movements.

Elliott recognized that as time progresses, the price develops movements that, in its basic unit, correspond to segments, those that have a low level of complexity. 

The complexity increases at an additional level as these segments complete a series of three or five movements, giving origin to the wave. 

Later, as a wave is completed, another movement emerges, giving course to a new wave. As this ordered sequence advances in time, the price forms structures that we could call as “poli-waves,” which Elliott defined in the form of patterns corresponding to a structure or wave of higher degree.

The interaction between different sequences of “poli-waves” or basic wave patterns, give origin to a more complex structure, which we can define as “multi-wave.” In turn, when a succession of 3 or 5 multi-waves completes, the price action creates a structure of a higher degree whose complexity level is higher. We can call this complex structure as “macro-wave.”

Multi-wave Construction

Multi-waves are complex structural series that is characterized by having at least one poly-wave in their internal structure. The type of waves can be impulsive or corrective.

Impulsive Multi-waves. They are structures in which one or several of their impulsive waves are poly-waves. Its training requirements are as follows:

  1. Of the three impulsive forward waves, only one must be a poly-wave; the other two can be simple movements.
  2. At least one of the two corrective waves can be a poly-wave, the other can be a poly-wave or a simple wave.
  3. The longer-lasting corrective wave 2 or 4 will occur just before or after the extended wave.

The following figure shows the different patterns of multi-waves of impulsive nature, being the second case, which corresponds to the third extended wave the most common.

Corrective Multi-wave. In the same way as multi-impulsive waves, the corrective multi-waves must contain specific requirements, which are described below.

  1. One or two of the waves that are divided into five waves in the longer pattern should be able to be subdivided as a poly-wave. If it has only one structure subdivided into five, it will be a Flat, while if it has two structures divided into five, it will be a zigzag pattern.
  2. The multi-wave B wave is likely a corrective poly-wave.

The following figure shows two types of corrective multi-waves.

 

Complex Multi-waves Construction

The complex multi-wave analysis does not differ from complex wave analysis composed of poly-waves. The difference is that complex multi-waves are composed of multi-wave groups and not poly-waves.

Macro-waves Construction

As the market develops, the structural series can be grouped as multi-waves and thus form a macro-wave. 

Impulsive Macro-waves. This type of structure is composed of a multi-wave in one of its three impulsive waves, while the other two will be a poly-wave. 

Corrective Macro-waves. Must contain at least one multi-wave, and another wave must be a poly-wave. If the structural series has two multi-wave, the complex structure will be a zigzag, and its formation has only one multi-wave, the corrective structure will be a flat pattern.

Conclusions

In this educational article, we have seen how, as time advances, the complexity of the waves also increases. 

However, the wave analysis whose level of complexity is higher, being it a multi-wave or macro-wave, must be realized in the same way to that studied in the wave analysis section corresponding to the intermediate level wave analysis. 

This situation leads us to conclude that the market behaves in a fractal way over time, and wave analysis does not change regardless of the proportion of time studied.

In the next educational article, we will expand on the concepts of alternation and extensions.

Suggested Readings

  • Neely, G.; Mastering Elliott Wave: Presenting the Neely Method; Windsor Books; 2nd Edition (1990).
Categories
Forex Course

106. Introduction to Elliot Wave Theory

Introduction

Introduction

Introduction

Elliot Wave Theory is one of the most popular strategies applied by traders. This theory works exceptionally well if read correctly. In the early 1930s, there was this professional accountant named Ralph Nelson Elliot. He was a stock market expert who analyzed the data of stocks closely for 75 years’ timeframe. He thought that markets move in random chaotic directions but later realized that they don’t. After years of analysis and research, he published a book titled The Wave Principle. This book explained in detail about the theory he had proposed.

Elliot Wave Theory

According to Elliot, the market moves in repetitive cycles. The cause for these cycles is the emotions of mass retail investors, primarily due to psychological factors. It was seen that the upward and downward swings in prices caused by the collective psychology of traders always showed a repetition in the same manner. These swings were referred to as ‘waves.’

So, if traders have a clear understanding of these repetitive cycles, one can predict future price movements. In fact, traders can identify points precisely where the market is going to reverse.

Basic Terminologies

There quite a lot of terms involved in the Elliot Wave Theory. For now, we shall the two most fundamental terms and understand others in the later lessons.

Wave

Elliot proposed that trends are formed as a result of the psychology of investors. He proved that swings formed by this mass psychology were a recurring pattern. And these swings were termed as waves. Elliot’s theory, to an extent, resembles the Dow theory, which also mentions that prices move in ‘waves.’

Fractals

Generally speaking, fractals are structuring whose split parts are like a similar copy of the whole. These structures repeat themselves even on an infinite scale. Apart from individual stocks, Elliot discovered that stock indices showed the same recurring structures. So, he moved to the futures market to analyze if the theory worked there as well.

Predicting the Market with Elliot Waves

Elliot studied the stocks in detail and concluded that predictions could be made using the characteristics of wave patterns. It is known that for a trending market, there is a pullback or correction for it. It is usually said that “what goes up, must come down.” That is, price action is divided into trends and corrections. Trends represent the main direction of the market, while corrections are against the trend.

The Elliot wave theory also uses a similar principle. There is an Impulsive wave that moves in the same directions as the larger/main trend. It always shows five waves in its pattern. Then there is a corrective wave that travels in the opposite direction of the larger trend. On a smaller scale, under each impulsive wave, five other waves can be found again. And such a pattern repeats by going into smaller and smaller scales.

Wondering what the above figure represents? To interpret it, stay tuned for the next lesson.

[wp_quiz id=”71282″]
Categories
Forex Market Analysis

Daily F.X. Analysis, April 27 – Top Trade Setups In Forex – COVID19 Continues to Play! 

On the forex front, the U.S. dollar eased against other major currencies, with the Dollar Index slipping 0.2% on the day to 100.29. In the U.S., the Federal Reserve Bank of Dallas will release its Manufacturing Activity Index for April (-75.0 expected).

On the forex front, the U.S. dollar eased against other major currencies, with the Dollar Index slipping 0.2% on the day to 100.29. In the U.S., the Federal Reserve Bank of Dallas will release its Manufacturing Activity Index for April (-75.0 expected).

On the forex front, the U.S. dollar eased against other major currencies, with the Dollar Index slipping 0.2% on the day to 100.29. In the U.S., the Federal Reserve Bank of Dallas will release its Manufacturing Activity Index for April (-75.0 expected).

Economic Events to Watch Today     

 

 

EUR/USD – Daily Analysis

The EUR/USD currency pair continues to taking bids and rose above 1.0840 regions, mainly due to the positive German virus stats report. The broad-based U.S. dollar draw offers and reporting losses on the day in the wake of risk-on market sentiment, which eventually supports the currency pair. 

The bullish trend in the currency pair could be short-lived because the European leaders failed to agree on a comprehensive coronavirus stimulus package last week. The EUR/USD pair is currently trading at 1.0841 and consolidates in the range between the 1.0812 – 1.0843.

On the other hand, the German Chancellor Merkel showed some willingness to offer almost EUR 1 trillion as financial support for a coronavirus recovery package. The leaders failed to reach an agreement on the size of the fund, and it should share the burden of financing with those countries that run fiscal and trade surpluses.

As per the German disease and epidemic control center, Robert Koch Institute (RKI) showed the number of confirmed coronavirus cases increased to 155,193, with a total of 5,750 deaths registered so far. Moreover, the institute surveyed that a total of 114,500 people has recovered from the virus. 

Daily Support and Resistance

  • R3 1.0847
  • R2 1.0836
  • R1 1.0829

Pivot Point 1.0819

  • S1 1.0812
  • S2 1.0802
  • S3 1.0795

EUR/USD– Trading Tips

The EUR/USD pair continues trading in a buying mode around 1.0858, despite weaker manufacturing and services PMI figures from the Eurozone. The overall trading bias continues to be bearish as the EUR/USD prices are holding below 50 EMA, which is extending resistance around 1.08500 level. On the 4-hour chart, the EUR/USD is likely to find resistance below the symmetric triangle pattern, which may drive the selling bias in the pair. Currently, it’s holding the pair over 1.08580, which is the triple yop level. Above this, a slight bullish recovery can be seen until 1.0889 level. While bearish breakout of 1.0765 level can drive selling until 1.0649 level today, let’s look for selling trades below 1.0770 level today.  

GBP/USD – Daily Analysis

The GBP/USD currency pair succeeded in extending its 4th consecutive day winning streak and rose above mid-1.2400 while representing 0.60% gains on the day mainly due to the broad-based U.S. dollar weakness in the wake of better mood in the market. Apart from this, the on-going criticism about the U.K.’s handling of the coronavirus (COVID-19) crisis and Tory government’s stand on Brexit keeps the currency pair’s gain limited for the time being. A

The GBP/USD pair is currently training at 1.2452 and consolidates in the range between the 1.2360 – 1.2455. However, the UK PM Boris Johnson came back from the pandemic infection, which satisfied the buyers. The Uk PM Boris Johnson will likely take its seat back from the acting chief Dominic Raab after getting permission from the doctors at the Chequers. Although, Boris Johnson said that he is looking forward to going to Downing Street on Monday.

The U.k. PM Boris Johnson was absent since early April due to the coronavirus decease. Whereas, the UK Tory government getting an inadequate response from the entire nation about the handling of the coronavirus (COVID-19) crisis despite the hard efforts from the Chancellor Rishi Sunak and Health Secretary Matt Hancock, and the Deputy PM Dominic Raab.

Although, the shortage of medical supplies and the surge in the death toll have forced the United Nations (U.N.) poverty expert Philip Alston to attack the U.K.’s coronavirus response as “utterly hypocritical.

Moreover, the Health Secretary’s optimistic target of 100,000 tests a day got a surprise on Saturday after the government needed to avail the military helps to overcome the 29,000 marks.

Daily Support and Resistance

  • R3 1.2379
  • R2 1.2375
  • R1 1.2371

  Pivot Point 1.2367

  • S1 1.2363
  • S2 1.2359
  • S3 1.2356

GBP/USD– Trading Tip

The GBP/USD showed a slight bullish reversal to place a high around 1.2434, although the bullish trend wasn’t long enough as prices recorded soon. At the moment, the Cable is trading at 1.2437 area, after violating the resistance level of 1.2420 level and now this level is working as a support. A bullish breakout of 1.2368 level can extend the buying trend until 1.2420 level today. Elsewhere, the support continues to hold around 1.2258 level. The 50 EMA and MACD are both are suggesting selling bias in the Cable. So let’s look for selling trades below 1.2399 and bullish above 1.2420 level today. 

USD/JPY – Daily Analysis

The USD/JPY is consolidating in a tight trading range of 107.675 level to 106.950 level, mainly due to the risk-on market sentiment keeps the safe-haven Japanse lower and providing support to the currency pair. The U.S. announced 4.427 million initial jobless claims for the preceding week overnight, with an unparalleled 26 million people dropping their jobs since late March.

At the USD front, the U.S. dollar took bids due to mixed risk sentiment, which is starting to dominate the markets and caused the bearish pressure to remain intact. The U.S. Dollar Index, which dropped below the 100 marks earlier in the day, is up 0.12% on the day at 100.47 and stays on track to close the 4th-straight day in the positive area.

The latest pullback of the U.S. dollar kept a lid on bullish moves in the pair. Currently, the USD/JPY is trading at 107.27 and consolidates in the range between the 106.98 – 107.86. However, investors are cautious and waiting for a fresh catalyst before placing any position.

Whereas, the multiple diverging factors failed to provide any meaningful direction or assist the pair in breaking through a narrow trading band held since the beginning of this week. The reason behind the risk-on market sentiment is the report regarding the passage of another $484 billion U.S. economic support package by the U.S. Senate. 

While the latest modest recovery in crude oil prices also keeps the market sentiment calm. Looking ahead, the eyes will remain on the Core Durable Goods Orders m/mas that’s due during the U.S. session in order to forecast further trends in the USD related pairs. 

Daily Support and Resistance    

  • R3 107.84
  • R2 107.73
  • R1 107.62

Pivot Point 107.51

  • S1 107.4
  • S2 107.29
  • S3 107.17

USD/JPY – Trading Tips

The USD/JPY is mostly trading bearish within a narrow trading range of 107.720 – 107 zones. At the moment, the USD/JPY is holding at 107.197, and the triangle pattern that is formed during the previous week still lasts.  

The triangle pattern is prolonging resistance around 107.550, along with support around 106.980. If USD/JPY manages to violate the descending triangle pattern, we may see pair dropping towards 106.200. While on the upper side, a bullish breakout of 108 can lead USD/JPY prices towards 109.100. The leading indicator, such as MACD and 50 EMA, are supporting bearish bias in the market today. 

All the best for today! 

Categories
Forex Options

FX option expiries for Apr 27 NY cut

Thank you for visiting the Forex.Academy FX Options Expiries Section. Each day, where available, we will bring you notable maturities in FX Options of amounts of $100 million-plus, and where these large commutative maturities at specified currency exchange rates often have a magnetic effect on price action, especially in the hours leading to their maturities, which happens daily at 10.00 AM, Eastern Time. Each option expiry will be identified as ‘in-play’ or ‘not in-play” and labelled as Hot, Warm or Cold with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex.Academy FX Options Expiries Section. Each day, where available, we will bring you notable maturities in FX Options of amounts of $100 million-plus, and where these large commutative maturities at specified currency exchange rates often have a magnetic effect on price action, especially in the hours leading to their maturities, which happens daily at 10.00 AM, Eastern Time. Each option expiry will be identified as ‘in-play’ or ‘not in-play” and labelled as Hot, Warm or Cold with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex.Academy FX Options Expiries Section. Each day, where available, we will bring you notable maturities in FX Options of amounts of $100 million-plus, and where these large commutative maturities at specified currency exchange rates often have a magnetic effect on price action, especially in the hours leading to their maturities, which happens daily at 10.00 AM, Eastern Time. Each option expiry will be identified as ‘in-play’ or ‘not in-play” and labelled as Hot, Warm or Cold with regard to the likelihood of price action meeting the strike price at maturity.

……………………………………………………………………………………………………………………..

FX option expiries for Apr 27 NY cut

27 April 2020, 08:46

FX option expiries for Apr 27 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

EUR/USD: EUR amounts

1.0760 599m

1.0800 1.1bn

1.0820 504m

– USD/JPY: USD amounts

106.75 457m

107.00 1.2bn

107.50 874m

107.55 410m

107.60 668m

108.00 1.3bn

108.35 788m

108.40 521m

108.50 632m

– EUR/GBP: EUR amounts

0.8700 775m

…………………………………………………………………………………………………………………

DISCLAIMER: Please note that this information is for educational purposes.

Categories
Forex Price-Action Strategies

Good Things Come to Those Who Wait

Patience is a virtue. Forex traders need to keep patience and must not get carried away. It is not easy, but to be successful in trading, traders must be patient. A trader needs to have a sniper approach. He is to wait for the best trade setup to trigger an entry. The Forex market often produces entry with less chance. If a trader can restrain himself from taking those entries, he would be able to keep a better winning ratio. In the end, it gives him more confidence and makes him a good trader. In today’s lesson, we are going to demonstrate an example of an entry with less chance and a good entry. Let us get started.

Patience is a virtue. Forex traders need to keep patience and must not get carried away. It is not easy, but to be successful in trading, traders must be patient. A trader needs to have a sniper approach. He is to wait for the best trade setup to trigger an entry. The Forex market often produces entry with less chance. If a trader can restrain himself from taking those entries, he would be able to keep a better winning ratio. In the end, it gives him more confidence and makes him a good trader. In today’s lesson, we are going to demonstrate an example of an entry with less chance and a good entry. Let us get started.

Patience is a virtue. Forex traders need to keep patience and must not get carried away. It is not easy, but to be successful in trading, traders must be patient. A trader needs to have a sniper approach. He is to wait for the best trade setup to trigger an entry. The Forex market often produces entry with less chance. If a trader can restrain himself from taking those entries, he would be able to keep a better winning ratio. In the end, it gives him more confidence and makes him a good trader. In today’s lesson, we are going to demonstrate an example of an entry with less chance and a good entry. Let us get started.

The chart shows that the price makes a strong bullish move. Upon finding its resistance, it makes a bearish correction. It finds its support and produces a bullish engulfing candle. Such a nice price action for the buyers this is! However, it takes one more candle to make a breakout at consolidation resistance. As far as the breakout trading strategy is concerned, this is not an A+ trade setup. The price may come back down and consolidates again. Thus, it is better to skip such an entry.

The chart produces two more bullish candles, but the price does not go too further up. It rather starts having consolidation. The buyers may keep an eye on this chart to see whether it produces a bullish engulfing candle.

The chart does not take long to produce such a good-looking bullish engulfing candle closing well above consolidation resistance. This is an A+ trade setup. The buyers may trigger a long entry right after the last candle closes by setting stop loss below consolidation support and by setting take profit with 1R. Let’s proceed to the next chart to find out how the entry goes.

The chart produces another bullish candle. The last two candles suggest that the bull has taken control. It may hit the target soon.

As expected, the price hits the target. The last candle comes out as a bullish candle having an upper shadow. The price may reverse now. Anyway, the buyers have made some green pips. Their plan has worked well.

If we look back to the chart, we find that the first entry would not be that good an entry. It would make them wait too long. Often the price goes the other way and hits the stop loss. The second one comes out as an excellent entry. It does not make them wait but hits the target in a hurry. Traders must remember that if they want to avoid waiting with their entry to hit the target, they must wait and calculate well before triggering an entry.

Categories
Forex Assets

Analyzing The GBP/SAR Exotic Currency Pair

Introduction

Introduction

Introduction

In the Forex market, currencies are traded in pairs, and one currency is always quoted against the other. The abbreviation of GBP/SAR is British Pound Saudi Riyal. Here, the first currency GBP is the base currency, and the second one SAR is the quote currency.

Understanding GBP/SAR

We compare the value of one currency to another, and hence when we buy a currency pair, we are essentially buying the base currency and selling the quote currency. The market value of GBP/SAR determines the strength of SAR against the GBP, so if the exchange rate for the pair GBP/SAR is 4.7167, it means we need 4.7167 SAR to buy 1 GBP.

Spread

Trading the Forex market usually does not involve in spending a lot of commissions like the Stock market. Here, Forex brokers make a profit through spreads. The difference between the Bid and the Ask prices of an asset is called the spread. Some broker has the cost inbuilt into the buy and sell prices of the currency pair we want to trade instead of charging a separate fee. Below are the spread values of ECN and STP brokers for the GBP/SAR pair.

ECN: 40 pips | STP: 44 pips

Fees

A Fee is simply the charges we pay to the broker for executing a particular trade. The fee varies from the type of broker we use. For example, the fee on the STP account model is zero, but we can expect a few pips on ECN accounts.

