Tag: trading

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Crypto Market Analysis

Daily Crypto Review, Jun 24 – Italy Ready For The Digital Euro; Ethereum Rushing Towards Next Resistance Level

The cryptocurrency market has spent the past 24 hours, either establishing its current levels or gaining a bit of value. Bitcoin is currently trading for $9,639, which represents an increase of 0.36% on the day. Meanwhile, Ethereum gained 2.69% on the day, while XRP gained 0.87%.

The cryptocurrency market has spent the past 24 hours, either establishing its current levels or gaining a bit of value. Bitcoin is currently trading for $9,639, which represents an increase of 0.36% on the day. Meanwhile, Ethereum gained 2.69% on the day, while XRP gained 0.87%.

The cryptocurrency market has spent the past 24 hours, either establishing its current levels or gaining a bit of value. Bitcoin is currently trading for $9,639, which represents an increase of 0.36% on the day. Meanwhile, Ethereum gained 2.69% on the day, while XRP gained 0.87%.

DxChain Token took the position of today’s biggest daily gainer, with gains of 21.87%. Compound lost 17.50% of its daily value, making it the biggest daily loser.

Bitcoin’s dominance level decreased slightly since we last reported, with its value currently at 65.11%. This value represents a 0.17% difference to the downside when compared to yesterday’s value.

The cryptocurrency market capitalization increased slightly when compared to yesterday, with the market’s current value being $275.85 billion. This value represents an increase of $2.66 billion when compared to the value it had yesterday.

What happened in the past 24 hours

Is Italy implementing a digital Euro?

The Italian Banking Association has announced its willingness to support the implementation of a digital Euro. The IBA had approved guidelines governing its position on the digital currency as well as central bank digital currencies in general.

The ABI announced that monetary stability, as well as respecting regulations related to a digital Euro, are two of its top priorities.

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Technical analysis

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Bitcoin

The largest crypto by market capitalization spent the past 24 hours mostly stabilizing around the $9,600 level after taking over the $9,580 resistance (now support) level. The support level got tested and held up a couple of times, confirming that Bitcoin will (for the time being) trade within a range bound by it as well as the $9,735 resistance level.


Bitcoin’s volume is slowly decreasing while its RSI level is reaching the value of 60.

Key levels to the upside          Key levels to the downside

1: $9,735                                 1: $9,580

2: $9,870                                 2: $9,251

3: $10,010                                3: $9,120

Ethereum

Unlike Bitcoin, Ethereum spent the day reaching for new highs and trying to get to the $251.4 resistance level. The second-largest cryptocurrency by market capitalization managed to increase its value by over 2% on the day. Its volume is, however, lowering, while its RSI level on the 4-hour chart crossed into overbought territory. This might indicate a pause in the bullish move until Ethereum gathers enough strength to attempt a breakthrough the $251.4 resistance.


Key levels to the upside          Key levels to the downside

1: $251.4                                 1: $240

2: $260                                    2: $228

3: $225.4

Ripple

While XRP did not gain much percentage-wise, its move towards the upside is an extremely important one. The third-largest cryptocurrency by market cap is trying to get back above the $0.19 level, which will determine its position in the short-term. While the move initially moved above the resistance, XRP’s RSI is approaching overbought, while its volume is decreasing, signifying exhaustion.


Key levels to the upside          Key levels to the downside

1: $0.19                                      1: $0.178

2: $0.2                                  

3: $0.205

 

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Forex Videos

Fundamental Analysis For Novices – Average Hourly Earnings

Fundamental Analysis For Novices – Average Hourly Earnings Thank you for joining the fundamental analysis for novices’ educational video. This time we will be looking at. Hopefully, you will be reviewing all the fundamental analysis for novices videos in this series of educational videos. Professional traders regularly refer to an economic calendar, such as this […]

Fundamental Analysis For Novices – Average Hourly Earnings Thank you for joining the fundamental analysis for novices’ educational video. This time we will be looking at. Hopefully, you will be reviewing all the fundamental analysis for novices videos in this series of educational videos. Professional traders regularly refer to an economic calendar, such as this […]

Fundamental Analysis For Novices – Average Hourly Earnings

Thank you for joining the fundamental analysis for novices’ educational video. This time we will be looking at.

Hopefully, you will be reviewing all the fundamental analysis for novices videos in this series of educational videos.


Professional traders regularly refer to an economic calendar, such as this one, which is provided by most brokers. Use it as a tool to plan your trades, and most importantly, use it as a facility to tell you when not to trade via expected volatile periods in the market, which potentially follow high impact or high importance regarded data releases.


The key information that you need to take particular attention to is the time of the event, the economic event itself, the day and date, the impact level, which typically comes as low, medium, and high, the actual economic data release as listed at the time of the event, which is usually subject to an embargo, and before this, pay particular attention to the general consensus of what the actual figure might be. This is put together by leading economists and market analysis. Also, pay attention to the previous release of this data.


In this video, we are looking at average hourly earnings, year on year, for May 2020. This data is typically more important within the United States and has a maximum impact value. It is always released on the first Friday of each month, along with the non-farm payrolls.
This particular session of releases he’s very widely anticipated by the markets because it gives a clear picture of the economic conditions for the United States, which is one of the biggest economies in the world.
The data is released by the US Bureau of Labor Statistics. It reflects labour cost inflation and throws light on the conditions of the Labour market. The board of the Federal Reserve uses this as a leading indicator when setting interest rates, along with the unemployment figures.


Here we can see that the average hourly earnings figure for May came in at 6.7%, which was below the consensus value of 8.5% and below the previous figure of 8% for April. The deviation is also shown as -0.98%.
A higher reading would have been positive or bullish for the USD, while this reading is negative or bearish for the USD.

This is why it is always imperative to wait until the market has analysed all of the data, including average hourly earnings before you jump in and start trading purely on the non-farm payrolls figure only.

Tread cautiously and wait for a trend to begin and then join that in either direction. When trading this data always expect the unexpected because the market can become extremely volatile post data release.

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Forex Videos

Fundamental Analysis For Novices – House Price Index

https://youtu.be/LaBio7O9KJo

https://youtu.be/LaBio7O9KJo

Fundamental Analysis For Novices – House Price Index

Welcome to the educational video for Fundamental Analysis For Novices. In this session, we will be looking at the House Price Index.


If you are not already doing so, we strongly recommend that you regularly check a reliable economic calendar each day to be forewarned about economic data releases from countries that might affect your open or planned trades.


Economic data releases impact the market in various degrees, and you should pay particular attention to the date of the event, the time, and most importantly, the likely impact it will have, which usually is in 3 degrees, low, medium, and high.


Most calendars will also provide you with the previous data release in each category, the consensus, or the expected data release as analysed by economists and analysts who have come to an average consensus value, and the actual figure which is updated with the data upon release.

Each country releases similar titled economic data into the market, mostly on an embargoed basis, in order not to give traders an advantage and to avoid market manipulation.

Today we are looking at House Price Index!


Here we can see there are two releases due for the 15th June 2020; one has been collated by Rightmove property website for the UK where the numbers are a sample only and are reflected of the period for May and are devised on a month by month basis and the second which is updated on year by year basis. and the other
The impact level for this type of indicator is typically low and does not usually cause market volatility.

 

So what is the House Price Index, and how do you trade it?

The house price index or HPI, as it is also known, measures the price change in the value of residential houses. The data is typically released into the market on a month-by-month basis or updated on an annual basis.


The data, in all cases, is calculated as a percentage figure from a specific start date. In most cases, the statistical method to calculate price swings is called a hedonic regression model.

In the UK, the HPI is released by the Office for National Statistics. In the United States, the HPI is published by The US Federal Housing Finance Agency, where it measures those family homes that have been sold or refinanced in 363 metropolises. Not to be confused with the FNC Residential price index as published by FNC Incorporated, which records value in non-distressed home sales and is widely used by the mortgage sector as a tool to gauge price movements.

The basic rule of thumb is that house prices that are falling in value are reflective of an economy that is struggling and whereby perhaps unemployment is high, wages are low, and the growth of an economy is slowing, stalled, or in recession. This would have a negative impact on the currency of a particular country. Therefore you might find the value of a local currency falling in value in terms of exchange

rates.
On the flip side, a higher than expected HPI number might be reflective of an improving economy, in which case it is better for the local currency, and you might find it increasing in value on exchange rates.
Always compare the actual HPI release number to the consensus value and the previous release and remember that markets do not like shocks. Deviations from the consensus and previous releases can cause market instability.

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Forex Assets

Asset Analysis – Trading The ‘CHF/PLN’ Forex Exotic Pair

Introduction

Introduction

Introduction

CHF/PLN is the abbreviation for the Swiss Franc alongside the Poland złoty. It is categorized as an exotic currency pair that usually has high volatility and low trading volume. Here, the CHF is the base currency, and the PLN is the quote currency. CHF is the official currency of Switzerland, whereas PLN is the national currency of Poland.

Understanding CHF/PLN

The current value of the pair represents the value of PLN that is corresponding to one CHF. It is quoted as 1 CHF per X PLN. For example, if the value of this pair is 4.1627, these many units of PLN are required to buy one Swiss Franc.

CHF/PLN Specification

Spread

In trading, the difference between the bid-ask price is described as the spread. Spread normally fluctuates from broker to broker. The estimated spread on ECN and STP accounts is given below.

ECN: 49 | STP: 54

Fees

There is a small fee or payment charged by the broker for each trade a trader does. This varies on both types of accounts and broker. There are zero fees charged on STP accounts, but a few extra pips are charged on ECN accounts.

Slippage

The difference between the cost at which the trader executed the trade and the cost he received from the broker is termed as Slippage. Fundamentally, Slippage hangs on two factors – Broker’s execution & market’s volatility

Trading Range in CHF/PLN

The trading range is a tabular interpretation of the minimum, average, and maximum pip movement in a different timeframe. Having expertise about this is necessary because it helps in handling risk as well as determine the appropriate times of the day to enter and exit a trade with marginal costs. Below is a table that illustrates the minimum, average, and maximum volatility (pip movement) on several timeframes.

Procedure to assess Pip Ranges

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

CHF/PLN Cost as a Percent of the Trading Range

The number of pips the currency pair change in various timeframes is demonstrated in the table above. With this, we apply these values to get the cost percentage when the volatility is minimum, average, and maximum. This cost percentage will help us sort out an ideal time of the day to enter trades.

The understanding of the cost percentage is easy. If the percentage is above average, then the cost is higher for that specific timeframe and range. If the percentage is at a low level, then the cost is comparatively low for that timeframe and range. Note that, the total cost on a particular trade is calculated by combining the spread, Slippage, and trading fee.

ECN Model Account

Spread = 49 | Slippage = 5 | Trading fee = 8

Total cost = Slippage + Spread + Trading Fee = 5 + 49 + 8= 62 

STP Model Account

Spread = 54 | Slippage = 5 | Trading fee = 0

Total cost = Slippage + Spread + Trading Fee = 5 + 54 + 0 = 59

The Ideal way to trade the CHF/PLN

There are specific times a trader must deal with their trade to decrease both hazard and cost on the trade. This can be made feasible by understanding the above tables. Entering and exiting trades during any time of the day is highly not advised.

The percentages are most elevated in the min column. This means the cost is fairly high when the volatility of the market is low. For instance, on the 1H timeframe, when the volatility is 27 pips, the cost percentage is 218.5%. Meaning, one must bear high costs if they open or close trades when the volatility is around 27 pips. So, ideally, it is proposed to trade when the market volatility is above the average mark.

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Forex Course

131. Timing Your Entry While Trading Divergence

Introduction

Introduction

Introduction

Divergence is a powerful tool in trading. It works like a charm when used correctly. However, traders enter right after they spot a divergence, which is an incorrect method to trade it. Early entry can lead to spikes or wrong comprehension; as a result, executing your stop loss. Thus, precise entries are as crucial as understanding divergence. This shall go over some tips and tricks to not enter early in a trade.

The Double Confirmation Rule

When we spot a regular divergence, the market does not reverse immediately. The majority of the time, it goes through a consolidation phase. And patiently waiting through the price action is necessary. Here is an example that explains how long a trader must wait before taking the trade.

Below is the chart of GBP against CAD on the 15mins time frame. Reading from the left, the market was in a downtrend, making lower lows and lower highs. In the second lower low, we see that the indicator failed to make a lower low but made a higher low instead. There are several ways through which the market can reverse its direction. The double confirmation rule is for the situations when the market holds above the S&R level (purple ray).

According to the rule, the price must successfully hold above the S&R level two times. This is a confirmation that the S&R level has potentially turned into Support. So, when the rule is satisfied, you can place a buy order right at the S&R level. A logical Stop Loss must be maintained a few pips below the start of the buyer who broke above the S&R. Whereas a safe Take Profit can be at a strong Supply area.

The Spike confirmation

The previous case dealt when the scenario when the market held above the S&R level. Conversely, this is a scenario when the market holds below the S&R. Let us understand the spike confirmation entry with an example from real charts. Below is the chart of EUR against USD on the 15mins time frame. Initially, the market was trending down with lower lows. From the most recent low, we see that the price moved down, but the MACD indicator is faced up, indicating divergence.

When the buyers began to pull back, they were unable to pass through the S&R level (purple line), unlike the previous example. Thus, we cannot apply the double confirmation rule. Instead, the spike confirmation is applied. The spike confirmation is applied for scenarios when the market holds below the S&R level. According to it, one must wait until the market attempts to make a lower low and fails. After the failure, one can prepare to go long.

The Logic

When the market holds below the S&R level, it means that the sellers are not done with their business. The job of a seller is to make lower lows by holding below the S&R. So, though there is divergence, we cannot ignore the fact that the sellers are still in the game. Thus, we must wait for the sellers to attempt to make a lower low. And if the price shoots right back up, it signifies that the sellers are done with their business, and the buyers have taken over the market.

Once the buyers come up strong, you can trigger a buy at the most recent S&R (dotted line). The Stop Loss will go right below the area where the sellers had failed. Take Profit can be at a potential supply area. But in this case, we see a divergence when the price made a higher high. Thus, the positions must be liquidated in the area shown in the chart.

Note that the same principles can be applied to an uptrend as well. These were only a couple of effective ways to enter using divergence. As you gain experience, you come with your own rules too.

[wp_quiz id=”78246″]

Categories
Forex Daily Topic Forex Fundamental Analysis

Understanding ‘Industrial Production Index’ & Its Relative Impact On The Forex Market

What is the Industrial Production Index?

What is the Industrial Production Index?

What is the Industrial Production Index?

Industrial Production Index or IPI, as it is commonly called, is an index that tracks manufacturing activity in different sectors of the economy. The IPI number measures the industrial production for the period under consideration, usually a month. IPI is a key economic indicator of the manufacturing sector of the economy. It measures the real output in the mining, electric, and gas industries, relative to the base year.

How is IPI calculated? 

Industrial Production is expressed as an index relative to the base year, which is 2012. They do not express absolute production numbers or volume, but the percentage change in production relative to 2012. The parameter taken into account is often varied, including physical inputs and outputs such as tons of iron, or inflation-adjusted sales figures, and when these parameters are not available, hours logged in by production workers is considered. This data is obtained from industry associations and government agencies, and the index value figure is obtained after incorporating these numbers in the Fisher-Ideal formula.

Within the IPI index, several sub-indices provide a detailed look at the production levels of highly specific industries. One can find the monthly production data of residential gas sales, ice cream, carpet and rug mills, spring and wire products, audio and video equipment, and paper in these sub-indices. The indices are seasonally adjusted, and sometimes the format is unadjusted.

Limitations of the IPI

While GDP estimates show that the manufacturing sector has picked up, the IPI doesn’t. In such cases, the question arises, which of the two should we believe. The selection of items for measuring the production output has remained the same for many years. This will have implications on the index value. IPI growth will have a certain directional bias. The recommendation has always been to make it more dynamic. All they are saying is to revise it more frequently. But the officials have been only pushing the dates forward.

Another limitation is in the selection of the base year. The 2011-2012 base year series shows faster growth than the previous one, 2004-2005 base year. Therefore, it is suggested to use the old methodology alongside the new method.

Analyzing the IPI 

The IPI data is particularly useful for money managers and investors who are a part of the business. At the same time, the composite index is an important macroeconomic indicator for economists who analyze the impact of the numbers on the economy and industry. Fluctuations within the industrial sector account for variation in the overall economic growth. The monthly metric keep investors informed about the shifts in the production levels.

At the same time, IPI ignores the most popular economic output measure, the Gross Domestic Product (GDP). GDP calculates the price paid by the end-user, so it includes the value-added in the retail sector. This is ignored by IPI. Another observation is that the industrial sector is losing its share in the GDP of a country; for instance, it made up less than 20% of the GDP of the U.S. economy as of 2016.

Along with IPI, capacity utilization is another useful indicator that investors analyze to assess the demand scenario. Low capacity utilization or overcapacity, in other words, signals weak demand. Policymakers read it as a need for fiscal or monetary stimulus in the economy. Investors read it as a sign of coming downtrend for the currency and the stock market. High capacity utilization, on the other hand, acts as a warning signal that the economy is overheating, suggesting the risk of price hikes and asset bubbles. Policymakers react to such threats with interest rate hikes or fiscal austerity. There is also a possibility that this could ultimately result in a recession.

Impact on Currency

Industrial production figures are directly proportional to the value of a currency. When Industrial Production is high, it means economic activity is improving in the country that directly contributes to the GDP. A rate of GDP leads to an appreciation in the currency value. However, an effect on the overall economy is felt when industrial production is increasing each month. An improvement in the production output for one month has no impact on the currency; the average value of at least three months makes a difference. The IPI is an early indication of growth in the manufacturing sector, which is why it is closely watched by investors and traders.

Sources of information on Industrial Production Index

The Federal Reserve Board publishes the industrial production index (IPI) every month, which is released approximately in the 2nd week of the month. The revisions in the method of calculation, if any, are released at the end of every March. As it is an important indicator of growth in the manufacturing sector, most open-source economic websites keep track of their respective countries’ data.

GBP (Sterling) – https://tradingeconomics.com/united-kingdom/industrial-production

AUD – https://tradingeconomics.com/australia/industrial-production

USD – https://tradingeconomics.com/united-states/industrial-production

CAD – https://tradingeconomics.com/canada/industrial-production

EUR – https://tradingeconomics.com/european-union/industrial-production

JPY – https://tradingeconomics.com/japan/industrial-production

The Industrial Production Index (IPI) is an important economic indicator published by the Federal Reserve Board (FRB) of the United States that measures manufacturing, mining, and utilities’ real production output. The indices are computed mainly as fisher indices with more weightage on the annual estimates of value-added. The fisher methodology only preserves the growth information, which is why the value of the base year, i.e., 2012, is randomly set to 100. This index, along with other industrial output indexes and construction, accounts for the bulk of the total output variation throughout the business cycle.

Impact of the ‘Industrial Production Index’ news release on the Forex market

In the previous part of the article, we understood the significance of Industrial production fundamental indicators in an economy. Now let’s discuss the impact of the Industrial Production Index news announcement on the value of a currency and witness the change in volatility due to the news release. As discussed previously, Industrial Production measures the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities.

For instance, Industrial Production measures the output of businesses in the industrial sector of the United States economy, where the manufacturing sector accounts for 78 percent of total production. Some of the biggest segments of this sector are Chemicals, food, drinks and tobacco, machinery, computer and electronics, motor vehicles, and others.

Now let’s analyze the Industrial Production data of the United States released in June. As we can see in the below image, Industrial Production in the United States increased to 1.4% percent in May, which was much higher than the previous month. The Industrial Production numbers in April and May are largely influenced by COVID-19. Let us find out the reaction of the market to this data.

EUR/USD | Before the announcement

Let us start with the EUR/USD currency pair witness the change in volatility due to the news announcement. The above image shows the state of the chart before the news announcement, where we see that the market was in an uptrend and recently has laid out signs of reversal.

EUR/USD | After the announcement

After the news announcement, the price moves higher, and volatility slightly increases to the upside. However, the price does not go much higher, and the major trend to the downside continues. Thus, it would be right to say that the news announcement had a positive impact on the U.S. dollar.

USD/JPY | Before the announcement

USD/JPY | After the announcement

The above images represent the USD/JPY currency pair, where we see that the market is moving within a ‘range’ before the news announcement. Just when the Industrial production numbers are to be released, the price is at the top of the ‘range,’ and volatility is high. Depending on the impact of the news release, we take a suitable position in the currency pair.

After the news announcement, the market moves lower by a couple of candles, as seen in the above image, and gets retraced by strong buyers who take the price above the ‘news candle.’ But since the price is again at resistance, it eventually moves lower and reaches the support. By this price action, we can say that the currency pair becomes highly volatile after the news announcement.

NZD/USD | Before the news announcement

NZD/USD | After the news announcement

The above price charts belong to NZD/USD currency pair, where we see that before the news announcement, the price was moving higher, and now it has displayed a strong reversal pattern in the market, indicating a reversal to the downside. If the news release does not change the underlying price action pattern, one can take a risk-free ‘short’ position in the currency pair. This is how technical analysis is used in conjunction with fundamental analysis.

After the news announcement, the price moves higher by a little, and ultimately the reversal pattern dominates the market, and price makes a ‘lower low.’ Therefore, the slight bullishness that was witnessed due to the news announcement was of significance, and the market crashed.

We hope you got the gist on what the ‘Industrial Production Index’ is and its impact on the Forex price charts after its news release. In case of any questions, let us know in the comments section below. Cheers!

Categories
Forex Market Analysis

Daily F.X. Analysis, June 23 – Top Trade Setups In Forex – PMI Figures in Highlights! 

On the news front, we need to keep an eye on Manufacturing and Services PMI figures, which are expected to drive movement in the EUR/USD and EUR/CHF pairs. Besides, the U.S. Flash Manufacturing PMI will be in focus for the precious metal gold.

On the news front, we need to keep an eye on Manufacturing and Services PMI figures, which are expected to drive movement in the EUR/USD and EUR/CHF pairs. Besides, the U.S. Flash Manufacturing PMI will be in focus for the precious metal gold.

On the news front, we need to keep an eye on Manufacturing and Services PMI figures, which are expected to drive movement in the EUR/USD and EUR/CHF pairs. Besides, the U.S. Flash Manufacturing PMI will be in focus for the precious metal gold.

Economic Events to Watch Today 

 

 

EUR/USD – Daily Analysis

The EUR/USD prices were closed at 1.12612 after placing a high of 1.12697 and a low of 1.11684. Overall the movement of EUR/USD remained bullish throughout the day. The EUR/USD pair rose on Monday and broke the bearish streak of the previous four days on the back of U.S. dollar broad-based weakness.

The U.S. 10-year Treasury yield fell to 0.676%, its lowest since June 15, this exerted a negative impact on the U.S. dollar and rose EUR/USD pair on Monday. The Wall Street Journal’s main indexes, Dow Jones rose by 0.45%, and Nasdaq rose by 0.80% on increased risk appetite, which eventually weakened the greenback.

The safe-haven demand rose after an increased number of reported infection cases throughout the world, failed to hit EUR/USD pair. The safe-haven rallies were too short-lived that it failed to raise the U.S. dollar; hence, the EUR/USD pair followed its direction.

The EUR/USD gained traction on Monday on the back of E.U. coronavirus measures because Eurozone has been perceived as a region that handled the coronavirus pandemic relatively well than the U.K. and the U.S. as the methods to control the economy from falling by the U.K. and the U.S. have been criticized. Despite the delayed decision on the distribution of the latest fiscal policy of the Eurozone, the pair EUR/USD managed to find its demand based on the fact that the policy will be agreed on by member states eventually.

On the data front, from Eurozone, the Consumer Confidence over the Eurozone economy remained flat with the expectations at -15 for June. From America, the Existing Home Sales in May dropped to 3.91M from the expected 4.15M and weighed on the U.S. dollar. The weak U.S. dollar against the Euro also helped the pair EUR/USD to post gains. The dollar was stronger last week, but due to concerns over the impact of coronavirus over the U.S. economy, the U.S. dollar struggled to hold its ground.

The optimism over the Eurozone handling of the coronavirus pandemic kept the pair EUR/USD pair higher. This also means that if Eurozone outlook became gloomy, then the pair EUR/USD could lose its traction.

On Tuesday, the PMI projections from Eurozone will be released, giving a better idea to investors how well the Eurozone economy was performing in the given pandemic circumstances. If data came disappointing, then the pair EUR/USD would suffer on the back of the Eurozone’s weak outlook, which would eventually raise the appeal for the U.S. dollar as well.

Daily Support and Resistance

  • R3 1.1224
  • R2 1.1211
  • R1 1.1193

Pivot Point 1.1181

  • S1 1.1163
  • S2 1.1151
  • S3 1.1133

EUR/USD– Trading Tip

The EUR/USD is trading in a sideways range of 1.1278 – 1.1250 level. On the higher side, a bullish breakout of 1.1278 can lead EUR/USD prices towards 1.1300 and 1.1325 level. While the bearish breakout of 1.12500 can lead EUR/USD prices towards 1.1230 and 1.1205. Besides, the leading indicators are mixed; for example, the RSI is suggesting a selling bias, while the MACD is indicating a bullish bias. Let us look for buying trades over the 1.1245 level today. 