Slippage

Slippage is the implementation of a trade at a price different from that requested by a trader. Slippage can either be positive (be additional profit) or negative (additional loss) and Mostly occurs when the market is volatile.

Trading Range in GBP/SAR

The trading range is used here is to measure the volatility of the GBP/SAR pair. The amount of money we will win or lose in a given amount of time can be assessed using the trading range table. The minimum, average, and maximum pip movement of the currency pair is represented in the trading range. This can be evaluated simply by using the ATR indicator combined with 200-period SMA.

Procedure to assess Pip Ranges

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

GBP/SAR Costs as a Percent of the Trading Range

The cost of trade depends on the broker and differs according to the volatility of the market. This is because the trading cost includes slippage, fees, and the spread. The cost of variation in terms of percentage is given below. We will look into both the ECN model and the STP model.

ECN Model Account

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

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

STP Model Account

Spread = 44| Slippage = 3 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 3 + 44 + 0 = 47

Trading the GBP/SAR Forex pair

The GBP/SAR is an exotic-cross currency pair and is a low volatile market. Looking at the pip range table, the average pip movement on the 1H timeframe is only 62 pips. Hence, The volatility of this currency pair is on the lower side. We know that the higher the volatility, the lower will be the cost to execute the trade. However, this is not an advantage as trading in a volatile market involves more risk.

Let’s take, for example, in the 1M time frame, the Maximum pip range value is 3952, and the minimum is 896. When we compare the trading fees for both the pip movements, we note that for 896pip movement fess is 5.36%, and for 3952pip movement, fess is only 1.21%. As we can conclude from the above example, trading the GBP/SAR currency pair will be a bit expensive.

Categories
Forex Fundamental Analysis

Importance of ‘Consumer Spending’ as an Economic Indicator

Introduction

Introduction

Introduction

Consumer Spending is a significant contributor to the annual GDP of an economy. It is released ahead of GDP numbers and hence is widely used by traders and investors alike to make investment decisions. Consumer Spending is what drives the economy mostly. Imagine if consumers stopped spending on anything apart from the basic needs, it would result in the closure of many businesses and services. Hence, understanding the importance and impact of this advanced indicator is crucial for our Fundamental Analysis.

What is Consumer Spending? 

Consumer Spending refers to the amount spent to meet their daily needs and personal expenses. In other words, it refers to the money paid for goods and services by the general public. The products and services can include all that we, as an individual, consume to live our lives. The groceries, the movies, the drinks, the internet, phones, etc. all these are part of our lives that the Consumer Spending measures.

The money we SPEND on CONSUMPTION of goods and services by CONSUMERS is Consumer Spending. A nation in its core is its people, and what those people spend on is what runs the market. What you and I spend on is what will drive the market. Consumer Spending makes up 66% of the total Gross Domestic Product in the United States, and business and government spending contribute to the rest.

Consumer Spending depends on the macro scale on the below vital factors:

Mortgages and Debt: In the United States, almost all the citizens have debt in one form or another, be it student loan, education loan, house mortgage, or healthcare insurances. The more the debt, the lesser the consumer has left for his spending, thereby tightening his pocket on extra expenditures.

Disposable Income: It refers to the remaining part of an individual’s income left after deductions of all federal taxes. It is the difference between the average salary and tax deductions—higher the charges lesser the money available for spending.

Per Capita Income: It tells us the income per individual within the country. Only when the overall income per person is sufficiently large enough to exceed meeting the basic requirements only then will people have a budget for spending. Rising Per Capita Income indicates that the standard of living is improving, which automatically enhances consumer spending.

Income Disparity: The imbalance in the wages of different sections of society is bad for the economy. A sufficiently rich person’s increase in income will not lead to higher spending as he or she will tend to invest or save to accumulate more wealth. Only when the wages of the lower sections of the society increase will the spending increase as they are the ones cutting back on expenditures due to lack of money. Reformation can be brought about in the country if the government focuses more on benefiting the lower sections more than other parts of the society.

Consumer Sentiment: It is the people of the nation who know better than traders and investors about the economic prospects as they are the ones working on the ground and going about their daily routine facing all kinds of situations. Whatever analysts, investors, and traders assess a nation’s economy, it cannot beat the first-hand experience of the people themselves. The Consumer Sentiment tells what the general people feel about the prospects of their jobs, growth, and security.

If a consumer feels his income will increase steadily and is secure, he will tend to spend more now. Conversely, if the consumer is not sure of his job status and not confident about his future employment status, then he or she will tend to save more to meet their needs during times of unemployment. Thereby decreasing spending now and saving more for later.

How is the Consumer Spending Report obtained?

The Bureau of Economic Analysis releases monthly reports on the percentage of changes in the average Consumer Spending titled “Personal Consumer Expenditures.” BEA releases this report at a national level on a quarterly and annual basis. The Bureau of Labor Statistics also releases a report titled Consumer Expenditure Survey in August every year with little variations. They calculate using the statistics form the United States Census Bureau to arrive at this survey report.

Is Consumer Spending important?

It is one of the most significant indicators to predict GDP. It is an advanced indicator meaning it predicts future economic conditions rather than reflecting current or past industrial activities. Since it is a significant driver for the Gross Domestic Product, it is one of the top economic indicators amongst all. Consumer Spending tells us about the strength of the economy and the standard of living of the country’s citizens.  It almost drives 70% of the GDP figure; hence there is no doubt that it is a must for Fundamental Analysis.

Below is a plot of the percentage change in Consumer Spending vs. Real GDP from the St. Louis FRED website to demonstrate this indicator’s importance in comparison to the rest.

(Chart Source)

How can Consumer Spending be Used for Analysis?

What the consumers are willing to spend on can make or break the markets. By analyzing the spending trends and recognizing what sector of goods and services consumers purchase can tell us which market is going to flourish and stagnate. Consumer Spending represents the demand side of the supply-demand market, where supply is the providers or manufacturers of the goods.

When Consumers increase spending, this increases demand, which leads to business growth, increased employment, improved wages to meet the demand. This increase will again lead to increased spending by the newly employed and adjusted salaries, and all this becomes a positive feedbacking loop and continues till it saturates. When demand outpaces supply, we will have inflation, which is terrible for the economy as the increasing prices will make consumers increase spending now than later it will again result in price inflations. The primary job of the Federal Reserve is to prevent this vicious cycle of price inflation.

On the other end, low consumer spending reduces demand for goods and services, which stagnates business and hence the economy contracts and results in lower levels of GDP, which is also not good.

Traders can use the Consumer Spending Surveys, Indices to relatively compare economic situations of nations and also with previous periods to assess currency valuation or devaluation direction in the coming months. Investors can make investment decisions based on which sectors are experiencing increased demand looking at the spending patterns. Consumer Spending can also direct us in Stock Market evaluations of different companies.

Sources of Consumer Spending Reports

We can obtain the Consumer Spending monthly releases from the BEA, and that data can be found here. For illustration, you can refer to this link to see what the U.S. population spends more on. You can also check the University of Michigan’s Consumer Sentiment Index here.  As discussed, it is a primary driver of Consumer Spending.

Impact of the ‘Consumer Spending’ news release on the price chart 

In this section of the article, we will analyze the impact of the Consumer Spending economic indicator on the value of a currency. As we understood in the previous that the Consumer Spending measures the change in the inflation-adjusted value of goods expenditures by consumers, now we shall see how important the data is for traders and investors. Consumer Spending is one of the major economic activities in a country. However, looking at the below image, it seems like traders do not give a lot of importance to the data (Yellow box indicates less important) and may not make significant changes to their positions in the currency. In any case, let us see how the market reacts to the data release.

Below is the image showing the latest Consumer Spending data of France, which will have an effect on the EURO. The National Institute of Statistics and Economic Studies collects and disseminates information on the French economy and society. A higher than expected reading is considered to be positive for the economy, and a lower than expected reading is taken to be negative.

EUR/AUD | Before The Announcement

We start our analysis with the EUR/AUD currency pair, and as we can see in the image above, the chart is a strong uptrend, and the market has retraced recently. One of the reasons behind the violent up move is that the market participants are expecting a better Consumer Spending data for the month of February. Since the market has retraced quite a bit, aggressive traders can go ‘long’ in the market before the news announcement due to optimism in the market.

EUR/AUD | After The Announcement

After the Consumer Spending data is released, the market falls, but it leaves a wick on the bottom, and the price forms a ‘Doji’ candlestick pattern, which essentially indicates indecision in the market. As the data was far below what was predicted, we should wait for more confirmation from the market to notice the change in volatility. We see that that the volatility expands on the upside and goes above the moving average. This is an indication that the news outcome is digested by the market and will continue its trend. Thus, we can enter for a ‘buy’ after the price potently moves higher with a stop loss below the ‘low’ of news candle.

EUR/CHF | Before The Announcement

EUR/CHF | After The Announcement

Next, we discuss the EUR/CHF currency pair where before the news announcement, the market is in a strong downtrend, exactly opposite to the above currency pair. As the volatility is high on the downside, we should not expect a positive Consumer Spending data to cause a reversal of the trend. Whereas, a ‘bad news’ may take the currency much lower. We cannot take any position at this point, not even a ‘buy’ as we are in a strong downtrend, and there are no signs of reversal.

After the numbers are released, it is evident from the ‘news candle’ that there is an increase in volatility on both sides, and finally, the price closes near its opening price. The long wick on top of the ‘news candle’ is an indication that selling pressure is high due to poor Consumer Spending data. Therefore, at this point, one can go ‘short’ in the pair with a stop loss above the recent ‘high.’

EUR/SGD | Before The Announcement

EUR/SGD | After The Announcement

The above images represent the EUR/SGD currency pair, where the characteristics of the chart appear to be similar to that of the EUR/AUD pair. One major difference is that the uptrend is not as resilient as in the case of EUR/AUD. Before the news announcement, the market is at the key area of resistance equals support. This is the place where most traders go ‘long’ in the market and join the uptrend. But since the volatility is high, it is recommended to wait for the news release and then act accordingly.

After the news announcement, some selling pressure is witnessed as a result of weak Consumer Spending data, and the candle closes in red. But later, the ‘news candle’ is immediately is taken over by a bullish candle. This means, due to the bad news, the market initially reacted as per expectations, but this was not sufficient enough to cause a reversal in the market. As the impact of the news was less, we can trade with the trend, by going ‘long.’

This completes our discussion on Consumer Spending and the impact of its news announcements on the Forex price charts. If you have any queries, please let us know in the comments below. Cheers.

Categories
Forex Course

105. Summary of Leading and Lagging Indicators

Introduction

Introduction

Introduction

In the previous lessons, we have understood what leading, and lagging indicators are. We also saw how these indicators could be further divided into other types. Here’s a summary of everything we’ve learned so far in this space.

Leading Indicators

Leading indicators are those who forecast prices in the market using historical prices. It indicates a signal for the continuation or reversal of a trend the event occurs. However, these indicators do not work with complete certainty. As they are making a prediction, it is more probability driven.

Lagging Indicators

Lagging indicators, as the name suggests, are lagging in nature. These indicators confirm the market trend using past prices. They are called the trend-following indicators as they give an indication once the trend has been established in the price charts. However, these confirmatory indicators are more reliable than the leading indicators as they give more accurate signals though they are late in doing so.

Please refer to this article to know the differences between these two types of indicators.

In the industry, there are three types of indicators that are widely used. They are

  • Oscillators
  • Trend-following indicators
  • Momentum indicators

If we were to put them into the bag of leading or lagging indicators, Oscillators are leading, trend-following indicators and momentum indicators are lagging. Note that an indicator may not be under one of the types; they can be a combination of two or all three.

Oscillators

An oscillator is a leading indicator that moves within a predefined range. These are to our interest when it crosses above or below the specified bound. These areas determine the oversold and overbought conditions in the market. These indicators are very helpful in determining market reversal. Some of the most popular oscillators include MACD, ROC, RSI, CCI, etc. The usage and interpretation of oscillators have been discussed in detail in this article.

Trend-Following Indicators

Trend-following indicators are lagging indicators that are usually constructed with a variety of moving averages. Crossovers are the typical strategy used with these indicators. These indicators give a signal to buy or sell when the market has already begun its move. Hence, these indicators give us late entries but are more convincing than leading indicators. For example, Moving Averages and MACD are the most used trend-following indicators.

Momentum Indicators

As the name clearly indicates, these indicators show the speed or the rate of price change in the market. Since the momentum can be calculated after the price moves, it is considered a lagging indicator. These indicators indicate when there is a slowdown in the buyers or sellers. And with this, we can assume for a possible reversal. More about this can be found here.

Conclusion

This sums up the concept of leading and lagging indicators. Having an understanding of these indicators is necessary because it is risky if a lagging indicator is analyzed as a leading indicator and vice versa. Also, it is recommended to use these indicators in conjunction with each other for better results. In the upcoming course lessons, we will be discussing interesting topics related to Elliot Wave Theory.

Categories
Forex Videos

When Is It TimeTo Get Out Of A Forex Trend?

https://youtu.be/NeYEZ7K0G8w

https://youtu.be/NeYEZ7K0G8w

When is a trend likely to end?

The one common thing that all traders have is the desire to enter a trade that turns into an extended rally and bags an awful lot of pips. In reality, it doesn’t often turn out like that. Trends run out of momentum, price action turns abruptly, sometimes without any clear indication as to why it happened. And Traders become frustrated with the number of stop-outs they have to endure while waiting for the profitable trades to materialize.

So what are the main reasons that trends end?


This is a screenshot of the GBPUSD pair on a 1-hour time frame. Firstly we note the extended rally of 483 pips to the upside. The rally ends at the end of the US trading session, Where us Traders will have no doubt taken their profits before the end of the session. And we’re at the start of the Asian session price action begins to fall lower. In fact, it falls 200 pips and where this trend finishes due to the US retail sales economic data figure which was released at 1:30 GMT on the 15th of April and which was – 8.7% month-on-month, and where this very poor number was seen as a fallout from the coronavirus pandemic.

Price action then turns north, where we have another rally to the upside of 138 pips and which runs out of steam at the end of the European session and part way into the US session.

Here we have a 1-hour chart of the US dollar to Swedish Krona, or USDSEK, The first trend we see is a 220 pip move to the downside, which would have been considered as oversold and where price action is reversed in a classic v-shape reversal pattern.
Price action consolidates before falling again and fading into a consolidation phase before we see a bullish trend up to a key level of resistance and where that key level is 10.000.
The next trend is lower, where we can see a lot of tails, both of the bullish and bearish candlesticks, which usually means that there is uncertainty in the market. And eventually, price action moves higher up to and above the previous key level of resistance and where this reversal is a classic v-shape reversal pattern.

Another common reason for trends to end is areas where price action stalled and reversed previously, such as this low, and previous low, which is also known as a double bottom, or an area of support.


Or areas such as double tops, where traders see that price has previously been an area of resistance and where the price will be rejected multiple times as the area is seen as a barrier.


In this example, we can see that the trend is reversed on three occasions at very similar areas of resistance and where after the third move, higher price action aggressively gets sold.
These are the types of trend fade-outs and reversals that you will regularly see on charts. But where else might you expect to see trends end? Well, there are many different reasons that trends end, but the most common reasons are time zone change over, because of technical analysis such as signs the pair is overbought or oversold or just prior to or just after an economic data release, or perhaps because of profit-taking after price action begins to fade. It might be due to the run-up to a key policymaker speech, or in the aftermath of a key policy maker’s speech. Or a reversal in price subsequent to an economic data release, an emergency or unplanned data release, or even because of rumors circulating in the market.

It might also be because of unexpected events in another financial sector, including oil or the stock market, or perhaps there are not enough buyers or sellers to maintain the momentum.
A classic sign of the end of a trend is when price action begins to consolidate into a sideways motion, and you might see this during lulls in the market or at the end of the Asian, European, or US sessions.

Traders buy and sell a pair based on their trading portfolio requirements, if they trade for large institutions, or perhaps as speculators or because their balance sheet requirements have a need to add or sell off a particular currency. Maybe they have import and export requirements. They may have just seen a good trend and jumped on it, but when their session came to an end, they closed out their interest and took their profits. The bottom line is that we never know when the balance of buyers or sellers is dominating the price action, which in turn results in price action shifting one way to the other. But technical analysis is usually a very good tool to be able to determine when price action trends are coming to an end. So keep an eye out for long tails, the possible reversal in price action, small candlesticks, consolidation, sharp v-shaped reversal patterns, time zone sessions coming to an end, or beginning. And be very careful with regard to entering a trend that has gone on for a considerable number of pips, especially in the hundreds, because if you are not correct, you could see a sharp price action reversal leaving you looking at a financial loss making the trade.

Categories
Forex Options

FX option expiries for Apr 24 NY cut

Thank you for visiting the Forex.Academy FX Options Expiries Section. Each day, where available, we will bring you notable maturities in FX Options of amounts of $100 million-plus, and where these large commutative maturities, as specified currency exchange rates often have a magnetic effect on price action, especially in the hours leading to their maturities, which happen daily at 10.00 AM, Eastern Time.

Thank you for visiting the Forex.Academy FX Options Expiries Section. Each day, where available, we will bring you notable maturities in FX Options of amounts of $100 million-plus, and where these large commutative maturities, as specified currency exchange rates often have a magnetic effect on price action, especially in the hours leading to their maturities, which happen daily at 10.00 AM, Eastern Time.

Thank you for visiting the Forex.Academy FX Options Expiries Section. Each day, where available, we will bring you notable maturities in FX Options of amounts of $100 million-plus, and where these large commutative maturities at specified currency exchange rates often have a magnetic effect on price action, especially in the hours leading to their maturities, which happen daily at 10.00 AM, Eastern Time. Each option expiry will be identified as ‘in-play’ or ‘not in-play” and labelled as Hot, Warm, or Cold with regard to the likelihood of price action meeting the strike price at maturity.

……………………………………………………………………………………………………………………..

FX option expiries for Apr 24 NY cut

24 April 2020, 08:21

FX option expiries for Apr 24 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– EUR/USD: EUR amounts

  •  1.0845 530m

The current price action is bearish and therefore the strike at 1.0845 is out of play.

– USD/CAD: USD amounts

  •  1.4150 730m 

The current price action is bullish for the pair and therefore the strike at 1.4150 is in play.

…………………………………………………………………………………………………………………

DISCLAIMER: Please note that this information is for educational purposes.

Categories
Forex Market Analysis

Daily F.X. Analysis, April 24 – Top Trade Setups In Forex – Retail Sales & Business Climate Ahead! 

The U.S. dollar soared versus major currencies despite bounce off in the crude oil prices, at the same time, the U.K. Brent also made some bullish recovery. The U.S. House of Representatives assumes to establish a nearly $500 billion coronavirus relief bill, which once again can trigger safe-haven demand of the U.S. dollar. 

The U.S. dollar soared versus major currencies despite bounce off in the crude oil prices, at the same time, the U.K. Brent also made some bullish recovery. The U.S. House of Representatives assumes to establish a nearly $500 billion coronavirus relief bill, which once again can trigger safe-haven demand of the U.S. dollar. 

The U.S. dollar soared versus major currencies despite bounce off in the crude oil prices, at the same time, the U.K. Brent also made some bullish recovery. The U.S. House of Representatives assumes to establish a nearly $500 billion coronavirus relief bill, which once again can trigger safe-haven demand of the U.S. dollar. 

During the Asian session, the U.S. dollar is headed for its best week since early April, as plunging oil prices pressures on commodity currencies and division over Europe’s emergency fund dragged on the euro. The market will mostly move based upon U.K. retail sales and German business climate figures today. 

Economic Events to Watch Today     

 

 

 

EUR/USD – Daily Analysis

The EUR/USD has traded bearishly at 1.0771 level after having violated the symmetric triangle pattern, which was supporting it around 1.0850. A daily close under 1.0783 level is likely to drive more sell-off below this level. Traders seem worries about potential recession since the release of worse than expected PMI figures. 

The drop in business activity not only in Germany but also in overall Europe has expanded in April, with both services and manufacturing witnessing a historic dip in output as a consequence of the COVID-19 pandemic and subsequent lockdown.

The headline Flash Germany Composite PMI recorded 17.1 in April, down distinctly from 35.0 in March, and by far, it’s the lowest reading since comparable figures were first collected more than 22 years ago. The preliminary figures were based on replies received between April 7-22. Shutdowns caused by the COVID-19 did not influence the survey response rate.

There remains some uncertainty that Europe is still not ready to deepen fiscal integration, and the finance ministers will likely be unable to give an appropriate fiscal stimulus. As in result, the peripheral bond spreads may widen, which may booster further losses in the EUR/USD currency pair.

The eurozone economy experienced the sheerest declines in business activity and employment ever registered during April as a consequence of actions taken to restrain the coronavirus break, according to provisional PMI survey figures. Later today, the focus will remain on the German Ifo Business Climate figures to determine further trends in the EUR/USD pair.

Daily Support and Resistance

  • R3 1.0917
  • R2 1.0881
  • R1 1.0828

Pivot Point 1.0792

  • S1 1.0739
  • S2 1.0703
  • S3 1.065

EUR/USD– Trading Tips

On Friday, the EUR/USD pair continues trading in a selling mode around 1.0773, perhaps due to weaker manufacturing and services PMI figures. The overall trading bias continues to be bearish as the EUR/USD prices are holding below 50 EMA, which is extending resistance around 1.0837 level.

On the 4-hour chart, the EUR/USD has violated the symmetric triangle pattern, which is driving the selling trend in the pair. Currently, it’s holding the pair over 1.077, which is the triple bottom level. Above this, a slight bullish recovery can be seen until 1.0850 level. While bearish breakout of 1.0765 level can drive selling until 1.0649 level today, let’s look for selling trades below 1.0770 level today.  

GBP/USD – Daily Analysis

The GBP/USD price is consolidating in a narrow trading range of 1.2424 – 1.2300. Sterling’s overall bias remains bearish since the release of manufacturing data. General business shutdowns at local and international levels in reply to the coronavirus infection 2019 (COVID-19) pandemic unsurprisingly ended in a speedy decline in U.K. private-sector production during April. 

The latest Markit report on Flash U.K. manufacturing PMI signaled by far the most robust drop in business activity since comparable figures were first collected over two decades ago. The latest Markit Flash U.K. Manufacturing PMI was recorded between 7-21 April 2020, and shutdowns did not influence the survey response rate in place due to the COVID-19 break.

The United States President Donald Trump continues to push for the economic re-start, whereas giving worse warnings to Iran. He indicated a decrease in the further coronavirus outbreak. The GBP/USD currency pair flashing buy and sell, now holding at 1.2345 while reporting 0.07% losses on the day, probably due to the Tory government growing criticism about the mishandling coronavirus crisis.  

Daily Support and Resistance

  • R3 1.0917
  • R2 1.0881
  • R1 1.0828

Pivot Point 1.0792

  • S1 1.0739
  • S2 1.0703
  • S3 1.065

GBP/USD– Trading Tip

The GBP/USD showed a slight bullish reversal to place a high around 1.2414, but the bullish trend wasn’t long enough as prices recorded soon. At the moment, the Cable is trading at 1.2347 area, which is also a resistance level extended by the downward channel. The 50 periods EMA also extend resistance at the same level 1.2368. A bullish breakout of 1.2368 level can extend the buying trend until 1.2420 level today. Elsewhere, the support continues to hold around 1.2258 level. The 50 EMA and MACD are both are suggesting selling bias in the Cable. So let’s look for selling trades below 1.2399 and bullish above 1.2420 level today. 

USD/JPY – Daily Analysis

On Friday, the USD/JPY is consolidating in a narrow trading range of 108.00 level to 107.500 level, mainly due to the risk-on market sentiment keeps the safe-haven Japanse lower and providing support to the currency pair. The U.S. announced 4.427 million initial jobless claims for the preceding week overnight, with an unparalleled 26 million people dropping their jobs since late March.

At the USD front, the U.S. dollar took bids due to mixed risk sentiment, which is starting to dominate the markets and caused the bearish pressure to remain intact. The U.S. Dollar Index, which dropped below the 100 marks earlier in the day, is up 0.12% on the day at 100.47 and stays on track to close the 4th-straight day in the positive area.

The latest pullback of the U.S. dollar kept a lid on bullish moves in the pair. Currently, the USD/JPY is trading at 107.67 and consolidates in the range between the 107.66 – 107.86. However, investors are cautious and waiting for a fresh catalyst before placing any position.

Whereas, the multiple diverging factors failed to provide any meaningful direction or assist the pair in breaking through a narrow trading band held since the beginning of this week. The reason behind the risk-on market sentiment is the report regarding the passage of another $484 billion U.S. economic support package by the U.S. Senate. While the latest modest recovery in crude oil prices also keeps the market sentiment calm. 

Looking ahead, the eyes will remain on the Core Durable Goods Orders m/mas that’s due during the U.S. session in order to forecast further trends in the USD related pairs. 

Daily Support and Resistance    

  • S1 105.92
  • S2 106.84
  • S3 107.44

Pivot Point 107.76

  • R1 108.36
  • R2 108.69
  • R3 109.61

USD/JPY – Trading Tips

The USD/JPY is mostly trading sideways within a narrow trading range of 108.020 – 107.300 zones. At the moment, it’s holding at 107.597, having formed a descending triangle pattern on the 4-hour timeframe. The triangle pattern is extending resistance around 107.850, along with support around 106.980. If USD/JPY manages to violate the descending triangle pattern, we may see pair dropping towards 106.200. While on the upper side, a bullish breakout of 108 can lead USD/JPY prices towards 109.100. The leading indicator, such as MACD and 50 EMA, are supporting bearish bias in the market today. 

All the best for today! 

Categories
Forex Signals

EUR/USD Symmetric Triangle Breakout – Update on Sell Signal! 

On Thursday, the single currency euro slipped to its weakest level in a month following data, which showed a dramatic slowdown in the Eurozone’s economic activity. The business activity is mostly halted by government-imposed lockdowns to prevent the coronavirus pandemic.

On Thursday, the single currency euro slipped to its weakest level in a month following data, which showed a dramatic slowdown in the Eurozone’s economic activity. The business activity is mostly halted by government-imposed lockdowns to prevent the coronavirus pandemic.

On Thursday, the single currency euro slipped to its weakest level in a month following data, which showed a dramatic slowdown in the Eurozone’s economic activity. The business activity is mostly halted by government-imposed lockdowns to prevent the coronavirus pandemic.

The major currency pair EUR/USD exhibited selling bias as it’s price fell from 1.0800 level to 1.07780 level. Currently, it’s holding above 1.0770 level, which marks double bottom support for the EUR/USD. On the upper side, the EUR/USD has closed a hammer patter, which is fading the bearish bias for the pair. 


Anyways, we opened a sell trade at 1.0798 as soon as the EUR/USD violated the symmetric triangle pattern on the 4-hour timeframe. The stop loss and take profit were placed at 1.0838, 1.0758, respectively. However, we decided to close the trade early as the pair failed to violate the double bottom support area of 1.07650. Let’s keep an eye on 1.07650 now as we may open another sell trade below this level upon bearish breakout. 

Entry Price: Sell at 1.0798

Take Profit .0758 

Stop Loss 1.08381

Risk/Reward 1.00

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

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

Categories
Forex Videos

How Do Forex Option Expiries Effect Price Action In The Spot FX Market – Forex Academy Shows You

https://youtu.be/Noc_v1bRSBU

https://youtu.be/Noc_v1bRSBU

How do forex option expiries affect price action in the spot FX market

 

In this video presentation, we are going to be looking at how Forex option expiries affect price action in the spot FX market.
We will be exploring how forex options work, although we will not be concentrating too much on the technicalities of how they are traded because we are more interested in how FX options expiries can be of great benefit to traders in the spot FX arena.

So what are FX Options, and what is the significance of their expiries?

FX options is essentially another way of trading forex. In effect, they are different branches of the same entity. One is traded on the spot FX, thus known as the Spot FX market, which most of you will be familiar with, and the one we are discussing today is the Future’s FX Options market, where trades are made based upon the price of a currency exchange rate at some point in the future.

So what are FX options?

Options traders purchase what is called a premium, which is a contract and which gives them the right, but not an obligation to buy or sell an FX currency exchange rate at a specified price. This exchange rate is called a strike.
Typically these contracts will be purchased for a future date, typically days, weeks, or even months in advance and where the contract is purchased from a market maker, which is usually an institution that offers futures contracts trading, unlike banks and brokers which offer spreads in spot forex. Contracts expire on the date that the trader chose and always at 10:00 a.m. in New York, USA. This is known as the New York Cut.


If a trader wishes to purchase a premium, for a future date, for an FX Option, where he or she believes that a chosen currency pair’s exchange rate will be above that at the time of the purchase, he or she buys a Call Option. This is an option to buy. Alternatively, if the trader wishes to purchase a premium for an option where he or she believes that the future currency pair’s exchange rate would be below that at the time of the purchase, he or she buys a put option. This is an option to sell.

So how much does the premium contract cost a trader?

This will vary depending on the size of the contract and also so how far the future currency exchange rate is from the current one and the length of the future expiry date. However, futures traders often prefer this type of exposure in the FX market because they take a long term view of where exchange rates will be. And rather than swing trade to these levels in the spot FX market, they prefer to pay the price or premium for the contract upfront, and this then becomes their risk and exposure, unlike spot FX traders whose level of risk fluctuates with price action.

How do options traders make money?

If on the day of the maturity of the FX options contract at 10 a.m. for the New york cut the strike rate, or currency exchange rate, Is it at or above the exchange rate for a call option, or at or below the exchange rate for a put option, then the trader is known as being in the money. If a currency exchange rate is not hit, they are out of the money. If they are out of the money, the option expires, and the contract is worthless to the buyer, and he loses the premium.

If, however they are in the money, the buyer will get to exercise the option and create a position in the market. And the seller of the contract will be the counterparty in the ongoing trade. The seller of the contract also gets to keep the premium.

So who trades FX currency options?

Anybody can trade FX options, but typically we will find institutions, high net worth individuals, forex traders looking to hedge positions, forward forex traders, speculators, exporters, banks, institutions, companies with exposure in the foreign exchange market generally.
Insert G: So, how does FX currency options affect the spot FX market? Interestingly, when FX options expiries accumulate into large amounts, typically $100 million +, we often find that these accumulated amounts at a set currency exchange rate have somewhat of a magnetic effect to spot FX Trader in the run up to the 10 a.m. new york cut.

Although these huge amounts of options expiring at a particular level occur on an almost daily basis, it does not definitely mean that price action pertaining to a particular pair will hit the strike rate. However, some of the traders who are involved in FX options will also use the Spot FX market to hedge some of their own positions, thus using the Spot market to try and move price to where they need it to be.

Also, these currency options expiry levels with the accumulated amounts are available via certain brokers and commentators before the expiries. Thus this publicly available information is used by Spot FX traders to keep an eye out in the market in the period leading up to the expiry. Remember, the larger the amount of the expiring contracts, the more it would seem that there is a gravitational pull towards these exchange rates.

Forex.Academy will be making these levels available to you, free of charge, and they can be accessed on the options drop-down menu of our home page. For your convenience, as and when option expiries become available almost each day, we will also plot them onto a chart, as per this slide, and you will be able to view them there for your convenience.

Categories
Forex Price-Action Strategies

The Longer It Ranges, The Harder It Breaks

Price action traders usually look for entries on the chart that has a clear trend. However, even a choppy chart end up providing good entry to the traders. In today’s lesson, we are going to show how a choppy chart ends up producing a good entry. Let us get started.

Price action traders usually look for entries on the chart that has a clear trend. However, even a choppy chart end up providing good entry to the traders. In today’s lesson, we are going to show how a choppy chart ends up producing a good entry. Let us get started.

Price action traders usually look for entries on the chart that has a clear trend. However, even a choppy chart end up providing good entry to the traders. In today’s lesson, we are going to show how a choppy chart ends up producing a good entry. Let us get started.

The chart shows that the price has been choppy. It bounces at a level of support three times. As far as resistance is concerned, the price has a rejection at a level once and comes back down. Then, it heads towards the upside and finds its resistance getting rejection twice. The level of support seems stronger than the resistance here.

The price finds its resistance, and at the second rejection, it makes a breakout. As mentioned, the price bounces three times at the level of support. Thus, the breakout is strong as well. The sellers are to wait for the price to be held by the breakout level and a bearish reversal candle to go short in the pair.

The next candle comes out as a doji candle closing within the breakout level. The breakout comes out as a valid breakout. The sellers are to wait for the level to create a bearish reversal candle to trigger a short entry.

Here it comes. The last candle on the chart comes out as a bearish engulfing candle closing well below the last swing low. The sellers may trigger a short entry right after the candle closes by setting stop loss above the resistance and by setting take profit with 1R. Let us proceed to the next chart to find out how the entry goes.

The price heads towards the South with good bearish momentum. The price hits the take profit (1R). The last candle suggests that the price may head towards the South further. Some traders may take partial profits and let the rest of the trade run to make more pips.

The chart produces a bullish inside bar. The chart still favors the Bear. However, it may be time for the sellers to give it a second thought to close the whole trade. If we look at the chart, the price heads towards the downside and hits the target without producing any bullish candle in between. This is how it usually goes if the price makes a breakout within a long choppy market. Thus, traders may keep their eyes on the choppy charts to see whether the price makes a breakout to offer them an entry. A breakout in a choppy market is often very rewarding.

Categories
Forex Market Analysis

Daily F.X. Analysis, April 23 – Top Trade Setups In Forex -U.S. Unemployment Figures Ahead! 

On the forex front, the U.S. Dollar Index surged 0.1% on the day to 100.35, surging for a third consistent session. The U.K. Office for National Statistics will release March public sector net borrowing, excluding banking groups (1.8 billion pounds expected).

On the forex front, the U.S. Dollar Index surged 0.1% on the day to 100.35, surging for a third consistent session. The U.K. Office for National Statistics will release March public sector net borrowing, excluding banking groups (1.8 billion pounds expected).

On the forex front, the U.S. Dollar Index surged 0.1% on the day to 100.35, surging for a third consistent session. The U.K. Office for National Statistics will release March public sector net borrowing, excluding banking groups (1.8 billion pounds expected).

The U.S. Labor Department will release initial jobless claims in the week ended April 18 (4.5 million expected). The Commerce Department will report March new home sales (640,000 units expected).

Economic Events to Watch Today     

 

 

EUR/USD – Daily Analysis

The EUR/USD fell to trade below 1.0800, the lowest level in nearly two weeks. The official figures revealed that the eurozone’s Consumer Confidence Index slips to -22.7 in April (-20.0 expected) from -11.6 in March. At the coronavirus front, as per the latest report, the number of confirmed coronavirus cases grew to 145,694, with 4,879 deaths reported in Germany so far. As the incidents increased by 2,237 in Germany, a 1.6% rise picking-up pace from Tuesday’s 1.3% increment, the death toll moved sharply up by 281 vs. 194 a day before.

There remains some uncertainty that Europe is still not ready to deepen fiscal integration, and the finance ministers will likely be unable to give an appropriate fiscal stimulus. As in result, the peripheral bond spreads may widen, which may booster further losses in the EUR/USD currency pair.

The eurozone economy experienced the sheerest declines in business activity and employment ever registered during April as a consequence of actions taken to restrain the coronavirus break, according to provisional PMI survey figures. 

The flash IHS Markit Eurozone Composite PMI plunged to an all-time low of 13.5 in the month of April, falling from a previous historic low of 29.7 in March. It registers by far the most significant monthly breakdown in production recorded in over two decades of survey data collection.

Daily Support and Resistance

  • S1 1.0673
  • S2 1.0755
  • S3 1.0789
  • Pivot Point 1.0837
  • R1 1.0871
  • R2 1.0919
  • R3 1.1001

EUR/USD– Trading Tips

The EUR/USD is trading bearish at 1.0793, as traders are selling euro on the back of weaker than anticipated manufacturing and services PMI figures. The overall bias prevails bearish as the EUR/USD prices are holding below 50 EMA, which is extending resistance around 1.0837 level. Continuation of a selling trend below 1.0837 level may lead EUR/USD pair until the next support area of 1.0772, whereas below this, the next support prevails around 1.0652 level. The pair may find an immediate resistance level of around 1.0837, while the bullish breakout of this level can extend buying until the next resistance level of 1.0922. Conversely, we should look for selling trades below 1.0830 level today.  

GBP/USD – Daily Analysis

The GBP/USD surged 0.3% to 1.2325. Government economic figures reported that U.K. CPI soared 1.5% on year in March (as expected). On the other hand, the Markit U.K. Manufacturing PMI (42.0 estimated) and Services PMI (27.8 expected) for April will be published later today.

The latest and modest recovery in the U.S. dollar keeps the currency pair under pressure. The GBP/USD currency pair is currently trading at 1.2363 and consolidates in the range between the 1.2313 – 1.2369. However, the traders are keenly waiting for the key UK PMI, and U.S. Jobless Claims data. They are cautious about placing any strong bids.

The members of the cabinet got the chance for the first time to criticize Prime Minister Boris Johnson and Company’s poor performance about managing the coronavirus crisis in the U.K. However, the members did not only criticized for the lack of medical supplies, but they also indicated the shortage of nurses.