GBP/USD – Daily Analysis

The GBP/USD closed at 1.24699 after placing a high of 1.24768 and a low of 1.23346. Overall the movement of GBP/USD pair remained bullish throughout the day. After posting losses for four consecutive days, GBP/USD pair rose on Monday and recovered all of its previous day’s losses amid U.S. dollar weakness and Brexit hopes.

The latest meeting of PM Boris Johnson with French PM Emmanuel Macron and E.C. President Ursula von der Leyen last week gave some hope to Brexit when the E.U. agreed that the U.K. would not extend the transition period. Both sides reported that the UK-EU trade deal was possible as they pledged to prioritize the Brexit-trade deal.

The optimism after that meeting concerning Brexit has eased the selling pressure on the British Pound. Furthermore, the U.K. government has planned to ease the restrictions concerning COVID-19 included social distancing; it will allow the restaurants and puns to reopen and increase their capacities.

This report also helped the British pound gain traction as reopening restaurants will help the economy get back on track. On the data front, at 15:00 GMT, the CBI Industrial Order Expectations for June came in as -58 against the expected -50 and weighed on British Pound, which eventually exerted pressure on GBP/USD.

On the other hand, at 19:00 GMT, the Existing Home Sales in May were reported as 3.91M against the forecasted 4.15M and weighed on the U.S. dollar, which gave a push to GBP/USD prices on Monday. U.S. dollar opened this week with a softer tone due to decreased hopes of quick U.S. economic recovery after the renewed cases of coronavirus. The market has shifted its viewpoint from the fears of the second wave of coronavirus to the concerns about economic recovery, and this made the U.S. dollar weaker on Monday.

Meanwhile, Japan gave the U.K. just six weeks to strike a post-Brexit deal, if accomplished, it would be one of the fastest trade negotiations in history, along with Britain’s first trade deal in more than 40 years.  

Daily Support and Resistance

  • R3 1.2378
  • R2 1.2369
  • R1 1.2357

Pivot Point 1.2348

  • S1 1.2337
  • S2 1.2327
  • S3 1.2316

GBP/USD– Trading Tip

The GBP/USD is trading bullish at a level of 1.2479, holding right above 50 periods of EMA, which is likely to extend support at a level of 1.2445. On the downside, the GBP/USD may find support around the value of around 1.2440, and the continuation of a selling trade can lead Sterling prices to be further lower until 1.2378 level. The MACD and RSI are holding around in a buying zone right now, and the recent formation of a bullish engulfing candle can lead to GBP/USD prices further higher until 1.2511 level.

USD/JPY – Daily Analysis

The USD/JPY was closed at 106.899 after placing a high of 107.009 and a low of 106.728. Overall the movement of USD/JPY remained bullish throughout the day. After falling for three consecutive days, USD/JPY pair surged on Monday and posted gains on the back of decreased U.S. dollar strength against Japanese Yen.

The safe-haven currency Japanese Yen was stable due to the rising fears of coronavirus second wave and renewed restrictions in some countries to prevent the virus from spread again. World Health Organization said that 183,000 new cases of coronavirus were reported on Sunday, which indicated the renewed spread of the virus throughout the world. The organization said that the virus was deadly, and there were no signs of virus losing its potency.

This statement gave a surge to safe-haven demand amid rising fears of the second wave of coronavirus, and hence, Japanese Yen gained traction and weighed on USD/JPY pair, and the pair lost some of its daily gains. A large number of increased cases were reported by North & South America, which exerted negative pressure over the outlook of the U.S. economy, and hence, the U.S. dollar remained consolidated on the day. The Federal Reserve officials had already warned that if a pandemic was not brought under control, then the jobless rate could rise again.

However, despite the U.S. dollar weakness and Japanese Yen’s strength, USD/JPY barely moved and remained consolidated mostly in the day. The U.S. Dollar Index, which measures the value of the U.S. Dollar against the basket of six currencies, fell by 0.1% on the day.

On the other hand, E.U. leaders were aiming to reach an agreement before summer break on the attest stimulus package distribution, which they were failed to reach in the last virtual meeting. This time hopefully, they will conduct a physical meeting in July or early August. 

The latest stimulus package from E.U. commission in aid to fight against coronavirus pandemic crisis to E.U. members has already given strength to Euro, the rival of the U.S. dollar. It has also weighed on the U.S. dollar a bit, which is why the agreeability of E.U. member states on this package holds importance over the U.S. dollar movement.

However, given the fundamentals & news, everything was against the U.S. dollar, and despite this, USD/JPY pair moved in an upward direction, which indicated that investors took profit from their positions, which caused a surge in USD/JPY prices.

Moreover, some good news from China that it wanted to comply with phase one deal requirements and showed a willingness to buy more U.S. farm products also helped the U.S. dollar to gain its strength back.

Adding to the optimism and USD/JPY gains was the news that Donald Trump held the sanctions on Chinese officials over Uighurs only to pursue a trade deal. He said that a great deal means that he could not impose further sanctions on China as he wanted the phase one deal to complete.

Daily Support and Resistance    

  • R3 107.13
  • R2 107.05
  • R1 106.94

Pivot Point 106.85

  • S1 106.74
  • S2 106.65
  • S3 106.54

USD/JPY – Trading Tips

The USD/JPY is trading with a bullish bias at 107.220 level, but the overall trading range of 107.620 – 106.630 remains intact. It failed to break above an immediate resistance level of 107.580. This level is working as resistance for USD/JPY, and the 50 periods EMA is also prolonging strong resistance at 107.200 zones while immediate support lingers nearby 106.600. The USDJPY bearish trend can trigger a sell-off unto the next support level of the 106.017 level today. Let’s wait for the USD/JPY to test the 107.650 level before entering a sell in the USD/JPY. 

Good luck! 

Categories
Forex Options

FX Options Market Combined Volume Expiries for 23rd June 2020

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

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

FX option expiries for June 23 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– USD/JPY: USD amounts

  • 106.73 500m

USDJPY had a recent break out from a wedge formation, but the upside break was limited to a mere 26 pips, suggesting a lack of buying power. The pair is overbought on the one hour chart and ripe for a pullback. The 106.75 option maturity remains in play with possible further downside price action on the cards.

– EUR/GBP: EUR amounts

  • 0.9010 447m

EURGBP is in a consolidation phase with a downside bias. The pair is overbought on the one-hour chart. Price action is tilted to the downside and a test of the key 0.90 level looks to be on the cards, thus leaving our option maturity in play.

Watch out for PMIs form the Eurozone, UK and USA later which could affect both of the above.

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

As you can see on the charts we have also plotted the expiration levels at the various exchange rate maturities and we have also labelled in red, orange and blue. Therefore, if you see option expiry exchange rates labelled in red these should be considered in-play, because we believe there is a greater chance of the expiry maturing at these levels based on technical analysis at the time of writing. There is still a lesser possibility of a strike if they are in orange and so these are ‘in-play’ too. However, if we have labelled them in blue, they should be considered ‘not in-play’ and therefore price action would be unlikely to reach these levels, which are often referred to as Strikes, at the time of the 10 AM New York cut.

Our technical analysis is based on exchange rates which may be several hours earlier in the day and may not reflect price action at the time of the maturities. Also, we have not factored in economic data releases or keynote speeches by policymakers, or potential market volatility leading up to the cut.

Although we have added some technical analysis 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 AM Eastern time.

If you want to learn how forex option expiries affect price action in the spot FX market see our educational article by clicking here: https://bit.ly/2VR2Nji

DISCLAIMER: Please note that this information is for educational purposes. Also, the maturities will look more or less likely to become a strike at 10 AM NY time due to exchange rate fluctuations resulting in a different perspective with regard to technical analysis, and also due to upcoming economic data releases for the associated pairs.

Categories
Forex Price Action

Make Full Use of a Strong Reversal Candle

An engulfing candle makes a strong statement about the price reversal. The longer the body, the stronger the statement is. In today’s article, we are going to demonstrate an example of the daily-H4 chart combination trading, where the daily chart produces a bearish engulfing candle with a long bearish body. We find out what it has to offer to the sellers in the end.

An engulfing candle makes a strong statement about the price reversal. The longer the body, the stronger the statement is. In today’s article, we are going to demonstrate an example of the daily-H4 chart combination trading, where the daily chart produces a bearish engulfing candle with a long bearish body. We find out what it has to offer to the sellers in the end.

An engulfing candle makes a strong statement about the price reversal. The longer the body, the stronger the statement is. In today’s article, we are going to demonstrate an example of the daily-H4 chart combination trading, where the daily chart produces a bearish engulfing candle with a long bearish body. We find out what it has to offer to the sellers in the end.

The chart shows that the price produces a bearish engulfing candle having a tiny lower spike. The body of the candle is a long one closing well below the last bullish candle. This is one good-looking bearish engulfing candle. Since it is the daily chart, the daily-H4 chart combination traders may flip over to the H4 chart to look for short entries.

The above figure shows the H4 chart. We can see that the last candle comes out as a bullish inside bar. It means the price in the H4 chart may consolidate. The sellers are going to wait to get a bearish reversal candle to go short in the pair.

The last candle comes out as a bearish engulfing candle closing well below consolidation support. The sellers may trigger a short entry right after the last candle closes by setting stop-loss above consolidation resistance and by setting take profit with 1R. Let us now find out how the entry goes.

The next two candles come out as bearish candles. However, the price does not head towards the South as expected. Moreover, the last candle comes out as a doji candle having a long upper shadow. The sellers are to wait for the price to hit the target. The last candle does not convey a good message to the sellers.

Here it comes. The last candle hits the target of 1R. The reversal candle in the daily chart is a very strong one. Do the sellers get anything extra out of it? Let us proceed to the next chart to see what the price does in the chart.

The price makes a long bearish move. It heads towards the South upon having consolidation. The sellers can make a handful of pips by eying in the chart. One of the reasons may be the bearish reversal candle in the daily chart. As far as a candlestick pattern is concerned, an engulfing candle is the most reliable reversal pattern. When you get an engulfing candle like the one we have seen here, it does have a lot to offer. Okay, here is a question. What do you see in the H4 chart here? Yes, the last candle comes out as a strong bullish engulfing candle. This has a lot to offer to the H4-H1 chart combination traders. Therefore, if you are an H4-H1 combination trader, flip over to the H1 chart and make full use of it.

Categories
Crypto Market Analysis

Daily Crypto Review, Jun 23 – Bitcoin Logo and Name Trademarked. Defender of Bitcoin or Just Another Scammer?

The crypto market has spent the past 24 hours testing (and surpassing) its immediate resistance levels. Bitcoin is currently trading for $9,605, which represents an increase of 2.21% on the day. Meanwhile, Ethereum gained 3.06% on the day, while XRP gained 0.06%.

The crypto market has spent the past 24 hours testing (and surpassing) its immediate resistance levels. Bitcoin is currently trading for $9,605, which represents an increase of 2.21% on the day. Meanwhile, Ethereum gained 3.06% on the day, while XRP gained 0.06%.

The crypto market has spent the past 24 hours testing (and surpassing) its immediate resistance levels. Bitcoin is currently trading for $9,605, which represents an increase of 2.21% on the day. Meanwhile, Ethereum gained 3.06% on the day, while XRP gained 0.06%.

DigiByte took the position of today’s biggest daily gainer, with gains of 24.92%. Flexacoin lost 15.62% of its daily value, making it the biggest daily loser.

Bitcoin’s dominance level stayed at the same place since our last report, with its value currently at 65.28%. This value represents a 0.05% difference to the upside when compared to yesterday’s value.

The cryptocurrency market capitalization increased when compared to yesterday, with the market’s current value being $273.19 billion. This value represents an increase of $7 billion when compared to the value it had yesterday.

What happened in the past 24 hours

Bitcoin defender or a scammer? Bitcoin name logo trademarked

The Bitcoin name and logo have been trademarked in Spain by Ignacio Rubio Menéndez, a compliance expert and lawyer. He explained that he now owns the logo and the word ‘bitcoin’ that is registered at the national level. When asked why he bothered with doing this, he explained that he wants to protect Bitcoin, at least in Spain. He claims he will stand up to anyone that will try to abuse the logo or the name of the cryptocurrency he bases his business on.

Whether he will use his (now) right justly or abuse it, only time will tell.

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

The largest crypto by market capitalization spent the past 24 hours testing its immediate resistance level of $9,580. In fact, there was no actual “testing,” as Bitcoin skyrocketed and went past the resistance level in an instant. The move passed through $9,735 as well, but quickly came back below it. Bitcoin is now trying to find a price to consolidate at, and it will most likely test $9,580 as a support level.


Key levels to the upside          Key levels to the downside

1: $9,735                                 1: $9,580

2: $9,870                                 2: $9,251

3: $10,010                                3: $9,120

Ethereum

Ethereum followed in the footsteps of Bitcoin and used the momentum it created to push its price past the $240 level. On top of that, the price gain it made surpassed Bitcoin by half a percent. The second-largest cryptocurrency by market cap stopped its bullish move at around $247 and then started consolidating slightly below that price. The $240 level will be tested in the near future, so traders can expect a solid and easy trade, in whichever direction ETH goes.


Key levels to the upside          Key levels to the downside

1: $251.4                                 1: $240

2: $260                                    2: $228

3: $225.4

Ripple

Unlike Bitcoin and Ethereum, XRP did not have such a good day. While the price technically did end up in the green when compared to 24 hours ago, the price gain is negligible. The third-largest cryptocurrency by market cap didn’t have enough buying pressure to pass the $0.19 resistance level it fell under a couple of days ago.


XRP’s volume is extremely low, meaning that traders don’t really have many opportunities to trade it.

Key levels to the upside          Key levels to the downside

1: $0.19                                      1: $0.178

2: $0.2                                  

3: $0.205

 

Categories
Forex Education

Setting up a Trading Strategy using Candlesticks

Introduction

Introduction

Introduction

Candlestick Analysis is likely the most popular analysis method to read the market and allow the market analyst to understand the traders’ sentiment over time.

In this educational article, we will review some candlestick patterns, which could be used as technical formations to spot market turn, recognize and enter early in the new trend.

Candlesticks Basics

Candlesticks use the same information that OHLC bars; however, candlestick charts show the market information differently. The components of candlesticks are the open price, high, low, and close in a specific range of time, such as weekly, daily, and intraday. The following figure represents the structure of a candlestick in a bullish and bearish context.

In the previous figure, we observe that the range between the open and close prices of the candlestick forms the body of the candle. If the close of the session is higher than the open, then the candle is bullish (white). If the close price level is lower than the open price level, then the candle will be bearish (Black).

The range of the prices that moves above and below the body of the candle is called the shadow or wick, whose length can be from very short to quite long. The span between the high and low of the candle reveals how volatile it has been the trading session or intraday period.

Candlesticks Formations to Trade

Candlesticks formations provide a variety of information concerning the market movements. For instance, it can reveal when the price is in a slowdown, in trend, or soon to reverse in the next trading sessions. The understanding of these formations is essential to chart analysis because candlesticks charts can be analyzed without lag.

Hammer and Hanging Man

A Hammer is a candlestick pattern that shows a small body and a long shadow, with its close is near the high of the day. When the Hammer is located at the end of a bearish trend, the Hammer is considered a bullish reversal signal.

The Hanging Man is similar to the Hammer, but it appears at the end of an uptrend; this pattern reveals the possibility of a reversion of the uptrend.

Both Hammer and Hanging Man should have a large shadow compared to its body. The shadow extension will be indicative of the volatility of a trading session where the price plummeted and then recovered to close the session at the top of the trading range.

Belt-Hold Pattern

The Bullish Belt-Hold pattern is a formation in which the opening price is at the low of the session. Prices start to rally and close near the top of the session’s range with higher momentum. The opposite occurs on the bearish pattern, where the price opens at the high of the range and closes near the low.

If the next open is higher than the close of the bearish belt-hold candle, then it is likely that the price will continue moving higher. If the price opens below the bullish belt-hold close, then it is likely the market will continue moving bearish.

Engulfing Pattern

The engulfing pattern is a formation that requires a pair of candlesticks to complete the formation. The bullish engulfing pattern is a formation that suggests the reversion of the downtrend and surges at the end of a bearish trend. The opposite case occurs when the market moves in an uptrend. An engulfing pattern is one of the most powerful of the candlestick reversal signals.

The formation is completed once that large bullish candlestick body completely covers the body of a smaller candle of the previous trading session. The larger is the timeframe where the engulfing pattern appears, the more significative will be the reversal. The following figure represents the bullish and bearish engulfing pattern.

Harami Pattern & Harami Cross

The harami pattern, also known as an inside bar, requires two candlesticks to complete the formation—however, the harami pattern, or inside bar, the weakest of the reversal patterns.

The harami pattern is a formation with a small body that fits entirely into a large body candle. This pattern is indicative of the reversion of the trend, and its importance grows if the formation appears after a prolonged trend. The harami cross is a particular case of the harami pattern; the pattern consists of almost identical opening and closing levels.

The Doji Pattern

The doji pattern appears when the trend moves in an exhaustion stage. This pattern is characterized by a vanishing body, where the session’s open and close prices are almost identical.

The importance of a doji grows after an extended uptrend or downtrend. If following a doji, it appears an engulfing pattern, the possibility of a potential reversal move will increase.

Piercing Pattern and Dark-Cloud Cover

The piercing formation has similarities with the bullish engulfing pattern and is characterized by its appearance at the bottom of a downtrend. The main difference from the bullish engulfing pattern is that the bullish candle on the Piercing Pattern does not fully cover the previous candlestick. Instead, it closes above the 50% level.

The dark cloud cover is a bearish reversal formation. In this case, the bearish candle is a big body candlestick that covers at least 50% of the previous trading session’s candle. The strength of the reversal signal will be stronger, as more extension is covered.

Morning Star and Evening Star

The star candlestick pattern is a formation where a price gap separates a small body candle from the body of the previous candlestick. The star could be a doji or a narrow range candle. This formation warns the market analyst of an imminent reversion of the trend.

A Morning Star pattern is a bullish reversal formation that appears in the bottom of a downtrend and requires three candlesticks. The first candle is a powerful bearish candle with a body of wide range. The second candle corresponds to the star, and it is a candlestick of a narrow range, separated by a gap with the previous candle. The third candle is a bullish candle with upward momentum. The body of this candle should surpass 50% of the first candlestick.

The Evening Star pattern is a bearish reversal formation that appears at the end of a bullish trend. similarly to a morning star pattern, the range of the third candle will be indicative of the strength of the reversal movement

Conclusions

In this educational article, we reviewed seven candlesticks patterns that show trend reversals in a specific range of time. One of the pros of these candlestick patterns is that it is not a lagging indicator, and its analysis could provide the information the market sentiment without delay.

However, although the candlestick analysis could provide an entry setup, they can not provide a target level by itself. This type of study should be accompanied by complementary techniques to improve the odds of success and determine potential profit targets.

In the following article, we will review the use of chart patterns to determine the trend.

Suggested Readings

  • Fischer, R., Fischer J.; Candlesticks, Fibonacci, and Chart Patterns Trading Tools; John Wiley & Sons; 1st Edition (2003).
Categories
Forex Course

130. How to Effectively Trade Regular Divergence?

Introduction

Introduction

Introduction

The occurrence of divergence is considered by all types of traders, including traders who do not analyze charts without indicators. This is because divergence gives an edge to their trading strategy. In the previous lessons, we interpreted the meaning of divergence and also its different types. In this lesson, we shall put this knowledge into action, where an effective strategy will be discussed.

Trading a regular divergence

To recap a real quick, regular divergence is a type of divergence which indicates a reversal in the market. If it indicates a reversal to the upside, it is referred to as bullish divergence and bearish divergence for a reversal to the downside.

Spotting regular divergence

  1. Find the overall trend of the market.
  2. Mark the lower lows for a downtrend and higher highs for an uptrend on the price charts.
  3. Draw the corresponding movement on your choice of oscillator indicator.
  4. Determine if both prices and indicators are making the same sequences. If they are moving apart from each other, then we conclude that divergence has occurred.

Trade Example

Consider the below chart of AUD/JPY on the 15mins time frame. We can see that the market is in a downtrend making lower lows. For the first lower low in the price, the MACD had a lower low as well. But, for the second lower low in price, the indicator made a higher low. Thus, showing divergence in the market.

Since this is a regular bullish divergence, it indicates a reversal in the market. But, note that divergence does not give a trading signal to buy the security. An indication of a reversal must be based on the strategy. Here are some compelling points to confirm the legitimacy of a divergence.

When divergence occurs in a pair, the first factor is to measure the length and momentum of the down pushes. Comparing the first down push to the second, it is observed that the latter is smaller in length and also took a greater number of candlesticks than the former. This is a considerable indication that the downtrend is weakening.

Secondly, observe what the price does when it reaches the Support & Resistance level (purple ray). We can see that the price touched the purple ray, tried to go below the recent low, but failed to do so. This is another indication of the sellers’ weakening.

Now that the sellers are losing strength, we wait for the other party (buyers) to kick in. In the below chart, we can see the entry of the buyers with one massive bullish candlestick. This becomes our first confirmation that the big buyers are in the market.

However, it is not ideal to buy right when the buyers show up because, at times, the sellers could take over and continue to make lower lows. Thus, to confirm the reversal, the buyers must hold above the S&R level (purple ray). In the below chart, we see that the price came down, tried to go lower the S&R, didn’t succeed, and held above it. Hence, this confirms that the market has prepared for a reversal, and we can go long when the candlestick closes above the purple ray, as shown by the black arrow.

As a result, we see that the market successfully reversed its direction and began to make higher highs.

[wp_quiz id=”77943″]
Categories
Forex Options

FX Options Market Combined Volume Expiries for 22ND June 2020

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

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

FX option expiries for Monday, June 22 at the 10am NY cut

–  EUR/USD (Euro amounts)

  •  1.1200 870m
  •  1.1205 873m
  •  1.1250 858m
  •  1.1300 926m

EURUSD pair is in a bear channel and hovering near the key 1.12 level while overbought on the one hour chart. The economic calendar is light, but watch out for German Buba President Weidmann speech and Chicago Fed before the New York cut.

– USD/JPY (US $ amounts)

  •  108.00 853m

USDJPY pair is testing the resistance line of a wedge shape formation, but the large expiry at 108.00 is out of play.

 USD/CAD (US $ amounts)

  •  1.3600 685m

USDCAD pair faltered to the upside of an ascending channel on the one hour chart and is testing the support line having not conformed to the recent oversold indicator. If the support line holds our option maturity at 1.36 will remain in play.

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As you can see on the charts we have also plotted the expiration levels at the various exchange rate maturities and we have also labelled in red, orange and blue. Therefore, if you see option expiry exchange rates labelled in red these should be considered in-play, because we believe there is a greater chance of the expiry maturing at these levels based on technical analysis at the time of writing. There is still a lesser possibility of a strike if they are in orange and so these are ‘in-play’ too. However, if we have labelled them in blue, they should be considered ‘not in-play’ and therefore price action would be unlikely to reach these levels, which are often referred to as Strikes, at the time of the 10 AM New York cut.

Our technical analysis is based on exchange rates which may be several hours earlier in the day and may not reflect price action at the time of the maturities. Also, we have not factored in economic data releases or keynote speeches by policymakers, or potential market volatility leading up to the cut.

Although we have added some technical analysis 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 AM Eastern time.

If you want to learn how forex option expiries affect price action in the spot FX market see our educational article by clicking here: https://bit.ly/2VR2Nji

DISCLAIMER: Please note that this information is for educational purposes. Also, the maturities will look more or less likely to become a strike at 10 AM NY time due to exchange rate fluctuations resulting in a different perspective with regard to technical analysis, and also due to upcoming economic data releases for the associated pairs.

Categories
Forex Price Action

H1-15M Chart Combination Trading: Mind the Weekend

In today’s lesson, we are going to demonstrate an example of H1-15M chart combination trading. Usually, the H1-15M chart combination trading offers 1:2 risk-reward. However, in this example, the buyers may need to come out with their profit with 1:1 risk-reward. We find out why they shall do that so.

In today’s lesson, we are going to demonstrate an example of H1-15M chart combination trading. Usually, the H1-15M chart combination trading offers 1:2 risk-reward. However, in this example, the buyers may need to come out with their profit with 1:1 risk-reward. We find out why they shall do that so.

In today’s lesson, we are going to demonstrate an example of H1-15M chart combination trading. Usually, the H1-15M chart combination trading offers 1:2 risk-reward. However, in this example, the buyers may need to come out with their profit with 1:1 risk-reward. We find out why they shall do that so.

This is the H1 chart. The price heads towards the North with good bullish momentum. The price breaches the last swing high and continues its journey towards the North upon confirming the breakout. Look at the last candle. It comes out as a strong bearish candle. The buyers are to keep their eyes on the pair to get a bullish reversal candle to go long.

The price makes a long bearish correction. Look at the last candle in the chart. It comes out as a bullish candle. The combination of the previous three candles is not a morning star since the last candle does not close above the bearish candle. Nevertheless, the last candle comes out as a bullish engulfing candle. It is a strong bullish reversal candle. It is time for the buyers to flip over to the 15M chart.

This is how the 15M chart looks like. A bullish candle closing above the last candle’s body would be a good signal to go long in the pair. The buyers must keep their eyes in the chart. Let us proceed to the next chart to find out how it comes out.