In return, the deputized PM indicated the nearness to the peak of the outbreak. The Health Secretary Matt Hancock is suggesting the start of the human trials over 300,000 people in a year.

On the positive side, the report came that the Prime Minister johnson will attend his conversation with the Queen through telephone after this week, although his deputy Dominic Raab is officially leading the country due to his absence.

On the other hand, the United States President Donald Trump continues to push for the economic re-start, whereas giving worse warnings to Iran. He indicated a decrease in the further coronavirus outbreak. The GBP/USD currency pair flashing red and dropped to 1.2325 while representing 0.07% losses on the day, possibly due to the Tory government getting criticism about the mishandling coronavirus crisis.  

Daily Support and Resistance

  • S1 1.1974
  • S2 1.2148
  • S3 1.2223

Pivot Point 1.2322

  • R1 1.2397
  • R2 1.2496
  • R3 1.2671

GBP/USD– Trading Tip

The GBP/USD showed a slight bullish reversal after testing the target level of 1.2254 area. At the moment, the Cable is trading at 1.2347 area, which is also a resistance level extended by the downward channel. The 50 periods EMA also extend resistance at the same level 1.2368. 

A bullish breakout of 1.2368 level can extend the buying trend until 1.2420 level today. Elsewhere, the support continues to hold around 1.2258 level. The 50 EMA and MACD are both are suggesting selling bias in the Cable. So let’s look for selling trades below 1.2399 and bullish above 1.2420 level today. 

USD/JPY – Daily Analysis

During the Thursday’s European session, the USD/JPY currency pair flashing green but remained confined between the range between 108.00 Handles mainly due to the risk-on market sentiment keeps the safe-haven Japanse lower and providing support to the currency pair. 

The latest pullback of the U.S. dollar kept a lid on bullish moves in the pair. Currently, the USD/JPY is trading at 107.67 and consolidates in the range between the 107.66 – 107.86. However, investors are cautious and waiting for a fresh catalyst before placing any position.

Whereas, the multiple diverging factors failed to provide any meaningful direction or assist the pair in breaking through a narrow trading band held since the beginning of this week. The reason behind the risk-on market sentiment is the report regarding the passage of another $484 billion U.S. economic support package by the U.S. Senate. While the latest modest recovery in crude oil prices also keeps the market sentiment calm. 

The U.S. dollar drew offer and erased its previous session gains and turned out to be one of the key factors that kept a lid on any additional gains in the pair, at least for now. At the same time, the risk recovery in the global risk sentiment weakens the Japanese yen’s safe-haven demand and collaborates in the pairs gains. The risk-on sentiment was bolstered by a modest rise in the U.S. Treasury bond yields, which extend some support to the U.S. Dollar.

Daily Support and Resistance    

  • S1 105.92
  • S2 106.84
  • S3 107.44

Pivot Point 107.76

  • R1 108.36
  • R2 108.69
  • R3 109.61

USD/JPY – Trading Tips

On Thursday, the USD/JPY is trading mostly sideways within a narrow trading range of 108.020 – 107.300 zones. At the moment, it’s holding at 107.597, having formed a descending triangle pattern on the 4-hour timeframe. The triangle pattern is extending resistance around 107.850, along with support around 106.980. If USD/JPY manages to violate the descending triangle pattern, we may see pair dropping towards 106.200. While on the upper side, a bullish breakout of 108 can lead USD/JPY prices towards 109.100. The leading indicator, such as MACD and 50 EMA, are supporting bearish bias in the market today. Let’s wait for a breakout before taking more trades today.

All the best for today! 

Categories
Forex Fundamental Analysis

Everything About ‘Gold Reserves’ & It’s Impact On The Forex Market

Introduction

Introduction

Introduction

Gold is one of the most precious metals on the planet. In the field of monetary assets and currencies, Gold is like a nuclear warhead among all weapons. Throughout history, this yellow metal has always held its place as a secure financial investment. For a certain period in the international markets, it backed the major currencies like the United States Dollar.

Even though today’s currencies are no longer backed by any metal and are free-floating fiat currencies, countries still own and purchase gold year after year in tons. This shows that it is still one of the important financial assets of many countries. Change in Gold Reserves will have an impact on the nation’s currencies. Hence the study of the same is important for fundamental analysis for traders and investors.

What are Gold Reserves?

Most of the major nations which participate in international trades through export or import maintain a certain proportion of foreign currencies to hedge their currency at times of hyperinflation or deflation to manage their exchange rate at a fixed level, thereby not incurring losses on exports or imports.

Similarly, Many countries’ Central Banks maintain specific metric tons of Gold as reserves in their nation’s vaults along with other assets. Gold deposits saved in the nation’s vaults or other nation’s vaults as their holdings are called Gold Reserves.

Why Gold Reserves?

Up until a few decades ago, the Gold was used to back up the legal tenders of many countries. Today’s world is run by Fiat currencies, which can be printed as much as required by a government as the United States did before the Vietnam war, which led to the crashing of Bretton wood’s agreement. If, in a hypothetical case, let us say the United States dollar is no longer accepted as a legal tender in the global market, then the United States cannot buy or sell goods and services using their currency. Still, they can sell their Gold in exchange for the same.

The exposure of a currency to the market trends volatility, economic crisis makes it an unsafe form of wealth, which can depreciate over time. In this regard, Gold has always proven that it can hold its ground even during a major economic crisis and continue to appreciate to match with the inflationary trends. At times of economic crisis, extreme inflation, or deflation, which results in currency depreciation of a nation, investors, and people, in general, tend to run towards Gold as a safe financial bet.

Economic Reports

The International Monetary Fund (IMF) tracks and keeps the statistics of all assets of a nation as reported by various countries, which are then used by the World Gold Council (WGC), who are responsible for keeping up the demand and supply for Gold in the global market.

The data is obtained from the Central Bank’s Balance Sheets and compiled by WGC and releases monthly. They also provide historical data about the same for various countries to compare and analyze side by side.

How can the Gold Reserves numbers used for analysis?

Gold is not an abundant metal on the planet, and its rarity, along with unique lustrous yellow radiant color and other physical properties, has always kept it in demand in the market of jewelry, trades, and particular instrument designing sectors.

Gold is seen as one of the standard forms of wealth to be passed on from one generation to another, meaning its value keeps rising with global economic growth. As economies become wealthier, the Gold price also tends to be costlier. The worth of Gold in that sense has always remained constant, i.e., a precious and expensive metal.

The Gold demand increases during times of high inflation, and because of the limited supply, the price of Gold increases against the currencies. In this sense, the countries which are a net exporter of Gold see their domestic currency worth appreciating. Countries that are importers of Gold see their currency worth falling against Gold. In this aspect, Gold is indeed still a form of currency, or we can say it is an alternate form of currency.

Nations purchase Gold from the Bullions market and store up just like an ordinary employee saves up money for future needs or as an emergency fund for a rainy day.  Major Nations increase their Gold Reserves in hundreds of tons per year as it preserves wealth better than most currencies, and also for their concern on long term economic health and growth of their nation.

Below is Gold Reserves numbers for prominent countries having high holdings.

Above image is taken from the World Gold Council Official Website

Impact on Currency

A country with no Gold Reserves is exposed to all the risks associated with Fiat Currencies. Throughout history, there have been many currency crises where the dips have been so low that markets crashed, and governments collapsed, for instance, the Black Wednesday, which pushed the Sterling pound out of European Exchange Rate Mechanism.

Countries having substantial Gold Reserves numbers can face economic crises without market crashes, and the system collapses. As at any time, they can sell their Gold Reserves to increase their Currency worth, and let it float back again in the market against other fiat currencies.

Investors who have invested in foreign companies in that nation’s domestic currency can eliminate the fear of his returns depreciating over time or during economic crises there if the nation has sufficient Gold Reserves. Traders who Carry Trade can also be sure of their deposits not being subjected to major shocks that lead to unexpected volatility in the short run as the country will be able to recover from this through their reserves.

Gold Reserves inherently indicate a nation’s capacity to bounce back from a crisis or to never go into one in the first place. This is the reason why the United States Dollar and Euros are one of the major pairs as their Gold Reserves are in the top five amongst the world due to which the volatility in the currency is so low, making it a safe bet to trade on.

Low Gold Reserves can lose the confidence of investors, which would further depreciate the value of an already weakening currency, thereby pushing the economy further down the drain of a crisis. In Conclusion, the higher the Gold Reserves, the lesser the volatility and vice versa.

Sources of Gold Reserves Index

We can monitor the Gold Reserves changes of various nations across the globe from the WGC monthly reports, and they can be found here. Global Reserves data of different countries can also be found here. You can also go through Gold Reserves of the Federal Reserve Banks of the United States history here. We can derive the same numbers from the Central Bank’s balance sheets or the National Bureau of Economic Research.

Impact of the ‘Gold Reserves’ news release on the price chart 

Gold reserves play a major role in maintaining the economic stability of a country, and thus the government tries to own a lot of Gold. Some of the main uses of Gold include hedging against inflation and determining the value of import and export. The Gold Reserve of the country is released on a quarterly and monthly basis that shows the transactions carried out by different nations. Since the Gold Reserves held by a country is an important economic indicator, it said to have a moderate to high impact on the value of a currency.

The above image shows the previous and latest Gold Reserve data of India, which is published on the 1st of every month. A higher reading than before is considered to be bullish for the currency while a lower reading is taken to be bearish. India’s Gold Reserves was reported at 28.997 USD bn in Jan 2020. This shows an increase from the previous number of 27.831 USD bn for Dec 2019. The Reserve Bank of India is the official organization that provides Gold Reserves in USD.

EUR/INR | Before The Announcement

The first pair with which we will start our discussion is EUR/INR, where the above image shows a ‘daily’ time frame chart of the same. We see that the market is in a range from more than three months and currently seems like it has broken out of the range. Since we don’t have any clue of the Gold Reserves data, we cannot take a position on any side of the market. Technically, we have broken above the range, and we need a suitable retracement to join the trend.

EUR/INR | After The Announcement

As the data is released and the market gets to know that the Gold Reserves were increased than before, we see a sudden drop in prices as a result of strength in Indian Rupee. But later, the price reverses sharply, making the candle to close in green. One of the reasons could be that since the market was in a strong uptrend, it tried to make its last move up and finally collapsed later.

The volatility is seen to increase on both sides. From a ‘trade’ perspective, here’s where the technical analysis should be combined with fundamental analysis. We cannot take a short trade until the price crosses below the moving average, which is a sign of reversal.

GBP/INR | Before The Announcement

  

GBP/INR | After The Announcement

The above images represent the GBP/INR currency pair where we witness an extremely weak Indian Rupee, and just before the announcement, price is at the recent ‘higher high,’ which means this is the point from where the market fell. Without guessing what the Gold Reserve data might be, it is wise to wait for the news announcement and then take suitable action. However, one can still trade in ‘options’ to take advantage of high volatility when the announcement is being made.

After the news release, we see that the market drops, and the candle closes in red, which means there are high chances that traders may see the data as positive for the Indian economy and hence buy INR. Thus, as soon as the price falls below the moving average, we can go ‘short’ in the pair with a conservative target. Also, the price is in an area that could be a possible resistance.

USD/INR | Before The Announcement

USD/INR | After The Announcement

In the USD/INR currency pair, before the news announcement, the market moves up after reacting from the ‘support’ area and currently is in the middle of the range. Again, we don’t find any way to trade this pair as a news announcement can cause sudden volatility on any side. The overall volatility also appears to be low in this currency pair.

After the announcement is made, we see that the price drops below as a result of an increase in Gold Reserves from the previous month. The sudden increase in volatility on the downside, making the price go below the moving average, may attract one to go ‘short’ in the pair. We can sell the currency pair, but the stop loss needs to be placed above the resistance. The risk to reward ratio of this type of trade would be around 1:1.

That’s everything about Gold Reserves and the impact of its new release on the Forex price charts. If you have any queries, please let us know in the comments below. Cheers.

Categories
Forex Course

104. Understanding the Essence of the Momentum (Using MACD Indicator)

Introduction

Introduction

Introduction

Momentum indicators are those indicators that determine the rate of price changes in the market. These indicators are helpful in determining the change in the market trend. In this lesson, we shall be talking about the MACD indicator, which is one of the most extensively used momentum indicators.

Moving Average Convergence Divergence – MACD

Moving Average Convergence Divergence – MACD is a momentum indicator that primarily works on the relationship between two moving averages of an instrument’s price. Precisely, it takes Exponential Moving Average into consideration for its calculation.

A misconception in the industry is that MACD is a lagging indicator. There are a set of people considering it as a leading indicator, while some see it as a lagging indicator and use it as a confirmatory tool. Note that MACD is both leading as well as lagging indicators.

MACD is said to be a leading indicator when it is used to identify oversold and overbought conditions. It indicates the possibility of a reversal when the market is actually moving in the other direction. However, this form is not widely used. On the other hand, it is said to be a lagging indicator if it is used for crossovers. One will be aware of the market trend when there is a crossover on the indictor. But when this happens, the market would have already made its move.

Also, that’s not it. The real element of momentum is added by the histogram. This true aspect of MACD reveals the difference between the MACD line and the EMA. When the histogram is positive, i.e., above the zero-midpoint line but is declining towards the midline, then it indicates a weakening uptrend. On the contrary, if the histogram is below the zero-midpoint line, but is climbing towards it, then it signifies a slowing downtrend.

Apart from this, it is also used for identifying divergence in the market. That is, indicates when there is abnormal motion in the market, hence, indicating a possible change in direction.

What is the MACD indicator composed of?

The MACD is made up of two moving averages. One of them is referred to as the MACD line, which is derived by finding the difference between the 26-day EMA and the 12-day EMA. The other is the signal line, which is typically a 9-day EMA. And there is a zero-midpoint line where the histogram is placed.

MACD as a Momentum Indicator

To understand how momentum works in MACD, consider the example given below.

Firstly, the market is in a downtrend where the purple line represents the Support & Resistance level. In other terms, this line indicates a potential sell area. Below the price chart, the MACD indicator has plotted as well. Observing closely at the histogram at the marked arrow, it is seen that the histogram was falling towards the zero-midpoint line indicating the weakness of the buyers. Also, this situation happened in the area where the sellers are willing to hit the sell. In hindsight, the MACD gave the right signal solely from the histogram.

This hence concludes the lesson on momentum indicators. We hope you found this lesson very informative. If you have questions, leave us a comment below.

[wp_quiz id=”71030″]
Categories
Forex Market Analysis

Risk-off Sentiment Triggers Buying in Gold – Channel Breakout

During Wednesday’s European session, the safe-haven metal prices climbed over $1,710 mark mainly because the stocks are reporting losses due to the sharp decline in the oil prices. The intensifying coronavirus fears also keep the gold prices higher as high safe-haven demand in the market. 

During Wednesday’s European session, the safe-haven metal prices climbed over $1,710 mark mainly because the stocks are reporting losses due to the sharp decline in the oil prices. The intensifying coronavirus fears also keep the gold prices higher as high safe-haven demand in the market. 

During Wednesday’s European session, the safe-haven metal prices climbed over $1,710 mark mainly because the stocks are reporting losses due to the sharp decline in the oil prices. The intensifying coronavirus fears also keep the gold prices higher as high safe-haven demand in the market. 

The gold is currently trading at 1,710, and it has violated the previously traded consolidation range between the 1,696.20 – 1,713.50. One of the major reasons behind such a dramatic bullish trend is lashing red for a second day due to oil futures dropping in the previous session. The yellow metal is witnessing its prices restore its inverse relationship with stocks because investors prefer safe-haven assets in the wake of coronavirus fears.

At the oil front, crude oil, which started this year near $61, dropped into the negative territory earlier this week due to the oversupply concerns in the wake of coronavirus pandemic, which has caused demand destruction of oil. The risk sentiment is getting worse day by day while the US 10-year Treasury yields declined by 2-basis points (bps) to 0.55%, after dropping 4-bps on Tuesday, while the most stocks in Asia-Pacific flashing losses by the pres time.


Gold – XAU/USD – Daily Technical Levels

Support Resistance 

1,672.4     1,703.07

1,660.04   1,721.39

1,629.37   1,752.07

Pivot Point 1,690.72

Technically, gold is showing sharp bullish movement as its prices are going towards 1,726, while the support stays around 1,700 and 1,710 level. Gold is also forming three white soldiers pattern on the 4-hour chart, which is suggesting chances of a bullish trend continuation in the market. The 50 EMA is suggesting bullish trend continuation, so we should probably look for buying trades above 1,710 level to target 1,726 level. Good luck.  

Categories
Forex Elliott Wave

Complex Corrective Waves Analysis – Advanced Level – Part 2 of 2

Introduction

Introduction

Introduction

In the first part of the complex corrective wave analysis article, we presented two conditions that suggest the development of a wave x. 

The first condition considers whether the second compacted corrective wave retraces less than 61.8% from the first correction. The second condition occurs if the second corrective structure retraces more than 161.8% from the first correction.

Glenn Neely, in his work “Mastering Elliott Wave,” indicates that if the first condition occurs, then the market performs a complex correction with a small wave x. While for the second case, the price action develops a complex correction with a large wave X.

Condition 1 – Complex Correction with Small Wave x.

When the wave analyst identifies a non-standard wave, there is a high probability that the wave x is smaller than 61.8% of the previous corrective phase. This type of wave tends to take the form of an impulsive sequence. However, its internal details rule out this possibility.

The non-standard structural sequence or series may have various combinations, which are detailed below:

  1. Double zigzag (5-3-5-wave x-5-3-5)
  2. Double three (5-3-5-wave x-3-3-3-3-3)
  3. Double three (5-3-5-wave x-3-3-5)
  4. Double flat (3-3-5-wave x-3-3-5)
  5. Double three (3-3-5-wave x-3-3-3-3-3)
  6. Triple zigzag (5-3-5-wave x-5-3-5-wave x-5-3-5)
  7. Triple three (5-3-5-wave x-5-3-5-wave x-3-3-3-3-3)
  8. Triple three (5-3-5-wave x-3-3-5-wave x-3-3-3-3-3)

From the above list, the triangular formation likely corresponds to a contractive triangle. On the other hand, waves x can be other corrective waves without altering the entire structure. 

The wave analyst must take into account the application of the alternation principle. In particular, the x-wave will alternate with its preceding wave. For example, if the first compact wave corresponds to a zigzag, the x-wave will be a plane or a triangle.

The following figure shows two examples of complex corrective waves that accomplish thew first condition. In particular, the case corresponds to a double zigzag, and a double three consisting of a zigzag pattern and a triangle structure.

Condition 2 – Complex Correction with Large Wave X 

When the wave analyst detects a complex correction in which the wave X is larger than the previous correction in terms of price, the entire formation will be classified as double or triple three patterns.

This structural series can have various combinations, which are detailed below:

  1. Double three (3-3-5-wave X-3-3-3-3-3)
  2. Double three (3-3-5-wave X-3-3-5)
  3. Triple three (3-3-5-wave X-3-3-5-wave X-3-3-3-3-3)
  4. Triple three (3-3-5-wave X-3-3-5-wave X-3-3-5) 

In summary, the structural series of both conditions have been listed in the most likely order of occurrence.

As in the first condition, the following figure shows two cases of double three patterns.

Conclusions

So far, we have seen the different construction characteristics of complex corrective waves and how to differentiate each type of complex wave.

In particular, we saw the two main conditions that characterize complex corrective waves.

In the following educational article, we will present the conditions associated with each particular formation.

Suggested Readings

  • Neely, G.; Mastering Elliott Wave: Presenting the Neely Method; Windsor Books; 2nd Edition (1990).
Categories
Forex Videos

The Information On Oil You Need To Know! WTF!

https://youtu.be/bKPL2ZojDWw

https://youtu.be/bKPL2ZojDWw

What’s happening with oil prices?

 

Crude oil, which is sold by the barrel in the future’s market where buyers take delivery on a monthly basis, reached a peak of $65 per barrel just a few weeks ago.

 


The May contract, which expires today 21st of April 2020, had been hovering around the $20 per barrel level yesterday for one of the producers, West Texas Intermediate, or WTI. However, it became increasingly apparent that buyers for this contract were hard to come by because of a lack of storage facilities. And when the Chicago Mercantile Exchange or CME issued a warning statement yesterday that it was possible for oil prices to go into negative territory, it sent a shock through the oil markets.
While producers remained extremely eager to sell and buyers were left standing on the sidelines, and with just hours remaining until the May contract expired, panic selling set in and, as we can see on the graph, the price of a barrel of WTI, fell through zero into minus territory. And where this had happened for only the first time in the history of the crude oil market.


We can also see on the chart that the price did recover some upside to just over $1 per barrel, but where it currently hovers slightly underneath zero at around – $2 per barrel at the moment. This price action in crude oil is unprecedented, and, as I mentioned previously, has never happened before. So what exactly is going on, and what does this tell us about the oil and financial markets in general?

First, we need to take a step back just a few short weeks ago when the world was hit by the Covid-19 pandemic. People all over the world remain in lockdown, businesses are closed, the airline industry has almost flatlined, cars are off the road because nobody is going anywhere. And every one of these sectors uses by-products of oil in the form of petrol, diesel, gasoline, jet fuel, cooking oils, lubricants, plastics, etc. Springtime has hit the west, and with the warmer weather, we need less heating oil.
An old adage springs to mind, and has never been more appropriate: supply and demand: we have too much supply and too little demand. I think it’s safe to say that we just don’t need oil right now.

Storage facilities, including Cushing in Oklahoma in the United States, are at almost 80% capacity of barrels of oil, which are only trickling out to refineries, which are also busting to overflow with the by-products that they have produced including petrol and diesel, etc.
All the time I’m big oil-producing countries such as Saudi Arabia and Russia, the USA and others keep pumping out oil, in defiance of nations asking them to ease production and where the governing body, OPEC, seems not to have enough clout to force countries such as the belligerent Russia to do so.

However, when prices of oil go into negative territory, which many of us have never even considered before, a sudden realization occurs, that producers of oil, which falls into negative pricing during a futures contract, are forced to pay buyers to take oil off of their hands at the market rate. This will be extremely painful for oil producers, who are producing a product which they cannot store because of a lack of storage facilities, and where they are hiring – at great expense – barges, and cargo ships and huge tankers, many of which are languishing in ports and offshore while waiting to go into ports to be

offloaded, and which becomes a further expense to producers. Surely now the writing’s on the wall, and that the longer this pandemic goes on, the less oil we are going to need, and therefore we should expect production to fall even further.
But is there an underline message here? Well yes, this kind of unprecedented crash in a major financial sector, albeit a blip, will send out warning signs to investors that the financial markets remain extremely unstable during the virus pandemic, and that the longer this goes on for we should expect volatility to spill over into other markets such as stocks, currencies – and especially where those countries are producers and exporters of oil, is the United States, Canada, Russia Saudi Arabia, and oil, and of course markets will be keeping a close eye on future oil contract expires.

Categories
Forex Market Analysis

Daily F.X. Analysis, April 22 – Top Trade Setups In Forex -U.K. Inflation Stabilises! 

On the forex front, the U.S. dollar gained traction against other major currencies, with the Dollar Index climbing 0.3% on the day to 100.20. The U.S. official data showed that Existing Homes Sales fell to an annualized rate of 5.27 million units in March (5.25 million units expected).

On the forex front, the U.S. dollar gained traction against other major currencies, with the Dollar Index climbing 0.3% on the day to 100.20. The U.S. official data showed that Existing Homes Sales fell to an annualized rate of 5.27 million units in March (5.25 million units expected).

On the forex front, the U.S. dollar gained traction against other major currencies, with the Dollar Index climbing 0.3% on the day to 100.20. The U.S. official data showed that Existing Homes Sales fell to an annualized rate of 5.27 million units in March (5.25 million units expected).

The British Consumer Prices Index (CPI), including owner-occupiers’ housing inflation rate, came out at 1.5% in March 2020. Although it’s down from 1.7% in February 2020, it’s not as bad as investors were expecting considering the lockdown in global markets. 

Economic Events to Watch Today     

 

 

 EUR/USD – Daily Analysis

The EUR/USD fell by nearly 0.1% to trade at 1.0865. While Spain’s central bank announced, the country’s GDP could fall by 6.8% to 12.4% this year. Later in the today, the major focus will stay on the German ZEW Current Situation Index for April will be released (-75.0 estimated).  

After the Eurozone divided on community debt, most of the analytes are worried that the finance ministers’ may unable to provide a suitable fiscal stimulus to support growth. So, the shared currency could remain under pressure ahead of the Thursday summit.

At the coronavirus front, as per the latest report, the number of confirmed coronavirus cases grew to 145,694, with 4,879 deaths reported in Germany so far. As the cases increased by 2,237 in Germany, a 1.6% rise picking-up pace from Tuesday’s 1.3% increment, the death toll moved sharply up by 281 vs. 194 a day before.

Looking forward, the upbeat Eurozone Consumer Confidence, which is scheduled to release at 14:00 GMT, may put a bid under EUR/USD currency pair. However, the pair trend will remain sluggish until the pair break the trading range of 1.0897 to 1.08616. 

Daily Support and Resistance

  • S1 1.0724
  • S2 1.0788
  • S3 1.0823

Pivot Point 1.0852

  • R1 1.0887
  • R2 1.0916
  • R3 1.098

EUR/USD– Trading Tips

On Wednesday, the EUR/USD is trading sideways at 1.0825, as investors seem to wait for a solid reason to enter the market. The overall bias remains bearish as the EUR/USD prices are holding below 50 EMA, which is extending resistance around 1.08945 level. Continuation of a selling trend below 1.08945 level can continue selling until the next support area of 1.0772, but on the way, the pair may find support around 1.0815 level. 

The EUR/USD is likely to find support around 1.0772, but below this, the next support prevails around 1.0652 level. The pair may find an immediate resistance level of around 1.09230, where the bullish breakout of this level can extend buying until the next resistance level of 1.1036. Conversely, we should look for selling trades below 1.0894.  

GBP/USD – Daily Analysis

The GBP/USD soared 0.3% to trade at 1.2318 as the British Consumer Prices Index (CPI), including owner-occupiers’ housing inflation rate, came out at 1.5% in March 2020. Although it’s down from 1.7% in February 2020, it’s not as bad as investors were expecting considering the lockdown in global markets. 

 At the USD front, investors prefer to choose the U.S. dollar because of its safe-haven-demand in the market due to the fears of economic fallout, which is caused by the coronavirus outbreak. The dollar index, which measures the worth of the greenback against majors, rose 0.20% to levels above 100.00.

The reason behind the decline in GBP/USD pair could also be the immediate rise in COVID-19 cases, with the curve still not notably peaking. It indicates that there is still a high chance that lockdowns could last longer than expected, while the Bankruptcy and bad loans will likely boost the risk-off sentiment in the market and provide further support to the U.S. dollar again.

Apart from the U.K., U.S. President Donald Trump suggested that approximately 20 states ready for re-open while also showing a willingness to sign the bill that stops immigration into the U.S. for 60 days. As in result, the risk sentiment remains under pressure.

The reason behind the risk-off market sentiment could also be the early Asian news surrounding the U.S. Senate’s passage of $484 billion COVID-19 relief package and BOJ’s likely decline of economic and price forecasts. Moreover, statements from the BOE’s Bailey were also necessary to remark during the early Asian session.

As in result, the U.S. 10-year Treasury yields declined by 2-basis points (bps) to 0.55%, after dropping 4-bps on Tuesday, while the most stocks in Asia-Pacific flashing losses by the pres time.

    

Daily Support and Resistance

  • S1 1.1974
  • S2 1.2148
  • S3 1.2223

Pivot Point 1.2322

  • R1 1.2397
  • R2 1.2496
  • R3 1.2671

GBP/USD– Trading Tip

Yesterday, the GBP/USD fell sharply to trade at 1.2250 after violating the horizontal support level of 1.2424. On the 4 hour chart, the Cable has closed Doji candle above 1.2250 level can drive bullish bias until 1.2350. On the upper side, the Sterling may find next resistance around 1.2426, it’s the same level that supported the pair previously, and now it’s likely to drive selling bias in the GBP/USD pair. On the lower side, the violation of the 1.2265 level can lead the GBP/USD prices towards 1.2175. The 50 EMA and MACD are both are suggesting selling bias in the Cable. So let’s look for selling trades below 1.2322 and bullish above the same level today. 

USD/JPY – Daily Analysis

On Wednesday, the USD/JPY is trading around 107.500 level, mostly exhibiting sideways trading due to a lack of major economic events in the market. The U.S. dollar index slipped to the fresh lows of 100.07 ahead of recovering some ground, still bearish by 0.15% on the day.

The Japanese yen seems to suffer due to a lack of confidence when the state of emergency is being lifted in Japan. While drop-in, the domestic macroeconomic indicators are expected to keep the Japanese yen’s in a bearish mode while maintaining the USD/JPY bullish. Lately, the uptrend in the JPY could be limited due to the forecast of the Bank of Japan (BOJ) support measures to boost funding for the companies due to be announced next week. 

The U.S. Treasury prices advanced as investors continued to seek safe-haven assets. The benchmark 10-year U.S. Treasury yield declined to 0.571% from 0.625% Monday.

On the negative side, the greenback gained ground due to the oil price crash triggered a dash for cash. The high uncertainty in the market also boosted the greenback demand. So, if that trend continues during the ay ahead, the yellow metal could come under pressure.

Daily Support and Resistance    

  • S1 105.92
  • S2 106.84
  • S3 107.44

Pivot Point 107.76

  • R1 108.36
  • R2 108.69
  • R3 109.61

USD/JPY – Trading Tips

The USD/JPY is trading mostly sideways within a narrow trading range of 108.020 – 107.300 zones. At the moment, it’s holding at 107.597, having formed a descending triangle pattern on the 4-hour timeframe. The triangle pattern is extending resistance around 107.850, along with support around 106.980.  

In case, the USD/JPY violates the descending triangle pattern; we may see pair dropping towards 106.200. While on the upper side, a bullish breakout of 108 can lead USD/JPY prices towards 109.100. The leading indicator, such as MACD and 50 EMA, are supporting bearish bias in the market today. Let’s wait for a breakout before taking more trades today.

All the best for today! 

Categories
Forex Market Analysis

WTI Crude Oil’s Bearish Mode Dominates – COVID19 In-Play

The oil market saw a historical event during the session. The May contract for West Texas Intermediate (WTI) futures collapsed to zero before ending the day at minus-$37.63 a barrel, meaning producers have to pay buyers to take oil away or store it. 

The oil market saw a historical event during the session. The May contract for West Texas Intermediate (WTI) futures collapsed to zero before ending the day at minus-$37.63 a barrel, meaning producers have to pay buyers to take oil away or store it. 

The oil market saw a historical event during the session. The May contract for West Texas Intermediate (WTI) futures collapsed to zero before ending the day at minus-$37.63 a barrel, meaning producers have to pay buyers to take oil away or store it. 

This is the first time in recorded history that crude has dropped into negative territory, far surpassing the 1986 low of $10.20 a barrel. Meanwhile, the June WTI contract slumped 18.0% to $20.43 a barrel, and Brent crude oil fell 8.9% to $25.57 a barrel.

The oil traders will keep their eyes on any news about the supply restrictions from the majors for fresh impetus. Weekly oil stock data, for the period ended on April 17, from the American Petroleum Institute (API), prior 13.143M, could also offer second-tier clues for the energy benchmark.

WTI Crude Oil – Daily Technical Levels

Support Resistance 

14.82      16.06

14.25      16.74

13.01      17.98

Pivot Point 15.5

May contract for the Crude Oil faced a massive decline as its prices plunged into negative zone recently for the first time in history. Nevertheless, the spot rates are holding around 14.70, supported above the level of 11. Breakout of this level is expected to encourage sharp selling in the market, and technically, this presents room for selling unto 11 and 8 while resistance exists nearby 17.36 today. Good luck! 

Categories
Forex Videos

Forex Price Action Noise! How To Analyse Timeframes!

https://youtu.be/5e2eicwenQQ

https://youtu.be/5e2eicwenQQ

aThe Problem With Price Action Noise

In forex trading, a term that is used quite often in technical analysis is market or price action ‘noise.’ Quite often, we find that price action in Any Given currency pair spends an awful lot of time sideways or consolidation motion. Or where price action seems to be rising and falling in small increments, but where these moves tend to form the basis of a trend. However, the lower you go on a time frame and especially with regard to the 1-minute and 5-minutes time frame, the more difficult it becomes in ascertaining exactly where the trend is going, whether it be a part of a bullish move or a bearish move or if it is a part of a consolidation phase.


Insert A: This is a section of price action on a 5-minute chart of the USDCAD pair. We have added two vertical bars because this is the period that we want to drill down on a little bit more.


Insert B: This is the same section, but we have added 2 points on the charts at position a and b, and where the interest rate differential is 64 pips. That is to say, had you gone short at position a the maximum you would have made had you got out at position B would have been 64 pips less your spread. And of course had you bought the pair at position A and still being in the trade at position B you would have been offside by 64, pips plus your spread.


Insert C: In this section, we have added our own channel, where we can see a lot of rise and fall and tight consolidation in periods where the price is contracting within the range, but this in itself would become difficult to trade, especially if looking for trends.


Insert D, Now scalpers, while incorporating technical tools such as statistics, might argue that a few pips could be made here and there possibly based on highs with higher highs and lower lows, etc.

Insert E, But this type of technical analysis can quickly fall out of kilter in areas such as where we have highlighted we suddenly have a lower or high which is followed by buy a higher low, where we would need a lower low in order for the pair to remain in a bearish price pattern.


Insert F. This is also complicated in the area where we have highlighted where we see candles grouped together, which are both bullish and bearish and where several are more wick than candle telling traders that neither bulls nor the bears have this pair under control at this time. This is market noise. And while such noise can be seen in all time frames, the trick is to move up to a higher one to find out where directional bias might be heading.


Insert G. However if we moved to a higher time frame, such as the 1-hour time frame here and again, look at the price action within the two horizontal lines we get some more clarity about what is really happening to this pair over the time period which we have highlighted.


Insert H, And here we can see that the price action is consolidating after a rally to the upside and where we have a V-shaped potential reversal pattern within our highlighted area.
There is an old saying which I’m sure you’ve heard of that sometimes you can’t see the wood for the trees. Well, this is a perfectly good example, where in order to avoid the noise of the lower time frames, we must always look to the higher time frames to try and ascertain what the general bias is, even if you prefer to trade the lower ones.

Categories
Forex Price-Action Strategies

Forex Price Action: Do Not Be Over Confident

Engulfing candle is the strongest reversal candle. In a bearish market, the buyers wait for a bullish engulfing candle and flip over to the minor chart to take entry. It does not usually go wrong. However, from time to time, things may not go according to traders’ expectations, even with engulfing candle. In today’s lesson, we are going to demonstrate an example of that. Let us proceed.

Engulfing candle is the strongest reversal candle. In a bearish market, the buyers wait for a bullish engulfing candle and flip over to the minor chart to take entry. It does not usually go wrong. However, from time to time, things may not go according to traders’ expectations, even with engulfing candle. In today’s lesson, we are going to demonstrate an example of that. Let us proceed.

Engulfing candle is the strongest reversal candle. In a bearish market, the buyers wait for a bullish engulfing candle and flip over to the minor chart to take entry. It does not usually go wrong. However, from time to time, things may not go according to traders’ expectations, even with engulfing candle. In today’s lesson, we are going to demonstrate an example of that. Let us proceed.

This is a daily chart. The chart shows that the price makes a bearish move and finds its support. It produces a bullish engulfing candle. Thus, the H4 breakout traders may flip over to the H4 chart and wait for the price to consolidate and to create a bullish engulfing candle to go long in the pair. Let us flip over to the H4 chart.

The H4 chart also looks very bullish. The price starts having consolidation. Then, it produces a hammer. It seems the chart may not take too long to produce a bullish engulfing candle breaching consolidation resistance.

The chart produces another bullish candle closing within consolidation resistance. The price heads towards the South to search for its support. It has been taking longer than the buyers’ expectations. They must not be impatient but keep their eyes on the chart.

The price finds its support and produces a bullish engulfing candle. The candle closes well above consolidation resistance. The buyers may trigger a long entry right after the last candle closes by setting stop loss below the level of support and by setting take profit with 1R. The signal candle suggests that the buyers find a good deal here. Let us proceed to the next chart to find out what the price does.

I do not think that the buyers are ready for this. The last candle comes out as a bearish inside bar, but it closes within consolidation resistance and support. It does not hit stop loss yet. The buyers still have a chance to win this. This looks ominous for them, though.

The price hits stop loss now. The last candle comes out as a bearish candle closing below consolidation support this time. All of a sudden, it becomes the sellers’ territory. The H4 buyers must avoid this chart for a while.

The lesson we get from today’s example is a chart, which looks only for the buyers’ turns into opposite within two candles. Things get changed anytime in the Forex market. Thus, traders should not be overconfident with their analysis, strategy at any point in their trading life.

Categories
Forex Signals

GBP/USD Sideways Channel Breakout – An Update on Signal!  

The GBP/USD prices are on a bearish mode, falling from 1.2400 level to 1.23700 area. Overall, the pair was supported around 1.2400 zones, but since this level is already violated, the Cable has strong odds of falling further until the 1.2290 area. 