Look at the last candle. This is one beautiful bullish engulfing candle closing well above the last candle’s wick. A signal candle like this attracts more buyers and usually brings good liquidity. The H1-15 chart combination traders may trigger a long entry right after the last candle closes by setting stop loss below the support level and by setting take profit with 2R. Let us now flip over to the H1 chart again to see how the trade goes.

The price heads towards the North with good bullish momentum. It hits 1R in a hurry. The last candle comes out as an inside bar, which is the weakest bearish reversal candle. In most cases, H1-15 chart combination trading offers 1:2 risk-reward. The question is whether the buyers keep holding the trade or not. I may mention that it is Friday and only three/four hours to go to shut down the market. I think now you know what buyers should do here. Yes, they should close the trade and come out with the 1R profit. The H1-15M chart combination traders should not keep holding their trade during the weekend. In some cases, it may bring them some extra pips. However, in many cases, it may hurt them badly.

 

Categories
Forex Fundamental Analysis

Significance Of ‘Composite PMI’ As A Forex Fundamental Driver

Introduction

Introduction

Introduction

Composite Purchasing Manufacturing’s Index (PMI) is one of the major indicators of the country’s economic health. It is mainly concerned with the manufacturing and service sectors. The PMI provides information about the current business conditions from the data gathered from the company’s decision-makers, such as analysts and purchasing managers.

The PMI survey of each country consists of a questionnaire for the manufacturing or service sector, which collects the responses from the panel of senior purchasing executives at over 400 companies. The Composite PMI is basically a number that ranges between 0 to 100. The number above 50 represents an expansion compared to the previous reading. A PMI reading below 50 represents a contraction, and a reading at 50 indicates no change.

Calculation of the PMI

As mentioned in the above paragraph, the PMI is a number from 0 to 100, but we need to understand how one arrives at those numbers. The PMI is calculated using the below formula.

PMI = (P1 * 1) + (P2 * 0.5) + (P3 * 0)

Where:

P1 = percentage of answers stating an improvement

P2 = percentage of answers stating no change

P3 = percentage of answers stating a deterioration

The percentage stating deterioration has a zero multiplier; thus, it is always zero, but the larger the value of P3, the fewer the weight of the first two factors, thus lowering the total PMI value. in the case of P3=100% PMI = 0.

Use of Composite PMI

The PMI data is a critical decision-making tool for money managers that influences their investment across sectors to a great extent. Let us take the case of an automobile manufacturer, where the production decisions are based on the new orders it expects from the customers in future months. This will make them buy dozens of parts and raw materials, such as tires and plastics. The inventory rules also drive the amount of production the manufacturer needs to finish to fill new orders and to keep some inventory at the end of the month.

From the supplier’s point of view, the PMI data matter to him the most as well. The parts supplier to a manufacturing company will estimate the amount of demand it might get from these companies based on the PMI. Due to this, the suppliers charge more for their parts. The new orders data is closely related to the Composite PMI. For instance, if the new orders are growing, the manufacturing company may raise the prices of its products and accept the high cost of the parts. A company also uses the Composite PMI to plan its annual budget, supervise staffing levels, and manage cash flow.

The Economic Reports 

The Economic Reports of Composite PMI and related data are published monthly by the Institute for Supply Management (ISM) that is extremely useful for manufacturers and the investment managers. The ISM monitors changes in production levels from month to month and is at the core of the Manufacturing report. This is one of the earliest indicators of economic activity and that investors and economists get regularly. The institute also releases a Semi-annual report in May and December. When the number is rising, investors anticipate a bullish reaction from the market to the data that is seen in the currency and stock market.

Analyzing the data

The PMI data is very easy to analyze, where we only have to look at the number and compare it with the previous readings. A PMI reading above 50 indicates growth or expansion of the manufacturing sector. A reading of 50 indicates that the number of manufacturers reporting good business is equal to those stating business is not good. Another key number to look for is 43.2. If the PMI index has been above this number for a period of time, it indicates an expansion of the overall economy. Any number under 50 indicates a contraction in the manufacturing sector and that most businesses are not expecting good business in the near future.

Impact on the currency 

The composite PMI is closely watched by traders and investors around the world that greatly influences their investment decision. They mainly if the number is below or above the 50 levels, which shows potential contraction or expansion in the economy. If the number is greater than 50 over the last few quarters, it indicates growth in the economy, which drives the currency higher. If the number remains below the 50 mark, it means the economy has entered into a recession. Investors will not be interested in investing in countries where the economy is in a recession, which leads to a depreciation of the currency.

Sources of information on Composite PMI

Composite PMI is available on the official website of the Institute for Supply Management (ISM), which also provides a comprehensive analysis of the same. The data can also be found on some open-source economic websites and financial magazines.

Links to Composite PMI information sources

GBP (Sterling) – https://tradingeconomics.com/united-kingdom/composite-pmi

AUD – https://tradingeconomics.com/australia/composite-pmi

USD – https://tradingeconomics.com/united-states/composite-pmi

EUR – https://tradingeconomics.com/euro-area/composite-pmi

NZD – https://tradingeconomics.com/new-zealand/composite-pmi

JPY – https://tradingeconomics.com/japan/composite-pmi

The Composite PMI is a monthly survey sent to senior executives at more than 400 companies in 19 primary industries. The industries and companies are selected based on their contribution to the GDP and the sector, respectively. The surveys include questions about business conditions and any changes, whether it be improving, no change, or deteriorating. Hence, traders must keep an eye on this data and watch for its official releases.

Impact of the ‘Composite PMI’ news release on the Forex market 

Investors consider Composite PMI as a leading indicator of the economic health of a country. It is extremely for international investors looking to form an opinion on a country. The PMI is also a leading indicator of the growth in the gross domestic product (GDP). When formulating monetary policy, central banks use PMI surveys, which is reflected in the fixing of interest rates.

When it comes to predicting the GDP growth, a reading above 42 is considered a benchmark for economic expansion. In contrast, a reading below 42 indicates that the economy is heading into a recession. Since it is an important indicator for most of the people related to the economy and financial sector, it is bound to have a major impact on the value of a currency.

In today’s lesson, we will analyze the impact of composite PMI on different currency pairs and identify the change in volatility due to the news announcement. We will be looking at the PMI data in the Eurozone that was released in June (May as the reference month). The below image shows the previous, predicted, and latest PMI reading, where we see a big increase in the number compared to the previous month. Let us find out if the market receives the data positively or negatively.

EUR/USD | Before the announcement

Let us start with the EUR/USD currency pair to observe the change in volatility due to the news release. The above image shows the price’s behavior before the news announcement, where we see that the market is a strong uptrend. We will be looking to buy the currency pair after a price retracement to a support or demand level. At this point, we shouldn’t be taking any position in the currency pair.

EUR/USD | After the announcement

After the news announcement, volatility expands to the upside, and the market moves higher. As the PMI data was extremely positive for the economy, traders bought the currency and took the price higher. The PMI data had a positive impact on the currency pair, and the market makes new ‘high.’ One has to be cautious here by not jumping into the market for a ‘buy’ as it is against risk management rules.

EUR/JPY | Before the announcement

EUR/USD | After the announcement

The above images represent the EUR/JPY currency pair, where we see that the price is continuously moving higher with minimum retracements before the news announcement. It means the uptrend is very strong. From a ‘trade’ point of view, a similar approach will be followed here as well as we had in the previous currency pair, where we will be looking to buy the currency pair only a price retracement.

Right after the news is released, the price initially moves higher, but later selling pressure makes the ‘news candle’ to close near the opening. Therefore, we witness volatility in both the directions of the market in this currency pair. We can say that the PMI data did not have a major impact on the currency where the market remains sideways a few minutes after the news release as well.

EUR/AUD | Before the announcement

EUR/AUD | After the announcement

The above charts are that of the EUR/AUD currency pair, where the market shows a strong downtrend signifying a great amount of weakness in the Euro. Recently, the price has shown signs of retracement, and so we can expect a continuation of the down move after noticing trend continuation patterns. Until then, we will see what impact the PMI data makes on the currency pair.

After the news announcement, the price does not move adversely in any direction and remains almost at the same place as it was before. The PMI data has a neutral effect on the currency pair where ‘news candle’ forms a ‘Doji’ candlestick pattern. However, the Euro becomes bullish a few minutes after the news release and markets move higher, nearly reversing the downtrend.

This ends our discussion on ‘Composite PMI,’ and its relative impact on the Forex market post its news release. In case of any questions, please let us know in the comments below. All the best!

Categories
Crypto Market Analysis

Daily Crypto Review, Jun 22 – COVID-19 Test Results Stored on the Blockchain; Ethereum Chasing $240

The crypto market has spent the past weekend being quite stable. Bitcoin is currently trading for $9,351, which represents a decrease of 0.08% on the day. Meanwhile, Ethereum gained 1.25% on the day, while XRP lost 0.08%.

The crypto market has spent the past weekend being quite stable. Bitcoin is currently trading for $9,351, which represents a decrease of 0.08% on the day. Meanwhile, Ethereum gained 1.25% on the day, while XRP lost 0.08%.

The crypto market has spent the past weekend being quite stable. Bitcoin is currently trading for $9,351, which represents a decrease of 0.08% on the day. Meanwhile, Ethereum gained 1.25% on the day, while XRP lost 0.08%.

Compound took the position of today’s biggest daily gainer, with gains of 14.26%. Golem lost 9.21% of its daily value, making it the biggest daily loser.

Bitcoin’s dominance level stayed at the same place since our last report, with its value currently at 65.23%. This value represents a 0.04% difference to the downside when compared to yesterday’s value.

The cryptocurrency market capitalization stayed at almost the same place as yesterday, with the market’s current value being $266.19 billion. This value represents a decrease of $1.78 billion when compared to the value it had yesterday.

What happened in the past 24 hours

COVID-19 testing on blockchain

Blockchain tracking platform called VeChain made a Twitter announcement on June 20, saying that its blockchain-based platform that performs medical data management has gone live, and that it will store COVID-19 testing results. The platform, called E-NewHealthLife, was deployed in and for the Mediterranean Hospital in the Republic of Cyprus.

Cyprus citizens who go to this hospital’s COVID-19 laboratory will have their medical as well as test records on the blockchain.

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

The largest crypto by market capitalization spent the weekend moving within a range, bound by the support level of $9,251 and the resistance level of $9,580. The support level was tested a couple of times over the weekend, but there was no real initiative in breaking it to the downside.


Bitcoin’s volume is slowing down and reducing while its RSI level is rising slightly (52).

Key levels to the upside          Key levels to the downside

1: $9,580                                 1: $9,251

2: $9,735                                 2: $9,120

3: $9,870                                  3: $8,980

Ethereum

Unlike Bitcoin, Ethereum wasn’t so static over the weekend. While the second-largest cryptocurrency did start the weekend slowly, the most recent volume increase and price spike show its potential to possibly approach the $240 level. However, it is unlikely that Ethereum will pass the level by itself (without the help of Bitcoin), so traders can watch what Bitcoin does and trade accordingly.


Key levels to the upside          Key levels to the downside

1: $240                                    1: $228

2: $251.4                                 2: $225.4

3: $198                                    3: $217.6

Ripple

The third-largest cryptocurrency by market cap has broken its immediate support level of $0.19 on Friday, and has maintained its position over the weekend. Even though XRP managed to gain some value in the past hours, it is still extremely unlikely that it will go above the $0.19 resistance level.


XRP’s volume is extremely low, while its RSI level increased to 48.

Key levels to the upside          Key levels to the downside

1: $0.19                                      1: $0.178

2: $0.2                                  

3: $0.205

 

Categories
Forex Videos

The Golden Rules Of Trading Part 2! Becoming A Full Time Trader…

https://youtu.be/-DnjXpkXDG8

https://youtu.be/-DnjXpkXDG8

The Golden Rules of Trading -II

 


In part I of the Golden Rules of trading, we have developed the rules to accomplish the well-known rule of “cut your losses short and let your profits run.” In part II, we will discuss the next rule.

5.- Understand your trading strategy or system in terms of average, standard deviation, and Drawdown.

Any system or strategy produces a stream of results. These results can be expressed in terms of Multiples of a standard measure of risk, R. The denominator of the Reward/risk ratio. By applying statistical computations to these results, we will be able to obtain its average and standard deviation.

The Average

The average, when obtained from R-based results, is the mathematical expectation (E), and it will tell the expected gain (on average) for every trade in terms of R.
For example, if your E is 0.25, it tells you that your system delivers an average of 0.25 cents on every dollar risked. If your risk is $100 on each trade, your system will produce an average of $25 on every trade. Thus, if your system gives you six signals daily, 120 signals monthly, you will know that your monthly results will be $3,000 on average. But this result was made using $100 risk on all trades. If you were able to raise the risk to $200, you would double the results to $6,000 monthly. Thus, knowing the expectancy E of your strategy is key to define your profit objectives as a trader.

Variability of Results:

The Standard Deviation

The standard deviation (SD) is the other side of the knowledge. It tells you how much your results vary. It tells the risk side of your system. A small standard deviation tells you that the results do not vary much. A large figure will tell you that your results can be substantially different.

Let’s suppose a trader has a system with 0.25R E, but the SD is 4. After 30 trades, the expected gain will be 7.5R, but since it has a huge variability, that trader will have less than 50 percent probability of being profitable.


Drawdown

Drawdown is a metric that will tell the trader how much of its trading capital is risked in, long term. Drawdown is related to position sizing, but if we create risk-based statistics, it can be normalized.
To compute an approximation to the max Drawdown, we need just one value: the average loss, which, as said, is normalized to R.
Drawdown is closely related to losing streaks; thus, an approximation to it is to compute max losing streaks. We can define a max losing streak for a trading system as streak with a probability of occurrence of no more than one percent. That will catch 99% of all streaks.
The probability if a repeated event is an individual probability multiplied by itself n times, being n the number of the repetitions.

For example, the probability of obtaining two tails on a coin toss (50% chance each) is 0.5×0.5 = 25%. The probability of getting four tails is 0.5×0.5×0.5×0.5 = 6.2%.
In a 50% chance game, a streak of six repeated events is 1.56%, and the probability of seven repeated events is 0.78%. If this was a trading system, I’d set my max losing streak to seven to ensure it will cover over 99% of my trading situations.
That means I would need to plan my position sizing for a 7-streak event.
That will cover 7xR Drawdown.

Position size

How is this related to Position size? A max drawdown figure is a key decision for a trader. How much of your capital are you willing to lose before quitting? The answer is directly linked to the ideal position size.
Let’s assume Angie is not willing to lose more than ten percent of her capital, while Bob is willing to accept 50 percent. And let’s assume both are using the same 50% winner system with 1,000 USD in his trading account.
For Angie 7R = 10%, then her risk per trade should be 10%/7 = 1.43% of her account balance.
For Bob 7R = 50%, thus his risk per trade will be 50%/7 = 7.14% of his account balance.
We see that this will define the results, as well. The same system, when using different position sizes, will deliver quite different results.
If the system gives 120R monthly, on a trading account balance of $1,000, Angie will get about $1,714 while Bob will get $8,571.

Now we understand the importance of knowing our system and its parameters. This knowledge will provide us with the needed information to make important decisions and plan our trading objectives.

Categories
Forex Videos

The Golden Rules Of Trading Part 1! Becoming A Full Time Trader…

https://youtu.be/5GeY5csa27Q

https://youtu.be/5GeY5csa27Q

The Golden Rules of Trading -I

In this series of videos, we will deal with two subjects not much appreciated, less understood, and less valued topics: Evaluating the quality of a trading strategy, and position sizing strategy. We will also discuss the relation between these two important topics.


The Golden Rules of Trading -I

Van K Tharp, in his “Definitive Guide to Position Sizing Second Edition,” states the ten rules of trading. In this article, we will discuss the first four rules, as these should be the basis to succeed in the trading profession, especially when working in a leveraged environment such as in Forex.

1.- Never open a position in any market if you don’t know your dollar risk.

By dollar risk, we mean the dollar amount a trader would lose if the trade goes against him and the stop-loss gets hit. Thus, with this, we assume ALL TRADES will have a stop-loss level. That is mandatory in a leveraged environment.
In Forex, the dollar risk is easily computed with the following formula:

Dollar risk = (Pip distance from entry to stop-loss) * Pip-Lot-value * Position size in lots.

As an example, let’s assume we are going to trade the EURSD, and we have 55 pip distance from entry to stop, and our position size is 15 mini lots. We know that the pip-lot-value = $10, and that 15 mini lots are equal to 0.15 lots. Thus:

Dollar risk = 55 * 10 * 0.15 = $82.5

Knowing the risk of a trade should be vital to any trader.

2.- Define your profit in terms of your risk.

That seems a silly rule, but in fact, it is essential because it helps a trader think in terms of reward/risk ratios. It is easier to know if the trade is a good business or a bad one. A good business is a trade in which the potential loss is smaller than the potential gain. A businessman does not sell below cost. A trader must not accept a trade on which the profit is lower than the cost.

3.- Limit your losses to 1R or less.

This rule is a consequence of the first two. Traders must respect the settings of the trade. Moving or disregarding the stops shows a lack of discipline and also creates random effects in the trading system. This, in turn, makes the system random. That means it is wrong since a random system tends to have zero mean profitability.

4.- make sure your profits, on average, are higher than your risk.

As stated in point two, it is good business to have profits larger than the assumed risk. Also, thinking about trades with over 2xRisk is a mind state that helps traders to keep their portfolio healthy. Imagine a trader with 10XRisk trades. He can be wrong nine out of ten times and still be break-even. That is the power of the is philosophy. You cannot control the market, but you can control the Reward/risk ratio of your trades.


These four rules can be summarized as the famous golden rule of trading:
Cut your losses short and let your profits run. But even though this is a well-known adage in the trading world, traders usually forget it. That was well studied by Daniel Kahneman and his colleague Dr. Amos Tversky. They called it “prospect theory.” They showed that the natural bias of people under uncertainty conditions is just the opposite: cut gains short and let losses grow.

Categories
Forex Course

129. Learning The Concept Of Hidden Divergence

Introduction

Introduction

Introduction

In the previous lesson, we discussed regular divergence and its types. In this lesson, we shall continue with the second type of divergence – hidden divergence. The concept of divergence in this type remains the same but differs in the indication it provides.

What is the Hidden Divergence?

In a trending market, the prices make higher highs or lower lows. In addition to that, it sets in higher lows or lower highs as well. When the market prepares to reverse, the lower low or higher high turns to equal high or equal low.  The higher lows or lower highs become the other way round. And in the new leg of the trend, if there is divergence, it is referred to as hidden divergence.

In simple terms, hidden divergence is used to indicate trend continuation in the middle of a trend or typically at the beginning of a new trend.

Types of Hidden Divergence

There are two types of Hidden divergence based on the direction it indicates:

  • Hidden Bullish Divergence
  • Hidden Bearish Divergence

Let’s understand how each of them is formed with examples as well.

Hidden Bullish Divergence

In a downtrend, the market makes lower lows and lower highs. In preparation for a reversal, it leaves a higher low instead of a lower low. Also, there could be a higher high or equal high. In this price action, if there is a lower low in the oscillator, it indicates a hidden bullish divergence. It signals that the price could continue to go north.

In the above chart of AUD/USD, we can see that the market is coming from a downtrend. Later, the market does not hold at S&R to make a new lower low but makes a higher low. Looking at the indicator, it leaves a lower low. Hence, showing divergence and indicating that the market has turned into an uptrend and will possibly continue its move up.

Hidden Bearish Divergence

In the market goes into a transition from an uptrend to a downtrend, the price which was making higher highs now starts to make lower highs. In addition, the oscillator puts in a higher high for the lower high in the price chart. Thus, showing a hidden bearish divergence. It is an indication that the market is going to continue in a downtrend.

In the above chart of AUD/USD, the market was initially coming from an uptrend making higher highs. Later, it turned directions and made a higher low instead of a higher high. But the RSI made a higher high for the same move. Thus, indicating divergence and most probable continuation of the downtrend.

[wp_quiz id=”77847″]
Categories
Forex Assets

Costs Involved While Trading The XBR/USD Asset Class

Introduction

Introduction

Introduction

BCO is an acronym for Brent Crude Oil, which is one of the two types of crude oil and is a benchmark for determining the price of oil, along with West Texas Intermediate (WTI) crude oil. BCO is also known by Brent Blend, Brent Oil, and London Brent. It is the benchmark for the majority of the crude oil from the Atlantic basin, which marks for two-thirds of the crude oil price traded internationally. In the market, it is traded with the ticker XBR/USD.

Understanding XBR/USD

Brent Crude is a commodity traded in barrels. The price of XBR/USD depicts the value of the US Dollar for 1 barrel of crude oil. It is quoted as 1 XBR per X USD. For example, if the market price of XBR/USD is 41.42, then it means that each barrel of crude oil is worth $41.42.

XBR/USD Specification

Spread

It is the basic difference between the bid price and the ask price. The spread on ECN and STP account model is as follows:

ECN: 11 | STP: 15

Fee

There is a fee (commission) for every position a trader opens. However, this fee is only on the ECN account, not the STP account.

Slippage

Slippage is the difference between the price intended by the trader and the price given by the broker. It occurs due to two factors:

  • Broker’s execution price
  • The volatility of the market

 Trading Range in XBR/USD

It is the representation of the volatility of the market in different time frames. The table values represent the minimum, average, and maximum pip movements in various time frames. 

Procedure to assess Pip Ranges

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

XBR/USD Cost as a Percent of the Trading Range

The following are two tables that represent the variation in the fee in terms of a percentage for different time frames. The percentage values are calculated by finding the ratio between the total cost and the volatility values.

ECN Model Account

Spread = 11 | Slippage = 5 | Trading fee = 5

Total fee = Spread + Slippage + Trading fee

Total fee = 11 + 5 + 5 = 21 (pips)

STP Model Account

Spread = 15 | Slippage = 5 | Trading fee = 0

Total fee = Spread + Slippage + Trading fee

Total fee = 15 + 5 + 0 = 20 (pips)

Trading the XBR/USD

Crude oil is a commodity that is rigorously traded in the market. Its volatility and liquidity are comparable to major and minor currency pairs, providing good opportunities for traders to participate in the market. The crude oil prices are driven by various fundamental factors and its Demand and Supply. The reflection of the same is seen on the charts. Thus, traders can apply technical analysis as well to forecast the price movements.

There is a fee on every trade you take with a forex broker. This fee is the same irrespective of the time frame you trade on. So, traders must place themselves in a position that will have a reasonable cost for a sufficient P/L. The trading range and the cost percentage table are the tools for it.

The larger the percentage value, the higher is the relative fee on the trade and vice versa. For example, let’s there are two traders – 1D and 4H trading with the same lot size. The 1D trader places a take profit to 200 pips, while the 4H trader places it at 100 pips. But the fee paid by both the traders is the same. But, seeing the relative fee, the 4H trader pays a higher fee than the 1D trader because his take profit is only 100 pips. Thus, the percentage values are higher in the 1D time frame than the 4H time frame.

There is another scenario where the relative cost changes based on the volatility of the market. In simple terms, the relative fee can vary even if a trader trades in the same time frame. Precisely, the relative fee is higher when the volatility of the market is around the minimum values. Therefore, to balance between the total fee and the P/L, one must trade when the market volatility is above the average volatility, irrespective of the time frame traded.

Categories
Forex Daily Topic Forex Fundamental Analysis

Understanding ‘Electricity Production’ & Its Importance As A Forex Fundamental Driver

Introduction

Introduction

Introduction

Electricity is the most versatile and controlled form of energy. It is non-polluting and loss-free. It can be produced entirely using renewable methods, such as wind, water, and sunlight. Electricity is weightless, more comfortable to transport and distribute, and represents the most efficient way of consuming energy. Strategies are being developed to generate and use electricity in the most efficient way. It must be produced in the least damaging way, without inhibiting economic development.

Net power generation

The total worldwide production of electricity in 2016 was 25,082 TWh. Sources of electricity were coal 38.2%, natural gas 23.1%, hydroelectric 16.6%, nuclear power 10.4%, oil 3.7%, solar 5.6%, biomass and waste 2.3%.

Choosing the mode of production 

The selection of electricity production mode and their economic viability is linked with the demand and supply in that region. The dynamics vary considerably around the world, resulting in different selling prices across the globe; for example, the price in Iceland is 5.54 cents per kWh while in island nations, it is 40 cents per kWh. Hydroelectric plants, thermal power plants, nuclear power plants, and renewable sources have their pros and cons, and selection is based on the local power requirement and fluctuations in demand. All power plants have varying loads on them, but the daily minimum is baseload, often supplied by plants that run continuously. Nuclear, coal, gas, oil, and some hydro plants can supply baseload.

Due to the advancement in technology, renewable sources other than hydroelectricity experienced decreases the cost of production, and the energy in many cases is cost-comparative with fossil fuels. Many governments around the world are allocating funds to offset the higher cost of new power production and make the installation of renewable energy systems economically feasible. However, their use is curtailed by their intermittent nature, less demand, and sometimes transmission constraints.

Economic development and electricity

Electricity is a major contributor to the economic development of a nation. It is the wheel that drives most aspects of everyday life in society. A nation is a compilation of activities and people whose progress is determined by the infrastructural components. Electricity is the source of fuel for almost all sectors of the economy. Most of our daily activities are dependent on electricity, our hospitals need electricity for various purposes, and airports need electricity for regular functioning and ensuring the safety of passengers.