The GBP/USD prices are on a bearish mode, falling from 1.2400 level to 1.23700 area. Overall, the pair was supported around 1.2400 zones, but since this level is already violated, the Cable has strong odds of falling further until the 1.2290 area. 

The GBP/USD prices are on a bearish mode, falling from 1.2400 level to 1.23700 area. Overall, the pair was supported around 1.2400 zones, but since this level is already violated, the Cable has strong odds of falling further until the 1.2290 area. 

Sterling is getting weaker on the back of Brexit trade negotiations, which have been resumed. These should include another dimension to British Pound trading over the following weeks, with one economist saying markets should “fear” an initial July 01 deadline.

The United Kingdom and Eurozone have until July 01 to allow to prolong the transition phase, which is expected to run out by year-end to reach a free-trade plan. In case, no such extension is granted, economists warn the Pound could come below significant pressure throughout the second half of 2020.


Technically, the GBP/USD pair is trading at 1.2350, and it’s a good thing as we already entered the market at 1.2383 level. The reason behind entering selling trade is the breakout of the sideways trading range of 1.2400 – 1.2500, which got triggered after the release of worse than expected employment report from the United Kingdom. We have placed take profit 1.2323 with a stop loss of around 1.2443.    

Entry Price: Sell at 1.2383    

Take Profit 1.2323

Stop Loss 1.2443    

Risk/Reward 1.00

Profit & Loss Per Standard Lot = -$‭‭600‬/ +$‭600

Profit & Loss Per Micro Lot = -$‭‭60/ +$‭60

Categories
Forex Market Analysis

Daily F.X. Analysis, April 21 – Top Trade Setups In Forex – Economic Sentiment in Highlights! 

On the forex front, the U.S. dollar firmed against its major peers, with the Dollar Index gaining 0.2% on the day to 99.95. The ZEW survey results of April will be released for Germany (current situation at -75.0, expectations at -42.0 expected) and the Eurozone.

On the forex front, the U.S. dollar firmed against its major peers, with the Dollar Index gaining 0.2% on the day to 99.95. The ZEW survey results of April will be released for Germany (current situation at -75.0, expectations at -42.0 expected) and the Eurozone.

On the forex front, the U.S. dollar firmed against its major peers, with the Dollar Index gaining 0.2% on the day to 99.95. The ZEW survey results of April will be released for Germany (current situation at -75.0, expectations at -42.0 expected) and the Eurozone.

The U.K. Office for National Statistics will report a jobless rate for the three months to February (steady at 3.9% expected). While in the U.S., the National Association of Realtors will report March existing home sales (5.30 million units expected).

Economic Events to Watch Today     

 

 

EUR/USD – Daily Analysis

The EUR/USD fell by nearly 0.1% to trade at 1.0865. While Spain’s central bank announced, the country’s GDP could fall by 6.8% to 12.4% this year. Later in the today, the major focus will stay on the German ZEW Current Situation Index for April will be released (-75.0 estimated).  

European stocks were mostly trading higher, with the Stoxx Europe 600 Index surging 0.7%. Both Germany’s DAX and the U.K.’s FTSE 100 added 0.5%, and France’s CAC was up 0.7%, which are somehow supporting the Euro, the single currency. 

As of now, the market participants seem very concerned about the negative impact of the oil prices Monday’s declines and keeps their eyes on it. As in result, the U.S. dollar could continue to gain ground during the Europan trading hours ahead while the S&P 500 futures are now reporting a 0.65% drop. 

The additional bearish pressure could arise from President Trump’s decision to delay immigration to the U.S. to control the coronavirus outbreak. Let’s brace to trade ZEW survey results of April will be released for Germany (current situation at -75.0, expectations at -42.0 expected) and the Eurozone. 

Daily Support and Resistance

  • S1 1.0758
  • S2 1.0813
  • S3 1.084

Pivot Point 1.0869

  • R1 1.0896
  • R2 1.0924
  • R3 1.098

EUR/USD– Trading Tips

Technically, the EUR/USD is trading with a slightly bearish bias at 1.0825, exhibiting a bearish crossover below 50 EMA, which is now extending resistance around 1.0903 level. Continuation of a selling trend below 1.0903 level can extend selling until the next support area of 1.0772, but on the way, the pair may find support around 1.0815 level. The EUR/USD is likely to find support around 1.0772, but below this, the next support prevails around 1.0652 level. The pair may find an immediate resistance level of around 1.09230, where the bullish breakout of this level can extend buying until the next resistance level of 1.1036. Conversely, we should look for selling trades below 1.0870.

GBP/USD– Daily Analysis

The GBP/USD slid 0.5% to 1.2442. Investors will focus on the U.K. jobless rate for the three months to February due later in the day (steady at 3.9% expected). The United Kingdom and European Union Brexit drama keep moving while the latest news recommending to keep a check of Britain’s £39 billion has also been underlined by the cost of dealing with coronavirus, especially the economic £250 billion rescue package announced by Chancellor Rishi Sunak to protect jobs and businesses.

At the USD front, investors prefer to choose the U.S. dollar because of its safe-haven-demand in the market due to the fears of economic fallout, which is caused by the coronavirus outbreak. The dollar index, which measures the worth of the greenback against majors, rose 0.20% to levels above 100.00.

Later today, the U.S. dollar could continue to gain ground during the Europan trading hours ahead due to high safe-haven demand in the market in the wake of intensifying coronavirus fears while the S&P 500 futures are now reporting a 0.65% drop. 

On the other hand, the reason behind the cable’s pair declines could also be the immediate rise in COVID-19 cases, with the curve still not notably peaking. It indicates that there is still a high chance that lockdowns could last longer than expected, while the Bankruptcy and bad loans will likely boost the risk-off sentiment in the market and provide further support to the U.S. dollar again.

Looking forward, traders are keenly waiting for the key U.K. data which is scheduled to release during this day ahead As well as, the coronavirus related headlines also will be key to watch for taking fresh directions in the U.S. dollar.

    

Daily Support and Resistance

  • S1 1.2298
  • S2 1.2374
  • S3 1.2407

Pivot Point 1.245

  • R1 1.2483
  • R2 1.2526
  • R3 1.2601

GBP/USD– Trading Tip

Taking a look at the 4-hour timeframe, the GBP/USD is trading at 1.2394 level, violating the support level of 1.2400 level. A bearish breakout of 1.2400 support area is expected to trigger a sell-off until 1.2310. The 50 periods EMA is also keeping the GBP/USD pair under pressure while extending resistance around 1.2430. Thus, the bounce off above this level can lead the GBP/USD pair towards the next resistance level of 1.2657. While bearish breakout of 1.2460 can open up further room for selling until the next support area of 1.2220. 

USD/JPY – Daily Analysis

On Tuesday, the USD/JPY is trading with a selling bias around 107.350, due to intensifying coronavirus fears as increased risk sentiment is driving the demand for the safe-haven currency. The slump in the Japanese exports for March keeps Japanese yen down, which also supports the currency pair to stay at the upside. 

The U.S. dollar extends taking bids mostly due to its safe-haven demand in the wake of intensified coronavirus fears. Considering the fresh report that the United States death toll surged over 40,000, whereas SkyNews mentions the U.K. has a bit over 16,000 people who died from the virus.

Looking forward, the North Korean leader’s health and oil moves will be key to watch, and coronavirus updates could be the driver seat for taking fresh directions. Alongside, the trader will keep their eyes on the U.S. dollar dynamics.

Daily Support and Resistance    

  • S1 105.92
  • S2 106.84
  • S3 107.44

Pivot Point 107.76

  • R1 108.36
  • R2 108.69
  • R3 109.61

USD/JPY – Trading Tips

The USD/JPY is trading slightly bearish at 107.339, having formed a descending triangle pattern on the 4-hour timeframe. The triangle pattern is extending resistance around 107.850 along with resistance around 106.980. As we know, the descending triangle pattern usually breakout on the lower side, and if this happens, the violation of 106.980 level may send the USD/JPY currency pair towards 105.850 level. 

All the best for today! 

Categories
Forex Signals

EUR/JPY Slips Below Descending Triangle – Quick Update on Signal! 

The EUR/JPY is trading bearish at 116.450, having violated the support level of 116.600 level. Holding below this strong resistance can extend selling bias until 115.650 areas in the coming days. It’s the COVID 19, which is consistently impacting the exchange rate of the EUR/JPY pair. 

The EUR/JPY is trading bearish at 116.450, having violated the support level of 116.600 level. Holding below this strong resistance can extend selling bias until 115.650 areas in the coming days. It’s the COVID 19, which is consistently impacting the exchange rate of the EUR/JPY pair. 

The EUR/JPY is trading bearish at 116.450, having violated the support level of 116.600 level. Holding below this strong resistance can extend selling bias until 115.650 areas in the coming days. It’s the COVID 19, which is consistently impacting the exchange rate of the EUR/JPY pair. 

The Spanish government will offer to its European Union allies that they produce a 1.5 trillion euro ($1.63 trillion) rescue fund supported through perpetual debt to help countries worst-hit by the coronavirus trauma. With an increased number of finance, the single currency Euro may weaken. Alongside this, the Japanese yen is facing slight support in the wake of safe-haven appeal.

Technically, the EUR/JPY has violated a narrow range, which was extending support at 116.600 level. Below this, selling bias remains strong, and it can lead the EUR/JPY pair until 115.450. On the 4 hour timeframe, EUR/JPY seems to violate the descending triangle support level of 116.600, and this can lead the pair towards an initial target level of 115.450. The MACD is holding below 0, suggesting bearish bias among traders. While the 50 periods, EMA continues to support the selling trend in the pair. 


Entry Price: Sell at 116.452    

Take Profit 115.702    

Stop Loss 117.152    

Risk/Reward 1.07    

Profit & Loss Per Standard Lot = -$‭‭651‬/ +$‭697

Profit & Loss Per Micro Lot = -$‭‭65.1‬/ +$‭69.7

Categories
Forex Market Analysis

Gold Bullish Correction – Is It Good Time to Go Long?

On Monday, the precious metal gold edged higher from a more than one-week low hit earlier, helped by dwindling share markets as U.S. crude prices plunged and concerns about coronavirus-linked economic damage persisted.

On Monday, the precious metal gold edged higher from a more than one-week low hit earlier, helped by dwindling share markets as U.S. crude prices plunged and concerns about coronavirus-linked economic damage persisted.

On Monday, the precious metal gold edged higher from a more than one-week low hit earlier, helped by dwindling share markets as U.S. crude prices plunged and concerns about coronavirus-linked economic damage persisted.

The reason behind the fresh risk-off market sentiment is the rise in the coronavirus (COVID-19) driven death numbers from the U.S. and the U.K. The U.S. President Donald Trump’s indirect attack on China’s struggles to stop the coronavirus outbreak also pushes the risk-off.

On the flip side, U.S. President Donald Trump showed some willingness to deliver another relief plan while also pushing for an economic re-open program but failed to extend the Friday’s risk-on market sentiment. The yellow-metal got mild support earlier by the People’s Bank of China’s (PBOC) rate cut.

The U.S. 10-year Treasury yields drop more than 2-basis points (bps) to 0.634%, whereas Asian stocks also struggle. Looking forward, the traders will keep their eyes on the virus-related headlines for taking fresh directions.

Daily Support and Resistance

  • S1 1629.37
  • S2 1660.04
  • S3 1672.4
    Pivot Point 1690.72
  • R1 1703.07
  • R2 1721.39
  • R3 1752.07

Technically, gold is bouncing off above a strong support area of 1,672 to trade around 1,695 level. Closing of candles below 1,701 levels may drive some bearish correction in the market while the major resistance stays around 1,712. Below this, we may see some selling bias in gold today. The 50 EMA is suggesting buying while the MACD is suggesting selling trend, but histograms are becoming smaller suggestings chances of a bullish reversal. Let’s look for buying trades over 1,686 and selling trades below 1,712 today. Good lucK!

Categories
Forex Videos

Forex Chart Hopping! How To Be More Consistent

https://youtu.be/Qzyn-trrxgo

https://youtu.be/Qzyn-trrxgo

The Danger Of Chart Hopping

One of the biggest areas where new traders fall down is chart hopping.
They flip flop from one chart to another looking for the opportunity which will give them a chance to bag a couple of hundred pips

without fully appreciating all of the dynamics involved in technical analysis.
They think they spot a trend and jump right in and execute a trade, thinking only of the money they could make. They often make the mistake of buying at the top of the market or selling at the bottom. Think they may have spotted a trend, and perhaps they have, or it might be that some news has just come out, and they make a split second impulsive decision to buy or sell a currency pair simply based on what they’ve seen or heard.
And although they may indeed have spotted a nice trend, it could be that that trend is about to stop dead in its tracks and about to turn.
Such traders will not even bother to implement the most basic of technical analysis. It’s trading on a wing and a prayer and is tantamount to gambling.
No matter how much you think or believe that a currency pair may or may be trending, in any given direction, do not execute a trade until you have backed up your theory with tried and tested technical analysis methodology.

So when are trends likely to end? Why do trends finish reverse or go into periods of consolidation? Typically trends will start to fade and finish at the end of trading sessions, such at the end of the Asian, European or US sessions, where those traders had been buying or selling a pair based on their trading needs or beliefs pertaining to market conditions or possibly due to their balance sheet requirements or even because they are influenced due to their own country’s import and export requirements. They may have just seen a good trend and jumped on it, but when their session came to the end, they closed out their interest and took their profits.
Or it might be that they are rebalancing their portfolios by getting in and out of positions to cover market volatility in Risk on and Risk off scenarios. And where the sentiments of one session, which is ending may be completely different to the sentiment of those traders coming into a new session in a new country where they have their own various sets of requirements and beliefs about where currencies should be in relation to one another.
Of course, it could just be that trends fade for no apparent reason. It might come at the end of a 15- minute candlestick or an hourly or daily candle, which is enough to tip the balance and reverse a trend. Or it might be that a currency pair is deemed to be overbought or oversold due to technical analysis. Impending economic data releases is also another time when trains can stop for no apparent reason, or around the times when key policymakers are due to make policy statements or speeches.

One critical mistake is where traders will hop on a trend, which is absolutely great if they have done their homework and all the above mitigating circumstances are taken into consideration, but may not have factored in that perhaps a currency pair has already moved a couple of hundred pips in which case it is

quite dangerous to jump on and expect that trend to continue without some kind of pullback.
So our advice is: do not make impulsive trades based on hopping from one chart to the next. Always do your technical analysis research and make sure your timing is correct and that you have considered all of the above before you execute each trade.

Categories
Forex Assets

Exploring The GBP/ILS Forex Exotic Currency Pair

Understanding GBP/ILS

Understanding GBP/ILS

Understanding GBP/ILS

GBP/ILS is the abbreviation for the Pound sterling against the Israeli Shekel. In currency pairs, the first currency GBP here is the base currency and the second currency ILS is the quote currency. In Forex currency pairs, if the value of, let’s say, the base currency goes up, the quote currency’s value will go down and vice versa.

Also, when we buy a currency pair, we buy the base currency and implicitly sell the quote currency. The market value of GBP/ILS determines the strength of ILS against the GBP that can be understood as 1 Pound is equal to how much ILS. So if the conversion rate for the pair GBP/ILS is 4.4725, it means to buy 1 GBP, we need 4.4725 ILS.

Spread

We know that the “bid” is the price at which we sell the currency, and “ask” is the price is at which we can BUY the currency. The arithmetic difference between the ask and bid price is known as the spread. The spread is how most of the brokers make money. There are also brokers who charge a separate fee instead of making profits in the form of spread. Below are the ECN and STP spreads for the GBP/ILS Forex pair.

ECN: 54 pips | STP: 56 pips

Fees

Every time we place a trade, some commission must be paid to the brokers, and that is known as a fee. This fee varies from broker to broker. For instance, there is no fee charged on STP account models, but ECN brokers do charge some fee.

Slippage

The arithmetic difference between the expected price of a trader and the price at which the trade is executed is known as slippage. It can occur mostly when the market is volatile & fast-moving. Another reason when the slippage may occur is when we place a huge number of orders at the same time.

Trading Range in GBP/ILS

The trading range here is to measure the volatility of the GBP/ILS pair. Whether we make a profit or loss in a given time period depends on the movement of a currency pair that can be assessed using the trading range table. It is a representation of the min, avg, & max pip movement in a currency pair.

Procedure to assess Pip Ranges

  1. Add the Average True Range indicator to your price chart
  2. Make sure to set the period to one
  3. Then add a 200-period Simple Moving Average to ATR
  4. Shrink the chart in order to assess a significant period
  5. Select the timeframe of your choice
  6. Floor level must be measured and set that value as the min
  7. 200-period SMA must be measured and set that value as average
  8. Finally, measure the peak levels and consider this as Max values.

GBP/ILS Cost as a Percent of Trading Range

The cost of trade depends on the broker and mostly varies based on the market’s volatility. The below tables represent the cost variation in terms of percentages.

ECN Model Account

Spread = 54 | Slippage = 3 |Trading fee = 5

Total cost = Slippage + Spread + Trading Fee = 3 + 54 + 5 = 62

 

STP Model Account

Spread = 56| Slippage = 3 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 3 + 56 + 0 = 59

Trading the GBP/ILS

The GBP/ILS is an exotic-cross currency pair and is a trending market. We consider the market to be trending when the price generally moves in one direction, either downwards or upwards. As seen in the Range table, the average pip movement on the 1-hour time frame is 112. This clearly shows that the pip movements are normal, and this currency pair is tradable.

Note that the higher the volatility, the lower is the cost of the trade. However, this is not an advantage as it is risky to trade highly volatile markets. Let’s take, for example, in the 1M time frame, the Maximum pip range value is 3469, and the minimum is 1080. When we compare the fees for both the pip movements, we find that for 1080pip movement fess is 5.74%, and for 3469pip movement, fess is only 1.79%.

So, we can confirm that the prices are higher for low volatile markets and low for highly volatile markets. It is recommended to trade when the market volatility is around the average values, but experienced traders who strictly follow money management can trade in a volatile market. The volatility here is moderate, and the costs are a little high compared to the maximum values. But, if our priority is towards reducing costs, we may trade when the volatility of the market is around the maximum values.

Categories
Forex Course

103. Analyzing The Power Of Oscillators

Introduction

Introduction

Introduction

In the previous lesson, we had an introduction to oscillator indicators and understood how they work. In this lesson, we shall put that into action by analyzing some of the most used oscillators.

Quick Revision

In general, Oscillator is any object that moves back and forth between two points. In simple terms, anything that moves between two points, 1&2, is said to be an oscillator.

The concept remains the same for trading as well. An oscillator is an indicator which moves within two bounds in a range. When trading using oscillators, our eye catches interest when it is around the peaks and troughs. These areas generate buy and sell signals. Precisely, it indicates the end of a trend or the beginning of a new trend.

Trading Oscillators

Stochastic, Relative Strength Index, and Parabolic SAR are the extensively used oscillators by traders.

All these indicators work under the premise that the rate of price change begins to slow; that is, the number of buyers or sellers have reduced at the current trading price. And this change in the momentum indicates a possible trend reversal because the other party is losing its gas. Such indications are given when the oscillators are at the overbought or oversold regions.

Stochastic Indicator

The stochastic indicator is an oscillator whose upper and lower bounds are 80 and 20, respectively. So, if the line moves 80, it enters into the overbought region, and if it drops below 20, it is said to be in the oversold region.

Calculating stochastic variables

There are two line on the stochastic oscillator, namely, %K and %D. Both the values are calculated as follows:

%K = 100 x (Price – L) / (H – L)

%D = (K1 + K2 + K3) / 3

Where, in %K, H and L represent the Low and High for the specified period. And %D represents the average of the most three recent values of the %K.

Note: In the given example, the period is chosen as 14 (last 14 days/candles).

RSI Indicator

The Relative Strength Index (RSI) is a momentum oscillator that measures the rate of change of price and the magnitude of directional price movements. The RSI calculates the momentum as the ratio of higher close values and lower close values for a specified period. As it is an oscillator, it oscillates between the bounds 30 and 70. The interpretation for it is the same as that of other oscillators.

Interpretation Example

To illustrate the use of the oscillators, consider the given chart of USD/CAD on the 1D timeframe. To the price chart, the stochastic and the RSI oscillator has been applied.

At the vertical red lines, it can be seen that the market was overbought according to both the oscillators. This is an indication that the market which was in an uptrend priorly is not losing strength. Hence, in hindsight, the market falls as the oscillators start to make their way back into the range.

Bottom Line

Oscillators are great leading indicators that help in determining oversold and overbought conditions. It also gives traders an indication of the possibility of a market reversal. From the above example, it is seen that these indicators work like a charm. However, one must note that oscillators work in your favor, but not always. Sometimes, one oscillator indicates a buy while the other does not. These are the times when traders must avoid trading such instruments. As shown, oscillators must be used with other oscillators or technical tools to achieve the best out of it.

[wp_quiz id=”70760″]
Categories
Forex Fundamental Analysis

Impact Of ‘Consumer Credit’ Economic Indicator On The Forex Market

Introduction

Introduction

Introduction

Consumer Credit is one of the economic indicators used by economists to analyze the health of the economy. It can be useful to infer the direction of other economic indicators like Spending, inflation, and standard of living. Although it is a low impact indicator in the trading world, a good understanding of Consumer Credit can be beneficial for strengthening our overall fundamental analysis.

What is Consumer Credit?

Consumer Credit refers to the debt incurred by individuals to serve their immediate needs. Consumer Credit here, in general, applies to the short-term loans given out to spend on their daily requirements like groceries, paying electricity bills. Consumer Credit is different in this context from long-term loans like House Mortgages, which are secured by real-estate. Consumer Credit is usually unsecured with no collateral.

Consumer Credit in these days comes in the form of Credit Cards mostly although there are other variants. The limit of Credit available on a given Credit Card depends on the net-salary of the individual. In general, the Credit limit is 8-12 times the monthly salary. Credit Cards are issued to people usually who can show a consistent flow of income in their bank statements, which generally translates to job-holders and business people as their default rate is lower than that of unemployed people.

Consumer Credit is made available through banks, retailers (like shopping malls, retail chains) and other small agencies to enable customers to be able to fulfill their immediate needs and pay-off at a later date with interest. The credit limit, interest rate, and the time after which the interest comes into effect vary from one lender to another. There are two different types of credits, and let’s discuss them in detail below.

Installment Credit

Installment Credit is given out for a specific purchase, and is issued for a definite amount for a fixed period and fixed monthly installments. The monthly payments are usually equal, and the time frame ranges from 3-month to 5-years generally. Installment Credit is also called EMI (Easy Monthly Installments) nowadays.

It is popular among the general population as it is widely used to make goods and services which are more on the expensive side, like a car, TV, or furniture, etc.  For example, a 3500$ bike could be purchased with an EMI, where the individual may make the initial downpayment of 500$ and choose to pay the remainder 3000$ as 500$ monthly installments in the form of a 6-month tenure EMI plus a little extra service charge for issuing this Credit.

Revolving Credit

Revolving Credits are used for any type of purchase, unlike Installment Credit. Revolving Credit is mostly available in the form of Credit Cards, where the line of Credit is open to the maximum limit set by the lender.

For example, a 50,000 dollar limit Credit Card can be simultaneously used to purchase a 20,000 dollars item and also again for anything else that is worth up to 30,000 dollars. The Credit line stays open as long as the individual pays the minimum amount to settle the interest on the Credit issued. It may even never be paid in full as long as we pay the minimum interest while the overall credit piles up.

This is unsecured Credit, and hence the interest rates on this type of Credit are high, which is risky as once you default, the interests can pile up very quickly, making it very difficult to recover. For example, a 10,000 dollar revolving credit, when you miss payments, let us say for six months, then the total settlement of the Credit can go up to 20,000 dollars also. This can also affect the credit rating of the individual debarring him from future Credit approvals from the agencies.

How can the Consumer Credit numbers be used for analysis?

As Consumer Credit refers to the short-term loans which are usually paid back with a little interest, generally, Consumers take Credit for personal enjoyment or servicing immediate needs. Hence, it tells us the Consumer’s confidence towards repayment of the incurred Credit.

People facing tight monetary situations during job loss generally cut back on Spending and stay away from such Credits. Hence, an increase in Consumer Credit can be seen as a sign of a healthy and growing economy.

Increased Credit numbers also tell us that banks and other retail agencies are willing to lend out money, as they are confident about the repayment and their prospects. High Credit also signifies that the liquidity of the economy is too high, meaning there is enough cash flowing in the system to give Credit lenders confidence to supply Credits to more and more individuals.

Impact on Currency

Consumer Credit number is a proportional indicator. Higher Consumer Credit numbers are good for the economy and thereby for the currency. Lower Consumer Credit signifies tight monetary conditions resulting in deflationary situations in the marketplace, which is depreciating for the economy. When Credit goes down, so does Spending, and thereby, business slowdowns are apparent once the demand is reduced, which is terrible for the economy anyway. 

Economic Reports

In the United States, the Board of Governors of the Federal Reserve System releases the Consumer Credit report around the fifth business day of every month on their official website under the section called G.19. The reports are released in Billions of Dollars in both Seasonally Adjusted and Not Seasonally Adjusted formats. The data report set goes back until 1945. The report details of the type of credits also, like Car loans, personal loans, with which institutions being the lenders of the Credit and the related maturity periods.

Sources of Consumer Credit

Monthly Consumer Credit Reports can be found here.

Fred Consumer Credit & Consumer Credit Owned and Securitized information can be found here & here, respectively.

If you are interested in comparing the Consumer Credit numbers of different nations, you can do that here.

Impact of the ‘Consumer Credit’ news release on the price chart 

In the previous section of the article, we understood and comprehended the Consumer Credit economic indicator, which essentially measures the change in the total value of outstanding consumer credit that requires installment payments. It is also strongly related to consumer spending and credit. Repeated revisions to the methodology result in volatile figures during a specific period of time. Consumer Credit does not majorly affect the value of a currency, and the volatility witnessed during the news release is on the lower side.

The image below shows the latest month-on-month Consumer Credit data of the U.S. that is published by the Federal Reserve. Traders usually have a short term view on the market based on the data, as it is not an enormous event, and it does not have a long-term impact on the currency. A higher than expected reading should be positive for the currency while a lower than expected is considered to be negative. Let us analyze the market reaction.

GBP/USD | Before The Announcement

First, we look into the GBP/USD currency pair, where we see that the market is pretty much range-bound, and just before the announcement, price is near the ‘support’ area. The volatility appears to be high both sides, and sudden movement can be expected on any side of the market after the news release. Since the economists have forecasted a lower Consumer Credit this time, as the price is at ‘support’ aggressive traders can enter for a ‘buy’ due to pessimistic expectations. Conservative traders will only be able to take a trade after we get a clear indication from the market.

GBP/USD | After The Announcement

After the Consumer Credit numbers are announced, the market quickly goes higher and shows up a strong bullish candle. The market rightly reacted to the bad Consumer Credit data as the data was much lower than expectations. This made traders and investors sell U.S. dollars, and thus volatility increased on the upside. Now that we have got a clear indication from the market, we can confidently enter for a ‘buy’ as the data was terrible for the U.S. economy. In this case, the market is expected to make new ‘highs,’ and thus, we can hold on our trades as long as we see signs of reversal.

NZD/USD | Before The Announcement

NZD/USD | After The Announcement

The next currency pair which we will discuss is the NZD/USD pair, and from the first image (before the announcement), we can clearly say that the characteristics of the chart are similar to the previously discussed pair. The reason is that here too, the U.S. dollar is on the right-hand side. One major difference is that, just before the news announcement, price is at the ‘resistance’ area. So, based on the forecasted Consumer Credit numbers, we cannot enter for a ‘buy’ as technically this is where traders sell a currency pair.

After the news release, the price tries to go down, but it gets immediately pushed up, and the candle closes in green. This happens as a consequence of poor Consumer Credit data. In this pair, volatility is seen on both sides after the announcement. However, from a trading point of view, since some selling pressure is seen, it is advised to wait for a breakout above the ‘resistance’ and then go ‘long’ in the market.

USD/SGD | Before The Announcement

USD/SGD | After The Announcement

The above images represent the USD/SGD currency pair, and since the U.S dollar is on the left-hand side, we see a down-trending nature of the market and recently is moving in a range. The volatility seems to have slowed a bit before the news announcement, and there are no signs of reversal. Right before the announcement, price is at the bottom of the range, also known as ‘support,’ and hence one cannot go ‘short’ in the pair based on the predicted Consumer Credit data.

We should always use technical analysis along with fundamental analysis to enter a trade. After the news announcement, price falls owing to bad data, but it fails to break the ‘support.’ This illustrates the importance of the amount of impact of an economic indicator on a currency pair. Until the impact is visible, we cannot decide as to which side of the market we should be trading.

That’s about Consumer Credit and the impact of its new release on the Forex market. Please let us know if you have any queries in the comments below. All the best.

Categories
Forex Fundamental Analysis

Understanding The Impact Of ‘Crude Oil Production’ On The Forex Market

Introduction

Introduction

Introduction

Crude Oil is the primary mineral from which the most widely used petroleum products like Diesel, Petrol (or Gasoline) are produced. For most countries, Oil is a primary energy source. Any decrease or increase in the global production of Crude Oil creates significant Oil market price volatility.

There are many countries whose primary source of revenue is from Crude Oil production alone. Hence, changes in the Crude Oil Production levels hurt the buyers due to raised Oil prices and the sellers due to decreased income. Thus, Crude Oil Production statistics are critical metrics to predict expenditures of Oil Consumers and revenues of Oil Exporters.

What is Crude Oil Production?

Crude Oil

It is a naturally occurring, hydrocarbon mineral, unrefined petroleum product inside Earth. It is dark yellow-black in texture, and, based on the region of extraction, it can have different impurities with it. It is a non-renewable energy source and hence is limited.

If the impurities are more, it is called Sour/Heavy Oil and is generally abundant and is not preferred much due to the additional refining costs that are associated with it. If the impurities are less, it is called Sweet/Light Oil and is the preferred one over the Heavy one and is naturally costlier than its counterpart. Refining of Crude Oil and boiling it distills away the impurities to give useful petroleum products like Petrol, Kerosene, Diesel, etc.

Crude Oil Production

It refers to the process of Oil extracted from the ground after the removal of impurities and inert matter. It consists of Crude Oil, Natural Gas Liquids (NGLs), and additives. It is measured in a thousand tonne of Oil equivalent (toe). The final products, like Gasoline, are measured in the number of barrels produced. One barrel is equivalent to 42 Gallons, or 159 Litres, or 35 Imperial Gallons. The leading Oil Producing countries are the United States, Saudi Arabia, and Russia.

Organization of the Petroleum Exporting Countries (OPEC)

It is an organization of 12-oil major producing countries that make up 46% of the world’s oil production. They regulate the price of fuel to sustain this non-renewable resource for an extended period. In the early 21st century, the advent of new technologies (mainly Hydrofracturing) has led to a boom in the U.S. Oil production numbers, decreasing the influence of OPEC.

How can the Crude Oil Production numbers be used for analysis?

Crude Oil production is susceptible to the following factors:

Political Tensions: Many of the countries sitting on top of Crude Oil reserves are victims of political unrest. Crude Oil supply is drastically affected by political turmoil and wars. Iran-Iraq War, the Persian Gulf wars, Arab Oil Embargo, etc. are some typical examples.

Weather Patterns: Storms and Hurricanes have always threatened Crude Oil deposits and shipments. Oil spillage due to bad sea-weathers is the worst. An example would be the Deepwater Horizon Oil Spill in 2010, where approximately 480 tonnes of Crude Oil was spilled into the Ocean. This type of incident spikes the Crude Oil prices as the supply is reduced.

Exploration and Production: Crude Oil is a non-renewable energy resource. It will be exhausted after a certain period. Exploring new regions for drilling and extraction involves huge costs. Set up of Production units is also a hefty investment

Investments & Innovation: Poor technology and lack of funds can negatively affect Crude Oil Production. The United States gained back its dominance in Crude Oil Production through the innovation of Hydrofracturing that dramatically increased its Crude Oil Production.

Demand: Demand motivates companies and governments to invest more in Crude Oil Production. As the world starts to switch to other resources, it is the demand that will primarily drive the supply of Crude Oil in the long run. Application is linked to population growth and reliance on Crude Oil as an energy source. As emerging economies increase Oil consumption while alternate energy sources are being developed, the current Oil consumption is set to stay steady and, if not, increase more for now.

Impact on Currency

Investors purchase mainly two types of Oil contracts:

Spot Contract: In this, the price of Oil reflects the current market price of Oil. Commodity Contracts in the Spot market are effective immediately, i.e., Money is exchanged, and Oil delivery starts right then.

Futures Contract: This is the more common form of Contracts purchased by traders, as they speculate the price of Crude Oil based on many factors and algorithms. They agree to pay a certain amount for Oil at a set future date. Companies dependent on Crude Oil use these contracts to hedge the risk of price volatility.

In Northern America, West Texas Intermediate (WTI) is the benchmark for Oil futures traded on New York Mercantile Exchange (NYMEX). In the Middle East, Europe, the reference is the North Sea Brent crude exchanged on the Intercontinental Exchange (ICE).

A decrease in Crude Oil Production leads to a rise in oil prices, which is terrible for the economy and currency. As fuels become expensive, currency value depreciates. It creates inflationary conditions within the economy. All Oil dependent industries like textile, chemical, medicine industries increase the cost of their end-products to compensate for the price increase. Gasoline, Petrol, and Other Crude Oil end-products become less affordable.

A sufficient supply of Crude Oil is necessary to keep inflation in check. Hence, it is a proportional indicator. Although the Crude Oil market is more volatile than currency and stock markets, large scale price changes reflect in the currency and stock values over a period. The effect on currency is dependent on the degree of dependence of the nation on Oil. The more dependency, the more the volatility in the currency. Typically, Major currencies do not see a change in values as dramatic as the Oil price.

Economic Reports

Investors, economists, and traders closely watch OPEC’s Monthly Oil Market Report (MOMR). It is released in the middle of the month for the previous month. The International Energy Agency (IEA) Oil Market Report released monthly is also widely used by many. IEA was formed in 1983, and since then, it has been the source for official government statistics from all OECD and few non-OECD countries.

The Weekly Petroleum Status Reports from the United States Energy Information is also a famous report to monitor Crude Oil Inventory levels. The American Petroleum Institute’s Weekly Statistical  Bulletin (WSB) reports the United States and regional Crude inventories and data related to refinery operations.

Sources of Crude Oil Production

The Global Crude Oil Production and Trade statistics can be found in the sources provided below.

OPEC – MOMR | IEA – Oil Market Report

Enerdata – Crude Production | Crude Oil Production – OECD | EIA – Crude Oil Production

EIA Weekly Inventory Status Report | API WSB Report

Impact of the ”Crude Oil Production” news release on the price chart 

Crude Oil Production plays a significant role in the economic growth of a country and in determining the rate of inflation. It is especially important for monetary policymakers and Central banks who decide on the interest rates based on oil production. The fundamental factors of demand and supply influence the rise and fall of oil prices. This Crude Oil Production has a direct impact on the oil price.

Low production of crude oil increases the price of Oil, which increases the cost of production and transportation. This increases the cost of goods and services in the country and has an adverse effect on the value of a currency. As Crude Oil Production is such an important news release, it creates a great impact on almost currency pairs, but predominantly more on the U.S. dollar pairs.

In today’s article, we will be analyzing the impact of Crude Oil Production in the Gulf, where the data is published by the Organisation of the Petroleum Exporting Countries, famously known as OPEC. The below image shows the quantity of Crude Oil Production in Barrels for the month of March.

USD/JPY | Before The Announcement

First, we shall analyze the USD/JPY currency pair, and the above image shows the state of the chart before the news announcement.  Around three hours before the release, we see that the market is aggressively moving down, indicating a great amount of downward pressure. If we carefully observe, currently is at a place where this price was portraying as ‘support’ on the previous day. Therefore, we can expect ‘buying’ strength to come back into the market from this point.

USD/JPY | After The Announcement

After the Crude Oil Production data is announced, the price falls drastically, and the ”news candle” closes as a strong bearish candle. The market reacted very negatively because the Crude Oil Production was lower as compared to the previous month. This impacted the U.S dollar adversely, and traders sold the currency, thereby increasing the volatility on the downside. As mentioned in the previous paragraph, since the price at the key ”support” level, taking a ”short” trade can prove to be risky at this point. It is safer to ”sell” after a suitable retracement.

AUD/USD | Before The Announcement

AUD/USD | After The Announcement

The above images are that of the AUD/USD currency pair, where we see that the market is in a strong downtrend, and recently the price has moved higher in the form of retracement. Technically, this is the ideal scenario for trend trading and going ”short” in the pair, but as there is a high impact news announcement in few minutes, the market could sharply move on any side. Therefore, it is wise to wait for the release and then trade based on the data and shift in volatility.