When so many activities are dependent on electricity, production of the same is very important for every nation’s economic development because it brings investment opportunities for the country. In a country where electricity production is more, investors get interested because the cost of production in such a country is minimal compared to where there is no electricity. Running machines on electricity is cheaper compared to running them on generators. High electricity production helps to reduce the mortality rate in the country because the hospitals will be efficiently powered and is a key factor in service delivery at hospitals.

In countries with good electricity production, agricultural productivity is also high because electricity can help in powering irrigation, food preservation, and seed preservations. They enable the country to have fewer damages to agricultural products because they can be kept in storage facilities, and wastage can be avoided.

Impact on currency

Although electricity production is an important sector of the economy and a vital component, it may not have a direct impact on the value of a currency. The effect of shortage in electricity is first felt on the company, which will be reflected in its quarter-quarter data. If the results are bad, one can analyze the impact of electricity on the numbers and the stock price. If the industry itself is suffering, it primarily impacts the stock market and not the currency value. Hence, we can say that the impact of electricity is minimal on the value of a currency where investors, too, do not give much importance to this data.

Sources of information on Electricity Production

Economists and investors have not keenly tracked the electricity production data, so not many economic websites and newspapers publish the data regularly. The country’s electricity board is the official source of the data from where reliable figures can be obtained. However, we were able to collect the data on the electricity production of a few countries that can be used for reference and comparison.

GBP | AUD | USD | CAD | NZD | JPY

High levels of electricity production improve the standard of living of the people in the country. This is very important for the economic advancement of a country. If people live in better conditions, it has ripple effects on every aspect of the country. It reduces unnecessary expenditures for the government. It improves the security of the country and helps to create job opportunities for the entire country because the indirect sectors use electricity to power their businesses. Development can only be realized when the key drivers of the economy are unhindered by the country’s lack of infrastructural components.

Impact of Electricity Production’s News Release On The Forex Market

In the previous section of the article, we comprehended the Electricity Production economic indicator and saw it’s economic importance. We shall extend our discussion and understand the impact of the Electricity Production news announcement on various currency pairs.

It is important to note that although electricity is needed for the economic development and well-being of citizens, it is not a crucial fundamental indicator. Therefore, investors and traders do not invest based on Electricity Production data. However, let us find out the impact on a few currency pairs on the day of the announcement.

The below image shows total Electricity Production in the United Kingdom, where it increased to 29731 in Gigawatt-hour in December from 28902 Gigawatt-hour in November of 2019. Let us see how the market reacts to this data.

GBP/USD | Before the announcement

We will begin our analysis with the GBP/USD currency pair and observe the change in volatility due to the news announcement. The above image shows the daily time frame chart of the currency pair before the news announcement. We see that the market has been moving in a ‘range,’ and currently, the price is almost at the top of the ‘range.’ Aggressive traders can take ‘short’ positions with a large stop-loss, as there can be volatility in the pair during the news announcement.

GBP/USD | After the announcement

After the news announcement, the price hardly makes a move and stays at the same place as it was before. There is no change in the volatility, as indicated by the ‘news candle.’ The market continues to move higher on subsequent days and breaks out from the ‘range.’ The move should not be considered as a result of news but instead was a technically driven move. Now traders should trade this currency pair using their breakout strategy.

GBP/CAD | Before the announcement

GBP/CAD | After the announcement

The above images represent the GBP/CAD currency pair, where we see that the market is in a strong uptrend before the news announcement and recently has been sideways. We should not expect major volatility in the pair. Technically speaking, we will be looking to go ‘long’ in the market after a suitable price retracement to the nearest support or demand level.

After the news announcement, the market moves higher by little, and volatility expands to the upside. We could say that since the Electricity Production data was slightly positive for the British economy, traders bought the currency after the news announcement and raised its value. At this point, we cannot take any trade as there is no formation of an appropriate continuation pattern in the market.

GBP/CHF | Before the announcement

GBP/CHF | After the announcement

The previous images are of the GBP/CHF currency pair, where we see that before the news announcement, the market is in a strong uptrend, indicating a great amount of the strength in the British Pound. Here too, the idea is to go ‘long’ in the market after a price retracement to a key technical level. The price seems to have broken out a small ‘range.’ Thus, we cannot take any position in the market at this point.

After the news announcement, the market instantly drops, and the prices move lower. The news data had a negative impact on the currency pair, where volatility increases to the downside. As the Electricity Production data does not have a long-lasting effect on the currency, the fall in price due to the release of the news can be an opportunity for joining the uptrend.

We hope you find this article informative. Let us know if you have any questions in the comments below. All the best.

Categories
Forex Market Analysis

Daily F.X. Analysis, June 19 – Top Trade Setups In Forex – E.U. Economic Summit Ahead! 

A day before, the U.S. dollar was also supported by the Philly Fed Manufacturing Index, which surged to 27.5 from the expected -23.0. The C.B. Leading Index for May also supported dollar when came in as 2.8% against the .4%. Today, the eyes will remain on the Canadian economic events and E.U. economic summit. Overall, the price action will be driven by the technical levels today.

A day before, the U.S. dollar was also supported by the Philly Fed Manufacturing Index, which surged to 27.5 from the expected -23.0. The C.B. Leading Index for May also supported dollar when came in as 2.8% against the .4%. Today, the eyes will remain on the Canadian economic events and E.U. economic summit. Overall, the price action will be driven by the technical levels today.

A day before, the U.S. dollar was also supported by the Philly Fed Manufacturing Index, which surged to 27.5 from the expected -23.0. The C.B. Leading Index for May also supported dollar when came in as 2.8% against the .4%. Today, the eyes will remain on the Canadian economic events and E.U. economic summit. Overall, the price action will be driven by the technical levels today.

Economic Events to Watch Today

 

  

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.12045 after placing a high of 1.12611 and a low of 1.11854. Overall the movement of the EUR/USD pair remained bearish throughout the day. The EUR/USD pair followed its previous day’s trend and posted losses for 3rd consecutive day on Thursday amid risk-off market sentiment and bleak economic data. The pair extended its losses and dropped to its lowest level near 1.11800 since June 3.

The bearish trend of EUR/USD was supported by the increased demand for the U.S. dollar, which made it strong across the board. U.S. dollar was higher on Thursday amid its safe-haven status, which was buoyed by the multiple factors. The safe-haven market sentiment was supported by the increased fears of coronavirus second wave after the U.S. & China reported an increased number of infection cases from some parts of their country.

The U.S. dollar was also supported by the Philly Fed Manufacturing Index, which surged to 27.5 from the expected -23.0. The C.B. Leading Index for May also supported dollar when came in as 2.8% against the .4%.

However, the losses of EUR/USD were limited after the release of Unemployment Claims from the U.S. that surged to 1.508M against the 1.3M forecasts.

From the Eurozone side, at 13:03 GMT, the Italian Trade Balance in April showed a deficit of 1.16B against the expected surplus of 4.88B. Poor than expected Trade Balance from Italy weighed heavily on the single currency Euro as the difference between expected and actual value was very large.

Despite poor than expected jobless claims, the U.S. dollar index, which measures the U.S. value against a basket of six currencies, rose to 97.4 level. Increased dollar stressed the demand for EUR/USD, and hence, pair fell for 3rd consecutive day.

Furthermore, the European Central Bank issued another trillion million euros to strengthen the economies from the coronavirus pandemic. The offer made by the Central Bank to commercial banks of its ultra-cheap three years loan was taken up by 742 banks on Thursday. Bloomberg reported that a total of 1.31 trillion euros of offers were taken by the banks, which were in line with the predicted range of 1.2T – 1.5T euros.

These loans were carrying below zero interest rates, which means ECB was paying the lenders to lend to households and business people to bolster the economic recovery from the pandemic and cushion the losses.

Daily Support and Resistance

  • R3 1.1462
  • R2 1.1408
  • R1 1.1336

Pivot Point 1.1282

  • S1 1.1211
  • S2 1.1156
  • S3 1.1085

EUR/USD– Trading Tip

On Friday, the EUR/USD pair is trading with a bearish bias, holding below the descending triangle pattern, which can lead EUR/USD prices towards 1.1164 level. On the higher side, the pair may find resistance at 1.1219 level, which is extended by the downward trendline that can be seen on the hourly timeframe. Besides, the leading indicators are mixed; for example, the RSI is suggesting a selling bias, while the MACD is indicating a bullish bias. However, the 50 EMA is in support of selling. Therefore, we can look for selling trade below 1.1219 level today. 

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.2407 after placing a high of 1.25667 and a low of 1.24014. Overall the movement of GBP/USD pair remained bearish throughout the day. The GBP/USD pair dropped on Thursday and extended its losses for 3rd consecutive day on the back of dovish commentary from BoE and Brexit uncertainties.

On Thursday, the BOE held its monetary policy meeting in which it left the rates unchanged at 0.10% but increased the Quantitative Easing package by100 Billion Pounds. Bank of England dropped its expectations for the U.K.’s economic contraction for Q1 and Q2. In its previous meeting, the Bank of England anticipated that the economy would shrink by 27% in Q1 and Q2. But in the latest meeting on Thursday, BoE issued its expectation for GDP to contract by 20% in the first half of 2020.

The Governor of BoE, Andrew Bailey, said on Thursday that Britain’s economy was recovering a bit faster than Bank thought in the previous month. It could be due to decreased lockdown measures; however, the labor market was mostly providing negative data.

Bailey told reporters that BoE announced an increase of 100 billion pounds around $124 billion in its bond-buying program, but it also slowed the pace of purchases. He added that BoE had plans to stretch its 745 billion pounds bond-buying program. Bailey repeated his previous comments on negative interest rates that they were an option for the Bank as the issue was complex, but given the situation, when banks could afford bond-buying and another stimulus, taking borrowing cost below zero was not going to happen.

The Bank of England also said that it would take further necessary actions to support the economy and boost inflation towards its 2% target.

On Brexit front, the European Union’s Chief executive, Ursula von der Leyen, said on late Wednesday that there would be no post-Brexit trade deal without a level playing field, including everything from state aid to labor to environmental interests. She said that the Bloc would do everything to secure a deal by the end of 2020, but it will not compromise its core values.

Daily Support and Resistance

  • R3 1.2695
  • R2 1.2632
  • R1 1.2529

Pivot Point 1.2465

  • S1 1.2362
  • S2 1.2298
  • S3 1.2195

GBP/USD– Trading Tip

On Friday, the GBP/USD is trading at a level of 1.2430, holding right below support to become a resistance level of 1.2480. The pair is in the oversold zone now, and we may see a slight bullish correction until 1.2465 and 1.2485. But below this, the odds of selling will remain high, and it can lead Sterling lower towards the next support area of 1.2350 level. The RSI and 50 periods of EMA are suggesting a selling bias today. Let’s consider taking selling trades below 1.2450 today.  

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 106.969 after placing a high of 107.127 and a low of 106.655. Overall the movement of USD/JPY pair remained flat but slight bearish throughout the day. The USD/JPY painted a fresh three day low at 106.65 after a short-lived rise toward 107.1 in the beginning session. Japanese Ye was amongst the best performer currencies on Thursday on the back of lower U.S. yields and mixed sentiment.

The U.S. dollar data showed mixed results as jobless claims exceeded the expectations and weighed on the U.S. dollar, but the Philly Fed Manufacturing Index jumped and supported the U.S. dollar.

At 17:30 GMT, the Philly Fed Manufacturing Index for June reported as 27.5 against -23.0. The Unemployment Claims for last week were reported as 1.508M against the expected 1.3M. At 19:00 GMT, the C.B. Leading Index for May surged to 2.8% against the expected 2.4% and supported the U.S. dollar. The U.S. Dollar Index (DXY) surged above 97.44 level and posted weekly high. While U.S. stocks posted losses where Dow Jones was down by 0.15%, and S&P 500 was down by 0.27%.

An FOMC member Loretta Mester gave a speech on Thursday where she said that Fed and Fed longer than expected the road to economic recovery would have to provide additional and continuous support by being very easy on the monetary policy till 2023. The dovish comments exerted downside pressure on the U.S. dollar and ultimately to USD/JPY pair on Thursday.

Some reports suggested Beijing has succeeded in containing the virus after the renewed cases emerged due to ease of lockdown restrictions. Apart from Beijing, many states of America and other countries also send reports about rebuilt virus cases.

The hopes for V shape recovery for the global economy also faded away as the development of the vaccine was needed for that which only can increase the confidence of people against the virus spread.

However, the increased tensions between China & India and North & South Korea on their disputed borders also kept the USD/JPY pair under pressure.

Daily Support and Resistance    

  • R3 108
  • R2 107.82
  • R1 107.57

Pivot Point 107.39

  • S1 107.14
  • S2 106.96
  • S3 106.71

USD/JPY – Trading Tips

The USD/JPY is trading at 106.914 level as it continues trading sideways in a wide trading range of 107.620 – 106.630. It failed to break above an immediate resistance level of 107.580. This level is working as resistance for USD/JPY, and the 50 periods EMA is also prolonging strong resistance at 107.580 zones while immediate support lingers nearby 106.600. The USDJPY bearish trend can trigger a sell-off unto the next support level of the 106.017 level today. Let’s wait for the USD/JPY to test the 107.650 level before entering a sell in the USD/JPY. 

Good luck! 

Categories
Forex Price Action

Chart Combination Trading: Even an Inside Bar Has a Lot to Offer

An Inside Bar is considered the weakest reversal candle as far as candlestick trading is concerned. However, in today’s article, we find out the significance of a daily Inside Bar in the daily-H4 chart combination trading. Let us get started.

An Inside Bar is considered the weakest reversal candle as far as candlestick trading is concerned. However, in today’s article, we find out the significance of a daily Inside Bar in the daily-H4 chart combination trading. Let us get started.

An Inside Bar is considered the weakest reversal candle as far as candlestick trading is concerned. However, in today’s article, we find out the significance of a daily Inside Bar in the daily-H4 chart combination trading. Let us get started.

This is the daily chart. The chart shows that the last candle comes out as a bearish Inside Bar. The daily chart traders may still think that the chart is bullish biased. However, the daily-H4 chart combination traders are to flip over to the H4 chart and look for short entries since it is a bearish reversal candle after all.

The H4 chart looks to be tailor-made for the sellers. The chart produces a double top, and the price breaches the neckline. The last candle comes out as a doji candle. The price may consolidate now.

The chart produces another bearish candle closing within the same resistance. Then, it creates a bullish engulfing candle. Let us draw two lines here. The level of support looks very evident. However, the level of resistance still has a lot to prove.

The level of resistance produces a bearish reversal candle. To be precise, it creates a bearish engulfing candle, closing below the level of resistance. The sellers may trigger entry right after the last candle closes by setting stop-loss above the level of resistance and by setting take profit with 1R.

The price heads towards the South in the next candle as well. It seems that the sellers may not have to wait too long to achieve their target. Let us proceed to the following chart to find out how it goes.

As expected, the next candle comes out as another bearish candle. This time it has even a longer body. Look at the last candle. The candle comes out as a bullish inside bar. Technically, the chart is still bearish biased. Do not forget that for the H4-H1 chart combination trading, they may have to flip over to the H1 chart to go long in the pair. This is what we have just demonstrated in the daily-H4 chart combination trading.

To sum up the lesson, an Inside Bar may not be a strong reversal signal in the chart. For the chart combination traders, it is a bit different. As long as it is a reversal candle does not matter how weak it is. The combination traders may flip over to the counterpart and wait for consolidation and a signal candle to trigger entry.

Categories
Forex Options

FX Options Market Combined Volume Expiries for 19th June 2020

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

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

FX option expiries for June 19 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

EUR/USD: EUR amounts

  • 1.1200 1.1bn
  • 1.1235 515m
  • 1.1260 664m

EURUSD is in a bear channel and is in a pullback from a dip below the key 1.1200 line and is now overbought. Price action is hovering above the key 1.1200 level but pressure remains to the downside. The economic calendar is light during the European session. The key 1.12 maturity remains in play.

– GBP/USD: GBP amounts        

  • 1.2400 525m
  • 1.2415 299m
  • 1.2500 501m

GBPUSD is in a consolidation phase after a bear move yesterday. The pair is overbought on the one our chart. The maturities at 1.2400 and 1.2415 are both in play.

– USD/JPY: USD amounts         

  • 106.45 386m
  • 106.50 470m
  • 107.50 435m
  • 107.70 440m

USDJPY price action is muted. We have a sloping wedge formation brewing. Watch for the breakout. But the options look out of play.

– AUD/USD: AUD amounts       

  • 0.6800 836m
  • 0.6900 826m

AUDUSD price action is muted on the one hour chart with a tight bull range. 0.6900 option is within range but this key level may prove more of a barrier than a magnet.

– EUR/GBP: EUR amounts

  • 0.8930 545m

EURGBP found a strong bid tone yesterday to lift it back above the 0.90 exchange rate. The option maturity looks to be well out of play.

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

As you can see on the charts we have also plotted the expiration levels at the various exchange rate maturities and we have also labelled in red, orange and blue. Therefore, if you see option expiry exchange rates labelled in red these should be considered in-play, because we believe there is a greater chance of the expiry maturing at these levels based on technical analysis at the time of writing. There is still a lesser possibility of a strike if they are in orange and so these are ‘in-play’ too. However, if we have labelled them in blue, they should be considered ‘not in-play’ and therefore price action would be unlikely to reach these levels, which are often referred to as Strikes, at the time of the 10 AM New York cut.

Our technical analysis is based on exchange rates which may be several hours earlier in the day and may not reflect price action at the time of the maturities. Also, we have not factored in economic data releases or keynote speeches by policymakers, or potential market volatility leading up to the cut.

Although we have added some technical analysis 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 AM Eastern time.

If you want to learn how forex option expiries affect price action in the spot FX market see our educational article by clicking here: https://bit.ly/2VR2Nji

DISCLAIMER: Please note that this information is for educational purposes. Also, the maturities will look more or less likely to become a strike at 10 AM NY time due to exchange rate fluctuations resulting in a different perspective with regard to technical analysis, and also due to upcoming economic data releases for the associated pairs.

Categories
Forex Basic Strategies

Restrict Your Losses To Only 10-Pips a Day With This Strategy

Introduction

Introduction

Introduction

Every trader loves the idea of winning on each trade they take. After all, winning is the sole purpose of trading. Various strategies in the market promise to offer profits every day, but none of them are good enough to make you win every single trade you take. In the end, almost all of the traders wish for a method that could reap them good profit every day. But as we all know, trading is less about making money and more about saving your capital. For this same purpose, we have created the 10 Pip Loss Strategy.

The strategy suggests that we must take two to three trades a day by placing only ten pips stop-loss and go for bigger targets. For instance, let’s consider that we took three trades in a single day. If we lose two trades and end up winning one, we will be losing only 20 pips, but the gains that are earned on the third trade can be more. By following this strategy, our primary focus should be on taking three potential trades in a day.

The Strategy – Pairing Double Moving Average & Stochastic Indicator

It is highly advisable to use this strategy in a strong trending market.

To Go Long (Buy Trades)

  • Firstly, identify an uptrend in any currency pair.
  • Apply the double moving average indicator to the price chart. Go with 9 and 14 periods.
  • Wait for the pullback to happen, and the price action must hold below the double moving average.
  • Look if the Stochastic is reversing at the oversold area.
  • Go long if all the above rules are met.
  • Place the stop-loss just ten pips below the entry. Take profit placement depends on the market state. If the buyer movement is strong, expect a brand new higher high; if the momentum is a slow, exit at the most recent higher high.

The image below represents our losing trade in the AUD/CHF forex pair. As you can see, both the indicators gave us a trading signal at around 08:45 AM. We activated our trade when the price of the asset is 0.6129. It went a bit up and suddenly dropped down to hit our stop loss. As a result, we ended up losing the trade.

The best thing is that we lost only ten pips. Hence, these smaller losses won’t influence our decision-making abilities.

The image below represents our winning trade in the AUD/NZD Forex pair. We took this trade on 22nd April at around 08:45 AM. When the moving average went below the price, the Stochastic gave a reversal at the oversold area, indicating us to go long in this pair. Right after we went long, the price action blasted to the north and printed a brand new higher high. We end up making 90 pips in this trade.

Overall, we lost ten pips till now, and hence we stand at 80 pips profit.

The below price chart represents our third trade on 22nd April. We took this trade at around 6:45 PM. Following our strategy, we made entry, and the price action has printed a brand new higher high. This trade gave us a profit of 80 pips.

To sum it up, we took three trades out of which we made 170+ pips profit and a loss of only ten pips. By following this strategy, we can make profits on every single trading day. Note: Use this strategy only when you see the potential of having at least three trades in a single day. Otherwise, there is no point in using this strategy.

To Go Short (Sell Trades)

  1. Firstly, identify a downtrend in any currency pair.
  2. Apply the double moving average indicator to the price chart. Go with 9 and 14 periods.
  3. Wait for the pullback to happen, and the price action must hold above the double moving average.
  4. Look if the Stochastic is reversing at the overbought area.
  5. Go short if all the above rules are met.
  6. Place the stop-loss just ten pips above the entry. Take profit placement depends on the market state. If the seller movement is strong, expect a brand new lower low; if the momentum is a slow, exit at the most recent lower low.

The image below represents a sell signal in the CHF/JPY Forex pair. This is the first trade we activated on 13th April at around 08:45 AM. Overall, the market was in a strong downtrend, and when it pulled back, both the indicators gave us a sell signal. After we went short, the price sharply goes down and prints a brand new lower low. This trade gave us 60+ pip profit.

We took the second trade relatively at the same time in the USD/JPY Forex pair. Overall, this pair was also in a strong downtrend, and we activated the trade when both the indicators gave us a sell signal. In this pair, the seller momentum was strong enough, and we ended up making 82+ pips. 

This is the third trade we took in the EUR/JPY Forex pair. When price action pulled back to the moving average, the Stochastic also gave us a reversal at the overbought area, indicating us to go short. By the time we have exited, we booked 64+ pips of profit.

In total, we took three trades, and all of them hit our take-profit. If you observe, even if we would have lost two trades and won only one, we would still have ended up on the winning side. In a strong trending market, it is easy to win all the trades we take. All you need to do is to follow the rules of the strategy very well. To sum it up, with minimum risk, we gained a profit of 206 pips from the market.

We hope you understood the strategy well. Please try and trade this strategy in a demo account before applying it to the live market. Cheers!

Categories
Crypto Market Analysis

Daily Crypto Review, Jun 19 – Bitcoin Mid-Term Bullish vs. Bearish Outlook – Explained

The crypto market has spent the past 24 hours being on a slow downward-facing path. Bitcoin is currently trading for $9,336, which represents a decrease of 0.69% on the day. Meanwhile, Ethereum lost 1.46% on the day, while XRP lost 1.37%.

The crypto market has spent the past 24 hours being on a slow downward-facing path. Bitcoin is currently trading for $9,336, which represents a decrease of 0.69% on the day. Meanwhile, Ethereum lost 1.46% on the day, while XRP lost 1.37%.

The crypto market has spent the past 24 hours being on a slow downward-facing path. Bitcoin is currently trading for $9,336, which represents a decrease of 0.69% on the day. Meanwhile, Ethereum lost 1.46% on the day, while XRP lost 1.37%.

Aave took the position of today’s biggest daily gainer, with gains of 26.09%. SwissBorg lost 16.61% of its daily value, making it the biggest daily loser.

Bitcoin’s dominance level stayed at the same place since our last report, with its value currently at 65.27%. This value represents a 0.01% difference to the downside when compared to yesterday’s value.

The cryptocurrency market capitalization stayed at almost the same place as yesterday, with the market’s current value being $266.19 billion. This value represents a decrease of $1.78 billion when compared to the value it had yesterday.

What happened in the past 24 hours

Russia lifting ban on Telegram

After many years of unsuccessful efforts to ban Telegram in Russia, the local authorities have finally decided to fully cancel the ban. Russia’s Federal Service for Supervision of Communications, IT, and Mass Media, better-known as Roskomnadzor, has lifted the two-year-long ban imposed on Telegram.

The authority has removed requirements that restrict the access to the Telegram messenger in an agreement with the Prosecutor General of Russia.

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

The largest crypto by market capitalization spent the past 24 hours slowly moving towards the downside, ultimately testing its support level of $9,251. The bullish trend that Bitcoin was in (on the 1-day chart) was broken to the downside with the most recent Bitcoin drop. In order for BTC movements to still be considered bullish in the long run, its price needs to be above 9,120 on June 30. On the other hand, even though the outlook is not exactly bullish at the moment, Bitcoin seems to have some good support in its $9,251 level as well as the 1-day 50-period moving average.


If, on the other hand, Bitcoin makes a higher high at above $10,500, bull run will be almost certain, and people should consider pulling more of their portfolio into crypto.

Key levels to the upside          Key levels to the downside

1: $9,580                                 1: $9,251

2: $9,735                                 2: $9,120

3: $9,870                                  3: $8,980

Ethereum

Ethereum keeps creating lower highs and slowly moving lower throughout the day. The second-largest cryptocurrency by market cap is on its way to test the $228 once again. As this support level is a new one, it might not hold as well, and the price is likely to fall towards $225.4 level.


Ethereum’s long-term outlook will greatly depend on how Bitcoin moves, so there is no reason to discuss it at the moment.

Key levels to the upside          Key levels to the downside

1: $240                                    1: $228

2: $251.4                                 2: $225.4

3: $198                                    3: $217.6

Ripple

XRP has also spent the day slowly moving to the downside, but with one major difference. The third-largest cryptocurrency by market cap has, unlike Bitcoin and Ethereum, broken its immediate support level. While the $0.19 support level isn’t completely beaten and there is still time for the price to recover, it is likely that the price will remain below it due to the lack of volume and initiative when it comes to either buying or selling XRP at the moment.


Key levels to the upside          Key levels to the downside

1: $0.2                                      1: $0.19

2: $0.205                                  2: $0.178

3: $0.214

 

Categories
Forex Assets

Asset Analytics – Trading The CHF/HKD Foreign Exchange Pair

Introduction

Introduction

Introduction

CHF/HKD is the abbreviation for the Swiss Franc against the Hong Kong Dollar. It is categorized as an exotic currency pair that usually has high volatility and low trading volume. Here, the CHF (on the left) is the base currency, and the HKD (on the right) is the quote currency.

Understanding CHF/HKD

The market price of CHF/HKD represents the value of HKD that are obliged to purchase to one CHF. It is quoted as 1 CHF per X HKD. If at all the market price of this pair is 8.1718, then this amount of HKD is required to buy one CHF.  

 

Spread

The difference between the bid-ask price is described as the spread. Its value differs from the ECN account model and STP account model. The approximate value for the two is specified below:

ECN: 35 pips | STP: 40 pips

Fees

A fee is a price that one pays to the broker for executing a trade. There is no fee charged on STP accounts, but a few pips are charged on ECN accounts.

Slippage

The difference between price called for by the client and price that was offered by the broker is described as the slippage. Its value varies on the volatility of the market and the broker’s execution.

Trading Range in CHF/HKD

The trading range is that the tabular representation of the pip movement of a currency pair in several timeframes. These values are useful in determining the profit, which will be generated from trade in advance. To seek out the worth, you need to multiply the below volatility value with the pip value of this pair.

Procedure to assess Pip Ranges

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

CHFHKD Cost as a Percent of the Trading Range

By implementing the total cost to the mentioned table, we can ascertain the cost differences in a trade. The values are attained by finding a proportion between total cost and volatility value and are indicated as a percentage.

ECN Model Account

Spread = 35 | Slippage = 5 |Trading fee = 8

Total cost = Slippage + Spread + Trading Fee = 5 + 35 + 8 = 48 

STP Model Account 

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

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

The Ideal way to trade the CHF/HKD

Comprehending the above tables is important. The ratio to the total cost of trade is directly proportional to the value. It is seen that the rates are nearly high on the min section (less volatility) and the other way around. Now, the perfect chance to enter the market would be the point at which the volatility of CHF/HKD is somewhere between the average pip movement. Trading this pair during such minutes will guarantee low trading costs just as lower liquidity.

You can reduce the trading costs by placing orders using limit/pending orders instead of market orders. This will considerably reduce the total cost with slippage being zero. I hope this article will assist you in trading this pair in a much efficient way. Cheers!

Categories
Forex Fundamental Analysis

Why Understanding ‘Corruption Index’ Is Crucial In Determining Economy’s Health?

Introduction To Corruption Index

Introduction To Corruption Index

Introduction To Corruption Index

The corruption index is a score that is given to the government of a country, which indicates the degree of corruption in the country. The value is assigned from 0 to 100, with 0 indicating high levels of corruption and 100 indicating low levels. The score is given by Transparency International, an organization that tries to stop bribery and other forms of corruption activities in the country. Transparency international started ranking in 1995, and today it scores more than 176 countries and territories.

The Corruption Index focusses on the public sector and evaluates the degree of corruption among public officials and politicians. In highly corrupt countries, the judiciary’s quality and independence are usually low, and official statistics try to underestimate the level of corruption to hide the bitter truth. The international agencies are a valuable alternative source of information to report the extent of illegal practices being done by civil servants and politicians in a given country.

Impact of corruption on the economy  

Most economists view corruption as a key obstacle to economic growth. It is seen as one of the reasons for low income and plays a critical role in generating poverty traps. It prevents economic and legal systems from functioning properly. Other effects are a misallocation of talent or human development, reduction in the incentive to accumulate “capital.”

Corruption hampers development by allowing agents to interfere in the usual functioning of the government. Economists believe that corruption is like a competitive auction; those who want a service, use the power of money to get it, and the result is an inefficient allocation of resources. The resources get used by people who do not deserve or are not meant to use it.

Contrary to this idea, some people argue that corruption ‘greases’ the wheels of development and that foster growth. The main idea is that corruption facilitates beneficial trades that otherwise would not have taken place. In this way, it promotes productivity by allowing individuals in the private sector to correct or avoid government failures of various sorts.

Limitations of Corruption Index

The index has been criticized lately based on its methodology used for ranking countries. Political scientists find some flaws in the way the corruption index is calculated. These flaws include:

  • Corruption data is too complex to be captured by a single source. For example, the type of corruption in rural Michigan will be different from that in the city administration of Chicago, yet the index measures them in the same way.
  • It is seen that the corruption index is influenced by perception about it. It means it is not measured by considering its real value, where the index may be reinforcing existing stereotypes and clichés.
  • The index only measures public sector corruption and ignores the private sector. This means the well-publicized scandals such as the Libor scandal, or the VW emissions scandal were not included in the corrupt segment.

 Analyzing the data

Corruption index is an important economic indicator that most economists and money managers look at before making investments. In recent times, it is making a huge impact on the economic development of a country. Thus, we need to understand how the data is analyzed. By comparing the two countries’ rankings, one can determine which of the two economies is stronger and enjoying investor confidence.

While analyzing the data, it important to keep in mind that economies of the same stature should be compared. We cannot compare the ranking of a developed country with that of a developing country. This is because corruption has a much greater impact on the growth rates of developing countries.

Impact on currency

Public corruption in emerging countries, especially, contributes to currency crises and put a major dent in the development of the country. Corruption acts repel stable forms of foreign investment and leave countries dependent on foreign bank loans to finance growth. Foreign investors refuse to put their money in developing countries where, for example, local bureaucrats accept bribes, and the government has been known to fall prey to businesspersons and builders.

A corrupt government may be undesirable for foreign direct investment (FDI), but it may not be equally disadvantageous when it comes to obtaining loans from international creditors. This is because governments of most countries offer considerably more insurance and protections to lenders than to direct investors. The result is a country with high debts and no foreign investment. Such an imbalance leaves an economy much more vulnerable to currency crises.

Sources of information on Corruption Index

The Corruption Index is published annually by Transparency International since 1995, which ranks countries by their perceived levels of corruption in the public sector. Transparency International is the official agency that keeps track of the corruption activities and wrongdoing of the government, which is reflected in the rankings. However, other economic websites measure corruption based on their parameters and factors. They also provide a statistical comparison of different countries with a clear graphical representation.

GBP (Sterling) – https://tradingeconomics.com/united-kingdom/corruption-index

AUD – https://tradingeconomics.com/australia/corruption-index

USD – https://tradingeconomics.com/united-states/corruption-index

CAD – https://tradingeconomics.com/canada/corruption-index

NZD – https://tradingeconomics.com/new-zealand/corruption-index

JPY – https://tradingeconomics.com/japan/corruption-index

The corruption index is gaining a lot of attention and importance around the world. Corruption decreases the amount of wealth in a country and lowers the standard of living. The economic impact of corruption is measured in two ways, first, the direct impact on the GDP growth rate and, secondly, an indirect impact on human development and capital inflow. The new methodology used by Transparency International uses four basic steps, including the selection of data, rescaling source data, aggregating the rescaled data, and a statistical measure indicating the level of certainty. The data collection and calculations are done by two in-house researchers and academicians.

Impact of Corruption Index’s news release on the Forex market 

The Corruption Perception Index (CPI) scores countries on how corrupt a country’s public sector is perceived to be by experts and business executives. It is a composite index, which is a combination of 13 surveys and assessments. The data is collected and compiled by a variety of reputed institutions.

The CPI is the widely used indicator of corruption all over the world. The corruption index is closely watched by investors who take investment decisions based on the ranking. However, it has a long-term impact on the currency, and the effect may not be seen immediately after the official news release.

In this section of the article, we will observe the impact of the CPI announcement on different currency pairs and witness the change in volatility due to the news release. For that purpose, we have collected the CPI ranking of Japan, where the below image shows Japan’s corruption score and rank in 2019. A score above 50 indicates low corruption levels and that the country’s government is clean.

USD/JPY | Before the announcement

Let us start our analysis with the USD/JPY currency pair and analyze the reaction of the market. The above image shows the daily time frame chart of the forex pair before the news announcement, where we see that the market is moving in a ‘range’ with the price at the top of the range. We will look to take a ‘short’ trade once we get confirmation from the market.

USD/JPY | After the announcement

After the news announcement, volatility increases to the downside, and the price falls drastically. The market reacted positively to the news data, where we see that the Japanese Yen gains strength after the news release. As the corruption index score was positive, traders strengthened the currency, as indicated by the large bearish ‘news candle.

GBP/JPY | Before the announcement

GBP/JPY | After the announcement

The above images represent the GBP/JPY currency pair, where we see that before the announcement, the market is in a strong uptrend, and recently the market has shown signs of reversal. We should be looking to sell the currency pair if the market is not able to move higher. However, we should wait for the news release to get a clear idea of the direction of the market.

After the news announcement, the market reacts similarly as in the previous currency pair, where the price moves lower and volatility expands to the downside. As the CPI data came out to be positive, traders sold British Pound and bought Japanese Yen, thereby strengthening the currency. At this moment, one can take risk-free ‘short’ trade with a stop loss above the ‘news candle.’

AUD/JPY | Before the announcement

AUD/JPY | After the announcement

Lastly, we will find out the impact on the AUD/JPY currency pair. The first image shows the characteristic of the chart before the news announcement, where it appears that the price is moving in a channel. One needs to be cautious before taking a ‘short’ trade as the price is at the bottom of the channel.

After the news announcement, the market gets a little volatile where we see that the price moves in both directions and finally closes near the opening. The overall reaction was bullish for the currency due to the healthy CPI data. The ‘news candle’ is not enough to confirm that the market is going lower as it has lower wick on the bottom, indicating buying pressure.

We hope you understood what ‘Corruption Index’ is and the impact on the Forex market after its news announcement. Cheers!

Categories
Crypto Videos

Forex Expiry Options Review 12-06- 2020! Making Forex Easy!

https://youtu.be/_8fby-JH1bI

https://youtu.be/_8fby-JH1bI

 

FX Options Market Combined Volume Expiries. A weekly retrospective review for the financial week ending: 12, 06, 2020

Hello everybody, and thank you for joining us for the daily FX Options Market Combined Volume Expiries review for the trading week ending on Friday, 12th June 2020. Each week we will bring you a video taking a look back at the previous week’s FX option expiries and how they may have attributed to price action leading up to the maturities which happen at 10 AM Eastern Time, USA.

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 even months.

Each morning, from the FA website, our analyst, Kevin O’Sullivan, will bring you details of the notable FX Options Market Combined Volume 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 New York 10 AM cut, as the big institutional players hedge their positions accordingly.

Kevin also plots the expiration levels on to the relevant charts at the various expiry exchange rates and colour codes them in red, which would have a high degree of being reached, or orange which is still possible and where these are said to be in-play. He also labels other maturities in blue and where he deems it unlikely price action will be reached by 10 AM New York, and thus they should be considered ‘out of play.’ Kevin also adds some technical analysis to try and establish the likelihood of the option maturities being reached that day. These are known as strikes.
Please bear in mind that Kevin will not have factored in upcoming economic data releases, or policymaker speeches and that technical analysis may change in the hours leading up to the cut.
So let’s look at a few of last weeks option maturities to see if they affected price action.
Firstly, there were no notable options for Monday, 8th June.

So here is the early morning analysis for Tuesday as provided by Kevin on the USDJPY pair where there was an option maturing at 107.85 in 390M US Dollars.
I’ll quote you the text as provided by Kevin: USDJPY has found support at the level of the option maturity. However, the bear move was strong. Expect more downward pressure. The option expiry remains in-play.

 

Now, let’s roll on a few hours and to the candle, which closed at the 10 AM cut. The exchange rate at this time was 107.71. Just 14 pips below the strike. So we saw that the support held out, but the bears finally got their way and pushed through the support area. Prior to this, the 107.85 maturity had been acting as a magnet for price action.

Here is the analysis for the Euro USD pair, also on Tuesday, with a large maturity at 1.1300 for €802 M. Kevin mentioned that price action was in a sideways action and that at the time of writing it was fading and retesting the downside, but that it was oversold on the one hour chart and that there were important data out in the Eurozone area.


Now let’s fast forward a few hours. We can see an arrow above the candle, which took us up to 10 AM in New York cut. Subsequent to this price action pushed to a low of 1.1240, which was suggested by Kevin before rebounding. Price action was around the 1.1300 maturity one hour before the cut. However, momentum simply carried the pair up to the high of 1.1362. Traders who purchased a premium option for a Put would have been in the money as the price was above the maturity at the time of the cut.


On Wednesday we had two expiries on the Euro Usd pair, and Kevin’s analysis was based on the sideways price action of the pair on the one hour chart and also the fact that it needed to break above the resistance line and form a candle above it for a continuation up to the 1.1390 cut to be possible.


A few hours later, and this was the picture. Price did form a candle above the resistance line and moved to within two pips of the maturity, before falling lower.

Here, we can see that the price action at the maturity was 1.1366, just 24 pips away.


Let’s move forward to Thursday. Here we have the EURGBP pair, which was trading at 0.8959 at the time of the analysis where Kevin reposted the bull run was strong.

The pair continued to rally during the European session and hit 0.8990at the 10 AM Cut, just five pips away from the maturity.

 


On Friday the 12th, We had three option expiries for the EURO Usd pair.

 


The exchange rate at 10 AM New York was 1.1302, just eight pips below the 1.1310 option
expiration Kevin labeled in Red.


in fact price action remained elevated until the cut at which time the pair softened to a low of 1.1332


Lets now take a look at USD Japanese Yen; We have an option expiration at 107.35
Kevin suggested a dip in price action before a retracement to the maturity in his analysis.


There was indeed a slight pullback and then a continuation higher.


and here, we can see the exchange rate at maturity was 107.35, which was an official strike.

Please remember, Kevin’s technical analysis is based on exchange rates, which may be several hours earlier in the day and may not reflect price action at the time of the maturities.
We suggest you get into the habit of visiting the FA website each morning just after 8 AM BST and 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 AM 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

FX Options Market Combined Volume Expiries for 18th June 2020

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

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

FX option expiries for June 18 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– EUR/USD: EUR amounts

  • 1.1100 536m
  • 1.1245 640m
  • 1.1260 711m

EURUSD is overbought on the one hour chart. And the size of the candlesticks over the Asian session indicates that volume is thin. Potential for price action to retest the 1.1200 key level, however, the 1.1250 must be breached first. Key US data out later,

– USD/JPY: USD amounts         

  • 106.00 483m
  • 107.45 356m
  • 108.00 432m

USDJPY finally broke out of its tight consolidation range to the downside and is currently giving back some of that bear run. The options for today all remain out of play. Look out for the US data including Initial Claims later today as the impetus for the next move.

– AUD/USD: AUD amounts       

  •  0.6925 530m

AUDUSD is overbought on the one hour chart. The momentum for a retest of 0.70 to the upside has long run out of steam. A push lower seems likely leaving today’s option expiry out of play.

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

As you can see on the charts we have also plotted the expiration levels at the various exchange rate maturities and we have also labelled in red, orange and blue. Therefore, if you see option expiry exchange rates labelled in red these should be considered in-play, because we believe there is a greater chance of the expiry maturing at these levels based on technical analysis at the time of writing. There is still a lesser possibility of a strike if they are in orange and so these are ‘in-play’ too. However, if we have labelled them in blue, they should be considered ‘not in-play’ and therefore price action would be unlikely to reach these levels, which are often referred to as Strikes, at the time of the 10 AM New York cut.

Our technical analysis is based on exchange rates which may be several hours earlier in the day and may not reflect price action at the time of the maturities. Also, we have not factored in economic data releases or keynote speeches by policymakers, or potential market volatility leading up to the cut.

Although we have added some technical analysis 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 AM Eastern time.

If you want to learn how forex option expiries affect price action in the spot FX market see our educational article by clicking here: https://bit.ly/2VR2Nji

DISCLAIMER: Please note that this information is for educational purposes. Also, the maturities will look more or less likely to become a strike at 10 AM NY time due to exchange rate fluctuations resulting in a different perspective with regard to technical analysis, and also due to upcoming economic data releases for the associated pairs.

Categories
Crypto Market Analysis

Daily Crypto Review, Jun 18 – Binance Pool the Biggest Miner of Craig Wright’s Bitcoin SV – What’s Actually Happening?

The crypto market has spent the past 24 hours testing its support levels after failing to break the resistance levels during yesterday’s price increase. Bitcoin is currently trading for $9,412, which represents a decrease of 0.62% on the day. Meanwhile, Ethereum lost 0.71% on the day, while XRP lost 1.37%.

The crypto market has spent the past 24 hours testing its support levels after failing to break the resistance levels during yesterday’s price increase. Bitcoin is currently trading for $9,412, which represents a decrease of 0.62% on the day. Meanwhile, Ethereum lost 0.71% on the day, while XRP lost 1.37%.

The crypto market has spent the past 24 hours testing its support levels after failing to break the resistance levels during yesterday’s price increase. Bitcoin is currently trading for $9,412, which represents a decrease of 0.62% on the day. Meanwhile, Ethereum lost 0.71% on the day, while XRP lost 1.37%.

SwissBorg took the position of today’s biggest daily gainer, with gains of 31.95%. DigiByte lost 7.95% of its daily value, making it the most prominent daily loser.

Bitcoin’s dominance stayed at the same place since our last report, with its value currently at 65.28%. This value represents a 0.04% difference to the downside when compared to yesterday’s value.

The cryptocurrency market capitalization stayed at the same place as yesterday, with the market’s current value being $267.97 billion. This value represents a decrease of $0.02 billion when compared to the value it had yesterday.

What happened in the past 24 hours

Binance Pool mining the most Bitcoin SV – Why?

Only a year after removing Bitcoin SV from its exchange, news came out that Binance (through its Binance Pool) produces more Bitcoin SV blocks through mining than any other pool. Many people would jump to the conclusion that Binance knows something we don’t, but that really isn’t the case.

Even though Binance Pool is undoubtedly the largest miner of Bitcoin Satoshi’s Vision blocks at the moment (with 26.39% of total Bitcoin SV mining on June 17), it is not Binance who is mining them, but rather the users of the Pool. However, Binance is profiting from the mining operations by imposing a 2.5% pool fee. That being said, it is highly unlikely that Binance will return Bitcoin SV to its exchange, or that its stance on the controversial coin changed.

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

The largest cryptocurrency by market capitalization spent the past 24 hours testing its support levels, right after failing to break the $9,580 resistance. While the $9,251 level showed strength, bouncing the price back immediately, Bitcoin is still moving down slightly. If nothing changes in terms of volume and market sentiment in general, Bitcoin might have another go at testing this support level.


Bitcoin’s volume has decreased slightly when compared to the previous days, while its RSI level is at 50.

Key levels to the upside          Key levels to the downside

1: $9,580                                 1: $9,251

2: $9,735                                 2: $9,120

3: $9,870                                  3: $8,980

Ethereum

Ethereum made the same move as Bitcoin and had no initiative when it came to a non-correlated movement today. After failing to reach its resistance level of $240, ETH started moving towards the downside. It, however, got stopped by the (possibly) new support level of $228, bouncing the price slightly up towards $235. The price stopped after reaching $235 and started moving sideways, possibly threatening the downside once again.


Key levels to the upside          Key levels to the downside

1: $240                                    1: $228

2: $251.4                                 2: $225.4

3: $198                                    3: $217.6

Ripple

XRP had a slightly different movement when compared to BTC and ETH, but with the same sentiment. The third-largest cryptocurrency by market cap failed to reach $0.2 successfully, therefore making the possibility of breaking the resistance almost none-existent in the short-term. This triggered the bears to test the support level of $0.19, which (after some fighting) managed to hold its position. XRP is now trading just above the support line, preparing for the next move.


Key levels to the upside          Key levels to the downside

1: $0.2                                      1: $0.19

2: $0.205                                  2: $0.178

3: $0.214

 

Categories
Forex Market Analysis

Daily F.X. Analysis, June 18 – Top Trade Setups In Forex – BOE Rate Decision In Focus!

Let’s keep an eye on the U.K. Monitory Policy meeting, especially on the MPC members voting for the Asset Purchase facility. Overall, the bank isn’t expected to change it’s interest rate today. Besides, the U.S. Jobless Claims and Manufacturing Index will remain in focus.

Let’s keep an eye on the U.K. Monitory Policy meeting, especially on the MPC members voting for the Asset Purchase facility. Overall, the bank isn’t expected to change it’s interest rate today. Besides, the U.S. Jobless Claims and Manufacturing Index will remain in focus.

Let’s keep an eye on the U.K. Monitory Policy meeting, especially on the MPC members voting for the Asset Purchase facility. Overall, the bank isn’t expected to change it’s interest rate today. Besides, the U.S. Jobless Claims and Manufacturing Index will remain in focus.

Economic Events to Watch Today

 

 

EUR/USD – Daily Analysis

The EUR/USD prices were closed at 1.12425 after placing a high of 1.12938 and a low of 1.12068. Overall the movement of the EUR/USD pair remained bearish throughout the day. The EUR/USD pair extended its losses for the second consecutive day on Wednesday on the back of the risk-off market sentiment.

The escalating geopolitical tensions in the disputed border between India & China and North Korea and South Kore weighed on the risk-on market sentiment on Wednesday. The risk-off market sentiment was then bolstered by the fears of a fresh second wave of coronavirus after an increased number of infection cases from Beijing and some states of the United States.

To stop the virus from further spread and second wave to emerge, China ordered to impose strict restrictions in 29 communities of Beijing on Wednesday, and hence, risk sentiment dropped. Riskier currency Euro suffered and moved in a downward direction.

Meanwhile, the European Commission presented a “European Strategy” to accelerate the development, manufacturing, and deployment of vaccines against COVID-19. According to the European Commission, the pandemic’s permanent solution was an effective and safe vaccine development.

The announced European Strategy proposed a joint E.U. approach and was built on the mandate received from E.U. health ministers. The latest strategy gave some support to the falling Euro currency and kept a lid on any additional losses.

On the other hand, the chief of Eurogroup meeting, Mario Centeno on Wednesday, said that his decision to step down from his post had no specific political reason but was simply the end of the cycle. He claimed that his tenure was due to the period, and he just did not apply for a second chance. E.U. leaders are due to meet later this week to discuss the trillion-euro fund that will finance the European coronavirus recovery plan.

On the data front, the Consumer price index (CPI) for the year remained in line with the expectations of 0.1%, and the Final Core CPI from the Eurozone also came as expected 0.9% and had a null effect on Euro currency.

On the U.S. front, the Building permits remained flat with the expectations of 1.22M however, the Housing Starts in May were recorded as 0.97 M against the expected 1.1M and weighed on the U.S. dollar.

In his second testimony of Federal Reserve Chairman Jerome Powell, he stressed that Fed would use all of its tools to curb the damage caused by coronavirus pandemic. He also showed that no hike in interest rate was any near in the future. This decision helped the U.S. dollar to find demand in the market, and hence, the EUR/USD pair suffered more on the day.

Daily Support and Resistance

  • R3 1.1462
  • R2 1.1408
  • R1 1.1336

Pivot Point 1.1282

  • S1 1.1211
  • S2 1.1156
  • S3 1.1085

EUR/USD– Trading Tip

The EUR/USD pair is testing the double bottom support level at 1.1210 level in the 4-hour timeframe, and now it’s bouncing off towards 1.12730 level. Continuation of a bullish trend can extend bullish bias until the next resistance level of 1.1340. Elsewhere, a bearish breakout of 1.1210 can trigger selling until 1.1170. Let’s look for selling below 1.1298 and buying above the same level today. 

GBP/USD – Daily Analysis

The GBP/USD pair was closed at1.25548 after placing a high of 1.25885 and a low of 1.25106. Overall the movement of GBP/USD remained bearish throughout the day. The pair GBP/USD posted losses for the second consecutive day on Wednesday amid the sudden pick up in the U.S. dollar demand.

The greenback’s relative safe-haven status was continuously benefitted by the growing fears of the second wave of coronavirus and geopolitical tensions in Asia. However, the bearish trend for the GBP/USD pair remained under stress due to the latest optimism related to the Brexit progress.

The market expectations of no-deal Brexit have faded away after the U.K. & E.U. agreed to intensify post –Brexit talks. Besides, UK PM Boris Johnson said that the end of July could reach an outline of a deal. This helped to limit the additional losses in the GBP/USD pair.

Investors are keenly awaiting the update from Bank of England, which will hold its monetary policy meeting on Thursday. Although the moves from BoE in upcoming monetary policy meeting are highly anticipated, market participants still await the monetary policy update.

On the data front, the CPI from the U.K. at 11:00 GMT was released, which showed that during May, CPI remained as expected to be 0.5%. The Core CPI from the U.K. dropped to 1.2% from the expected 1.3% and weighed n GBP.