After the news announcement, the price suddenly surges and moves higher in the beginning, but the price sees some selling pressure from the top and closes with a large wick on the top. The sudden up move is because of the weak Crude Oil Production data, which made traders sell the U.S. dollar and cause a short-term reversal in the market. As the ”news candle” still closes as a bullish candle, one should not underestimate the buyer’s strength and go ”short” in this pair. We also cannot go ”long” in the currency pair due to the selling pressure seen later. Thus, we can only trade the pair after he/she gets a sense of clear direction.

NZD/USD | Before The Announcement

  

NZD/USD | After The Announcement

Lastly, we shall discuss the NZD/USD currency pair, where the first image shows the characteristics of the chart before the news announcement. As we can see, the pair is in a strong downtrend, and just before the release, it is at the lowest point. This indicates a great amount of strength in the U.S dollar, as it is on the right-hand side. If the Crude Oil Production is lower than before, the pair will continue to move lower, and we will not have a suitable trade entry.

On the other hand, if the data is better than last time, we can only go ”long” in the market, if we see some reversal patterns. After the data is released, the market moves sharply higher, almost similar to the above pair, and again leaves a wick on the top. The bad news in the form of lesser Crude Oil Production increased the volatility on the upside and shot the price up.

That’s about ‘Crude Oil Production’ and its impact on the Forex market. Let us know if you have any questions in the comments below. Cheers.

Categories
Forex Market Analysis

Daily F.X. Analysis, April 20 – Top Trade Setups In Forex – Eurozone Events in Focus! 

On the forex front, the U.S. Dollar Index eased 0.2% on the day to 99.72. On the economic data front, the Conference Board U.S. Leading Index dropped 6.7% on month in March (-7.2% expected). Today, the focus will be on the Eurozone’s economic events, which include the Trade balance, PPI, and current account, and these are due during the European session.

On the forex front, the U.S. Dollar Index eased 0.2% on the day to 99.72. On the economic data front, the Conference Board U.S. Leading Index dropped 6.7% on month in March (-7.2% expected). Today, the focus will be on the Eurozone’s economic events, which include the Trade balance, PPI, and current account, and these are due during the European session.

On the forex front, the U.S. Dollar Index eased 0.2% on the day to 99.72. On the economic data front, the Conference Board U.S. Leading Index dropped 6.7% on month in March (-7.2% expected). Today, the focus will be on the Eurozone’s economic events, which include the Trade balance, PPI, and current account, and these are due during the European session.

Economic Events to Watch Today     

 

 

EUR/USD – Daily Analysis

The EUR/USD gained 0.4% to 1.0878 and GBP/USD rebounded 0.3% to 1.2501. The markets are now concerned about extended lockdowns indicating a deeper economic recession than previously forecasted. Moving on, the market sentiment is expected to stay pro-risk during the day ahead. 

European stocks rebounded further, with the Stoxx Europe 600 Index gaining 2.6%. Germany’s DAX climbed 3.2%, the U.K.’s FTSE 100 increased by 2.8%, and France’s CAC jumped 3.4%.

The coronavirus outbreak has brought the deep divides among the member states on fiscal spending. Italy and Spain have blamed northern nations led by Germany and the Netherlands – of not doing enough.

Whereas Italy, Spain, France, and some other countries need debt mutualization through corona bonds, Germany and the Netherlands are still not buying the idea of community debt needed to control the economic fallout from the virus outbreak. 

Looking forward, as the data calendar is light with no first-tier releases scheduled for release in the Eurozone and the U.S. The traders keep their eyes on the coronavirus related updates for meaningful direction.

Daily Support and Resistance

  • S1 1.0698
  • S2 1.0779
  • S3 1.0826

Pivot Point 1.0859

  • R1 1.0907
  • R2 1.094
  • R3 1.1021

EUR/USD– Trading Tips

On Monday, the EUR/USD is trading sideways at 1.0835, exhibiting a bearish crossover below 50 EMA, which is now extending resistance around 1.0903 level. Continuation of a selling trend below 1.0903 level can extend selling until the next support area of 1.0772, but on the way, the pair may find support around 1.0815 level. The EUR/USD is likely to find support around 1.0772, but below this, the next support prevails around 1.0652 level. 

At this moment, the EUR/USD is holding at 1.0835, having an immediate resistance level of around 1.09230, where the bullish breakout of this level can extend buying until the next resistance level of 1.1036. Conversely, we should look for selling trades below 1.0870.

GBP/USD– Daily Analysis

The GBP/USD rebounded 0.3% to 1.2501 and consolidated in the range between the 1.2604 – 1.2450. However, the currency pair traders did not give any major attention to the coronavirus (COVID-19) crisis at home because the cases are comparatively more significant in the U.S. 

Moreover, the United Kingdom and European Union Brexit drama keep moving while the latest news recommending to keep a check of Britain’s £39 billion has also been underlined by the cost of dealing with coronavirus especially the economic £250 billion rescue package announced by Chancellor Rishi Sunak to protect jobs and businesses.

On the other hand, U.S. President Donald Trump showed some willingness for another relief plan while also supporting an economic re-open plan.

Looking forward, all traders will keep their eyes on the coronavirus headlines due to a light economic calendar. However, any surprise announcement of stimulus might grab the spotlight.

Daily Support and Resistance

  • S1 1.2254
  • S2 1.2365
  • S3 1.2433

Pivot Point 1.2475

  • R1 1.2544
  • R2 1.2586
  • R3 1.2697

GBP/USD– Trading Tip

The GBP/USD is trading with a neutral bias over 1.2420 support areas to trade around 1.2446. The GBP/USD pair is likely to find support around 1.2420, which is extended by the triple bottom level that we can see on the 4-hour timeframe. A bearish breakout of 1.2425 support area is expected to trigger a sell-off until 1.2210. The 50 periods EMA is also keeping the GBP/USD pair supported around 1.2430. Thus, the bounce off above this level can lead the GBP/USD pair towards the next resistance level of 1.2657. While bearish breakout of 1.2460 can open up further room for selling until the next support area of 1.2220. 

USD/JPY – Daily Analysis

The USD/JPY is flashing green and registered fresh gains near the 107.94, mainly due to the broad-based U.S. dollar strength in the wake of intensifying coronavirus fears, keeps the market tone heavy on the day. The slump in the Japanese exports for March keeps Japanese yen down, which also supports the currency pair to stay at the upside. The USD/JPY is trading at 107.84 and consolidates in the range between the 107.50 – 107.94.

At the USD front, the U.S. dollar continues to take bids mainly due to its safe-haven demand in the wake of intensified coronavirus fears. As per the latest report that the United States death toll rose above 40,000, whereas SkyNews mentions the U.K. has a bit over 16,000 people who died from the virus.

On the other hand, the reason behind the fresh risk-off market sentiment is the rise in the coronavirus (COVID-19) related death figures from the U.S. and the U.K. Whereas, the lack of clarity on the easing lockdown keeps the investors confused, as the new infections continue to rise globally.

Daily Support and Resistance    

  • S1 105.92
  • S2 106.84
  • S3 107.44

Pivot Point 107.76

  • R1 108.36
  • R2 108.69
  • R3 109.61

USD/JPY – Trading Tips

The technical side of the USD/JPY has not changed much as it’s price continues to hold above the triple bottom area of 107.039. The MACD and 50 periods of EMA are suggesting bearish bias. Therefore, a downward breakout of this level can extend selling until 105.300, while the resistance holds around 108.640. We should look for selling trades below 107 to target 106.630, and buying can be seen above the same 107.360 level today.  

All the best for today! 

Categories
Forex Daily Topic Forex Price-Action Strategies

Forex Price Action: A Losing Trade

Forex trading is considered one of the riskiest businesses. The market is volatile and it gets unpredictable from time to time. There is no trading strategy, which can guarantee one hundred per cent success. Thus, Forex traders must be mentally prepared to take losses. In today’s lesson, we are going to demonstrate an example of […]

Forex trading is considered one of the riskiest businesses. The market is volatile and it gets unpredictable from time to time. There is no trading strategy, which can guarantee one hundred per cent success. Thus, Forex traders must be mentally prepared to take losses. In today’s lesson, we are going to demonstrate an example of […]

Forex trading is considered one of the riskiest businesses. The market is volatile and it gets unpredictable from time to time. There is no trading strategy, which can guarantee one hundred per cent success. Thus, Forex traders must be mentally prepared to take losses. In today’s lesson, we are going to demonstrate an example of a losing trade.

The chart shows that the price upon finding its resistance heads towards the South with good bearish momentum. The first candle comes out as a bearish engulfing candle followed by two bearish candles. These suggest that the bear takes control. The sellers are to wait for the price to consolidate and a bearish engulfing candle to go short in the pair. Let us proceed to the next chart to find out what the price does.

The price finds its support. It produces a bullish inside bar followed by two doji candles. It seems that the price has been searching for its resistance. The sellers are to keep their eyes on this chart.

The price finds its resistance. It produces a bearish engulfing candle closing below consolidation resistance. Without any doubt, this is an A+ breakout candle. The sellers may trigger a short entry right after the candle closes by setting stop loss above consolidation resistance and by setting take profit with 1R. Let us find out how the trade goes.

It looks fantastic for the sellers. The next candle comes out as a bearish candle as well. Consecutive two bearish candles suggest that the bear is in a hurry to hit the take profit. The sellers may not have to wait too long to achieve their target as far as the price action in this chart is concerned.

Would you believe it? The next candle comes out as an inverted hammer. The upper shadow hits the stop loss. The sellers are out with their entry with a loss. That was beyond their imagination some might say. However, it happens a lot in the Forex market. Thus, traders must not be overconfident with any entry. Discipline and money management are to be maintained with every single trade.

Some traders, especially at the beginning can’t take losses easily. It bugs them up. Losing money may make them think something is wrong with their strategy. There is nothing wrong if traders want to try to develop new strategies. However, they should not just lose the belief and abandon a long proven strategy all of a sudden.

Categories
Forex Price-Action Strategies

Breakout With and Without Momentum

A Breakout without momentum often does not push the price towards the trend. The price seems to come back at the breakout level again. On the other hand, a breakout with momentum pushes the price towards the trend in most of the cases. In today’s lesson, we are going to demonstrate a chart, which has two types of breakouts. Let us get started.

A Breakout without momentum often does not push the price towards the trend. The price seems to come back at the breakout level again. On the other hand, a breakout with momentum pushes the price towards the trend in most of the cases. In today’s lesson, we are going to demonstrate a chart, which has two types of breakouts. Let us get started.

A Breakout without momentum often does not push the price towards the trend. The price seems to come back at the breakout level again. On the other hand, a breakout with momentum pushes the price towards the trend in most of the cases. In today’s lesson, we are going to demonstrate a chart, which has two types of breakouts. Let us get started.

The chart shows that it heads towards the North. Upon finding its resistance, it makes a bearish correction. It finds its support and produces a bullish engulfing candle. The price heads towards the North again. It makes a breakout with a candle having a long upper shadow. It is a breakout. However, the breakout takes place with two bullish candles. Let us proceed to the next chart to find out what the price does.

Despite making a breakout, the price does not head towards the North. It rather consolidates around the breakout level. The breakout level still holds the price. Nevertheless, it does not look that good for the buyers. The price may come back within those two levels and hit the lower support. Let us find out what happens next.

The price does not come back within the breakout level. It makes another breakout at consolidation resistance. It takes only one candle to make the breakout. Breakout traders want to get this kind of breakout to trigger a long entry. The buyers may trigger a long entry right after the last candle closes by setting stop loss below consolidation support and by setting take profit with 1R.

The price heads towards the North with good bullish momentum. The next candle comes out as a strong bullish candle. It suggests that the bull has taken control. It seems the price may hit 1R in a hurry as well. This is what the breakout traders want.

As anticipated, the chart produces another bullish candle and hits the target. It takes two candles to achieve 1R. It gives traders more confidence about the strategy and saves their time. They can concentrate on other charts to look for entries. It does not mean it goes like this every single time though.

The above charts show that a breakout by two candles does not generate the momentum towards the trend. However, when the breakout takes place with a single candle, the price heads towards the trend’s direction in no time. Thus, if we do not want to hang around with our entries and keep an amazing winning rate, we may take entries on a breakout that takes place with good momentum.

Categories
Forex Daily Topic Forex Price-Action Strategies

Price Action Trading and Trade Management

Trade management is such an important factor in Forex trading. Managing trades effectively saves traders from making a loss or help them secure their profit. Sometimes traders are to close their trades earlier or lock the profit. This shall be done only when trading is done on major time frames such as the H4, the daily, or the weekly, though. In today’s lesson, we are going to demonstrate an example of an early exit in the H4 chart.

Trade management is such an important factor in Forex trading. Managing trades effectively saves traders from making a loss or help them secure their profit. Sometimes traders are to close their trades earlier or lock the profit. This shall be done only when trading is done on major time frames such as the H4, the daily, or the weekly, though. In today’s lesson, we are going to demonstrate an example of an early exit in the H4 chart.

Trade management is such an important factor in Forex trading. Managing trades effectively saves traders from making a loss or help them secure their profit. Sometimes traders are to close their trades earlier or lock the profit. This shall be done only when trading is done on major time frames such as the H4, the daily, or the weekly, though. In today’s lesson, we are going to demonstrate an example of an early exit in the H4 chart.

The chart shows that the price makes a strong bearish move. It makes a breakout and produces a bullish inside bar. The H4 breakout traders are to wait for the price to find its resistance and produce a bearish engulfing candle to offer them a short entry. The price is at the breakout level. It seems that the breakout level is going to play a vital role here.

The chart produces a bearish spinning top and a bullish candle. However, the breakout level works as a level of resistance and produces a bearish engulfing candle closing well below consolidation support. The sellers may trigger a short entry right after the candle closes by setting stop-loss above the breakout level and by setting take profit with 1R. The signal candle suggests that the sellers do not have to wait too long to achieve their target.

As expected, the next candle comes out as a bearish Marubozu candle as well. The sellers would love to get a bit longer bearish candle. However, as long as it comes out as a bearish candle, they should be happy with it. Remember, this is an H4 chart. Thus, a bearish Marubozu candle means a lot for the sellers. It seems the price is going to take one more candle to hit the target.

The next candle comes out as a Bearish Marubozu candle as well. However, it does not hit the target 1R. A very few pips are left to achieve the target. The sellers must wait. The last candle suggests that it is only a matter of time for the sellers to reach their destination. Let us proceed to the next chart and find out what happens next.

The last candle comes out as a bullish engulfing candle. This does not convey a good message for the sellers. The price is yet to hit the target. They have some profit running in the trade. What should the sellers do here?

If it is an inside bar bullish candle, the sellers should keep holding the position to hit the target. However, the last candle comes out as a bullish engulfing candle (in an H4 chart). This means a lot for the minor intraday buyers. Thus, the best thing to do would be if the trade is closed manually, right after the last candle closes. It gets the sellers some profit, at least. Yes, the target is not achieved, and some profit is lost. Take it easy. Things go according to plan and sometimes don’t. This is what trading is all about.

Categories
Forex Videos

Is The Stochastic Oscillator The Key To Making Money In Forex Or Is It Loosing You Money?

https://youtu.be/0PM1Fh9d-wI

https://youtu.be/0PM1Fh9d-wI

-Stochastic Oscillator, Friend or Foe ?


Insert A, The stochastic oscillator is used in technical analysis and was invented by George Lane in the late 1950s. The indicator measures the opening price of a financially traded asset and compares it to the closing price over a predetermined period of time. Because the data uses historical calculations and plots them in the form of two moving averages, the k-line, and the D-line, this is considered to be a lagging momentum indicator. The actual mathematical complications for the tool are very complex, and we will not be going into them in this session. The basic and generally widely used settings for the stochastic oscillator will automatically be set by your broker at 5 3 3. More experienced Traders are able to adjust the settings to their preference. However, we will be leaving them at the standard settings, and that way, we will be very much going with the crowd as it were in this example.

 


Insert B, The stochastic oscillator is widely used by professional traders and will be offered on almost every trading platform. It can simply be dragged straight onto your trading chart and will sit at the bottom, as in our example.


Insert C: The basic principle is that the Kline which is calculated over a slightly longer time period than the D line and when both of these lines are above the 80% Overbought line, the currency pair is considered to be overbought, and when the K and D lines are below the 20 % oversold line, the pair is said to be oversold.


Insert D, traders look for the ‘k’ and D lines to have been above the 80% line in the overbought area and then dipped below the 80% line where the K-line has crossed over the d line, at which point they will go short on the currency pair.


Insert E, Conversely, traders look for the K and D lines to have been below the 20% oversold line, and where the K-line has crossed above the D-line, they use this as a signal to buy a currency pair.
One of the biggest areas that new Traders falling into a trap is that they take the stochastic signal has been gospel and trade it accordingly and then wonder why they are losing money.
And so, is the stochastic indicator a friend or foe? First, we have to remember that all indicators, and especially lagging indicators, are just that: indicators. They are an indication that the market, in this example, might be overbought and ready to turn lower, or that the market is oversold and it might be ready to move higher.
Let’s drill down a little bit more by going back to our 4-hour chart of the EURUSD pair. The longer the time frame, the more likely, the longer trend will become apparent, and that’s where the more pips will be realized, and of course, that translates into more money-making opportunities.


Insert F: By drawing a vertical line at position A, we can follow that down and see that the stochastic k and D lines have both moved above the 80% overbought area, and that’s the k-line has crossed below the d line, and both lines have moved below the 80% overbought line. This is represented by the price action which has been falling.


Insert G: Traders who sold the pair on this signal and stayed in the trade would have seen an overall pip movement in their favor of 390 pips, which is huge. The stochastic was a true friend at this point.


Insert H, However traders who abandoned the trade as soon as the stochastic became oversold, as per the example on your screen now at position B, because the K & D lines in the oversold area under the 20% line and where the k-line has crossed above the d line, they would have been extremely disappointed as the market continued to trend lower. While they would have made around 40 pips, they would have lost out on 350.
But one of the biggest problems we find with new traders is that they will buy a currency pair in a situation like this, where their trade goes immediately against them and falls
hitting them with losses of over 350 pics on this occasion because they have not supported their trade with a stop loss, due to poor risk management. In this example, the stochastic indicator would have been a foe.


Insert I, Let’s return to our chart at position C, we can see that the stochastic is oversold, and more importantly, it is staying or remaining very close to the oversold 20% line as the market trends for lower.
And so the lesson here is that if the market is overbought, it does not necessarily mean that it will automatically fall, and which is clear from how example today if a pear is oversold, it does not necessarily mean that they will turn around and move higher.
So remember indicators are simply an indication that something might happen and not that it definitely will happen. Incorporate good risk management and money protecting tools such as stop losses in your trading plan. Learn to use price action as the definitive trendsetter, while incorporating other technical indicators to more reliably established entry points for your trades. And what is most important, which I’m sure you’ve heard many times, is to let the trend be your friend and I never trade against it.