The P.I. Input for May also dropped to 0.3% against the expected 4.1% and weighed on British Pound. The PPI Output for May reached -0.3% from the anticipated 0.0% and weighed on British Pound. At 11:02 GMT, the RPI for the year in May decreased to 1.0%from the forecasted 1.2% and weighed on GBP. Poor than expected economic data dragged the pair near 1.2500 level on Wednesday. In the meantime, risk-off market sentiment also weighed on GBP/USD risky currency pair.

Daily Support and Resistance

  • R3 1.2794
  • R2 1.2741
  • R1 1.2659

Pivot Point 1.2606

  • S1 1.2524
  • S2 1.2471
  • S3 1.2388

GBP/USD– Trading Tip

On Thursday, the GBP/USD is trading at a level of 1.2580, holding right above a next support level of 1.2550. Continuation of a bullish trend requires the cable to break above 1.2585 level first. The 50 periods EMA is weighting on Sterlin gat 1.2585 level while the RSI and MACD are holding in the bearish zone. Although they are very close to crossover into the bullish zone, so we should wait for a bullish breakout before taking a buy trades. By the way, a bullish breakout of 1.2585 level can extend to buying until the next target level of the level of 1.2685, while bearish breakout of 1.2545 level can lead Sterling to be lower towards 1.2475. 

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 107.004 after placing a high of 107.439 and a low of 106.950. Overall the movement of the USD/JPY pair remained bearish throughout the day. After moving in a consolidation phase for the previous two days, the USD/JPY pair finally found a trend to follow on Wednesday and dropped below 107.06 level. The bearish trend of USD/JPY was because of the risk-off market sentiment.

At 4:50 GMT, the Trade Balance of Japan for May showed a deficit of 0.6T against the expected 0.68T and supported the Japanese Yen. The strength of the Japanese Yen dragged the pair USD/JPY lower on Wednesday.

The downward trend was then supported by the U.S. economic docket, which released negative or flat results. At 17:30 GMT, the Building permits for May from the U.S. came flat with the expectations of 1.22M. The Housing Starts in May dropped to 0.97Mfrom the expected 1.10M and weighed on the U.S. dollar.

The decreased housing starts weighed on the U.S. dollar and dragged the USD/JPY prices further. In his second round of testimony to Congress, the Fed Chair, Jerome Powell, told the lawmakers that the U.S. economy was beginning to recover from the worst of coronavirus crisis. He added that to provide support to 25M jobless Americans with ongoing pandemic will need more help.

He said that with interest rates remain near zero for an extended period, the U.S. central bank would have to continue to buy bonds to make the longer-term borrowing cost lower. Powell also said for Congress to extend in some form the extra $600 weekly payments to the unemployed people that were the part of the relief package which was passed in March and will expire in July.

Congress has already allocated 3T USD for coronavirus related economic aid, and the U.S. central bank has also pumped trillions of dollars of credit into the economy to support the economy through the pandemic crisis.

On the other hand, the rising geopolitical tensions in Asia between India and China over their disputed border. The site left 20 Indian soldiers dead in a fistfight and an unspecific number of Chinese casualties.

Meanwhile, the tensions between North Kore and South Korea also escalated after North Korea blew up the de facto embassy of South Korea near both nation’s highly armed border on Tuesday and threatened to send troops. These geopolitical tensions faded away from the market’s risk sentiment, which weighed on USD/JPY, and the pair posted losses on Wednesday.

The risk-off market sentiment was further bolstered by the recent lockdown measures imposed in 29 communities of Beijing to control the increasing number of virus cases. Meanwhile, the Fed Chairman Jerome Powell presented a gloomy outlook for a road to recovery of the U.S. economy and faded away from the optimism of V-shaped global economic recovery, which also weighed on USD/JPY pair.

Daily Support and Resistance    

  • R3 108
  • R2 107.82
  • R1 107.57

Pivot Point 107.39

  • S1 107.14
  • S2 106.96
  • S3 106.71

USD/JPY – Trading Tips

The USD/JPY pair is trading at 106.914 level as it continues trading sideways in a wide trading range of 107.620 – 106.630. It failed to break above an immediate resistance level of 107.580. This level is working as resistance for USD/JPY, and the 50 periods EMA is also prolonging strong resistance at 107.580 zones while immediate support lingers nearby 106.600. The USDJPY bearish trend can trigger a sell-off unto the next support level of the 106.017 level today. Let’s wait for the USD/JPY to test the 107.650 level before entering a sell in the USD/JPY. 

Good luck! 

Categories
Forex Course

127. Getting started with ‘Divergence Trading’

Introduction

Introduction

Introduction

There are several types of technical traders in the forex industry. Some trade based on price action while some trade using indicators. Price action traders typically do not use any indicator, but the Divergence is an exception to it. Divergence is an indicator concept that can yield immense risk to reward if used correctly. It is a powerful tool that helps traders catch the absolute peak and trough of the market.

What is Divergence?

Generally, the meaning of Divergence is to move apart. And the meaning of trading is no different. In forex, Divergence is a scenario when the price charts do not agree with the movement of the indicator. In a sense, if the price moves in one direction, the indicator moves in the other direction.

Formation of Divergence

Divergence can be found by comparing the price action on the charts with an oscillator indicator. Typically, Divergence is formed in trending markets. That is, they occur in markets that move making higher highs and or lower lows.

Consider a market a market making higher highs and higher lows. The job of an oscillator indicator is to follow the price action. Thus, the indicator should also follow an upward trajectory. But, if the charts make higher highs and the indicator makes an equal or higher low, then we conclude that there is a divergence in the market.

Significance of Divergence

Divergence is used to signify that there is something not right in the market and the uptrend. In an uptrend, for instance, the market breaks above the recent resistance (high), makes a new high, retraces to the Support & Resistance level, and continues the same cycle. But when the market makes a higher high with Divergence, there is a high possibility that the market might not hold at the S&R level. The market could reverse or might drop slightly below the S&R and then continue the uptrend.

Indicators used to Identify Divergence

Divergences can be identified using oscillator indicators. An oscillator, going by the name, moves between two levels – overbought and oversold. Typically, a level above 70-80 is considered overbought, and a level below 20-30 indicates an oversold market.

Following are the most commonly used indicators to identify Divergence

  1. Relative Strength Index (RSI)
  2. Stochastic Indicator
  3. Moving Average Convergence Divergence (MACD)

Types of Divergence

Based on the direction of the market, there are two types of Divergence:

Regular Divergence

This is the most used type of Divergence and very easy to spot. They are found at the top or bottom of a trend and are used to give a reversal signal. Regular Divergence can again be split into two types: Bullish Divergence | Bearish Divergence.

Hidden Divergence

Hidden divergences are relatively trickier to spot. Converse to regular Divergence, hidden Divergence is used for a trend continuation indication. They are typically found in the middle of a trend. Hidden divergences, too, can be divided into two types: Hidden Bullish divergence | Hidden Bearish Divergence.

That’s about the introduction to divergences. In the next lesson, we shall elaborate on each of the divergence types.

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Categories
Forex Daily Topic Forex Trading Strategies

Principles of Trading Strategies

Introduction

Introduction

Introduction

A trading strategy is a systematic methodology of investment that can be applied in any financial market, for example, bonds, stocks, futures, commodities, forex, and so on. In this context, a profitable trading strategy is more than a system that provides an entry signal on the long or short side with a stop-loss and a profit target.

Big traders make money to take their investment decisions systematically, reducing their risk with the diversification of the assets that make up their portfolio.

In this educational article, we’ll present a set of elements that can be part of a trading strategy.

The Elements of a Trading Strategy

A systematic trading strategy should be tested and validated with historical data, and its execution in the real-market should be done with the same accuracy as when using paper money.

The strategy should provide a setups series that allow us to recognize where to locate the market entry and in which direction. Finally, the trading strategy should allow market positioning in the long and short sides. This positioning should require identifiable stop-loss and profit target levels.

In particular, in this article, we’ll present the use of Fibonacci, candlesticks formations, chart patterns, trend lines, and trend channels.

Fibonacci Analysis

Likely, Fibonacci retracements and extensions are the most used tools in the world of retail and institutional trading. The Fibonacci series has its origin from the mathematical problem of the rabbits’ population solved by Leonardo da Pisa “Fibonacci” in his work “Liber Abaci” published in 1202.

The sequence discovered by Fibonacci not only can be applied in the rabbits’ population growth, but this series also solves other growth problems in nature and also on the financial markets.

Fibonacci and Corrections

One application of the Fibonacci tools in financial markets is the measurement of a retracement size that an impulsive wave may experience in its corrective move.

The rationale of this strategy considers that when the initial impulsive movement ends and following the subsequent corrective move, the market will develop a second impulsive move in the same direction of the first move.

The selection of the asset is linked to the timeframe under analysis; for example, the structure developed in a weekly chart will require more time than an hourly chart formation.

The following figure illustrates two potential entry setups using the Fibonacci retracement tool. The first scenario considers a retracement of 38.2% of the first move. The second scenario will occur when the price experiences a retracement of 61.8% from the top of the first impulse. 

The stop-loss will be placed at the origin of the previous impulsive movement.

Setting Targets with Fibonacci Extensions

Prices extensions are movements that resume the progress of a previous trend. Generally, the extensions occur in the third wave, and the correction corresponding to the second wave does not move beyond the origin of the first impulsive movement. The next figure exposes the extension of a regular three-wave pattern. Consider that the wave identification does not correspond to an Elliott wave labeling.

The analytic process follows the next steps:

  1. After an impulsive move, the price action must develop a minimum retracement of the first move.
  2. The size of the swing must be multiplied by the Fibonacci ratio of 1.618.
  3. The resulting level will correspond to the price target of the third wave.

The analysis in a five-wave pattern is similar to the three-wave case. The difference in this pattern is the seek the length of an additional impulsive move.

The five-wave pattern includes three impulsive movements and two corrective moves. The following figure illustrates the Fibonacci measures of this formation.

The Phi-Ellipse

The Phi-Ellipse is a countertrend trading method based on the oscillation of price with time. Its goal is to reduce the noise of falses breakouts and increase the stability of the investment strategy. The drawing process of a Phi-Ellipse requires to identify three points, as shown in the next figure.

After identifying the points A, B, and C, in a regular three-wave pattern, there should place the Phi-Ellipse in these points. We should expect a new impulsive move as the first impulse. There are three ways to trade against the trend at the end of the Phi-Ellipse, which are:

  1. Enter in a position when the price breaks outside the perimeter of the Phi-Ellipse.
  2. Entry based on a chart pattern at the end of the Phi-Ellipse.
  3. Place an order when the price action when the price moves outside a parallel line to the median line of the Phi-Ellipse.
  4. A buy position is recommended at the end of the Phi-Ellipse when it has a descending slope, and a sell position is recommended when the Phi-Ellipse has an upward slope.

Conclusions

In this educational article, we discussed the elements that should contain a trading strategy. The application of a systematic trading strategy or a combination with a strategy across time in a diversified portfolio could help the investor reduce the risk in its investment decisions.

On the other hand, the strategy’s analysis methodology should provide entry-setups for both long and short-side positions. In this context, in this article, we presented the use of Fibonacci retracements and extensions to offer entry setups inlcuding its stop loss and profit target level. Finally, we introduced the Phi-Ellipse method, which allows the investor to reduce the risk of falses breakouts in its investment portfolio.

In the next educational article, we will review the use of candlesticks formations, chart patterns, trend lines, and trend channels.

Suggested Readings

– Fischer, R., Fischer J.; Candlesticks, Fibonacci, and Chart Patterns Trading Tools; John Wiley & Sons; 1st Edition (2003).

Categories
Forex Course

126. Trading Harmonic Patterns – Detailed Summary

Introduction 

Introduction 

Introduction 

We have discussed all the major Harmonic trading patterns in our previous course lessons. The purpose of this article is to provide a comprehensive summary so that it will easy to navigate for you. Although you have a fair idea on how to trade these patterns, it is essential to practice them over and again to master them. From our personal experience, we can say that Harmonic patterns are THE most difficult patters to trade, and there are many reasons for it.

One of the critical reasons why it is so difficult to trade these patterns is because of its lack of appearance on the price charts. That is, we hardly be able to see these Harmonic patterns forming in any of the currency pairs. Having said that, once we identify and trade them correctly, we can easily make a massive sum of profits when compared to trading other Forex patterns. Hence, as a technical Forex market analyst, you must be able to identify and trade these patterns with the utmost accuracy.

In our previous course lessons, we have mentioned detailed ways to identify these patterns on the price charts using Fibonacci levels. Each of the pattern legs needs to respect specific Fibonacci extensions and retracement levels in order to confirm their formation. So make sure to take the help of these Fib ratios for easy identification. As always, keep practicing the trading of these patterns in a demo account until you master them.

Below are the links for the course lessons related to the Harmonic Patterns.

Introduction To Harmonic Pattern – Link

Trading The AB=CD Pattern – Link | Extended Trading Strategy – Link

Trading The Crab Pattern – Link | Extended Trading Strategy – Link

Trading The Butterfly Pattern – Link | Extended Trading Strategy – Link

Trading The Bat Pattern – Link | Extended Trading Strategy – Link

Trading The Gartley Pattern – Link | Extended Trading Strategy – Link

The only thing that is crucial while trading or identifying these patterns is to be patient. As you all are aware by now, it takes a lot of time for a Harmonic pattern to form. There will be many cases where three legs of the pattern will be formed accurately, but the final leg rules won’t be met, and as a result, the entire pattern gets invalidated. Don’t be disappointed or impatient at that point. After all, trading is a game of skill and patience; the more patient you are, the better results you will see. All the best!

Categories
Forex Fundamental Analysis

Ease of Doing Business – Comprehending This Macro-Economic Indicator

What is the ‘Ease of Doing Business Index?’

What is the ‘Ease of Doing Business Index?’

What is the ‘Ease of Doing Business Index?’

The ease of doing business index was created jointly by two leading economists, namely Simeon Djankov and Gerhard Pohl from the Central and Eastern sector of the World Bank Group. It is an aggregate number that includes different parameters that define the ease of doing business in a country. The ease of doing business (EODB) measures the country’s position in offering the best regulatory practices. Though the World Bank started publishing the reports in 2003, the ranking only started only in 2006.

The EODB study captures the experience of small and medium-sized companies in a country with their regulators and the relationship with their customers, by measuring time, costs, and red tape they deal with. The goal of the World Bank is to provide an objective basis for understanding and to improve the regulatory environment for businesses worldwide.

Methodology

The survey consists of a questionnaire made by a team of experts with the assistance of academic advisors. The questionnaire consists of feedback on business cases that cover topics such as business location, size, and nature of its operations. This survey’s motive is to collect information that is affecting their business and not to measure conditions such as the nation’s proximity to large markets, quality of infrastructure, interest rates, and inflation.

The next step of the data-gathering process involves over 12,500 expert contributors such as lawyers and accountants from 190 countries in the survey to interact with the Doing Business team in conference calls, written reviews, and visits by the global team. Respondents fill out the surveys and provide information relevant to laws, regulations, and different fees charged.

A nation’s ranking is decided after assessing the following factors:

  • Starting a business – idea, time, procedure, and capital required to open a new business
  • Construction permits – permissions, land, and cost to build a warehouse
  • Electricity access – procedure, time and cost needed to obtain an electricity connection from the electricity board
  • Property registration- procedure, time, and cost required to register the warehouse with the local government body
  • Getting credit and loan – the process involved in getting credit from banks, and depth of credit information index
  • Investor protection – the extent of disclosure, liability, and ease of shareholder suits
  • Payment of taxes – tax filing process, preparation of tax filing and number of taxes paid
  • Cross border trading – number of documents required, and cost for import and export
  • Enforcing contracts – procedure, time, and cost to impose debt contract
  • Insolvency process – time, cost and recovery rate under a bankruptcy proceeding

Based on the score obtained in the above sub-indices, a country is assigned a rank in the ease of doing business index. The ease of doing business report is a complete assessment of competitiveness or the business environment. Still, rather it should be considered as a proxy of the regulatory framework faced by the private sector before starting a new business.

The Economic Reports

The ease of doing business reports is an annual report published by a team led by Djankov in 2003. The report is then elaborated by the World Bank Group that basically measures the costs firm is incurring for business operations. The World Bank report is, in fact, an important knowledgeable product in the field of private sector development. It has also motivated the design of various regulatory reforms in developing countries. The study presents a detailed study of costs, time, and procedures that a private firm is subject to before opening the company. This then creates rankings for a country.

Impact on Currency

The Doing Business report is used by policymakers, politicians and development experts, journalists, and, most importantly, the fund managers to understand the easiness of starting a business in the country. More companies mean more jobs, and more jobs mean faster development. Growth in the economy is directly related to the companies’ performance and the opening of new businesses. Therefore, when regulations are eased for starting a business, it contributes to the GDP of the country longer and increases the value of the currency in the international market.

Sources of information on Ease of Doing Business 

The ease of doing business report is one of the most sought reports in the finance industry, so many financial institutions and economic websites give mention ranking of a country after collecting the data from official sources. However, the data published by the World Bank is the most reliable and factual.

Sources

GBP (Sterling) – https://tradingeconomics.com/united-kingdom/ease-of-doing-business

AUD – https://tradingeconomics.com/australia/ease-of-doing-business

USD – https://tradingeconomics.com/united-states/ease-of-doing-business

CAD – https://tradingeconomics.com/canada/ease-of-doing-business

CHF – https://tradingeconomics.com/switzerland/ease-of-doing-business

JPY – https://tradingeconomics.com/japan/ease-of-doing-business

NZD – https://tradingeconomics.com/new-zealand/ease-of-doing-business

Ease of Doing Business report is one of the most discussed issues around the world. The report that is issued by the World Bank gets a lot of attention from the government around the world. For country authorities, it sheds light on regulatory aspects of their business climate. For business representatives, it helps initiate debates and dialogue about reform.

The private sector creates pressure on the respective government to ensure required reforms to indirectly improve the country’s rank in the EODB index. Investors take the decision of investment in a country based on the ranking of that country in the ease of doing business report. From the World Bank’s point of view, it demonstrates an unconditional ability to provide knowledge and resource information. This exercise by the World Bank generates information that is useful and relevant.

Impact due to news release

In the previous section of the article, we understood the definition of ‘Ease of Doing Business’ and the methodology used for ranking a country. Now we will extend our discussion in identifying the impact of the news announcement on the value of a currency. Many case studies tell correlation exists between ease of doing business and FDI flows.

One study finds that judicial independence and labor market flexibility are significantly associated with FDI flows. The number of procedures required to start a business and strength of the arbitration regime both have a significant and robust effect on FDI. Due to these reasons, foreign investors always invest in an economy where business activities can be carried out without any obstructions.

In today’s lesson, we will analyze the impact of ‘Ease of Doing Business’ on different currencies and analyze the change in volatility due to its news release. The below image is a graphical representation of Switzerland’s rank in 2018 and 2019. We see that the country had shown improvement in it’s ranking by two places. Let us find out the reaction of the market to this announcement.

USD/CHF | Before the announcement

Let us start with the USD/CHF currency pair to analyze the impact of the ‘Ease of Doing Business’ announcement. The above image is the daily time frame chart of the currency pair, where we can see that the pair is moving within a ‘range.’ Presently, the price is at a resistance area, which means sellers can push the price lower anytime soon. Therefore, we should be cautious before taking a ‘buy’ trade in this pair.

USD/CHF | After the announcement

After the news announcement, a slight amount of volatility is witnessed, which takes the price higher that results in the formation of a bullish ‘news candle.’ Since the Swiss Franc is on the left-hand side of the pair, a bullish candle indicates bearishness for the currency, and that is becoming weak. We can say that the news announcement a slight negative on the currency.

CAD/CHF | Before the announcement

CAD/CHF | After the announcement

The above images represent the CAD/CHF currency pair, where it appears that the market is moving in a channel before the news announcement. We should be looking to sell the currency pair as the price is at the top of the channel. However, the news announcement shall give us a clear direction of the market. We will not be taking any position before the news release as the news release has a moderate to high impact on the currency pair.

After the news announcement, the price moves a little higher and closes with some amount of bullishness. As the ‘ease of doing business’ was not so encouraging for the economy, traders went ‘short’ in Swiss Franc right after the news release. However, the effect does not last long, and the market collapses a couple of days later.

CHF/JPY | Before the announcement

CHF/JPY | After the announcement

The above images are that of the CHF/JPY currency pair, where we see a strong move to the upside before the news announcement, and currently, the price is at the resistance turned support area. There is a high chance of buyers becoming active at this point; hence, sell trades should be avoided.

After the news announcement, we witness some volatility in the market that takes the price lower but not by a lot. The impact was not great on this currency pair as the country slipped below by two places in the ‘ease of doing business’ ranking. When the impact of news settles down, one should start analyzing the pair technically and take the position accordingly.

That’s about the ‘Ease of Doing Business’ as an economic indicator and its relative impact on the Foreign Exchange market. Cheers!

Categories
Forex Signals

Gold: Moving South Below the 50-Period SMA

XAUUSD had a bounce off its lows that began on Jun 15 at 13:00 the bounce re3ached the $1730 level and began to move sideways, making lower lows. The last interaction made an evening star with a large bearish candlestick. We think this is a good short setup to scalp with a target at the current 200-hour SMA for a nice and fast reward. The R/r factor is just 1 but the odds of the pair going south are very high, which makes the trade appealing. We see also that the Stochastics made a crossover to near the middle of the range, suggesting an increased bearish momentum.

XAUUSD had a bounce off its lows that began on Jun 15 at 13:00 the bounce re3ached the $1730 level and began to move sideways, making lower lows. The last interaction made an evening star with a large bearish candlestick. We think this is a good short setup to scalp with a target at the current 200-hour SMA for a nice and fast reward. The R/r factor is just 1 but the odds of the pair going south are very high, which makes the trade appealing. We see also that the Stochastics made a crossover to near the middle of the range, suggesting an increased bearish momentum.

XAUUSD had a bounce off its lows that began on Jun 15 at 13:00 the bounce re3ached the $1730 level and began to move sideways, making lower lows. The last interaction made an evening star with a large bearish candlestick. We think this is a good short setup to scalp with a target at the current 200-hour SMA for a nice and fast reward. The R/r factor is just 1 but the odds of the pair going south are very high, which makes the trade appealing. We see also that the Stochastics made a crossover to near the middle of the range, suggesting an increased bearish momentum.

Trade Setup:

Entry: 1,724.64

Stop-loss: 1,734.64

Take profit: 1,714.64

Reward/Risk: 1

Risk: 100 pips which is $1000 per XAUUSD Lot, or $10 on a micro-lot. The reward is identical as the R/r =1

 

 

 

 

Categories
Forex Market Analysis

Daily F.X. Analysis, June 17 – Top Trade Setups In Forex – FED Chair Testimony In Focus! 

On the news side, the CPI figures from the U.K. and Canada will be in focus. These may impact the GBP and Canadian related pairs today. Besides, a major focus will remain on the Fed Chair Powell Testimony, while he isn’t expected to do any change with an interest rate, but the recent series of positive data can make dollar bullish.

On the news side, the CPI figures from the U.K. and Canada will be in focus. These may impact the GBP and Canadian related pairs today. Besides, a major focus will remain on the Fed Chair Powell Testimony, while he isn’t expected to do any change with an interest rate, but the recent series of positive data can make dollar bullish.

On the news side, the CPI figures from the U.K. and Canada will be in focus. These may impact the GBP and Canadian related pairs today. Besides, a major focus will remain on the Fed Chair Powell Testimony, while he isn’t expected to do any change with an interest rate, but the recent series of positive data can make dollar bullish.

Economic Events to Watch Today

 

   

EUR/USD – Daily Analysis

The EUR/USD closed at 1.12637 after placing a high of 1.13532 and a low of 1.12276. Overall the movement of the EUR/USD remained bearish throughout the day. After touching a daily high of 1.1353 during the European trading hours, the EUR/USD pair reversed its run in the second half of the day and ended its day with losses. The pair moved into a consolidation phase after dropping 100 pips on Tuesday and posted a daily low below 1.1228.

Furthermore, the rising Treasury bond yields during the American session gave strength to the U.S. dollar after the release of U.S. economic data. The Dollar Index also rose along with the Wall Street Journal. The main indexes if WSJ opened a sharp higher and made the market move higher.

From the European side, at 10:59 GMT, the German Wholesale Price Index (WPI) showed a decline of 0.6%against the expected decline of 1.0% and supported Euro. At 11:00 GMT, the German Final CPI came in line with the expectations of -0.1% in May.

At 14:00 GMT, the ZEW Economic Sentiment index also rose to 58.6 from the expected 53.4 and supported Euro. The German ZEW Economic Sentiment also surged to 63.4 from the expected 60.0. During European trading hours, EUR/USD surged above 1.1353 level due to better than expected macroeconomic data release.

Meanwhile, the U.S. economic docket released the U.S. Retail Sales data for May on Tuesday, showing that the Retail Sales in May increased by 17.7% against the expected 5.5% and supported the U.S. dollar. The stronger U.S. dollar dragged the pair EUR/USD towards its daily lows. The U.S. Dollar Index rose by 0.4% on the day near 97.01, and the 10-year U.S. Treasury bond earned around 3.7% near 0.75%.

After the release of U.S. economic data, the EUR/USD pair started to follow and then remained depressive throughout the day. Jerome Powell, the Chairman of Federal Reserve, commented on the data and said that the Sales figure showed an increase in demand. However, Powell stressed that full economic recovery was uncertain until the public had confidence that the COVID-19 pandemic had controlled.

On Wednesday, European traders will look forward to the release of the Consumer Price Index from Europe, and later in the day, Powell’s testimony will continue for the second day of the semi-annual monetary policy report.

Daily Support and Resistance

  • R3 1.1462
  • R2 1.1408
  • R1 1.1336

Pivot Point 1.1282

  • S1 1.1211
  • S2 1.1156
  • S3 1.1085

EUR/USD– Trading Tip

The EUR/USD is trading at 1.1340, having violated the double top resistance level of 1.1280 level. The extension of a bullish trend can lead the EUR/USD prices further higher until the next target level of 1.1330 level. The MACD and RSI are suggesting bullish bias in the pair, and this bullish bias can help traders to capture a quick buy trade over 1.1270 level today until the next target level of 1.1380, only if 1.1330 gets violated. While support stays at 1.1280 and below this, the next support will stay around 1.1267. 

GBP/USD – Daily Analysis

The GBP/USD closed at 1.25722 after placing a high of 1.26873 and a low of 1.25524. Overall the movement of GBP/USD pair remained bearish. The pair in its earlier trading hours on Tuesday moved higher and followed the previous day’s trend and surged to 1.26800 level on the fresh hopes about Brexit negotiations. However, the gains were changed into losses after the concerns related to the second wave of coronavirus infections rose and strengthened the safe-haven U.S. dollar against its main rivals like GBP.

The pair rose on Monday and earlier Tuesday after the optimism surrounding Brexit talks emerged. The U.K. & E.U. committed to approaching the next meeting with new energy and aimed to avoid an unorderly exit from the bloc in December. The Unemployment Rate from the U.K. supported the surge in GBP on Tuesday. The unemployment rate in the U.K. during April decreased from 4.7%of expectations to 3.9% and supported Pound.

However, the pair GBP/USD started to move in the opposite direction after the release of Claimant Count Change that was closely watched by the investors on Tuesday. In May, 528.9K jobless benefits claims made in Great Britain against the expected 405.3K that depressed the GBP and dragged the pair GB/USD with itself.

The U.S. dollar also remained stronger across the board due to multiple factors. One included the better than expected U.S. economic data release included Retail Sales. The Retail Sales in May increased to 17.7% from the expected 5.5% and supported the U.S. dollar.

The strength of the U.S. dollar further dragged the currency pair. The GBP/USD down that day. The fresh concerns about the second wave of coronavirus in China led towards the renewed emergency lockdown after the increasing number of coronavirus cases in Beijing was another reason behind the strength of the safe-haven U.S. dollar on Tuesday was 

The downfall of the GBP/USD pair could also be attributed to the political front where no news came out of the recent round of talks between PM Boris Johnson and E.U. commission.

Later in the week, the Bank of England rate decision will also release in which another massive increase in quantitative easing is expected. There are chances of some talks about negative interest rates by Governor Bailey, given the upside-down condition of the market.

Daily Support and Resistance

  • R3 1.2794
  • R2 1.2741
  • R1 1.2659

Pivot Point 1.2606

  • S1 1.2524
  • S2 1.2471
  • S3 1.2388

GBP/USD– Trading Tip

The GBP/USD is trading at a level of 1.2580, holding right above a next support level of 1.2550. Continuation of a bullish trend requires the cable to break above 1.2585 level first. The 50 periods EMA is weighting on Sterlin gat 1.2585 level while the RSI and MACD are holding in the bearish zone. Although they are very close to crossover into the bullish zone, so we should wait for a bullish breakout before taking a buy trades. By the way, a bullish breakout of 1.2585 level can extend to buying until the next target level of the level of 1.2685, while bearish breakout of 1.2545 level can lead Sterling to be lower towards 1.2475. 

USD/JPY – Daily Analysis

The USD/JPY pair was closed at 107.314 after placing a high of 107.639 and a low of 107.210. Overall the movement of the USD/JPY pair remained flat throughout the day. The USD/JPY pair remained range bound and did not give any specific movement on Tuesday as the market mood was mixed due to mixed fundamentals.

The Bank of Japan kept its monetary policy steady on Tuesday and signaled that it had taken enough steps in support of economic growth. BoJ has stuck with its view that the economy will gradually recover from the pandemic. BoJ, in its monetary policy meeting, increased the nominal size of its lending packages for cash strapped firms to $1 trillion from about $700 billion announced last month.

The increased lending program from Japan added strength to the Japanese Yen and dragged the pair USD/JPY on Tuesday. While the Chairman of Federal Reserve Jerome Powell warned on Tuesday that the U.S. economy was facing a deep downturn with significant uncertainty about the time and strength of a recovery. He was worried that the longer the recession would last, the worse the damage would be on the job market and businesses.

Powell, in his testimony to Congress, stresses that the Fed was committed to using its all financial tools to lessen the economic damage from the coronavirus crisis. But he was concerned and said that until the public was satisfied that the virus has been contained, the chances for a full recovery were unlikely. He also warned that a downturn for a longer period could impose severe damage, especially to low-income workers who already have been hit hardest.

Daily Support and Resistance    

  • R3 108
  • R2 107.82
  • R1 107.57

Pivot Point 107.39

  • S1 107.14
  • S2 106.96
  • S3 106.71

USD/JPY – Trading Tips

On Wednesday, the USD/JPY continues to follow previously discussed technical levels. The Japanese pair is trading sideways as it failed to break above an immediate resistance level of 107.580. This level is working as resistance for USD/JPY, and the 50 periods EMA is also prolonging strong resistance at 107.580 zones while immediate support lingers nearby 106.600. The bearish trend in the USD/JPY pair can trigger a sell-off unto the next support level of the 106.017 level today. Let’s wait for the USD/JPY to test the 107.650 level before entering a sell in the USD/JPY. 

Good luck! 

Categories
Forex Price Action

Mark Significant Levels and Watch out Price Action around Them

In today’s lesson, we are going to demonstrate an example of the H4-H1 chart combination trading where the breakout takes place, but the traders have to be sensible to spot out the breakout. Let us get started.

In today’s lesson, we are going to demonstrate an example of the H4-H1 chart combination trading where the breakout takes place, but the traders have to be sensible to spot out the breakout. Let us get started.

In today’s lesson, we are going to demonstrate an example of the H4-H1 chart combination trading where the breakout takes place, but the traders have to be sensible to spot out the breakout. Let us get started.

This is an H4 chart. The chart shows that the price heads towards the North upon having its second bounce at the level of support. Look at the last candle. The candle comes out as a bullish engulfing candle since it closes well above the body of the last candle. Can you spot something out here?

The candle closes well above the level where the price had a rejection earlier. The price reacted around the same level before producing the last candle. If we draw a level by using the significant level, which has been working as the level of resistance, we see that the last candle breaches the level. This means the piercing may be considered a breakout. Let us now flip over to the H1 chart.

This is how the H1 chart looks. The chart shows that the last candle comes out as a Spinning Top. The H4-H1 buyers are to wait for the price to consolidate and to get a bullish reversal candle to go long in the pair. Let us wait and see what the price does.

The chart produces a bearish engulfing candle closing within the breakout level. Look at the last candle. The last candle came out as a long bullish engulfing candle. The buyers may get huge confidence about the earlier H4 breakout and trigger a long entry right after the last candle closes. Let us now find out how the entry goes.

The price heads towards the North with good bullish momentum. The last candle comes out as a bearish Inside Bar. This action suggests that the Bull may continue its run. It is a bearish reversal candle (the weakest one). Thus, the buyers may consider closing their entry. In the end, this comes out as an excellent trade setup.

If we concentrate on the breakout, it is to be found out by the traders. Without drawing the horizontal line, it would be difficult to found that out. Thus, mark the points that are significant and keep looking at our charts. It would help you find out breakout and make the trading decision easily. Some breakouts may not seem like a breakout without drawing lines on the chart. Thus, pick your drawing tool to mark significant levels with horizontal lines/trend lines/channels on your trading chart and watch out how the price reacts around them.

Categories
Forex Options

FX Options Market Combined Volume Expiries for 17th June 2020

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

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

FX option expiries for June 17 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– EUR/USD: EUR amounts

  • 1.1300 825m
  • 1.1325 862m

EURUSD is stuck in a range between 1.1220 and 1.1400 during June. Overnight saw the pair consolidate in a tight range at section A, and it is currently breaking out of that range and moving higher, although overbought n the one hour chart. Both option maturities are in play. Watch out for Eurozone and US data before the cut.

– USD/JPY: USD amounts         

  • 107.25 1.1bn
  • 107.50 363m

USDJPY pair is in a consolidation phase which has spilled over from yesterday. Both options remain in play with a small bias towards the 107.50 maturity. US data out later may help the pair find impetus for a break from the tight range.

– USD/CAD: USD amounts

  • 1.3500 780m

USDCAD has flirted with the key 1.3500 exchange rate but not punched through for over a week. Currently in a descending wedge formation. The squeeze could well push is lower than the support level. The 1.3500 maturity remains in play.

– EUR/GBP: EUR amounts

  • 0.8925 483m

The EURGBP has resisted a move above the key 0.90 level and found strong resistance there. Currently flagging bull run arrears to be running out of steam and the pair is overbought on the one-hour time frame. There is potential for a second attempt at the support line we have highlighted at around 0.8915 which would leave our maturity in play.

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

As you can see on the charts we have also plotted the expiration levels at the various exchange rate maturities and we have also labelled in red, orange and blue. Therefore, if you see option expiry exchange rates labelled in red these should be considered in-play, because we believe there is a greater chance of the expiry maturing at these levels based on technical analysis at the time of writing. There is still a lesser possibility of a strike if they are in orange and so these are ‘in-play’ too. However, if we have labelled them in blue, they should be considered ‘not in-play’ and therefore price action would be unlikely to reach these levels, which are often referred to as Strikes, at the time of the 10 AM New York cut.

Our technical analysis is based on exchange rates which may be several hours earlier in the day and may not reflect price action at the time of the maturities. Also, we have not factored in economic data releases or keynote speeches by policymakers, or potential market volatility leading up to the cut.

Although we have added some technical analysis 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 AM Eastern time.

If you want to learn how forex option expiries affect price action in the spot FX market see our educational article by clicking here: https://bit.ly/2VR2Nji

DISCLAIMER: Please note that this information is for educational purposes. Also, the maturities will look more or less likely to become a strike at 10 AM NY time due to exchange rate fluctuations resulting in a different perspective with regard to technical analysis, and also due to upcoming economic data releases for the associated pairs.

Categories
Crypto Market Analysis

Daily Crypto Review, Jun 17 – Craig Wright Called a Thief or a Fraud by the Ex CEO of Mt. Gox

The crypto market has taken its time to consolidate throughout the day, as well as possibly test nearest resistance levels. Bitcoin is currently trading for $9,447, which represents an increase of 0.56% on the day. Meanwhile, Ethereum gained 1.6% on the day, while XRP lost 0.07%.

The crypto market has taken its time to consolidate throughout the day, as well as possibly test nearest resistance levels. Bitcoin is currently trading for $9,447, which represents an increase of 0.56% on the day. Meanwhile, Ethereum gained 1.6% on the day, while XRP lost 0.07%.

The crypto market has taken its time to consolidate throughout the day, as well as possibly test nearest resistance levels. Bitcoin is currently trading for $9,447, which represents an increase of 0.56% on the day. Meanwhile, Ethereum gained 1.6% on the day, while XRP lost 0.07%.

SwissBorg took the position of today’s biggest daily gainer, with gains of 30.87%. DigiByte lost 6.96% of its daily value, making it the most prominent daily loser.

Bitcoin’s dominance stayed at the same place since we last reported, with its value currently at 65.32%. This value represents a 0.2% difference to the downside when compared to yesterday’s value.

The cryptocurrency market capitalization increased over the course of the day, with the market’s current value being $267.99 billion. This value represents an increase of $2.35 billion when compared to the value it had yesterday.

What happened in the past 24 hours

Craig Wright called a liar or a thief by Mark Karpeles

Former CEO of Mt. Gox Mark Karpeles claims that the 80,000 Bitcoin that Dr. Craig Wright lays claim to was actually stolen from the Mt. Gox exchange in March 2011. This claim isn’t just empty words, as cryptocurrency experts side with Karpeles. The Bitcoin residing at one of the addresses that Craig Wright listed among the numerous addresses he supposedly owns was stolen from Mt. Gox.

Karpeles said, “This was confirmed in 2011, and records are a part of court documents available publicly.”

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

The largest cryptocurrency by market capitalization spent the past 24 hours trying to consolidate above $9,251 as well as to test the $9,580 resistance level for a brief amount of time. The resistance was strong, and Bitcoin couldn’t break it, which continued its consolidation within a range bound by $9,251 and $9,580.


Bitcoin’s volume decreased after the recovery bull run ended, while its RSI level currently stagnates at around 51.

Key levels to the upside Key levels to the downside

1: $9,580 1: $9,251

2: $9,735 2: $9,120

3: $9,870 3: $8,980

Ethereum

Ethereum seems to have had a solid day, not only recovering from the plunge but slowly rising in price as well. However, the most recent sentiment shows that bears are testing how far they can go. Whether bears manage to drive ETH’s price down a bit or not, there’s still a long way until the $225.4 support level.


Ethereum’s volume lower and lower as the time passes, while its RSI level hovers below the value of 50.

Key levels to the upside Key levels to the downside

1: $240 1: $225.4

2: $251.4 2: $217.6

3: $198

Ripple

XRP had a decent day as well, as the price drop ended after the price hit the red descending line and bounced from it. The third-largest cryptocurrency by market cap managed to get back above $0.19 (which is, as we mentioned yesterday, a big deal for XRP) and consolidate above it. The line got tested once, without much success for the bears.


XRP’s volume is a bit below the weekly average (after excluding the volume bumps for upward and downward spikes), while its RSI level is just below 50.

Key levels to the upside Key levels to the downside

1: $0.2 1: $0.19

2: $0.205 2: $0.178

3: $0.214

 

Categories
Forex Videos

Fundamental Analysis For Novices – Fed Interest Rate Decision

https://youtu.be/pQGT_S-s4Jg

https://youtu.be/pQGT_S-s4Jg

FOMCFundamental Analysis For Novices – Fed Interest Rate Decision

Thank you for joining the fundamental analysis for novices educational video. In this session, we are going to be talking about the federal reserve interest rate decision.

So what is it, and how can you trade it?


Professional Traders keep a careful eye on their economic calendars, and you should do the same, paying particular attention to the daily activity of economic release information, especially as you plan your day or week ahead, with regard to trading.

The critical information is the time of release, the name of the event, the impact that it is likely to have upon release into the marketplace, the previous data release, and the consensus of professional economists and analysts as to what the figure is likely to be.


The US fed interest rate decision, as seen here, is released to the market at 7 PM BST, and is subject to an embargo. The impact of status is a full red bar on this particular calendar, and in fact, this economic release is one of the most important data releases, and especially at this time during the coronavirus pandemic.
The Federal Open Market Committee or FOMC is the branch of the Federal Reserve Board that has the power to set monetary policy and alter interest rates for the United States.
The FOMC comprises of the board of governors and includes seven members and five federal reserve bank presidents.
The board of governors of the Federal Reserve, which is also known as the Central Bank for the United States, meet at intervals of 5 to 8-weeks, and this is where they decide to set their interest rates, where this will have effects on loans and advances to commercial banks in the United States, especially if they are changed.


The interest rate decision is simultaneously released with the FOMC’s economic projections, monthly budget statement, and, more importantly, the fed’s monetary policy statement.


Thirty minutes later, there is an FOMC press conference to explain the rationale behind the decisions for any changes interest rate changes, or not, as the case may be, and also to explain the monthly monetary policy.
The conference lasts for around an hour and includes a prepared statement, and then the floor is opened to press questions that are unscripted and often leads to market volatility as traders and analysts try to decipher future policy decisions and directions.

How to trade fed interest rate decisions?

Firstly, pay particular attention to the consensus. Deviations from the consensus can cause market volatility.

As a rule of thumb, When the Fed increases interest rates, it typically tends to attract investors to buy dollars because they get a better yield from the higher interest rate. This is typically better for the economy.
On the other hand, a rate cut is seen as a sign of a poor economy with inflationary headaches for the FOMC, and in turn, investors tend to move out of Dollars, and this weakens the local currency.
Always trade this economic data released with extreme caution because it will typically cause extreme volatility, and sometimes this may not occur until the FOMC press conference and especially when the board member is answering questions from the press. Wait for a trend to develop and pick an opportunity to join it.

Categories
Forex Videos

Forex! We Are In The Eye Of The Financial Storm!

https://youtu.be/Imk4bfIAGpc

https://youtu.be/Imk4bfIAGpc

 

Are we in the eye of a financial storm?

 

Are We are in the midst of the most turbulent market conditions we have seen since the financial market crash of 2008.
Although the world is nervously tiptoeing out of the clutches of the coronavirus pandemic, there is still no known cure for the disease and as governments around the world ease the lock-down which has become the norm for many of us since March this year the virus Is still rife amongst us in our communities.


But on the 5th of June, when the non-farm payrolls were released at 1:30 British Summer Time, and where the market was expecting an unemployment figure in the USA of 20%, as warned by the Federal Reserve bank committee, and in fact, the number was better than expected at just above 13%, the Dow Jones industrial index rose 1000 points, almost instantly. One of the sharpest increases in the shortest amount of time that it has ever seen.


If we go back to the 23rd of March, just a few short weeks ago, when the Dow Jones index crashed to just above 18,000, where 3.3 million people filed for unemployment under the lock-down measures. At the time, 31,000 Americans had been diagnosed with Covid-19, and 400 had died.
Now fast forward to where there are almost 2 million confirmed cases of Covid-19 with more than 111,000 deaths, and vastly more unemployment and yet the Dow Jones’ rise to current levels in which case the rise in US equities has been quite staggering when you take into consideration that the American industrial machine has been ground to a halt since all this time, with mass lay-offs in unemployment – 5% GDP, many people still not able to return to work, companies such as hertz filing for bankruptcy, with the Airlines in the United States in a quagmire situation, how on earth can we be seeing one of the biggest bull runs in history United States stock markets and indeed others around the world?

Many financial analysts and economists all over the world are asking the same question. In a recent survey of 150 chief financial officers from major companies across the United States, the majority said they had no confidence in the so-called v-shaped recovery for the United States economy, which has been predicted by many from the Federal Reserve.
Insert D. So, what exactly is driving stock markets higher?

On a typical bull run such as we are seen with the Dow Jones, you would typically expect strong fundamental information to be driving the market such as high rate of employment, strong gross domestic product, stable inflation, strong GDP across the globe which is essential for all countries to grow, other fertile conditions including strong leadership and stable domestic issues. In fact, in January, the United States had all of this in abundance It had just signed phase 1 of a massive trade deal with China, it had the best employment records in history, strong gross domestic product, and a thriving economy. All of these conditions helped the Dow Jones to rise above 29,000, its highest point in history.
And yet here we are, with massive unemployment, a huge dent in the gross domestic product, companies filing for bankruptcy, weak leadership, rioting on the streets because of racially aggravated police brutality, relations between the United States and China at an all-time low, and with the United States

threatening contingency action against China because of the damage that the virus has caused the US economy and where this is laid blame by the US directly at China’s door.
And so where fundamentals have gone out of the window, and where earnings to share price ratios are vastly overinflated, the American stock markets can only be driven by fear of missing out by huge hedge funds and financial institutions, and where they believe there will indeed be a sharp v-shaped recovery and that the United States will quickly return to financial health which enjoyed just a few short months ago. Indeed most of them have simply jumped on the bull run bandwagon for no other reason than to milk it for all it’s worth.

But back in the real world, many analysts believe that a bubble is looming and that we are, in fact, in the eye of a financial storm the likes of which will be far greater than the 2008 financial crash.
And here is the reason why, unlike the 2008 crash, people cannot just return to work as if nothing happened, well nit without repercussions, the virus is still as virulent as ever and has only been contained due to social distancing, and where that social distancing is relaxed, and in fact has to be relaxed if people are to return to work in factories, aviation, entertainment industry including restaurants bars and clubs, banks and financial institutions, and almost every walk of life, in which case there is a danger that a second wave will occur.
This is a huge cloud over the United States economy, coupled with the fact that there will be a huge debt burden for the government and companies and even the normal person on the street to face in the months and years to come. The mighty industrial machine that is America, where there is no cure for this virus at the moment, cannot simply shrug its shoulders and say everything is ok and back to normal we go. Expect shocks ahead, because this situation is not over yet, as much as we all want it to be.

Categories
Forex Course

125. Trading The ‘Crab’ Pattern Like A Pro

Introduction

Introduction

Introduction

Crab is the last pattern that we are going to discuss in the harmonic group. Just like other patterns, the Carb is also identified and traded using the Fibonacci levels in order to determine the precise turning points. The Crab is a reversal pattern and is composed of four legs – XA, AB, BC, and C-D. Let’s understand them in detail below.

The Four Legs Of Crab Pattern

XA – In its bullish version, the first leg forms when the price action rises sharply from the point X to point A.

AB – The AB move goes against the actual market direction and retraces between 38.2% to 61.8% of the distance covered by the XA leg.

BC – In the BC leg, the price action resumes its original direction and retraces between 38.2% to 88.6% of the distance covered by the AB leg.

CD – The CD is the final leg that confirms the formation of the Crab pattern. Place the sell order when the CD leg reaches the 161.8% Fibs extension of the AB leg.

Trading The Crab Pattern

Bullish Crab Pattern

In the below GBP/USD Forex pair, we have identified the formation of the Crab pattern. The first movement XA can be considered any random bullish move. The second leg AB was a counter-trend, and it reached the 61.8% Fib leg of the XA leg. For the third move, price action goes up, and it retraces 38.2% of the XA leg. The last leg was the CD move, which 161.8% of the AB leg. The fourth leg confirms the pattern formation on the price chart.

We activated our trade at point D with stops below point D and taking profit at point A.

Bearish Crab Pattern

The price chart below represents the formation of a bearish crab pattern on the price chart. The first leg XA was the random move, and second leg AB goes up, and it retraces at 38.2% of the XA leg. The next third leg was the BC move, and it retraces 88.6% of the AB move. The last leg CD was the decision-making move, and it closes at 161.8% of the AB leg.

The trade activation was at point D, and the stop was a bit above the trade, and to book profits, we opted out for the most recent lower low.

Conclusion

The Crab pattern rarely appears on the price chart, but when it does, it provides excellent risk to reward ratio trades. If you are new to harmonic trading, practice trading this pattern on a demo account first and only then trade on the live account. Always remember to trade the Bearish Crab pattern in an uptrend, and Bullish Crab patterns in a downtrend only. Cheers!

Categories
Forex Assets

Asset Analysis – Analyzing The XAG/USD Asset Class

Introduction

Introduction

Introduction

Silver is a precious metal standing after Gold. It is a vital asset to understand and forecast the potential movements in the commodity market. This is because buyers and sellers trade the silver market based on global macro trends. Moreover, Silver highly correlates with the Gold Spot prices. XAG/USD is the ticker for Silver against the US Dollar. XAG can be traded against other fiat currencies as well.

Understanding XAG/USD

Silver is a commodity that is traded in troy ounces (Oz), just like any other precious metal. The market price of XAG/USD represents the value of the US Dollar for 1 ounce (Oz) of Silver. It is quoted as 1 XAG per X USD. For example, if the market price of XAG/USD is 17.432, it signifies that each ounce of Gold is worth $17.432.

XAG/USD Specification

Spread

Spread is essentially the difference between the buying price and the selling price. The spread varies on the based account-model used.

ECN: 15 | STP: 21

Fee

A fee is basically the commission on the trade. It applies only to ECN accounts, not STP accounts.

Slippage

The arithmetic difference between the price asked by the trader and the price given by the Broker is referred to as slippage. It occurs due to two reasons: High market volatility & Broker’s execution speed

Trading Range in XAG/USD

The minimum, average, and maximum pip movement in different time frames is represented in the following table. It can be used to assess your risk on the trade.

Procedure to assess Pip Ranges

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

XAG/USD Cost as a Percent of the Trading Range

Cost a percent of the trading range is the representation of the variation in fees on the trade-in different time frames for varying volatility.

ECN Model Account

Spread = 15 | Slippage = 5 | Trading fee = 5

Total fee = Spread + Slippage + Trading fee

Total fee = 15 + 5 + 5 = 25 (pips)

STP Model Account

Spread = 21 | Slippage = 5 | Trading fee = 0

Total fee = Spread + Slippage + Trading fee

Total fee = 21 + 5 + 0 = 26 (pips)

Trading the XAG/USD

Silver Spot is extensively traded in the commodity market, after Gold Spot. It offers enough volatility and liquidity for traders to participate in the market. Silver highly correlates to Gold. Traders can use it as a proxy to place their bets on Silver prices. The technical analysis can be used on Silver as applied to any other market. Even though there is enough volatility in this pair, it is not ideal for entering any time into the market. The reason for it can be accounted for through the cost percentage table.

The cost percentage table represents how expensive a trade is going to be based on the time frame and volatility. Note that, the absolute total cost will remain the same irrespective of the two factors but will vary relatively. For instance, a 1H trader must pay the same fee a 4H trader pays for their trade. But, there a catch; the 4H trader generates more P/L than a 1H trader.

Thus, to have a balance between the P/L and fee on the trade, one must trade when the market volatility at or above the average values. Trading in low volatility markets will cause hurdles in the market to reach your target. Hence, we will have to pay the same costs, even for a small P/L.

Categories
Forex Daily Topic Forex Fundamental Analysis

Understanding The Importance Of ‘Terms Of Trade’ As A Macro Economic Indicator

Introduction

Introduction

Introduction

Terms of Trade is a direct and useful measure of an economy’s International Trade health and gives us a good measure of how fast capital is moving in or out of the country. Terms of Trade make analyzing Balance Of Payments and, more specifically, Current Account Balance easier. Understanding of Terms of Trade can help us better analyze the current liquidity of the economy and its changes in a more crude way.

What are Terms Of Trade Indices?

Terms of Trade is the ratio of its Export Prices and Import Prices. It is the ratio of money received on exports to money spent on imports. If there is an individual’s analogy to be made, then it would be the ratio of an individual’s monthly income to his monthly expenses. Mathematically, it would be the number of export goods that can be purchased per unit of import.

Terms of Trade ratio expressed in percentages, and hence the ratio is multiplied by a hundred. A TOT figure above100 indicates that the country is receiving more on its exports than on its income and vice-versa.

When a country has a TOT figure of more than 100, it means that it is receiving more capital on exports compared to sending capital out on imports. Hence, on an overall basis, capital is flowing into the country. Higher the ratio, the faster the rate at which capital flows into the country. It ultimately translates to the pace at which a country is becoming wealthy and liquid.

When a country has a TOT figure less than 100, it means capital is flowing out of the economy, and its import expenses exceed that of its export revenue generated. Continued periods of TOT figures less than 100 will drive the economy to a vicious debt cycle from which recovery may be difficult. The ratio will tell us how fast the capital is depleting from the economy and is nearing a financial crisis. Countries prefer to have a ratio above 100.

The ratio tells us the rate at which the economy is accumulating capital. On the global market place and International Trade, the ratio will determine what portion of the world’s wealth goes to each country. In other words, based on the demand and supply on the international markets, the ratio will tell us how profits from international trade will be distributed amongst the participating countries.

How can the Terms Of Trade numbers be used for analysis?

Since TOT is a ratio change in TOT, figures can imply multiple things. An improvement in TOT figure could mean:

  1. Export prices have increased in contrast to Import prices being stagnant or dropped.
  2. Export prices would have dropped but not as sharply as import prices. Both dropped but not to the same degree.
  3. Export prices would have stayed the same while Import prices would have dropped.

All the above scenarios can lead to an improvement in the TOT figure. Hence, simple changes in TOT figures cannot be directly used to draw economic conclusions. It is crucial to understand the factors that have resulted in a change in TOT numbers. It is crucial to know whether the change is a consequence of a short-term shock or development or a consistent long-term trend that will persist throughout the coming periods.

TOT is susceptible to multiple economic factors, some of which are:

Exchange rate: A decrease in exchange rate adversely affects imports and benefits exports and vice versa. Imports become costly, and exports become cheap, adversely affecting TOT.

Inflation: The inflation rate across different economies and different sectors affect different economies having different export and import portfolios. For example, a sharp increase in Iron Ore prices can greatly benefit Australia, whose chief exports are Iron Ore, while it can affect importing countries like China and Japan adversely. So inflation across sectors have different impacts across economies and within the country amongst different sectors.

Demand and Supply: Increase in demand, coupled with the availability of those resources also affects TOT as exports and imports are a function of demand and supply. Scarcity increases prices and oversupply decreases the same.

Quality of Produce: Size and quality affect the pricing of products. A high-quality product is likely to cost more and benefit the exporter more. Hence, the portfolio of the country’s exports and imports determines the TOT fluctuations of different product grades.

Trade Tariffs: Protectionist strategies from Governments lead to putting trade barriers on imports. The political and trade ties between countries can also affect the long term trend of TOT figures for a given economy.

Portfolio of Exports and Imports: What types of Goods and Services a country exports and imports also matter. Countries that export goods and services that are more of primary importance (ex: food and energy) tend to always have high demand and TOT ratio more than 100 both within the economy and on the global economy.

Impact on Currency

When the TOT figure is above a hundred, it implies domestic currency is flowing into the country and creating a deficiency in the global market. Hence, higher TOT figures will increase its currency demand and thereby leading to currency appreciation. On the other hand, a continued TOT less than 100 indicates the world is being supplied with domestic currency and therefore leads to currency depreciation.

It is a coincident indicator and is more useful as a long-term trend indicator rather than short-term changes. The indicators affecting TOT would have been identified through Trade agreements or other media sources in general and hence, is a mild-impact indicator.

Economic Reports 

The Bureau of Economic Analysis publishes its TOT figures in the National Income and Product Accounts every quarter of the year on its official website. Below is a figure for an illustration of the same:

We can also find the aggregated TOT reports for the OECD countries on the official website. The World Bank also aggregates and maintains TOT data for most countries on its official website.

Sources of Terms Of Trade

For the US, we can find the Terms of Trade in their National Income and Product Accounts here:

BEA – National Income and Product Accounts

OECD – Terms Of Trade

World Bank – TOT

We can also find Terms of Trade Index for many countries categorized here.

Impact of the ‘Capacity Utilization’ news release on the price charts

In the previous section of the article, we learned the Terms of Trade economic indicator and understood its significance in an economy. The ToT Index measures the ratio of an export to the price of an import, per commodity. A country that heavily relies heavily on exports, this number gives an important hint of the nation’s growth. Even though the Terms of Trade is useful in determining the balance of trade in a country, it does not have a major influence on the GDP of the economy. Therefore, investors don’t give much importance to the data during the fundamental analysis of a currency.

Today, we will be analyzing the impact on Terms of Trade on different pairs and witness the change in volatility due to the news release. The below image shows the latest Terms of Trade data of New Zealand that indicates an increase in the value compared to the previous quarter. A higher than expected reading is considered to be positive for the currency while a lower than expected reading is considered as negative. Let’s see how the market reacted to this data.

NZD/USD | Before the announcement:

We shall start with the NZD/USD currency pair to examine the impact of Terms of Trade on the New Zealand dollar. In the above price chart, we see that the market is in a strong downtrend before the news announcement with increased volatility. Currently, the price is at a key technical area, which is known as the ‘demand’ area, and hence we can expect buyers to come in the market at any moment. Thus, once needs to be cautious before taking a ‘short’ trade.

NZD/USD | After the announcement:

After the news announcement, the market moves lower and volatility increases to the downside. The Terms of Trade data showed an increase in the total percentage, but this was not good enough for the market players who apparently took the price down and weakened the New Zealand dollar. Although the ‘News Candle’ closes in red at the time of release, it gets immediately taken over by a bullish candle, as this was a ‘demand’ area.

NZD/JPY | Before the announcement:

NZD/JPY | After the announcement:

The above images represent the NZD/JPY currency pair, where we see that the characteristics of the chart are similar to that of the above-discussed pair. Before the news announcement, here too, the market is in a strong downtrend, and the volatility appears to be high on the downside. One thing that is different in this pair is that the price is presently at its lowest point and seems to have made a ‘lower low.’ This means New Zealand is weaker in this pair.

After the news announcement, market crashes and the price drops sharply. The Terms of Trade has a similar impact on the pair, where we see a further increase in volatility to the downside. Again. the weakness does not sustain, and the price shows a large bullish candle after the ‘news candle.’

NZD/CAD  | Before the announcement:

 

NZD/CAD  | After the announcement:

Lastly, we shall discuss the impact on the NZD/CAD currency pair and observe the change in volatility. Here, we see that the market is continuously moving lower before the news announcement indicating a great amount of weakness in the New Zealand dollar. Just before the news release, the price seems to be approaching the ‘demand’ area, which can possibly change the trend for a while by initiating some bullishness in the pair.

The Terms of Trade news announcement gets lukewarm from the reaction where the price initially moves higher little and finally closes forming a ‘Doji’ candlestick pattern. The news release leads to further weakening of the currency where the volatility expands on the downside.

That’s about ‘Terms Of Trade’ and its impact on the Forex market after its news release. If you have any questions, please let us know in the comments below. Good luck!

Categories
Forex Market Analysis

Daily F.X. Analysis, June 16 – Top Trade Setups In Forex – Eyes on U.S. Retail Sales! 

On the news front, the eyes will remain on the U.K. Jobless Claims and U.S. Retail sales data. Both of the events are expected to perform better than before, but traders are highly doubtful due to lockdown, the numbers can get worse and drive selling trends in the GBP during the European session and USD during the New York session. The yield on U.S. 10 year Treasuries jumped as traders favored risk to the safety of bonds. Furthermore, on Tuesday, Fed Chair Jerome Powell will testify before the virtual hearing of the Senate Banking Committee, and traders will look forward to it for fresh impetus.

On the news front, the eyes will remain on the U.K. Jobless Claims and U.S. Retail sales data. Both of the events are expected to perform better than before, but traders are highly doubtful due to lockdown, the numbers can get worse and drive selling trends in the GBP during the European session and USD during the New York session. The yield on U.S. 10 year Treasuries jumped as traders favored risk to the safety of bonds. Furthermore, on Tuesday, Fed Chair Jerome Powell will testify before the virtual hearing of the Senate Banking Committee, and traders will look forward to it for fresh impetus.

On the news front, the eyes will remain on the U.K. Jobless Claims and U.S. Retail sales data. Both of the events are expected to perform better than before, but traders are highly doubtful due to lockdown, the numbers can get worse and drive selling trends in the GBP during the European session and USD during the New York session. The yield on U.S. 10 year Treasuries jumped as traders favored risk to the safety of bonds. Furthermore, on Tuesday, Fed Chair Jerome Powell will testify before the virtual hearing of the Senate Banking Committee, and traders will look forward to it for fresh impetus.

Economic Events to Watch Today

 

  

EUR/USD – Daily Analysis

The EUR/USD pair closed at 1.13255 after placing a high of 1.13323and a low of 1.12263. Overall the price action of the EUR/USD remained bullish throughout the trading day, although the EUR/USD pushed lower at the end of last week. After the risk sentiment increased on Monday, the pair EUR/USD reversed its movement and started posting gains. 

In earlier sessions’ the U.S. dollar was strong, which kept a lid on EUR/USD pair’s upward movement, but in the late session, the U.S. dollar lost its pace, and the currency pair EUR/USD started to move higher. The U.S. Dollar Index, which gauges the value of the U.S. dollar against the basket of six currencies, spent most of its day in positive territory above 97.00 level but it turned negative in the second half of the day and helped EUR/USD to start posting gains.

On the data front, at 14:00 GMT, the Trade Balance from Eurozone showed a surplus of only 1.2B against the expected 20.3 B in April and weighed on Euro. From the American side, the only data from the U.S. was New York’s Empire State Manufacturing Index, which rose to -0.2 from the expected -30.0 and supported the U.S. dollar.

In the Late session on Monday, Federal Reserve announced that it would begin broad buying of corporate bonds and debts, which boosted the risk appetite in the market and perceived EUR. The air EUR/USD recovered almost all of its previous day’s losses on the back of U.S. dollar weakness after the Fed’s announcement.

According to the Fed, it would start purchasing investment-grade U.S. corporate bonds in a view to secure companies and ensure credit market liquidity due to coronavirus crisis. After this news, risk sentiment was back in the economy, and the EUR/USD pair moved higher. After the Fed announcement, the yield on U.S. 10 year Treasuries jumped as traders favored risk to the safety of bonds. Furthermore, on Tuesday, Fed Chair Jerome Powell will testify before the virtual hearing of the Senate Banking Committee, and traders will look forward to it for fresh impetus.

Daily Support and Resistance

  • R3 1.1293
  • R2 1.1275
  • R1 1.1263

Pivot Point 1.1245

  • S1 1.1233
  • S2 1.1215
  • S3 1.1203

EUR/USD– Trading Tip

The EUR/USD pair is trading at 1.1340, having violated the double top resistance level of 1.1328 level. The continuation of a bullish trend can lead the EUR/USD prices further higher until the next target level of 1.1380 level. The MACD and RSI are suggesting bullish bias in the pair, and this bullish bias can help traders to capture a quick buy trade over 1.1328 level today until the next target level of 1.1380. While support stays at 1.1328 and below this, the next support will stay around 1.1267. 

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.26059 after placing a high of 1.26063 and a low of 1.24539. Overall the movement of GBP/USD pair remained bullish throughout the day. The Pound jumped from session lows against the dollar on Monday as the U.K. & Brussels agreed to boost up post-Brexit talks. PM Boris Johnson gave hope that the end of next month could reach an outline of a deal.

The lack of progress in negotiations following the latest round of talks between the U.K. & European Union, PM Boris Johnson said that he would personally work with the E.U. to find common ground to break the deadlock. Britain left the European Union in January, but it is still under transition period until 2020 when it should strike a deal over its future trade, travel, security, and financial relations with Europe. Many rounds of trade talks between trade representatives from both parties failed to secure a deal, and then PM Boris Johnson decided to do it himself.

On Monday, PM Boris Johnson held talks with Brussels chief Ursula von der Leyen, and Charles Michael as the European Union finally acknowledged the rejection of the U.K. overextension of the transition period. Both parties have agreed that new momentum in the countdown period to secure a deal was required. Brussels formally accepted that the U.K. would not seek an extension to the transition period, and both parties agreed on work to conclude an agreement by the end of the year. It means both parties are hopeful that an agreement could be reached before the year-end.

The PM Boris Johnson added on Monday after his video conference with E.U. members that there was no reason not to agree to the Brexit deal’s outline by the end of July. E.U. has suggested October 31 as the latest date for a deal to reach. In the time from October to the end of the transition period in December, member states will back and ratify the deal.

The optimism about the Brexit deal gave a push to British Pound, and the pair GBP/USD surged and recovered its previous day’s losses on Monday.

On the other hand, after the announcement of the Federal Reserve to start buying corporate bonds in the secondary market to overcome the losses U.S. economy faced in the coronavirus crisis, the U.S. dollar turned weak and added in the currency pair’s gains.

Daily Support and Resistance

  • R3 1.2593
  • R2 1.2568
  • R1 1.2538

Pivot Point 1.2512

  • S1 1.2482
  • S2 1.2456
  • S3 1.2426

GBP/USD– Trading Tip

On Tuesday, the GBP/USD pair is trading with a bullish bias around 1.2650, but the recent candles seem to peak out of the upward regression channel, which may drive selling in the market. The pair is most likely to find resistance around 1.2707 level, and continuation of a selling trend below this level can lead the pair lower towards 1.2595 and 1.2550 Conversely, a bullish breakout of 1.2707 level can extend buying trend until 1.2805 level in upcoming days. 

USD/JPY – Daily Analysis

The USD/JPY was closed at 107.353 after placing a high of 107.552 and a low of 106.583. Overall the movement of USD/JPY remained bullish throughout the day. The USD/JPY gained strength after posting losses for the previous four consecutive days. The stronger U.S. dollar and negative macroeconomic data release from Japan might have added in the strength of this pair USD/JPY.

At 9:30 GMT, the Revised Industrial Production from Japan in April was declined by 9.8% against the forecasted 9.1% and weighed on Japanese Yen and moved the pair USD/JPY in the upward direction on Friday.

The brighter market sentiment due to come back of risk appetite in the market after the possibility of renewed lockdowns increased due to increased fears over the second wave of coronavirus outbreak.

The fears of the renewed spread of virus grew after the U.S. reported more than 2 million coronavirus cases as of June 12, and the infection cases were reported from the most populous states of America. The high level of new infections was reported from California, Texas, and Florida, which raised the possibility of a new wave of COVID-19 and prompted risk aversion.

Risk appetite increased the demand for the U.S. dollar across the board as the bar for renewed restrictions of lockdown raised. Federal Reserve has already announced that the road to economic recovery will be longer than expected, which indicated more need for stimulus packaged from governments.

However, the U.S. Dollar Index was up to 97 levels on Friday, and the strength of the U.S. dollar pushed the USD/JPY pair above 107.5 level.

Another factor aiding in the U.S. dollar’s strength was better than expected macroeconomic data from the USA. At 19:00 GMT, the Prelim Consumer Sentiment from the University of Michigan (UoM) surged to 78.9 in June from the expected 75.0 and supported the U.S. dollar. The Import Prices in May also increased by 1.0% from 0.6% of forecast and supported the U.S. dollar. The Prelim UoM Inflation expectation in June was reported as 3.0%.

Daily Support and Resistance    

  • R3 107.93
  • R2 107.75
  • R1 107.54

Pivot Point 107.36

  • S1 107.15
  • S2 106.97
  • S3 106.75

USD/JPY – Trading Tips

The USD/JPY pair is trading sideways as it failed to break above an immediate resistance level of 107.500. This level is working as resistance for USD/JPY, and the 50 periods EMA is also prolonging strong resistance at 107.650 zones while immediate support lingers nearby 106.600. The bearish trend in the USD/JPY pair can trigger a sell-off unto the next support level of the 106.017 level today. Let’s wait for the USD/JPY to test the 107.650 level before entering a sell in the USD/JPY today. 

Good luck! 

Categories
Forex Fibonacci

It is Not Always the Level, It is about the Zone

In today’s lesson, we are going to demonstrate an example of a chart where the price makes a strong move from the 61.8% Fibonacci level. However, in this example, things are slightly different. We know the world is not perfect; neither is the Forex market. Today’s lesson is going to show that. Let us get started.

In today’s lesson, we are going to demonstrate an example of a chart where the price makes a strong move from the 61.8% Fibonacci level. However, in this example, things are slightly different. We know the world is not perfect; neither is the Forex market. Today’s lesson is going to show that. Let us get started.

In today’s lesson, we are going to demonstrate an example of a chart where the price makes a strong move from the 61.8% Fibonacci level. However, in this example, things are slightly different. We know the world is not perfect; neither is the Forex market. Today’s lesson is going to show that. Let us get started.

The chart shows that the price makes a strong bearish move. After that, the price may have found its support. The last candle comes out as a bearish candle with a long lower shadow. The price may make a bullish correction and, then, a bearish breakout at the lowest low of the wave to offer a short entry.

The price makes its bullish correction. Upon producing a doji candle followed by a bearish Marubozu candle, it heads towards the South. The last candle closes within the level of support, where the price gets a rejection earlier. The sellers are going to eagerly wait for a bearish breakout.

The price makes a breakout at the lowest low of the wave, consolidates, and produces a bearish reversal candle. The sellers may trigger a short entry right after the last candle closes by setting Stop Loss above consolidation resistance. We talk about Take-profit in a minute. Let us find out how the entry goes.

The price heads towards the South with extreme pressure. It seems like the Bear is in a real hurry to hit the target. It produces only one bullish candle before the last one. The last candle comes out as a bullish inside bar. Typically, it suggests that the chart is still bearish biased. We find that out whether it really is or is it time for the sellers to come out with their profit. Let us draw Fibonacci levels.

Here it is. Despite producing an inside bar, the price heads towards the North for a bullish correction. It may change the trend as well. The reason for this is the price hits 161.8%. Typically, the price makes a reversal once it hits 161.8% of an existing trend when the trend starts from 61.8%. The question is whether the price really trends from 61.8% or not? If you closely look at the chart, the price does not hit 61.8%, but it trends from well below. Nevertheless, it trends from the zone of 61.8% to 78.6%. As long as the price trends from that zone, the Fibonacci traders consider that it trends from 61.8%. This is what makes the price behave as if it trends right from the  Fibonacci level of 61.8%. When it trends from there, we know where to set our Take Profit. Yes, it is to be set at 161.8%.

Categories
Forex Options

FX Options Market Combined Volume Expiries for 16th June 2020

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

Thank you for visiting the Forex Academy FX Options market combined volume 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 combined 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. This is because the big institutional players hedge their positions accordingly. Each option expiry should be considered ‘in-play’ with a good chance of a strike if labelled in red, still in play and a possible strike if labelled in orange and ‘out of play’ and an unlikely strike if labelled in blue, with regard to the likelihood of price action meeting the strike price at maturity.

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

FX option expiries for June 16 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

– EUR/USD: EUR amounts

  • 1.1250 968m
  • 1.1300 681m

EURUSD pair rejected a move below 1.1225 and is in a bull channel. Therefore the current range is 1.1400 to 1.1225. Watch out for ZEW during the European session and US data out before the 10 AM cut. Both can cause volatility for the pair.

– USD/JPY: USD amounts         

  • 106.60 950m
  • 107.30 431m

USDJPY pair is in consolidation mode on the one hour chart with price action in a tight range and currently pushing lower and where the Stochastic is showing divergence. 107.30 remains in play for the New York cut. Watch out for US retail sales before then.

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

As you can see on the charts we have also plotted the expiration levels at the various exchange rate maturities and we have also labelled in red, orange and blue. Therefore, if you see option expiry exchange rates labelled in red these should be considered in-play, because we believe there is a greater chance of the expiry maturing at these levels based on technical analysis at the time of writing. There is still a lesser possibility of a strike if they are in orange and so these are ‘in-play’ too. However, if we have labelled them in blue, they should be considered ‘not in-play’ and therefore price action would be unlikely to reach these levels, which are often referred to as Strikes, at the time of the 10 AM New York cut.

Our technical analysis is based on exchange rates which may be several hours earlier in the day and may not reflect price action at the time of the maturities. Also, we have not factored in economic data releases or keynote speeches by policymakers, or potential market volatility leading up to the cut.

Although we have added some technical analysis 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 AM Eastern time.

If you want to learn how forex option expiries affect price action in the spot FX market see our educational article by clicking here: https://bit.ly/2VR2Nji

DISCLAIMER: Please note that this information is for educational purposes. Also, the maturities will look more or less likely to become a strike at 10 AM NY time due to exchange rate fluctuations resulting in a different perspective with regard to technical analysis, and also due to upcoming economic data releases for the associated pairs.

Categories
Crypto Market Analysis

Daily Crypto Review, Jun 16 – BTC Whale Count Back To Dec 2017 Levels; BTC Back Above $9,000

The crypto market has taken the day to restore its price level to the pre-drop of June 15. Bitcoin is currently trading for $9,386, which represents an increase of 1.46% on the day. Meanwhile, Ethereum lost 0.05% on the day, while XRP gained 1.85%.

The crypto market has taken the day to restore its price level to the pre-drop of June 15. Bitcoin is currently trading for $9,386, which represents an increase of 1.46% on the day. Meanwhile, Ethereum lost 0.05% on the day, while XRP gained 1.85%.

The crypto market has taken the day to restore its price level to the pre-drop of June 15. Bitcoin is currently trading for $9,386, which represents an increase of 1.46% on the day. Meanwhile, Ethereum lost 0.05% on the day, while XRP gained 1.85%.

Verge took the position of today’s biggest daily gainer, with gains of 21.03%. Flexacoin lost 13.05% of its daily value, making it the most prominent daily loser.

Bitcoin’s dominance stayed at exactly the same place since we last reported, with its value currently at 65.52%. This value represents a 0% difference when compared to yesterday’s value.

The cryptocurrency market capitalization increased over the course of the day, with the market’s current value being $265.64 billion. This value represents an increase of $11.37 billion when compared to the value it had yesterday.

What happened in the past 24 hours

Bitcoin whales returning to pre-December 2017 pump levels

The number of investors that are holding an immense amount of Bitcoin (otherwise known as Bitcoin whales) is starting to approach the level that the crypto community hadn’t seen since the 2017 levels when Bitcoin rallied to $20,000.

According to Glassnode’s report dating June 15, we can see steady growth in the number of Bitcoin whales (traders holding over 1000 BTC) since April 2019.

_______________________________________________________________________

Technical analysis

_______________________________________________________________________

Bitcoin

The largest cryptocurrency by market capitalization managed to return to its pre-price drop level, reaching back above $9,000. Bitcoin has skipped the $9,120 and $9,251 levels as well, currently stabilizing between $9,251 and $9,580.


Bitcoin’s volume increased during the rally but returned to the previous levels, while the RSI level increased to 50.

Key levels to the upside                    Key levels to the downside

1: $9,580                                           1: $9,120

2: $9,735                                           2: $9,251

3: $9,870                                            3: $8,980

Ethereum

Ethereum also had a correction over the day, bouncing above the $225.4 and trying to consolidate. However, the price action looks like the $225.4 level will be tested to the downside. If it stays strong, traders will have a chance to possibly enter a strong position towards the upside from there.


Ethereum’s volume increased both during the price spike as well as in general. Its RSI level is currently at 43.5.

Key levels to the upside                    Key levels to the downside

1: $240                                               1: $225.4

2: $251.4                                           2: $217.6

                                                           3: $198

Ripple

XRP moved back above the $0.19 during the day, which represents a great bullish sign for it. Unlike with Bitcoin and Ethereum, XRP doesn’t have many support levels below $0.178, and dropping below it would be extremely bearish. However, the recent price increase returned XRP’s price to pre-price drop levels.


XRP’s volume returned to average after a slight increase due to the price increase, while its RSI level came to 50.

Key levels to the upside                    Key levels to the downside

1: $0.2                                              1: $0.19

2: $0.205                                            2: $0.178

3: $0.214